Delta Airlines 2011 Annual Report Download - page 83

Contingencies Related to Termination of Contract Carrier Agreements
We may terminate without cause the Chautauqua agreement at any time and the Shuttle America agreement at any time after January 2016 by providing
certain advance notice. If we terminate either the Chautauqua or Shuttle America agreements without cause, Chautauqua or Shuttle America, respectively, has
the right to (1) assign to us leased aircraft that the airline operates for us, provided we are able to continue the leases on the same terms the airline had prior to
the assignment and (2) require us to purchase or lease any aircraft the airline owns and operates for us at the time of the termination. If we are required to
purchase aircraft owned by Chautauqua or Shuttle America, the purchase price would be equal to the amount necessary to (1) reimburse Chautauqua or
Shuttle America for the equity it provided to purchase the aircraft and (2) repay in full any debt outstanding at such time that is not being assumed in
connection with such purchase. If we are required to lease aircraft owned by Chautauqua or Shuttle America, the lease would have (1) a rate equal to the debt
payments of Chautauqua or Shuttle America for the debt financing of the aircraft calculated as if 90% of the aircraft was debt financed by Chautauqua or
Shuttle America and (2) other specified terms and conditions . Because these contingencies depend on our termination of the agreements without cause prior
to their expiration dates, no obligation exists unless such termination occurs.
We estimate that the total fair values, determined as of December 31, 2011, of the aircraft Chautauqua or Shuttle America could assign to us or require
that we purchase if we terminate without cause our contract carrier agreements with those airlines (the "Put Right") are approximately $134 million and $536
million, respectively. The actual amount we may be required to pay in these circumstances may be materially different from these estimates. If the Put Right
is exercised, we must also pay the exercising carrier 10% interest (compounded monthly) on the equity the carrier provided when it purchased the put aircraft.
These equity amounts for Chautauqua and Shuttle America total $25 million and $52 million, respectively.
Legal Contingencies
We are involved in various legal proceedings related to employment practices, environmental issues, antitrust matters and other matters concerning our
business. We record liabilities for losses from legal proceedings when we determine that it is probable that the outcome in a legal proceeding will be
unfavorable and the amount of loss can be reasonably estimated. We cannot reasonably estimate the potential loss for certain legal proceedings because, for
example, the litigation is in its early stages or the plaintiff does not specify the damages being sought. Although the outcome of the legal proceedings in which
we are involved cannot be predicted with certainty, management believes that the resolution of these matters will not have a material adverse effect on our
Consolidated Financial Statements.
Credit Card Processing Agreements
Our VISA/MasterCard and American Express credit card processing agreements provide that no cash reserve ("Reserve") is required, and no withholding
of payment related to receivables collected will occur, except in certain circumstances, including when we do not maintain a required level of unrestricted
cash. In circumstances in which the credit card processor can establish a Reserve or withhold payments, the amount of the Reserve or payments that may be
withheld would be equal to the potential liability of the credit card processor for tickets purchased with VISA/MasterCard or American Express credit cards,
as applicable, that had not yet been used for travel. There was no Reserve or amounts withheld as of December 31, 2011 and 2010.
Other Contingencies
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 or their willful misconduct.
Our aircraft and other equipment lease and financing agreements typically contain provisions requiring us, as the lessee or obligor, to indemnify the other
parties to those agreements, including certain of those parties' related persons, against virtually any liabilities that might arise from the use or operation of the
aircraft or such other equipment.
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