Delta Airlines 2014 Annual Report Download - page 83

Operating Leases
NOTE 10 . AMERICAN EXPRESS RELATIONSHIP
General. Our agreements with American Express provide for joint marketing, grant certain benefits to Delta-American Express co-branded credit
card holders ("Cardholders") and American Express Membership Rewards Program participants and allow American Express to market using our
customer database. Cardholders earn mileage credits for making purchases using co-branded cards, may check their first bag for free, are granted
access to Delta Sky Club lounges and receive other benefits while traveling on Delta. These benefits that we provide in the form of separate products
and services under the SkyMiles agreements are referred to as "deliverables." Additionally, participants in the American Express Membership Rewards
program may exchange their points for mileage credits under the SkyMiles Program. As a result, we sell mileage credits at agreed upon rates to
American Express for provision to their customers under the co-brand credit card program and the Membership Rewards program.
During the December 2014 quarter, we amended our agreements with American Express resulting in a modification of the terms of these
agreements. The multi-year extended agreements became effective January 1, 2015. Previously, during 2013, we amended our agreements with
American Express that modified the products and services provided under the agreements. The amendments changed certain mileage award
redemptions and access to Sky Clubs, among other things. For a description of how these amendments changed our accounting, please see Note 1
under Frequent Flyer Program.
Advance Purchase of Restricted SkyMiles. In 2008, we entered into a multi-year extension of our American Express agreements and received $1.0
billion from American Express for an advance purchase of Restricted SkyMiles (the "prepayment"). The 2008 agreement provided that our obligations
with respect to the prepayment would be satisfied as American Express uses the purchased miles over a specified future period (“SkyMiles Usage
Period”), rather than by cash payments from us to American Express. Due to the SkyMiles Usage Period and other restrictions placed upon American
Express regarding the timing and use of the SkyMiles, we classified the $1.0 billion prepayment we received as long-term debt.
In 2010, we amended our 2008 American Express agreement. The amendments, among other things, (1) provided that Cardholders could check
their first bag for free on every Delta flight through June 2013 ("Baggage Fee Waiver Period"), (2) changed the SkyMiles Usage Period to a three-year
period beginning in the December 2011 quarter from a two-year period beginning in the December 2010 quarter and (3) gave American Express the
option to extend our agreements with them for one year.
During the SkyMiles Usage Period, American Express was drawing down on the prepayment instead of paying cash to Delta for SkyMiles used. As
SkyMiles were used by American Express, we recognized the two separate revenue components of these SkyMiles consistent with our accounting
policy discussed in Note 1 . In December 2013, we and American Express amended this agreement to allow American Express to use these SkyMiles
immediately and without restriction. As a result, in the December 2013 quarter, the remaining $285 million of the original $1.0 billion pre-payment
was classified as frequent flyer deferred revenue with a portion related to the marketing component recorded within other accrued liabilities. As of
December 31, 2014, there was no remaining deferred revenue or other accrued liabilities related to this prepayment.
76
Years Ending December 31,
(in millions)
Delta Lease Payments
(1)
Contract Carrier
Aircraft Lease
Payments
(2)
Total
2015
$
1,363
$
344
$
1,707
2016
1,187
306
1,493
2017
1,056
267
1,323
2018
881
239
1,120
2019
747
182
929
Thereafter
5,873
296
6,169
Total minimum lease payments
$
11,107
$
1,634
$
12,741
(1)
Includes payments accounted for as construction obligations. See Note 6
.
(2)
Represents the minimum lease obligations under our Contract Carrier agreements with Compass Airlines, Inc., ExpressJet Airlines, Inc., GoJet Airlines, LLC, Shuttle America
Corporation (“Shuttle America”) and SkyWest Airlines, Inc.