2014 Q4 Form 10-K Financial Statement

#000002790416000018 Filed on February 05, 2016

View on sec.gov

Income Statement

Concept 2014 Q4 2014 Q3 2014 Q2
Revenue $9.647B $11.18B $10.62B
YoY Change 6.29% 6.56% 9.42%
Cost Of Revenue $8.732B $6.236B $5.326B
YoY Change 74.15% -17.44% -5.83%
Gross Profit $915.0M $4.942B $5.295B
YoY Change -77.47% 68.27% 30.71%
Gross Profit Margin 9.48% 44.21% 49.85%
Selling, General & Admin $2.709B $2.929B $2.826B
YoY Change 11.9% 320.83% 15.44%
% of Gross Profit 296.07% 59.27% 53.37%
Research & Development
YoY Change
% of Gross Profit
Depreciation & Amortization $438.0M $440.0M $451.0M
YoY Change 4.29% 5.26% 8.67%
% of Gross Profit 47.87% 8.9% 8.52%
Operating Expenses $3.642B $10.34B $9.042B
YoY Change 13.78% 15.86% 2.83%
Operating Profit -$828.0M $835.0M $1.579B
YoY Change -218.12% -46.58% 72.76%
Interest Expense $1.829B $154.0M $173.0M
YoY Change -987.86% -12.5% 0.58%
% of Operating Profit 18.44% 10.96%
Other Income/Expense, Net -$170.0M -$256.0M -$281.0M
YoY Change 750.0% 28.0% 23.25%
Pretax Income -$1.140B $579.0M $1.298B
YoY Change -340.0% -57.52% 89.21%
Income Tax -$428.0M $222.0M $497.0M
% Of Pretax Income 38.34% 38.29%
Net Earnings -$712.0M $357.0M $801.0M
YoY Change -108.4% -73.92% 16.93%
Net Earnings / Revenue -7.38% 3.19% 7.54%
Basic Earnings Per Share -$0.86 $0.43 $0.95
Diluted Earnings Per Share -$0.86 $0.42 $0.94
COMMON SHARES
Basic Shares Outstanding 834.0M shares 841.0M shares
Diluted Shares Outstanding 843.0M shares 850.0M shares

Balance Sheet

Concept 2014 Q4 2014 Q3 2014 Q2
SHORT-TERM ASSETS
Cash & Short-Term Investments $3.305B $4.740B $4.081B
YoY Change -13.09% 6.18% -2.39%
Cash & Equivalents $2.088B $2.510B $3.362B
Short-Term Investments $1.217B $2.230B $719.0M
Other Short-Term Assets $1.779B $3.178B $3.371B
YoY Change -43.93% 113.86% 102.1%
Inventory $852.0M $942.0M $961.0M
Prepaid Expenses
Receivables $2.297B $2.135B $2.104B
Other Receivables $925.0M $0.00 $0.00
Total Short-Term Assets $9.158B $11.00B $10.52B
YoY Change -5.11% 22.84% 18.23%
LONG-TERM ASSETS
Property, Plant & Equipment $21.93B $21.72B $22.05B
YoY Change 0.34% 2.0% 4.75%
Goodwill $9.794B $9.794B $9.794B
YoY Change 0.0% 0.0% 0.0%
Intangibles $4.603B $4.614B $4.625B
YoY Change -1.18% -1.3% -1.43%
Long-Term Investments
YoY Change
Other Assets $926.0M $1.119B $1.105B
YoY Change -28.93% -12.58% -17.66%
Total Long-Term Assets $44.85B $40.95B $41.67B
YoY Change 5.64% 10.52% 13.01%
TOTAL ASSETS
Total Short-Term Assets $9.158B $11.00B $10.52B
Total Long-Term Assets $44.85B $40.95B $41.67B
Total Assets $54.01B $51.94B $52.19B
YoY Change 3.65% 12.92% 14.02%
SHORT-TERM LIABILITIES
YoY Change
Accounts Payable $2.622B $2.577B $2.536B
YoY Change 14.0% -0.58% -1.36%
Accrued Expenses $4.393B $2.775B $2.570B
YoY Change 5.2% 28.35% 30.06%
Deferred Revenue
YoY Change
Short-Term Debt $0.00 $0.00 $0.00
YoY Change
Long-Term Debt Due $1.075B $1.169B $1.233B
YoY Change -25.81% -35.87% -27.26%
Total Short-Term Liabilities $16.85B $14.81B $15.21B
YoY Change 19.04% 4.8% 2.94%
LONG-TERM LIABILITIES
Long-Term Debt $8.188B $8.970B $9.089B
YoY Change -12.86% -10.99% -13.65%
Other Long-Term Liabilities $2.128B $1.946B $1.735B
YoY Change 24.37% 13.87% 3.27%
Total Long-Term Liabilities $28.35B $24.83B $24.78B
YoY Change 7.14% -21.73% -23.0%
TOTAL LIABILITIES
Total Short-Term Liabilities $16.85B $14.81B $15.21B
Total Long-Term Liabilities $28.35B $24.83B $24.78B
Total Liabilities $45.19B $39.64B $39.99B
YoY Change 11.29% -13.55% -14.84%
SHAREHOLDERS EQUITY
Retained Earnings $3.456B $4.244B $3.962B
YoY Change 13.35% -178.9% -158.71%
Common Stock $12.98B $13.46B $13.69B
YoY Change -7.16% -4.48% -3.27%
Preferred Stock
YoY Change
Treasury Stock (at cost) $313.0M $312.0M $309.0M
YoY Change 21.32% 21.88% 21.18%
Treasury Stock Shares 19.79M shares 19.77M shares 19.69M shares
Shareholders Equity $8.813B $12.30B $12.20B
YoY Change
Total Liabilities & Shareholders Equity $54.01B $51.94B $52.19B
YoY Change 3.35% 12.92% 14.02%

