Delta Airlines 2006 Annual Report Download - page 106

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Certain of our aircraft and other financing transactions include provisions which require us to make payments to preserve an expected economic return to
the lenders if that economic return is diminished due to certain changes in law or regulations. In certain of these financing transactions, we also bear the risk
of certain changes in tax laws that would subject payments to non-U.S. lenders to withholding taxes.
We cannot reasonably estimate our potential future payments under the indemnities and related provisions described above because we cannot predict
(1) when and under what circumstances these provisions may be triggered and (2) the amount that would be payable if the provisions were triggered because
the amounts would be based on facts and circumstances existing at such time. We also cannot predict the impact, if any, that our Chapter 11 proceedings
might have on these obligations.
Employees Under Collective Bargaining Agreements
At December 31, 2006, we had a total of approximately 51,300 full-time equivalent employees. Approximately 17% of these employees, including all of our
pilots, are represented by labor unions. For additional information related to our collective bargaining agreements, see Note 1.
War-Risk Insurance Contingency
As a result of the terrorist attacks on September 11, 2001, aviation insurers significantly reduced the maximum amount of insurance coverage available to
commercial air carriers for liability to persons (other than employees or passengers) for claims resulting from acts of terrorism, war or similar events. At the
same time, aviation insurers significantly increased the premiums for such coverage and for aviation insurance in general. Since September 24, 2001, the U.S.
government has been providing U.S. airlines with war-risk insurance to cover losses, including those resulting from terrorism, to passengers, third parties
(ground damage) and the aircraft hull. The coverage currently extends to August 31, 2007. The withdrawal of government support of airline war-risk
insurance would require us to obtain war-risk insurance coverage commercially, if available. Such commercial insurance could have substantially less
desirable coverage than currently provided by the U.S. government, may not be adequate to protect our risk of loss from future acts of terrorism, may result in
a material increase to our operating expenses or may not be obtainable at all, resulting in an interruption to our operations.
Fuel Inventory Supply Agreement
On August 31, 2006, we entered into an agreement with J. Aron & Company (“Aron”), an affiliate of Goldman Sachs & Co., pursuant to which Aron became
the exclusive jet fuel supplier for our operations at the Atlanta airport, the Cincinnati airport and the three major airports in the New York City area. In
accordance with this agreement, on September 6, 2006, we sold to Aron, at then current market prices, (1) all jet fuel inventory that we were then holding in
storage at facilities that support our operations at the airports in Atlanta and Cincinnati and (2) all jet fuel inventory that was in transit to these airports as well
as to the three major New York City area airports. We received approximately $102 million from this sale. In addition, for the duration of the agreement, we
(1) assigned to Aron certain existing supply agreements with our third party suppliers for jet fuel for these locations, (2) transferred to Aron the right to use
our storage facilities in Atlanta and Cincinnati and (3) transferred to Aron allocations in pipeline systems through which jet fuel is delivered to storage
facilities for the Atlanta airport, the Cincinnati airport and the three New York City area airports. The initial sale of our jet fuel inventory did not have a
material impact on our Consolidated Statement of Operations. The agreement with Aron has six-month terms that automatically renew unless terminated by
either party thirty days prior to the end of any six-month period, and the agreement will terminate on its third anniversary. Upon termination of the agreement,
we will be required to purchase, at market prices at the time of termination, all jet fuel inventory that Aron is holding in the storage facilities that support our
operations at the Atlanta and Cincinnati airports and all jet fuel inventory that is in transit to these airports as well as to the three New York City area airports.
At termination of the agreement, Aron will return to us our rights to use the storage facilities in Atlanta and Cincinnati and our allocations in pipeline systems.
Other
We have certain contracts for goods and services that require us to pay a penalty, acquire inventory specific to us or purchase contract specific equipment, as
defined by each respective contract, if we terminate the contract without cause prior to its expiration date. Because these obligations are contingent on our
termination of the contract without cause prior to its expiration date, no obligation would exist unless such a termination occurs. We also cannot predict the
impact, if any, that our Chapter 11 proceedings might have on these obligations.
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