Delta Airlines 2012 Annual Report Download - page 85

Proposed Transatlantic Joint Venture With Virgin Atlantic
Pending regulatory approval, we agreed to buy 49% of Virgin Atlantic, currently held by Singapore Airlines, for $360 million . We also entered
into a joint venture agreement with Virgin Atlantic with respect to operations on non-stop routes between the United Kingdom and North America.
We and Virgin Atlantic will file an application with the U.S. Department of Transportation for U.S. antitrust immunity with respect to the joint
venture.
Contract Carrier Agreements
We have contract carrier agreements with seven contract carriers with agreements expiring from 2016 to 2022 .
Capacity Purchase Agreements . During the year ended December 31, 2012 , seven Contract Carriers operated for us (in addition to Comair)
under capacity purchase agreements. Under these agreements, the Contract Carriers operate some or all of their aircraft using our flight designator
codes, and we control the scheduling, pricing, reservations, ticketing and seat inventories of those aircraft and retain the revenues associated with
those flights. We pay those airlines an amount, as defined in the applicable agreement, which is based on a determination of their cost of operating
those flights and other factors intended to approximate market rates for those services.
The following table shows our minimum fixed obligations under our existing capacity purchase agreements. The obligations set forth in the table
contemplate minimum levels of flying by the Contract Carriers under the respective agreements and also reflect assumptions regarding certain costs
associated with the minimum levels of flying such as the cost of fuel, labor, maintenance, insurance, catering, property tax and landing fees.
Accordingly, our actual payments under these agreements could differ materially from the minimum fixed obligations set forth in the table below.
Revenue Proration Agreement . As of December 31, 2012 , a portion of our Contract Carrier agreement with SkyWest Airlines, Inc. is structured
as a revenue proration agreement. This revenue proration agreement establishes a fixed dollar or percentage division of revenues for tickets sold to
passengers traveling on connecting flight itineraries.
Contingencies Related to Termination of Contract Carrier Agreements
We may terminate without cause the Chautauqua agreement at any time and the Shuttle America agreement at any time after January 2016 by
providing certain advance notice. If we terminate either the Chautauqua or Shuttle America agreements without cause, Chautauqua or Shuttle
America, respectively, has the right to (1) assign to us leased aircraft that the airline operates for us, provided we are able to continue the leases on
the same terms the airline had prior to the assignment and (2) require us to purchase or lease any aircraft the airline owns and operates for us at the
time of the termination. If we are required to purchase aircraft owned by Chautauqua or Shuttle America, the purchase price would be equal to the
amount necessary to (1) reimburse Chautauqua or Shuttle America for the equity it provided to purchase the aircraft and (2) repay in full any debt
outstanding at such time that is not being assumed in connection with such purchase. If we are required to lease aircraft owned by Chautauqua or
Shuttle America, the lease would have (1) a rate equal to the debt payments of Chautauqua or Shuttle America for the debt financing of the aircraft
calculated as if 90% of the aircraft was debt financed by Chautauqua or Shuttle America and (2) other specified terms and conditions . Because these
contingencies depend on our termination of the agreements without cause prior to their expiration dates, no obligation exists unless such termination
occurs.
78
Years Ending December 31,
(in millions) Amount
(1)
2013
$
2,210
2014
2,200
2015
2,130
2016
1,850
2017
1,690
Thereafter
3,880
Total
$
13,960
(1)
These amounts exclude Contract Carrier payments accounted for as operating leases of aircraft, which are described in Note 9. The contingencies described below under
“Contingencies Related to Termination of Contract Carrier Agreements” are also excluded from this table.