Delta Airlines 2007 Annual Report Download - page 104

Table of Contents
Index to Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Prior to the amendment, the Processor withheld payment from our receivables and/or required a cash reserve of an amount ("Reserve") equal to the
Processor's potential liability for tickets purchased with Visa or MasterCard that had not yet been used for travel (the "Unflown Ticket Liability"). The
Processing Agreement allowed us to substitute a letter of credit, which was issued by a third party, for a portion of the Reserve equal to the lesser of $300
million and 45% of the Unflown Ticket Liability.
Including the letter of credit, the Reserve, which adjusted daily, totaled approximately $1.1 billion prior to entering into the Amended Processing
Agreement. In May 2007, Delta and the Processor entered into a letter agreement pursuant to which the Processor surrendered the letter of credit and
correspondingly reduced the amount of the Reserve. Upon entering into the Amended Processing Agreement, the Processor returned to us the remaining $804
million Reserve.
The Amended Processing Agreement provides that no future Reserve is required except in certain circumstances, including events that in the reasonable
determination of the Processor would have a material adverse effect on us.
Further, if either we or the Processor determines not to extend the term of the Amended Processing Agreement beyond October 31, 2008, then the
Processor may maintain a Reserve, if we do not maintain a certain amount of cash, during the period of 90 days before the expiration date of the agreement.
The Reserve would equal approximately 100% of the value of tickets for which we had received payment under the Amended Processing Agreement, but
which have not been used for travel, unless we have unrestricted cash above a level specified in the Amended Processing Agreement. Such a Reserve would
be released to us following termination of the Amended Processing Agreement as tickets are used for travel.
American Express
Our American Express credit card processing agreement, entered into in 2004 and amended in 2005, provides that American Express is permitted to
withhold our receivables in certain circumstances. These circumstances include a material increase in the risk that we will be unable to meet our obligations
under the agreement or our business undergoing a material adverse change. No amounts were withheld as of December 31, 2007 and 2006.
Other Contingencies
Regional Airports Improvement Corporation ("RAIC")
We have obligations under a facilities agreement with the RAIC to pay the bond trustee amounts sufficient to pay the debt service on $47 million in
Facilities Sublease Refunding Revenue Bonds. These bonds were issued in 1996 to refinance bonds that financed the construction of certain airport and
terminal facilities we use at Los Angeles International Airport. We also provide a guarantee to the bond trustee covering payment of the debt service.
General Indemnifications
We are the lessee under many commercial real estate leases. It is common in these transactions for us, as the lessee, to agree to indemnify the lessor and
the lessor's related parties for tort, environmental and other liabilities that arise out of or relate to our use or occupancy of the leased premises. This type of
indemnity would typically make us responsible to indemnified parties for liabilities arising out of the conduct of, among others, contractors, licensees and
invitees at or in connection with the use or occupancy of the leased premises. This indemnity often extends to related liabilities arising from the negligence of
the indemnified parties, but usually excludes any liabilities caused by either their sole or gross negligence and their willful misconduct.
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