Delta Airlines 2007 Annual Report Download - page 90

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Table of Contents
Index to Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Market risk associated with our fixed and variable rate long-term debt relates to the potential reduction in fair value and negative impact to future
earnings, respectively, from an increase in interest rates. The following table presents information about our fixed and variable rate debt and the fair value of
our debt at December 31, 2007 and 2006:
Successor Predecessor
(in millions)
December 31,
2007
December 31,
2006(1)
Variable rate debt $ 3,820 $ 5,580
Fixed rate debt 4,481 7,053
Plus: unamortized premium, net 155 —
Total $ 8,456 $ 12,633
Fair value(2) $ 8,148 $ 11,476
(1) In accordance with SOP 90-7, substantially all of our unsecured debt and certain of our undersecured debt had been classified as liabilities subject to compromise at December 31, 2006.
(2) The aggregate fair value of our secured and unsecured debt was based primarily on reported market values and recently completed market transactions.
Foreign Currency Exchange Risk
We are subject to foreign currency exchange risk because we have revenue and expense 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. We did not have
any foreign currency hedge contracts at December 31, 2007 and 2006.
Credit Risk
To manage credit risk associated with our aircraft fuel price hedging program, we select counterparties based on their credit ratings and limit our
exposure to any one counterparty. We also monitor the market position of this program and our relative market position with each counterparty. The credit
exposure related to this program was not significant at December 31, 2007 and 2006.
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 that may be subject to certain holdbacks by the credit card processors. We
also have receivables from the sale of mileage credits under our SkyMiles Program to participating airlines and non-airline businesses such as credit card
companies, hotels and car rental agencies. 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 historical experience. A portion of our projected workers' compensation liability is secured with
restricted cash collateral (see Note 2).
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