Delta Airlines 2012 Annual Report Download - page 76

We are responsible for the management and construction of the project and bear construction risk, including cost overruns. We record an asset for
project costs as construction takes place regardless of funding source. These costs include design fees, labor and construction permits, as well as
physical construction costs such as paving, systems, utilities and other costs generally associated with construction projects. The project will also
include capitalized interest based on amounts we spend calculated based on our weighted average incremental borrowing rate. The related
construction obligation is recorded as a non-current liability and is equal to project costs funded by parties other than us. Future rental payments will
reduce the construction obligation and result in the recording of interest expense, calculated using the effective interest method. During the
construction period, we are also incurring costs for construction site ground rental expense and any remediation and abatement activities, all of which
will be expensed as incurred. As of December 31, 2012 , we have recorded $585 million as a fixed asset as if we owned the asset and $473 million
as
the related construction obligation.
We have an equity-method investment in the entity which owns IAT, our sublessor at Terminal 4. The Sublease requires us to pay certain fixed
management fees. We determined the investment is a variable interest and assessed whether we have a controlling financial interest in IAT. Our
rights under the Sublease with respect to management of Terminal 4 are consistent with rights granted to an anchor tenant under a standard airport
lease. Accordingly, we do not consolidate the entity in which we have an investment in our Consolidated Financial Statements.
NOTE 6 . INTANGIBLE ASSETS
Indefinite
-Lived Intangible Assets
International Routes and Slots. We estimate the fair value on our international routes and slots using an excess earnings method, which is an
income approach, when it is more likely than not the fair value is less than the associated carrying value. In the December 2011 quarter, we reduced
flight frequencies between the U.S. and Moscow. Based primarily on the expected future use of our Moscow routes and slots, we determined the
carrying value of the related routes and slots exceeded the estimated fair value. As a result, we recorded a $50 million impairment charge in
restructuring and other items in the December 2011 quarter. As of December 31, 2012 and 2011, our remaining international routes and slots relate to
our Pacific routes and slots.
In October 2010, the U.S. and Japan signed a bilateral agreement, which allows U.S. air carriers unlimited flying to and from Japan under route
authorities granted by the U.S. Department of Transportation. Access to the primary Japanese airports (Haneda and Narita airports in Tokyo)
continues to be regulated through allocations of slots, which limit the rights of carriers to operate at these airports. The U.S. and Japan have agreed on
plans for a limited number of additional slots at these airports. The substantial number of slots we hold at Tokyo Narita Airport, combined with
limited-entry rights we hold in other countries, enables us to operate a hub at Tokyo serving the Asia-Pacific region.
We currently believe that the current U.S.-Japan bilateral agreement will not have a significant long-term impact on our Pacific routes and slots;
therefore, these assets continue to have an indefinite life and are not presently impaired. Negative changes to our operations could result in an
impairment charge or a change from indefinite-lived to definite-lived in the period in which the changes occur or are projected to occur.
Domestic Slots. In December 2011, we and US Airways exchanged takeoff and landing rights at LaGuardia Airport ("LaGuardia") and Reagan
National airports. Under the agreement, (1) we acquired
132 slot pairs at LaGuardia from US Airways and (2) US Airways acquired from us 42 slot
pairs at Reagan National and $66.5 million in cash. Additionally, we divested 16 slot pairs at LaGuardia and eight slot pairs at Reagan National to
airlines with limited or no service at those airports and received $90 million in cash proceeds from the sale of the divested slot pairs. The divestiture
of these slot pairs resulted in the recognition of a $43 million gain during the December 2011 quarter in restructuring and other items on our
Consolidated Statement of Operations.
69
Carrying Amount at December 31,
(in millions) 2012 2011
International routes and slots
$
2,240
$
2,240
Delta tradename
850
850
SkyTeam related assets
661
661
Domestic slots
622
624
Total
$
4,373
$
4,375