Judge Allows Delta to Hedge Fuel and Reject Hangar Lease

A bankruptcy court judge on Monday allowed Delta Air Lines Inc. to enter new agreements, or hedges, to protect against sharp spikes in fuel prices and approved the rejection of a lease for a hangar at Dallas-Fort Worth International Airport.

In approving the carrier's ability to enter the special agreements, Judge Prudence Carter Beatty cautioned the airline against speculating in non-fuel contracts.

Many companies try to protect themselves from changes in interest rates, the value of the dollar and raw goods they rely heavily on with hedges. The hedges often come in the form of futures contracts purchased on exchanges like the New York Mercantile Exchange or the Chicago Board of Trade.

Delta did not spell out exactly how it would hedge itself against rapid changes in fuel prices. Delta spokesman Dan Lewis could not immediately provide details about how the hedge process would work or when it would be implemented.

The issue of fuel expenses has been a recurring one in Delta's case because rising energy costs are one of the reasons cited by the carrier for its filing for bankruptcy protection.

Delta still flies to DFW but closed its hub there last year. The airline, which also shut down a maintenance facility there, is no longer using the hangar in Dallas. Lewis said he did not know how much the carrier would save through the rejection of the hangar lease.

Delta leased the land for the hangar in April 1972 and paid $1.1 million annually for it. A DFW Airport spokesman said it's unclear what will happen with the site.

Delta's main hub is near its Atlanta headquarters, with secondary hubs in Cincinnati and Salt Lake City.

Delta filed for bankruptcy in September, tipped into court protection from a steep jump in fuel prices as well as competition from low cost carriers. The company has lost more than $11 billion over the last five years.

Separately, the airline was allowed to pay a maintenance company for work done on its planes that involved retrofitting wide-body aircraft.

Also, Beatty approved a request by the U.S. bankruptcy trustee that limits communication between individuals serving on Delta and Northwest Airline credit committees simultaneously.

Pratt & Whitney, the engine maker, is one such creditor serving on both Delta's and Northwest's creditor committees. Northwest Airlines Corp. filed for bankruptcy in September.

"I don't want them to use the same representative on both Delta and Northwest committees. These are essentially direct competitors with each other," US Trustee Deirdre Martini said.

Beatty told her to "do what you want to do," adding: "I think we'll have to think about this in the long run over a number of cases."


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