Delta Airlines 2010 Annual Report Download - page 17

Table of Contents
We are currently able to obtain adequate supplies of aircraft fuel, but it is impossible to predict the future availability or price of aircraft fuel. Weather-
related events, natural disasters, political disruptions or wars involving oil-producing countries, changes in governmental policy concerning aircraft fuel
production, transportation or marketing, changes in aircraft fuel production capacity, environmental concerns and other unpredictable events may result in
additional fuel supply shortages and fuel price increases in the future. Additional increases in fuel costs or disruptions in fuel supplies could have additional
negative effects on us.
Our funding obligations with respect to defined benefit pension plans we sponsor is significant and can vary materially because of changes in
investment asset returns and values.
The recent financial crisis and economic downturn resulted in broadly lower investment asset returns and values, including in the defined benefit pension
plans that we sponsor for eligible employees and retirees. As of December 31, 2010, the defined benefit pension plans had an estimated benefit obligation of
approximately $17.5 billion and were funded through assets with a value of approximately $8.2 billion. The benefit obligation is significantly affected by
investment asset returns and changes in interest rates, neither of which is in the control of Delta. We estimate that our funding requirement for our defined
benefit pension plans, which are governed by ERISA and have been frozen for future accruals, is approximately $600 million in 2011. The significant level of
required funding is due primarily to the decline in the investment markets in 2008, which negatively affected the value of our pension assets. Estimates of
pension plan funding requirements can vary materially from actual funding requirements because the estimates are based on various assumptions concerning
factors outside our control, including, among other things, the market performance of assets; statutory requirements; and demographic data for participants,
including the number of participants and the rate of participant attrition. Results that vary significantly from our assumptions could have a material impact on
our future funding obligations.
Our obligation to post collateral in connection with our hedge contracts may have a substantial impact on our short-term liquidity.
Under hedge contracts that we may enter into from time to time, counterparties to those contracts can require us to fund the margin associated with any
loss position on the contracts. If fuel prices fall significantly below the levels at the time we enter into fuel hedging contracts, we may be required to post a
significant amount of collateral, which could have an impact on the level of our unrestricted cash and cash equivalents and short-term investments.
Our substantial indebtedness may limit our financial and operating activities and may adversely affect our ability to incur additional debt to fund
future needs.
We have substantial indebtedness, which could:
• require us to dedicate a substantial portion of cash flow from operations to the payment of principal and interest on indebtedness, thereby reducing
the funds available for operations and future business opportunities;
• make it more difficult for us to satisfy our payment and other obligations under our indebtedness;
• limit our ability to borrow additional money for working capital, restructurings, capital expenditures, research and development, investments,
acquisitions or other purposes, if needed, and increasing the cost of any of these borrowings;
• make us more vulnerable to economic downturns, adverse industry conditions or catastrophic external events;
• limit our ability to withstand competitive pressures;
• reduce our flexibility in planning for or responding to changing business and economic conditions; and/or
• limit our flexibility in responding to changing business and economic conditions, including increased competition and demand for new services,
placing us at a disadvantage when compared to our competitors that have less debt, and making us more vulnerable than our competitors who have
less debt to a downturn in our business, industry or the economy in general.
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