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.
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