"Frank F. Matthews" wrote:
More details have come out. It turns out that AE negotiated a priority
position in case of default. I wonder what the accounting implications
for that are?

FF points are a virtual liability. It costs nothing for Delta to provide the
service AMEX paid for (authorize Amex to add points to customer FF accounts).

And then, this virtual debt is slowly converted to a slightly less virtual
debt (FF points in customer accounts) each year.

Are all of FF points in customer balances aco****ed as liability now, or are
airlines in the USA only declaring as debt the capacity that is allocated to
FF freebies each year ?

If AMEX usually gives 2.5 billion points per year, it means it would send
DELTA $50 million bucks a year in payment for those points. So the deal could
last 10 years.

What is likely to happen is that Amex has minumum cash requirements as
covenants for this debt, so that shoudl Delta liquidate, there would be enough
cash to cover the cash balance remaining (which goes down as AMEX awards
points each month)