Cashflow Statement

Concept 2014 Q4 2014 Q3 2014 Q2
OPERATING ACTIVITIES
Net Income -$712.0M $357.0M $801.0M
YoY Change -108.4% -73.92% 16.93%
Depreciation, Depletion And Amortization $438.0M $440.0M $451.0M
YoY Change 4.29% 5.26% 8.67%
Cash From Operating Activities $582.0M $1.358B $2.056B
YoY Change -48.54% 16.97% 70.2%
INVESTING ACTIVITIES
Capital Expenditures -$660.0M -$457.0M -$518.0M
YoY Change -30.67% -27.58% 53.25%
Acquisitions
YoY Change
Other Investing Activities $622.0M -$1.126B $239.0M
YoY Change 15450.0% -8142.86% -207.17%
Cash From Investing Activities -$38.00M -$1.583B -$279.0M
YoY Change -95.99% 156.56% -50.27%
FINANCING ACTIVITIES
Cash Dividend Paid
YoY Change
Common Stock Issuance & Retirement, Net
YoY Change
Debt Paid & Issued, Net
YoY Change
Cash From Financing Activities -966.0M -627.0M -1.114B
YoY Change 170.59% 27.7% 250.31%
NET CHANGE
Cash From Operating Activities 582.0M 1.358B 2.056B
Cash From Investing Activities -38.00M -1.583B -279.0M
Cash From Financing Activities -966.0M -627.0M -1.114B
Net Change In Cash -422.0M -852.0M 663.0M
YoY Change 142.53% -1707.55% 101.52%
FREE CASH FLOW
Cash From Operating Activities $582.0M $1.358B $2.056B
Capital Expenditures -$660.0M -$457.0M -$518.0M
Free Cash Flow $1.242B $1.815B $2.574B
YoY Change -40.37% 1.28% 66.49%

