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#1




Delta Air Lines May Drop Preparation For Chapter 11 Filing
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? Delta may have a problem with how the payment is carried on the books. I suppose their team of crack ex Enron accountants has approved it though. nobody wrote: "Frank F. Matthews" wrote: will not go 11. Interesting that 500 ,million is prepayment for frequent flyer miles. That indicates that AE expects them to stay around but seats will be really hard to find. It won't make a difference to seat availabily. Amex already sends big fat cheques to Delta every month for the purchase of Delta FF miles which Amex then gives to customers for every dollr tehy spend on the card. The $500 million is simply prepayment for the miles AMEX will be giving to customers over the next X period. It would be interesting to know just how long it will take for AMEX to distribute those miles. If Amex negotiated a rate of say 2 cents per mile, that gives them 50*500 000 000 = 25000000000 FF points to hand out. It may take a while before cardholders of AMEX cards spend that much money. 
#2




"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) 
#3




nobody wrote:
"Frank F. Matthews" wrote: will not go 11. Interesting that 500 ,million is prepayment for frequent flyer miles. That indicates that AE expects them to stay around but seats will be really hard to find. It won't make a difference to seat availabily. Amex already sends big fat cheques to Delta every month for the purchase of Delta FF miles which Amex then gives to customers for every dollr tehy spend on the card. The $500 million is simply prepayment for the miles AMEX will be giving to customers over the next X period. It would be interesting to know just how long it will take for AMEX to distribute those miles. If Amex negotiated a rate of say 2 cents per mile, that gives them 50*500 000 000 = 25000m000m000 FF points to hand out. It may take a while before cardholders of AMEX cards spend that much money. 25 billion divided by over 50 million cardholders? That's $500 per AMEX card holder. 
#4




anon wrote:
25 billion divided by over 50 million cardholders? That's $500 per AMEX card holder. No. Credit cards typically give one point per dollar spent, and points cost anything between 2 to 4 cents. But in the case of Amex, it is likely that it is paying at the low end of the cost per point. Number of cardholders isn't so important. It is the number of cradholders with the Delta affinity card (eg: those who have their "goodies" converted to Delta FF point) with average spending for those customers. 
#5




nobody wrote:
anon wrote: 25 billion divided by over 50 million cardholders? That's $500 per AMEX card holder. No. Credit cards typically give one point per dollar spent 500 points per cardholder = $500 spent per cardholder. Did I miss something in the math? 
#6




"anon" wrote in message m... nobody wrote: anon wrote: 25 billion divided by over 50 million cardholders? That's $500 per AMEX card holder. No. Credit cards typically give one point per dollar spent 500 points per cardholder = $500 spent per cardholder. Did I miss something in the math? Yes  you get points worth one cent per dollar spent. To receive $500 worth of points you need to put $50,000 through the account. Keith 
#7




nobody wrote:
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 ? FF points were initially accounted as 100% liabilities. However, they've long since converted to a set percentage. 
#8




No. Credit cards typically give one point per dollar spent
500 points per cardholder = $500 spent per cardholder. Did I miss something in the math? Yes  you get points worth one cent per dollar spent. To receive $500 worth of points you need to put $50,000 through the account. My Amex Delta card gives double points on all regular purchases at grocery store, postage, gasoline, etc. Plus they're always handing out extra points for buying your ticket at Delta.com, or some other promotion. 
#9




Keith Willshaw wrote:
"anon" wrote in message m... nobody wrote: anon wrote: 25 billion divided by over 50 million cardholders? That's $500 per AMEX card holder. No. Credit cards typically give one point per dollar spent 500 points per cardholder = $500 spent per cardholder. Did I miss something in the math? Yes  you get points worth one cent per dollar spent. To receive $500 worth of points you need to put $50,000 through the account. Keith Yes, but they didn't pay 25 BILLION DOLLARS. I am talking about 25 billion points based on the previous post estimating a price of 2 cents per point for the 500 million dollars AMEX paid. So, if AMEX bought 25 billion miles and has 50 million cardholders, that would be 500 miles per cardholder 
#10




anon wrote:
per point for the 500 million dollars AMEX paid. So, if AMEX bought 25 billion miles and has 50 million cardholders, that would be 500 miles per cardholder Only a small proportion of AMEX's worldwide customer base have chosen the affinity AMEX card which yields Delta points. One would have to know more about the relationship between Amex and Delta to know how many cardholders are involved, and what their average spending per years is and this how long AMEX expects this bank of points to last until AMEX needs to buy more points. Having such a big bank of points to distribute amy allow Alex to make some more interesting offers (eg: 10,000 when you join, double the normal airport allocation campaigns etc). 
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