Delta Airlines 2012 Annual Report Download - page 44

As part of our fuel hedging program, we may be required to pay hedge margin to counterparties when our portfolio is in a loss position.
Conversely, if our portfolio with counterparties is in a gain position, we may receive hedge margin. Our future cash flows are impacted depending
upon the nature of our derivative contracts and the market price of the commodities underlying our derivative contracts
Timing of SkyMiles Sales. In December 2011, we amended our American Express agreements and agreed to sell $675 million of unrestricted
SkyMiles to American Express in each December from 2011 through 2014. Under the December 2011 amendment, American Express purchased
$675 million of unrestricted SkyMiles in both 2012 and 2011. In 2011, this operating cash flow was largely offset by working capital changes. We
anticipate American Express will make additional purchases of $675 million of unrestricted SkyMiles in both 2013 and 2014.
In 2008, we entered into a multi-year extension of our American Express agreements and received $1.0 billion from American Express for an
advance purchase of restricted SkyMiles. The 2008 agreement provided that our obligations with respect to the advance purchase would be satisfied
as American Express uses the purchased miles over a specified future period (“SkyMiles Usage Period”). During the SkyMiles Usage Period, which
commenced in December 2011, American Express draws down SkyMiles valued at $333 million
annually over three years beginning 2012 instead of
paying cash to Delta for SkyMiles used. This draw down of $333 million in SkyMiles reduced cash flows from operations in 2012 compared to 2011
and 2010.
Pension Contributions. We sponsor defined benefit pension plans for eligible employees and retirees. These plans are closed to new entrants and
are frozen for future benefit accruals. Our funding obligations for these plans are governed by the Employee Retirement Income Security Act, as
modified by the The Pension Protection Act of 2006. We contributed $697 million
and $598 million to our defined benefit pension plans during 2012
and 2011, respectively. We estimate the funding requirements under these plans will total approximately $675 million in 2013.
Undrawn Lines of Credit
Delta has available $1.8 billion in undrawn lines of credit. As described in Note 8 of the Notes to the Consolidated Financial Statements, we have
an undrawn $1.2 billion first-lien revolving credit facility, as part of our 2011 Credit Facilities. The revolving credit facility carries a variable interest
rate and expires in April 2016.
We also have an undrawn $450 million revolving credit facility included in the 2012 Pacific Facilities, as described in Note 8 of the Notes to the
Consolidated Financial Statements. The 2012 Pacific Facilities are secured by our Pacific routes and slots, as described in Note 6 of the Notes to the
Consolidated Financial Statements. This revolving credit facility carries a variable interest rate and expires in October 2017. In addition, we have an
undrawn bank revolving credit facility of $150 million.
The credit facilities mentioned above have covenants, such as collateral coverage ratios. If we are not in compliance with these covenants, we
must repay amounts borrowed under the credit facilities and may not be able to draw on the revolving credit facilities. Our ability to obtain additional
financing, if needed, on acceptable terms could be adversely affected by the fact that a significant portion of our assets are subject to liens.
Investing and Financing
Capital Expenditures
We incurred capital expenditures of $2.0 billion in 2012 and $1.3 billion in each of 2011 and 2010. Our capital expenditures were primarily for
the purchase of aircraft and aircraft modifications that upgraded aircraft interiors and are enhancing our product offering.
We have committed to future aircraft purchases that will require significant capital investment, and have obtained long-term financing
commitments for a substantial portion of the purchase price of these aircraft. We expect that we will invest more than $2 billion in 2013 primarily for
aircraft, aircraft modifications and the purchase of a $360 million equity investment in Virgin Atlantic. The 2013 investments will be funded through
cash from operations and new financings.
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