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CY2015 us-gaap Defined Benefit Plan Health Care Cost Trend Rate Assumed For Next Fiscal Year
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CY2014 us-gaap Earnings Per Share Diluted
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CY2014 us-gaap Effective Income Tax Rate Reconciliation State And Local Income Taxes
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CY2014 us-gaap Employee Service Share Based Compensation Tax Benefit From Compensation Expense
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426000000 USD
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102000000 USD
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560000000 USD
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1410000000 USD
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1200000000 USD
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1100000000 USD
CY2014 us-gaap Lease And Rental Expense
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1200000000 USD
CY2014Q4 us-gaap Liabilities And Stockholders Equity
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TreasuryStockShares
21066684 shares
CY2014Q4 us-gaap Treasury Stock Value
TreasuryStockValue
313000000 USD
CY2015Q4 us-gaap Treasury Stock Value
TreasuryStockValue
373000000 USD
CY2013Q4 us-gaap Unrecognized Tax Benefits
UnrecognizedTaxBenefits
37000000 USD
CY2014Q4 us-gaap Unrecognized Tax Benefits
UnrecognizedTaxBenefits
40000000 USD
CY2015Q4 us-gaap Unrecognized Tax Benefits
UnrecognizedTaxBenefits
32000000 USD
CY2015 us-gaap Weighted Average Number Of Diluted Shares Outstanding
WeightedAverageNumberOfDilutedSharesOutstanding
804000000 shares
CY2013 us-gaap Weighted Average Number Of Diluted Shares Outstanding
WeightedAverageNumberOfDilutedSharesOutstanding
858000000 shares
CY2014 us-gaap Weighted Average Number Of Diluted Shares Outstanding
WeightedAverageNumberOfDilutedSharesOutstanding
845000000 shares
CY2015 us-gaap Weighted Average Number Of Shares Outstanding Basic
WeightedAverageNumberOfSharesOutstandingBasic
797000000 shares
CY2013 us-gaap Weighted Average Number Of Shares Outstanding Basic
WeightedAverageNumberOfSharesOutstandingBasic
849000000 shares
CY2014 us-gaap Weighted Average Number Of Shares Outstanding Basic
WeightedAverageNumberOfSharesOutstandingBasic
836000000 shares
CY2015 us-gaap Advertising Cost Policy Expensed Advertising Cost
AdvertisingCostPolicyExpensedAdvertisingCost
<div style="font-family:Times New Roman;font-size:10pt;"><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-style:italic;font-weight:bold;">Advertising Costs</font></div><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:left;text-indent:18px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">We expense advertising costs in passenger commissions and other selling expenses in the year incurred. </font></div></div>
CY2015 us-gaap Property Plant And Equipment Impairment
PropertyPlantAndEquipmentImpairment
<div style="font-family:Times New Roman;font-size:10pt;"><div style="line-height:120%;text-align:left;text-indent:18px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">We record impairment losses on flight equipment and other long-lived assets used in operations when events and circumstances indicate the assets may be impaired and the estimated future cash flows generated by those assets are less than their carrying amounts. Factors which could cause impairment include, but are not limited to, (1) a decision to permanently remove flight equipment or other long-lived assets from operations, (2) significant changes in the estimated useful life, (3) significant changes in projected cash flows, (4) permanent and significant declines in fleet fair values and (5) changes to the regulatory environment. For long-lived assets held for sale, we discontinue depreciation and record impairment losses when the carrying amount of these assets is greater than the fair value less the cost to sell.</font></font><font style="font-family:inherit;font-size:10pt;"> </font></div><div style="line-height:120%;text-align:left;text-indent:18px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">To determine whether impairments exist for aircraft used in operations, we group assets at the fleet-type level (the lowest level for which there are identifiable cash flows) and then estimate future cash flows based on projections of capacity, passenger mile yield, fuel costs, labor costs and other relevant factors. If an impairment occurs, the impairment loss recognized is the amount by which the fleet's carrying amount exceeds its estimated fair value. We estimate aircraft fair values using published sources, appraisals and bids received from third parties, as available.</font></font><font style="font-family:inherit;font-size:10pt;"> </font></div></div>
CY2015 us-gaap Revenue Recognition Deferred Revenue
RevenueRecognitionDeferredRevenue
<div style="font-family:Times New Roman;font-size:10pt;"><div style="line-height:120%;text-align:left;text-indent:18px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-style:italic;">Passenger Ticket Sales Earning Mileage Credits. </font><font style="font-family:inherit;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;color:#000000;font-style:normal;text-decoration:none;">Passenger ticket sales earning mileage credits under our SkyMiles Program provide customers with two deliverables: (1) mileage credits earned and (2) air transportation.</font></font><font style="font-family:inherit;font-size:10pt;"> </font><font style="font-family:inherit;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;color:#000000;font-style:normal;text-decoration:none;">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.</font></font></div><div style="line-height:120%;text-align:left;text-indent:18px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">We defer revenue for the mileage credits related to passenger ticket sales when the credits are earned and recognize it as passenger revenue when miles are redeemed and services are provided. We record the air transportation portion of the passenger ticket sales in air traffic liability and recognize these amounts in passenger revenue when we provide transportation or when the ticket expires unused.</font></font><font style="font-family:inherit;font-size:10pt;"> </font></div><div style="line-height:120%;text-align:left;text-indent:18px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:left;text-indent:18px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-style:italic;">Sale of Mileage Credits.</font><font style="font-family:inherit;font-size:10pt;"> </font><font style="font-family:inherit;font-size:10pt;">Customers may earn mileage credits through participating companies such as credit card companies, hotels and car rental agencies with which we have marketing agreements to sell mileage credits. Our contracts to sell mileage credits under these marketing agreements have multiple deliverables, as defined below.