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.
Barring any disruptions, the company is on track to achieve approximately 70 percent of its business plan's benefits by the end of this year, with the goal of successfully emerging from bankruptcy in 2007.
Delta Air Lines (Other OTC: DALRQ) is one of the world's fastest growing international carriers with more than 50 new international routes added or announced in the last year.
Delta offers flights to 452 destinations in 95 countries on Delta, Song, Delta Shuttle, the Delta Connection carriers and its worldwide partners. In summer 2006, Delta plans to offer customers more destinations and departures between the U.S., Europe, India and Israel than any global airline*, including service on 11 new transatlantic routes from its Atlanta and New York-JFK hubs. Delta also is a major carrier to Mexico, South and Central America and the Caribbean, with more than 35 routes announced, added or applied to serve since Jan. 1, 2005. Delta's marketing alliances also allow customers to earn and redeem SkyMiles on more than 14,000 flights offered by SkyTeam and other partners. Delta is a founding member of SkyTeam, a global airline alliance that provides customers with extensive worldwide destinations, flights and services.
Customers can check in for flights, print boarding passes and check flight status at delta.com.
*From the U.S., based on July 2006 OAG.
Statements in this news release that are not historical facts, including statements regarding our estimates, expectations, beliefs, intentions, projections or strategies for the future, may be "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. All forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from the estimates, expectations, beliefs, intentions, projections and strategies reflected in or suggested by the forward-looking statements. These risks and uncertainties include, but are not limited to, the actions and decisions of our creditors and other third parties with interests in our Chapter 11 proceedings; our ability to obtain court approval with respect to motions in the Chapter 11 proceedings prosecuted from time to time; our ability to develop, prosecute, confirm and consummate one or more plans of reorganization with respect to the Chapter 11 proceedings and to consummate all of the transactions contemplated by one or more such plans of reorganization or upon which consummation of such plans may be conditioned; risks associated with third parties seeking and obtaining court approval to terminate or shorten the exclusivity period for us to propose and confirm one or more plans of reorganization, to appoint a Chapter 11 trustee or to convert the cases to Chapter 7 cases; our ability to obtain and maintain normal terms with vendors and service providers; our ability to maintain contracts that are critical to our operations; our ability to maintain adequate liquidity to fund and execute our business plan during the Chapter 11 proceedings and in the context of a plan of reorganization and thereafter; our ability to comply with financial covenants in our financing agreements; labor issues, including our ability to reduce our pilot labor costs to the level called for by our business plan and possible strikes or job actions by unionized employees; our ability to implement our expanded transformation plan successfully; the cost of aircraft fuel; pension plan funding obligations; interruptions or disruptions in service at one of our hub airports; our increasing dependence on technology in our operations; our ability to retain management and key employees; restructurings by competitors; the effects of terrorist attacks; and competitive conditions in the airline industry.
Additional information concerning risks and uncertainties that could cause differences between actual results and forward-looking statements is contained in Delta's Securities and Exchange Commission filings, including its Form 10-K, filed with the Commission on March 27 2006.
The risks and uncertainties and the terms of any reorganization plan ultimately confirmed can affect the value of our various pre-petition liabilities, common stock and/or other securities. No assurance can be given as to what values, if any, will be ascribed in the bankruptcy proceedings to each of these liabilities or securities.
We believe that our currently outstanding common stock will have no value and will be canceled under any plan of reorganization we propose, and that the value of our various pre-petition liabilities and other securities is highly speculative. Accordingly, we urge that caution be exercised with respect to existing and future investments in any of these liabilities and/or securities. Investors and other interested parties can obtain information about Delta's Chapter 11 filing on the Internet at delta.com/restructure.
Court filings and claims information are available at deltadocket.com. Caution should be taken not to place undue reliance on Delta's forward-looking statements, which represent Delta's views only as of April 28, 2006, and which Delta has no current intention to update.
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