Delta Airlines 2003 Annual Report Download - page 94

Table of Contents
Foreign Currency Exchange Risk
We are subject to foreign currency exchange risk because we have revenues and expenses denominated in foreign currencies, primarily the euro, the British
pound and the Canadian dollar. To manage exchange rate risk, we attempt to execute both our international revenue and expense transactions in the same
foreign currency, to the extent practicable. From time to time, we may also enter into foreign currency options and forward contracts with maturities of up to
12 months. We did not have any foreign currency hedge contracts at December 31, 2003 or 2002. We do not enter into foreign currency hedge contracts for
speculative purposes.
Credit Risk
To manage credit risk associated with our aircraft fuel price, interest rate and foreign currency exchange risk management programs, we select counterparties
based on their credit ratings and limit our exposure to any one counterparty under defined guidelines. We also monitor the market position of these programs
and our relative market position with each counterparty. The credit exposure related to these programs was not significant at December 31, 2003 and 2002.
Our accounts receivable are generated largely from the sale of passenger airline tickets and cargo transportation services. The majority of these sales are
processed through major credit card companies, resulting in accounts receivable which are generally short-term in duration. We also have receivables from the
sale of mileage credits to partners, such as credit card companies, hotels and car rental agencies, that participate in our SkyMiles program. We believe that the
credit risk associated with these receivables is minimal and that the allowance for uncollectible accounts that we have provided is appropriate.
Self-Insurance Risk
We self-insure a portion of our losses from claims related to workers' compensation, environmental issues, property damage, medical insurance for employees
and general liability. Losses are accrued based on an estimate of the ultimate aggregate liability for claims incurred, using independent actuarial reviews based
on standard industry practices and our actual experience. A portion of our projected workers' compensation liability is secured with restricted cash collateral
(see Note 1).
Note 4. Derivative Instruments
On July 1, 2000, we adopted SFAS 133, as amended, which requires us to record all derivative instruments on our Consolidated Balance Sheets at fair value
and to recognize certain changes in these fair values in our Consolidated Statements of Operations. SFAS 133 impacts the accounting for our fuel hedging
program, our interest rate hedging program and our holdings of equity warrants and other similar rights in certain companies.
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