</font></div><div style="line-height:120%;text-align:left;text-indent:18px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:left;text-indent:18px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">Our most significant contract to sell mileage credits relates to our co-brand credit card relationship with American Express. 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 discounted 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.</font></div><div style="line-height:120%;text-align:left;text-indent:18px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-indent:18px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">In December 2014, we amended our marketing agreements with American Express which increased the value we receive under the agreements and extended the term to 2022. The amended agreements became effective January 1, 2015. The deliverables under the amended agreements are substantially similar to the previous agreement. We account for the amended agreements consistent with the accounting method adopted in September 2013 that allocates the consideration received to the individual products and services delivered based on their relative selling prices (discussed below). The increased value received under the amended agreements increases the amount of deferred revenue for the travel component and increases the value of the other deliverables, which are recognized in other revenue as they are provided.</font></div><div style="line-height:120%;font-size:11pt;"><font style="font-family:inherit;font-size:11pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:left;text-indent:18px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">In September 2013, we modified our marketing agreements with American Express, which required us to change the accounting method for recording SkyMiles sold. Under the previous method, the embedded premium or discount was allocated to the residual products or services in a combined transaction. The new method allocates consideration received based on the relative selling price of each product or service. </font><font style="font-family:inherit;font-size:10pt;">We determined our best estimate of the selling prices by considering discounted cash flow analysis using multiple inputs and assumptions, including: (1) the expected number of miles awarded and number of miles redeemed, (2) the rate at which we sell mileage credits to other airlines, (3) published rates on our website for baggage fees, discounted access to Delta Sky Club lounges and other benefits while traveling on Delta and (4) brand value. The impact of adopting the relative selling price method re-allocated a portion of the embedded discount to the travel component, lowering the deferral rate we use to record miles sold under the agreements and increasing revenue recognized on the remaining deliverables.</font><font style="font-family:inherit;font-size:10pt;"> </font></div><div style="line-height:120%;text-align:left;text-indent:18px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-indent:18px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">We recognize revenue as we deliver each sales element. We defer the travel deliverable (mileage credits) as part of frequent flyer deferred revenue and recognize passenger revenue as the mileage credits are used for travel. The revenue allocated to the remaining deliverables is recorded in other revenue. We recognize the revenue for these services as they are performed.</font></div><div style="line-height:120%;text-indent:18px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:left;text-indent:18px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-style:italic;">Breakage. </font><font style="font-family:inherit;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;color:#000000;font-style:normal;text-decoration:none;">For mileage credits that we estimate are not likely to be redeemed (&#8220;breakage&#8221;), we recognize the associated value proportionally during the period in which the remaining mileage credits are expected to be redeemed. Management uses statistical models to estimate breakage based on historical redemption patterns. A change in assumptions as to the period over which mileage credits are expected to be redeemed, the actual redemption activity for mileage credits or the estimated fair value of mileage credits expected to be redeemed could have a material impact on our revenue in the year in which the change occurs and in future years.</font></font><font style="font-family:inherit;font-size:10pt;font-style:italic;"> </font></div></div>
CY2015 us-gaap Revenue Recognition Loyalty Programs
RevenueRecognitionLoyaltyPrograms
<div style="font-family:Times New Roman;font-size:10pt;"><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-style:italic;font-weight:bold;">Frequent Flyer Program</font></div><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:left;text-indent:18px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">Our SkyMiles Program </font><font style="font-family:inherit;font-size:10pt;">offers incentives to travel on Delta. This program allows customers to earn mileage credits by flying on Delta, Delta Connection </font><font style="font-family:inherit;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">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. </font></font><font style="font-family:inherit;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">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.</font></font><font style="font-family:inherit;font-size:10pt;"> </font></div><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:left;text-indent:18px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">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.</font></font><font style="font-family:inherit;font-size:10pt;"> </font></div><div style="line-height:120%;text-align:left;text-indent:18px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:left;text-indent:18px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-style:italic;">Passenger Ticket Sales Earning Mileage Credits. </font><font style="font-family:inherit;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;color:#000000;font-style:normal;text-decoration:none;">Passenger ticket sales earning mileage credits under our SkyMiles Program provide customers with two deliverables: (1) mileage credits earned and (2) air transportation.</font></font><font style="font-family:inherit;font-size:10pt;"> </font><font style="font-family:inherit;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;color:#000000;font-style:normal;text-decoration:none;">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.