Delta Airlines 2012 Annual Report Download - page 10

Strategic Agreements. Under a multi-year agreement, we are exchanging a significant portion of the non-jet fuel products with Phillips 66 for jet
fuel to be used in our airline operations. Substantially all of the remaining production of non-jet fuel products is being sold to BP under a long-term
buy/sell agreement effectively exchanging those non-jet fuel products for jet fuel. Our agreement with Phillips 66 requires us to deliver specified
quantities of non-jet fuel products and they are required to deliver jet fuel to us. If we or Phillips 66 do not have the specified quantity and type of
product available, the delivering party is required to procure any such shortage to fulfill its obligation under the agreement. Substantially all of the
refinery's expected production of non-jet fuel products is included in these agreements.
Segments . Because the products and services of Monroe's refinery operations are discrete from our airline services, segment results are prepared
for our airline segment and our refinery segment. Financial information on our segment reporting can be found in Note 2 of the Notes to the
Consolidated Financial Statements.
Fuel Hedging Program
We actively manage our fuel price risk through a hedging program intended to reduce the financial impact on us from changes in the price of jet
fuel. This fuel hedging program utilizes several different contract and commodity types. The economic effectiveness of this hedge portfolio is
frequently tested against our financial targets. The hedge portfolio is rebalanced from time to time according to market conditions, which may result
in locking in gains or losses on hedge contracts prior to their settlement dates.
Fuel Supply Availability
We are currently able to obtain adequate supplies of aircraft fuel, including through our purchases from Monroe, 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 government policy concerning aircraft fuel production, transportation or marketing, changes in aircraft fuel production capacity,
environmental concerns and other unpredictable events may result in fuel supply shortages and fuel price increases in the future.
Frequent Flyer Program
Our SkyMiles
®
frequent flyer program is designed to retain and increase traveler loyalty by offering incentives to customers to increase travel on
Delta. The SkyMiles program allows program members to earn mileage for travel awards by flying on Delta, Delta's regional carriers and other
participating airlines. Mileage credit may also be earned by using certain services offered by program participants, such as credit card companies,
hotels and car rental agencies. In addition, individuals and companies may purchase mileage credits. Miles do not expire, but are subject to all
program rules. We reserve the right to terminate the program with six months advance notice, and to change the program's terms and conditions at
any time without notice.
SkyMiles program mileage credits can be redeemed for air travel on Delta and participating airlines, for membership in our Delta Sky Clubs
®
and
for other program participant awards. Mileage credits are subject to certain transfer restrictions and travel awards are subject to capacity-controlled
seating. In 2012 , program members redeemed more than 262 billion miles in the SkyMiles program for 11 million award redemptions. During this
period, 8% of revenue miles flown on Delta were from award travel.
Other Businesses
Cargo
Through our global network, our cargo operations are able to connect all of the world's major freight gateways. We generate cargo revenues in
domestic and international markets primarily through the use of cargo space on regularly scheduled passenger aircraft. We are a member of SkyTeam
Cargo, a global airline cargo alliance, whose other members are Aeroflot, Aeromexico Cargo, Air France-
KLM Cargo, Alitalia Cargo, China Airlines
Cargo, China Southern Cargo, Czech Airlines Cargo and Korean Air Cargo. SkyTeam Cargo offers a global network spanning six continents.
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