Delta Takes Step to Reduce Real Estate Costs at the Cincinnati/Northern Kentucky Int'l Airport

Such facilities include, among others, Delta's Terminal 3 and Concourse B at the airline's second largest hub.


ATLANTA - Delta Air Lines today took another step to reduce its real estate costs and provide additional flexibility at its airport facilities by filing a motion with the U.S. Bankruptcy Court for the Southern District of New York seeking court authority to reject a number of leases and agreements related to certain facilities that were financed by 1992 special facility bonds at the Cincinnati/Northern Kentucky International Airport (CVG). Such facilities include, among others, Delta's Terminal 3 and Concourse B at the airline's second largest hub. Delta emphasized, however, that it remains committed to continuing full service to its CVG customers.

Lease and contract rejections are a normal part of the Chapter 11 restructuring process and are subject to court approval.

Such actions are typically required to allow a restructuring company to meet its financial targets and achieve competitive costs in order to successfully reorganize.

"We are reviewing every airport location where we fly to ensure we are utilizing airport facilities in the most efficient and cost-effective way possible," said Edward H.

Bastian, Delta's executive vice president, chief financial officer and head of the company's in-court restructuring efforts. "This action is an important step towards achieving our financial goals and will allow Delta to obtain greater flexibility in the event Delta's space needs at CVG change."

In December 2005, Delta notified the Kenton County Airport Board (KCAB) and UMB Bank, N.A., the trustee for the 1992 special facility bonds (approximately $413.5 million outstanding), that it needed to restructure the costs of these facilities and that without a negotiated agreement it would expect to have to reject the various leases and agreements related to such facilities. Negotiations among the parties have failed to produce an acceptable agreement related to restructuring relevant financial and other obligations. As a result, Delta concluded that it should file today's motion prior to the May 1 end of the negotiating period agreed to by the parties pursuant to an earlier Court approved stipulation.

"We value our business relationship with KCAB and plan to work closely with KCAB going forward," stated Bastian. "Our goal is to negotiate new agreements that are cost-effective, provide flexibility and support our transformation plan objectives for the use of these facilities."

"This action does not signal a reduced commitment by Delta to the Cincinnati market. In fact, this should have no impact on Delta customers," emphasized Bastian. Delta offers more than 400 average daily departures to 125 non-stop destinations in the United States and the Bahamas from CVG. The airline also recently announced new direct summer service to such popular destinations as Cabo San Lucas and Anchorage, Alaska, and is resuming its international summer service to Rome and Amsterdam to supplement existing international service to London Gatwick, Paris and Frankfurt.

The timing of today's filing of the rejection motion corresponds with the expiration of the negotiation period with KCAB and the bond trustee. Earlier in the week the judge presiding over Delta's Chapter 11 restructuring process issued a ruling on a motion filed by Comair, a wholly owned subsidiary of Delta, under section 1113 of the Bankruptcy Code to reduce certain labor costs. "While it is a coincidence of timing, this week's Comair development further reinforces the need to provide flexibility in the restructuring of our Cincinnati operations," commented Bastian. "We are operating on borrowed money and borrowed time, so it is important that we become cost competitive in every aspect of our business as quickly as possible."

Delta is working to achieve $3 billion in additional annual benefits by 2007, approximately one-third of which is targeted to be delivered through in-court restructuring initiatives.

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