Delta Airlines 2012 Annual Report Download - page 46

Employee Benefit Obligations. Represents primarily (1) our estimated minimum required funding for our qualified defined benefit pension plans
based on actuarially determined estimates and (2) projected future benefit payments from our unfunded postretirement and postemployment plans.
For additional information about our employee benefit obligations, see “Critical Accounting Policies and Estimates”.
Aircraft Purchase Commitments. Represents primarily our commitments to purchase 100 B-737-900ER aircraft, 18 B-787-8 aircraft, 56 CRJ-900
aircraft and four previously owned MD-90 aircraft. Our purchase commitment for 18 B-787-8 aircraft provides for certain aircraft substitution rights.
Other Obligations. Represents estimated purchase obligations under which we are required to make minimum payments for goods and services,
including but not limited to insurance, marketing, maintenance, technology, sponsorships and other third party services and products. Additionally,
other obligations includes estimates of lease payments that will be made under agreements entered into in 2012 with Southwest Airlines and The
Boeing Company to lease 88 B-717-200 aircraft with deliveries beginning in 2013 and continuing through 2015.
Critical Accounting Policies and Estimates
Our critical accounting policies and estimates are those that require significant judgments and estimates. Accordingly, the actual results may differ
materially from these estimates. For a discussion of these and other accounting policies, see Note 1 of the Notes to the Consolidated Financial
Statements.
Frequent Flyer Program
Our frequent flyer program (the “SkyMiles Program”) offers incentives to travel on Delta. This program allows customers to earn mileage credits
by flying on Delta, regional air carriers with which we have contract carrier agreements and airlines that participate in the SkyMiles Program, as well
as through participating companies such as credit card companies, hotels and car rental agencies. We also sell mileage credits to non-airline
businesses, customers and other airlines.
The SkyMiles Program includes two types of transactions that are considered revenue arrangements with multiple deliverables. As discussed
below, these are (1) passenger ticket sales earning mileage credits and (2) the sale of mileage credits to participating companies with which we have
marketing agreements. Mileage credits are a separate unit of accounting as they can be redeemed by customers in future periods for air travel on
Delta and participating airlines, membership in our Sky Club and other program awards.
Passenger Ticket Sales Earning Mileage Credits. Passenger ticket sales earning mileage credits under our SkyMiles Program provide customers
with two deliverables: (1) mileage credits earned and (2) air transportation. We value each deliverable on a standalone basis. Our estimate of the
standalone selling price of a mileage credit is based on an analysis of our sales of mileage credits to other airlines and customers and is re-evaluated
at least annually. We use established ticket prices to determine the standalone selling price of air transportation. We allocate the total amount
collected from passenger ticket sales between the deliverables based on their relative selling prices.
We defer revenue for the mileage credits related to passenger ticket sales and recognize it as passenger revenue when miles are redeemed and
services are provided. We record the air transportation portion of the passenger ticket sales in air traffic liability and recognize these amounts in
passenger revenue when we provide transportation or when the ticket expires unused. A hypothetical 10% increase in our estimate of the standalone
selling price of a mileage credit would decrease passenger revenue by approximately $50 million, as a result of an increase in the amount of revenue
deferred from the mileage component of passenger ticket sales.
Sale of Mileage Credits.
Customers may earn mileage credits through participating companies such as credit card companies, hotels and car rental
agencies with which we have marketing agreements to sell mileage credits. Our contracts to sell mileage credits under these marketing agreements
have two deliverables: (1) the mileage credits redeemable for future travel and (2) the marketing component.
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