Delta Airlines 2015 Annual Report Download - page 68

TableofContents
Weperform,atleastquarterly,anassessmentoftheeffectivenessofourderivativecontractsdesignatedashedges,includingassessingthepossibilityof
counterpartydefault.Ifwedeterminethataderivativeisnolongerexpectedtobehighlyeffective,wediscontinuehedgeaccountingprospectivelyandrecognize
subsequentchangesinthefairvalueofthehedgeinearnings.Webelieveourderivativecontractsthatcontinuetobedesignatedashedges,consistingofinterest
rateandforeigncurrencyexchangecontracts,willcontinuetobehighlyeffectiveinoffsettingchangesinfairvalueorcashflow,respectively,attributabletothe
hedgedrisk.
Cashflowsassociatedwithpurchasingandsettlinghedgecontractsgenerallyareclassifiedasoperatingcashflows.However,ifahedgecontractincludesa
significantfinancingelementatinception,cashflowsassociatedwiththehedgecontractarerecordedasfinancingcashflows.
HedgeMargin.Inaccordancewithourfuel,interestrateandforeigncurrencyhedgecontracts,wemayrequirecounterpartiestofundthemarginassociated
withourgainpositionand/orcounterpartiesmayrequireustofundthemarginassociatedwithourlosspositiononthesecontracts.Theamountofthemargin,if
any,isperiodicallyadjustedbasedonthefairvalueofthehedgecontracts.Themarginrequirementsareintendedtomitigateaparty'sexposuretotheriskof
contractingpartydefault.Wedonotoffsetmarginfundedtocounterpartiesormarginfundedtousbycounterpartiesagainstfairvalueamountsrecordedforour
hedgecontracts.
Thehedgemarginwereceivefromcounterpartiesisrecordedincashandcashequivalentsorprepaidexpensesandother,withtheoffsettingobligationin
accountspayable.Thehedgemarginweprovidetocounterpartiesisrecordedinhedgemarginreceivable.
Passenger Tickets
Werecordsalesofpassengerticketsinairtrafficliability.Passengerrevenueisrecognizedwhenweprovidetransportationorwhentheticketexpiresunused,
reducingtherelatedairtrafficliability.WeperiodicallyevaluatetheestimatedairtrafficliabilityandrecordanyadjustmentsinourConsolidatedStatementsof
Operations.Theseadjustmentsrelateprimarilytorefunds,exchanges,transactionswithotherairlinesandotheritemsforwhichfinalsettlementoccursinperiods
subsequenttothesaleoftherelatedticketsatamountsotherthantheoriginalsalesprice.
Passenger Taxes and Fees
Wearerequiredtochargecertaintaxesandfeesonourpassengertickets,includingU.S.federaltransportationtaxes,federalsecuritycharges,airportpassenger
facilitychargesandforeignarrivalanddeparturetaxes.Thesetaxesandfeesareassessmentsonthecustomerforwhichweactasacollectionagent.Becausewe
arenotentitledtoretainthesetaxesandfees,wedonotincludesuchamountsinpassengerrevenue.Werecordaliabilitywhentheamountsarecollectedand
reducetheliabilitywhenpaymentsaremadetotheapplicablegovernmentagencyoroperatingcarrier.
Frequent Flyer Program
OurSkyMilesProgramoffersincentivestotravelonDelta.ThisprogramallowscustomerstoearnmileagecreditsbyflyingonDelta,DeltaConnectionand
airlinesthatparticipateintheSkyMilesProgram,aswellasthroughparticipatingcompaniessuchascreditcardcompanies,hotelsandcarrentalagencies.Wesell
mileagecreditstonon-airlinebusinesses,customersandotherairlines.EffectiveJanuary1,2015,theSkyMilesprogramwasmodifiedfromamodelinwhich
customersearnredeemablemileagecreditsbasedondistancetraveledtoamodelbasedonticketprice.Thisawardchangedidnotaffectthewayweaccountfor
theprogram.
TheSkyMilesProgramincludestwotypesoftransactionsthatareconsideredrevenuearrangementswithmultipledeliverables.Asdiscussedbelow,theseare
(1)passengerticketsalesearningmileagecreditsand(2)thesaleofmileagecreditstoparticipatingcompanieswithwhichwehavemarketingagreements.Mileage
creditsareaseparateunitofaccountingastheycanberedeemedbycustomersinfutureperiodsforairtravelonDeltaandparticipatingairlines,membershipinour
SkyClubandotherprogramawards.
PassengerTicketSalesEarningMileageCredits.PassengerticketsalesearningmileagecreditsunderourSkyMilesProgramprovidecustomerswithtwo
deliverables:(1)mileagecreditsearnedand(2)airtransportation.Wevalueeachdeliverableonastandalonebasis.Ourestimateofthesellingpriceofamileage
creditisbasedonananalysisofoursalesofmileagecreditstootherairlinesandcustomers,whichisre-evaluatedatleastannually.Weuseestablishedticketprices
todeterminetheestimatedsellingpriceofairtransportation.Weallocatethetotalamountcollectedfrompassengerticketsalesbetweenthedeliverablesbasedon
theirrelativesellingprices.
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