Delta Airlines 2014 Annual Report Download - page 91

Contingencies Related to Termination of Contract Carrier Agreements
We have two agreements with Shuttle America that relate to its operation of Embraer 145 and Embraer 170/175 aircraft under capacity purchase
agreements. The Embraer 145 aircraft were operated by Chautauqua Airlines at December 31, 2014 and assigned with our consent to Shuttle America
in January 2015. By providing required advance notice, we may terminate the Embraer 145 agreement without cause at any time. Similarly, we may
terminate the Embraer 170/175 agreement without cause at any time after January 2016 . If we terminate either of the agreements without cause,
Shuttle America has the right to (1) assign to us certain 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 certain of the aircraft the airline owns and operates for us at
the time of the termination. If we are required to purchase aircraft owned by Shuttle America, the purchase price would be equal to the amount
necessary to (1) reimburse 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 Shuttle America, the lease would have (1) a
rate equal to the aircraft-related debt payments of Shuttle America as if 90% of the aircraft was financed by 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.
We estimate that the total fair values, determined as of December 31, 2014 , of the aircraft Shuttle America could assign to us or require that we
purchase if we terminate without cause our contract carrier agreement are approximately $111 million with respect to the Embraer 145 aircraft and
$290 million with respect to the Embraer 170/175 aircraft. The actual amount we may be required to pay in these circumstances may be materially
different from these estimates. If Shuttle America exercises this right, we must also pay Shuttle America 10% interest (compounded monthly) on the
equity it provided when it purchased the aircraft. These equity amounts for the Embraer 145 and the Embraer 170/175 aircraft total $25 million and
$52 million , respectively.
Venezuelan Currency Devaluation
As of December 31, 2014, we had $102 million of unrestricted cash on our Consolidated Balance Sheets primarily related to our 2013 Venezuelan
ticket sales for which repatriation has been requested, but not yet authorized. While the cash is available for use in Venezuela, our ability to repatriate
these funds has been limited due to Venezuelan government controls. Cash related to 2013 sales is stated at the official exchange rate of 6.3 bolivars
per U.S. dollar. Until these funds can be repatriated, they are at risk of future devaluations.
In January 2014, the Venezuelan government affirmed the official exchange rate for 2013 sales and announced that some sectors of the economy,
including airlines, will use the SICAD I reference rate of 11.7 bolivars per U.S. dollar for 2014 sales and repatriation requests. The SICAD I reference
rate is a complementary currency auction system that was created by the Venezuelan government in 2013 for purposes of exchanging currency. At the
time of the announcement, we recorded a $23 million
charge in miscellaneous, net within other expense to reflect the devaluation of currency related to
January 2014 sales that were denominated in bolivars. We are recording all sales subsequent to January 2014 at the then current SICAD I reference
rate.
Legal Contingencies
We are involved in various legal proceedings related to employment practices, environmental issues, antitrust matters and other matters concerning
our business. We record liabilities for losses from legal proceedings when we determine that it is probable that the outcome in a legal proceeding will
be unfavorable and the amount of loss can be reasonably estimated. We cannot reasonably estimate the potential loss for certain legal proceedings
because, for example, the litigation is in its early stages or the plaintiff does not specify the damages being sought. Although the outcome of the legal
proceedings in which we are involved cannot be predicted with certainty, management believes that the resolution of these matters will not have a
material adverse effect on our Consolidated Financial Statements.
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