Delta Airlines 2012 Annual Report Download - page 75

Credit Risk
To manage credit risk associated with our aircraft fuel price, interest rate and foreign currency hedging programs, we select counterparties based
on their credit ratings and limit our exposure to any one counterparty.
Our hedge contracts contain margin funding requirements. The margin funding requirements may cause us to post margin to counterparties or
may cause counterparties to post margin to us as market prices in the underlying hedged items change. Due to the fair value position of our hedge
contracts, we received net margin of $62 million and posted net margin of $30 million as of December 31, 2012 and 2011 , respectively. Margin
received is recorded in accounts payable and margin posted is recorded in prepaid expenses and other.
Our accounts receivable are generated largely from the sale of passenger airline tickets and cargo transportation services. The majority of these
sales are processed through major credit card companies, resulting in accounts receivable that may be subject to certain holdbacks by the credit card
processors. We also have receivables from the sale of mileage credits under our SkyMiles Program to participating airlines and non-
airline businesses
such as credit card companies, hotels and car rental agencies. The credit risk associated with our receivables is minimal.
Self
-Insurance Risk
We self-insure a portion of our losses from claims related to workers' compensation, environmental issues, property damage, medical insurance
for employees and general liability. Losses are accrued based on an estimate of the aggregate liability for claims incurred, using independent actuarial
reviews based on standard industry practices and our historical experience. A portion of our projected workers' compensation liability is secured with
restricted cash collateral.
NOTE 5 . JFK REDEVELOPMENT
During 2010, we began a redevelopment project at John F. Kennedy International Airport (“JFK”). At JFK, we currently operate domestic flights
primarily at Terminal 2 and international flights at Terminal 3 under leases with the Port Authority of New York and New Jersey (“Port Authority”),
which operates JFK. We also conduct flights from Terminal 4, which is operated by JFK International Air Terminal LLC (“IAT”), a private party,
under its lease with the Port Authority.
We estimate the redevelopment project, which will be completed in stages concluding in 2015, will cost approximately $1.2 billion . The project
currently includes the (1) enhancement and expansion of Terminal 4, including the construction of nine new international gates; (2) demolition of
Terminal 3, which was constructed in 1960; and (3) development of the Terminal 3 site for aircraft parking positions. Construction at Terminal 4 is
expected to be complete in May 2013, at which time we will relocate our operations from Terminal 3 to Terminal 4 and expect that passengers will
benefit from an enhanced customer experience and improved operational performance, including reduced taxi times and better on-time performance.
Subsequent to our relocation, we will proceed with the demolition of Terminal 3 and thereafter conduct coordinated flight operations from Terminals
2 and 4.
In December 2010, the Port Authority issued approximately $800 million principal amount of special project bonds to fund the substantial
majority of the project. Also in December 2010, we entered into a 33 year agreement with IAT (“Sublease”) to sublease space in Terminal 4. IAT is
unconditionally obligated under its lease with the Port Authority to pay rentals from the revenues it receives from its operation and management of
Terminal 4, including among others our rental payments under the Sublease, in an amount sufficient to pay principal and interest on the bonds. We
do not guarantee payment of the bonds. The balance of the project costs will be provided by Port Authority passenger facility charges, Transportation
Security Administration funding and our contributions. Our future rental payments will vary based on our share of total passenger and baggage
counts at Terminal 4, the number of gates we occupy in Terminal 4, IAT's actual expenses of operating Terminal 4 and other factors.
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