Fitch Places Delta U.S. Hub Airports on Negative Outlook

Delta and its affiliates represented nearly 95% of total enplanements at CVG as of July 2005, with the airline's hubbing activity leading to a disproportionately high level of connecting traffic at 72% of total passenger volume. While on Sept. 9, 2005, Delta announced that, effective Dec. 1, 2005, it will reduce total capacity offered in the Cincinnati market by 26%; the airline still plans to offer 440 daily flights to 122 worldwide destinations from the airport, making it the carrier's second largest hub behind ATL. A further pull-down in service during reorganization could affect operations. However, the airport benefits from an approximately $35.8 million cash cushion and boasts a competitive cost structure and advantageous Midwestern location, which could be marketed in attracting new or replacement air service.

At somewhat less risk are airports served by Delta that rely on local demand for air travel to drive their operations. In many smaller such markets, however, Delta extensively utilizes regional jets (RJs) where it reportedly has excess capacity. Should the carrier decide to rationalize or pare down this fleet while in bankruptcy, some smaller cities could lose service. The O&D nature of traffic in many of these markets does, however, increase the probability that another carrier or carriers may enter the market and provide service previously offered by Delta. Fitch will issue credit updates on these, and other airports, as warranted by events in Delta's bankruptcy proceedings.

In addition to the general airport revenue bonds at airports served by Delta, the bankruptcy filing presents implications for holders of the airline's $1.9 billion original par of special facility debt. The structure and security of special facility transactions vary considerably, from a simple guarantee of the airline, in which case the investor's claim ranks behind secured creditors with limited chance for recovery, to secured structures, such as mortgage, and leases, which may provide the investor with a much higher likelihood of recouping their investment.

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CONTACT: Fitch Ratings Douglas J. Kilcommons, 212-908-0740 (New York) Peter Stettler, 312-368-3176 (Chicago) Jessica L. Soltz-Rudd, 415-732-5616 (San Francisco) Brian Bertsch, 212-908-0549 (Media Relations, New York) KEYWORD: NEW YORKINDUSTRY KEYWORD: BANKING BOND/STOCK RATINGSSOURCE: Fitch Ratings

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