Delta Airlines 2013 Annual Report Download - page 78

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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.
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 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 remediation and abatement activities, which are
expensed as incurred. As of December 31, 2013 , we have recorded $675 million as a fixed asset as if we owned the asset and $646 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. Our remaining international routes and slots primarily relate to the Pacific region. The U.S. and Japan have a
bilateral agreement that 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) is 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.
70
Carrying Amount at December 31,
(in millions) 2013 2012
International routes and slots
$
2,287
$
2,240
Delta tradename
850
850
SkyTeam related assets
661
661
Domestic slots
622
622
Total
$
4,420
$
4,373