</font></font></div><div style="line-height:120%;text-align:left;text-indent:18px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">We defer revenue for the mileage credits related to passenger ticket sales when the credits are earned and recognize it as passenger revenue when miles are redeemed and services are provided. We record the air transportation portion of the passenger ticket sales in air traffic liability and recognize these amounts in passenger revenue when we provide transportation or when the ticket expires unused.</font></font><font style="font-family:inherit;font-size:10pt;"> </font></div><div style="line-height:120%;text-align:left;text-indent:18px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:left;text-indent:18px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-style:italic;">Sale of Mileage Credits.</font><font style="font-family:inherit;font-size:10pt;"> </font><font style="font-family:inherit;font-size:10pt;">Customers may earn mileage credits through participating companies such as credit card companies, hotels and car rental agencies with which we have marketing agreements to sell mileage credits. Our contracts to sell mileage credits under these marketing agreements have multiple deliverables, as defined below.</font></div><div style="line-height:120%;text-align:left;text-indent:18px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:left;text-indent:18px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">Our most significant contract to sell mileage credits relates to our co-brand credit card relationship with American Express. 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 discounted 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.</font></div><div style="line-height:120%;text-align:left;text-indent:18px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-indent:18px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">In December 2014, we amended our marketing agreements with American Express which increased the value we receive under the agreements and extended the term to 2022. The amended agreements became effective January 1, 2015. The deliverables under the amended agreements are substantially similar to the previous agreement. We account for the amended agreements consistent with the accounting method adopted in September 2013 that allocates the consideration received to the individual products and services delivered based on their relative selling prices (discussed below). The increased value received under the amended agreements increases the amount of deferred revenue for the travel component and increases the value of the other deliverables, which are recognized in other revenue as they are provided.</font></div><div style="line-height:120%;font-size:11pt;"><font style="font-family:inherit;font-size:11pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:left;text-indent:18px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">In September 2013, we modified our marketing agreements with American Express, which required us to change the accounting method for recording SkyMiles sold. Under the previous method, the embedded premium or discount was allocated to the residual products or services in a combined transaction. The new method allocates consideration received based on the relative selling price of each product or service. </font><font style="font-family:inherit;font-size:10pt;">We determined our best estimate of the selling prices by considering discounted cash flow analysis using multiple inputs and assumptions, including: (1) the expected number of miles awarded and number of miles redeemed, (2) the rate at which we sell mileage credits to other airlines, (3) published rates on our website for baggage fees, discounted access to Delta Sky Club lounges and other benefits while traveling on Delta and (4) brand value. The impact of adopting the relative selling price method re-allocated a portion of the embedded discount to the travel component, lowering the deferral rate we use to record miles sold under the agreements and increasing revenue recognized on the remaining deliverables.</font><font style="font-family:inherit;font-size:10pt;"> </font></div><div style="line-height:120%;text-align:left;text-indent:18px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-indent:18px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">We recognize revenue as we deliver each sales element. We defer the travel deliverable (mileage credits) as part of frequent flyer deferred revenue and recognize passenger revenue as the mileage credits are used for travel. The revenue allocated to the remaining deliverables is recorded in other revenue. We recognize the revenue for these services as they are performed.</font></div><div style="line-height:120%;text-indent:18px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:left;text-indent:18px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-style:italic;">Breakage. </font><font style="font-family:inherit;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;color:#000000;font-style:normal;text-decoration:none;">For mileage credits that we estimate are not likely to be redeemed (&#8220;breakage&#8221;), we recognize the associated value proportionally during the period in which the remaining mileage credits are expected to be redeemed. Management uses statistical models to estimate breakage based on historical redemption patterns. A change in assumptions as to the period over which mileage credits are expected to be redeemed, the actual redemption activity for mileage credits or the estimated fair value of mileage credits expected to be redeemed could have a material impact on our revenue in the year in which the change occurs and in future years.</font></font><font style="font-family:inherit;font-size:10pt;font-style:italic;"></font></div></div>
CY2015 us-gaap Revenue Recognition Sales Of Services
RevenueRecognitionSalesOfServices
<div style="font-family:Times New Roman;font-size:10pt;"><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-style:italic;font-weight:bold;">Passenger Tickets</font></div><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:left;text-indent:18px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">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.</font></div><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div></div>
CY2015 us-gaap Use Of Estimates
UseOfEstimates
<div style="font-family:Times New Roman;font-size:10pt;"><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-style:italic;font-weight:bold;">Use of Estimates</font></div><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:left;text-indent:18px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">We are required to make estimates and assumptions when preparing our Consolidated Financial Statements in accordance with GAAP. These estimates and assumptions affect the amounts reported in our Consolidated Financial Statements and the accompanying notes. Actual results could differ materially from those estimates.</font></div></div>

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