Financial Condition and Liquidity

Our cash and cash equivalents and short-term investments were $4.5 billion at December 31, 2008 compared to $2.8 billion at December 31, 2007. This increase primarily reflects our Merger with Northwest, in which we acquired $2.4 billion of cash and cash equivalents, $1.0 billion we received from American Express for an advance purchase of SkyMiles and the borrowing of $1.0 billion under the Revolving Facility that is a part of our senior secured exit financing facilities (the “Exit Facilities”), partially offset by $1.2 billion of fuel hedge margin that we were required to post with counterparties.

The counterparties under our fuel hedge contracts have the right to require us to secure our obligations under those contracts by posting the margin associated with any loss position on those contracts. Our contracts related to the margin balance as of the end of 2008 generally settle during the first half of 2009. If fuel prices continue to fall, we may be required to post additional collateral under those contracts.

We expect to meet our cash needs for 2009 from cash flows from operations, cash and cash equivalents, short-term investments and financing arrangements. We have an undrawn $500 million revolving credit facility. With respect to our aircraft order commitments at December 31, 2008, we have financing commitments from third parties, cancellation rights or definitive agreements to sell certain aircraft to third parties immediately following delivery of those aircraft to us by the manufacturer.

While we do not currently anticipate a need to access the capital markets to meet our cash needs in 2009, the continued credit crisis and related turmoil in the global financial system may restrict our ability to access the markets at a time when we would like, or need, to do so. These conditions could have an impact on our flexibility to react to changing economic and business conditions. In addition, our ability to obtain additional financing on acceptable terms for future needs could be affected by the fact that substantially all of our assets are subject to liens.

The financing agreements of Delta and its subsidiaries contain certain affirmative, negative and financial covenants. We were in compliance with all covenants as of December 31, 2008.

 

Significant Liquidity Events

Significant liquidity events during 2008 were as follows:

 

 

 

 

For additional information regarding these matters, see Notes 4 and 6 of the Notes to the Consolidated Financial Statements.

Combined Sources and Uses of Cash

Cash flows from operating activities

Cash used in operating activities totaled $1.7 billion for 2008, and cash provided by operating activities was $1.4 billion for 2007. Cash used in operating activities for 2008 reflects (1) an increase in aircraft fuel payments due to record high fuel prices for most of the year, (2) the posting of $1.1 billion in margin with counterparties primarily from our estimated fair value loss position on our fuel hedge contracts at December 31, 2008, (3) the payment of $438 million in premiums for fuel hedge derivatives entered into during 2008, (4) a $444 million decrease in