Delta Airlines 2008 Annual Report Download - page 23

Table of Contents
Index to Financial Statements
circumstances, including in which we do not maintain a required level of unrestricted cash. If circumstances were to occur that would allow either processor
to initiate a holdback, the negative impact on our liquidity likely would be significant.
We are at risk of losses and adverse publicity stemming from any accident involving our aircraft.
An aircraft crash or other accident could expose us to significant tort liability. The insurance we carry to cover damages arising from any future
accidents may be inadequate. In the event that the insurance is not adequate, we may be forced to bear substantial losses from an accident. In addition, any
accident involving an aircraft that we operate or an aircraft that is operated by an airline that is one of our codeshare partners could create a public perception
that our aircraft are not safe or reliable, which could harm our reputation, result in air travelers being reluctant to fly on our aircraft and harm our business.
Our ability to use net operating loss carryforwards to offset future taxable income for U.S. federal income tax purposes is subject to limitation and may
be further limited as a result of the merger with Northwest and the employee equity issuance, together with other equity transactions.
In general, under Section 382 of the Internal Revenue Code of 1986, as amended (the "Code"), a corporation that undergoes an "ownership change" is
subject to limitations on its ability to utilize its pre-change net operating losses ("NOLs"), to offset future taxable income. In general, an ownership change
occurs if the aggregate stock ownership of certain stockholders increases by more than 50 percentage points over such stockholders' lowest percentage
ownership during the testing period (generally three years).
As of December 31, 2008, Delta reported approximately $9.2 billion of federal and state NOL carryforwards. As of December 31, 2008, Northwest
reported approximately $5.3 billion of federal and state NOL carryforwards. Both Delta and Northwest experienced an ownership change in 2007 as a result
of their respective plans of reorganization under Chapter 11 of the U.S. Bankruptcy Code. Pursuant to the merger agreement, Delta and Northwest elected out
of Section 382(l)(5) of the Code, in which case Section 382(l)(6) of the Code will be applicable to the ownership changes that occurred pursuant to our
respective plans of reorganization. As a result of the merger, Northwest experienced a subsequent ownership change. Delta also may experience a subsequent
ownership change as a result of the merger and the issuance of equity to employees in connection with the merger, together with other transactions involving
the sale of our common stock within the testing period. Even if the merger and the employee equity issuance did not result in an ownership change, the merger
and the employee equity issuance has significantly increased the likelihood there will be a subsequent ownership change for Delta as a result of transactions
involving sale of our common stock.
The Northwest ownership change resulting from the merger and the potential occurrence of a second ownership change for Delta could limit the ability
to utilize pre-change NOLs that are not currently subject to limitation, and could further limit the ability to utilize NOLs that are currently subject to
limitation. The amount of the annual limitation generally is equal to the value of the stock of the corporation immediately prior to the ownership change
multiplied by the adjusted federal tax-exempt rate, set by the Internal Revenue Service. Limitations imposed on the ability to use NOLs to offset future
taxable income could cause U.S. federal income taxes to be paid earlier than otherwise would be paid if such limitations were not in effect and could cause
such NOLs to expire unused, in each case reducing or eliminating the benefit of such NOLs. Similar rules and limitations may apply for state income tax
purposes.
Transfer restrictions on our stock issued in connection with our Plan of Reorganization may limit the liquidity of our stock.
To reduce the risk of a potential adverse effect on our ability to utilize our net operating loss carryovers, our certificate of incorporation contains certain
restrictions on the transfer of our stock. These transfer restrictions will be effective until May 1, 2009, subject to extension for an additional three years. These
transfer restrictions may adversely affect the ability of certain holders of our stock to dispose of or acquire shares of our stock during the period the
restrictions are in place. Furthermore, while the purpose of these transfer restrictions is to prevent an "ownership change" from occurring within the meaning
of section 382 of the Internal Revenue Code, no assurance can be given that such an ownership change will not occur.
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