Judge Orders U.S. to Pay $14.6M to Delta

A judge has ordered the U.S. government to pay Delta Air Lines Inc. at least $14.6 million for flights the airline provided to U.S. military personnel, saying the government has no right to withhold the money to resolve an old quarrel involving ticket overcharges.

Judge Adlai S. Hardin of the U.S. Bankruptcy Court in Manhattan ruled that the government's rights as a creditor in a bankruptcy case were no different from those of other creditors. Accordingly, he said, it was obligated to pay Atlanta-based Delta for flights provided after the airline began its bankruptcy reorganization in September 2005.

'It is not inequitable to treat the government like all other creditors' who are forbidden by law from offsetting pre-bankruptcy claims against post-bankruptcy liabilities, Hardin ruled earlier this month. He said the law is designed to ensure that 'no creditor, not even the government, obtains an unfair advantage over others.'

A spokeswoman for the General Services Administration, the government agency responsible for providing transportation for federal employees, said Monday the agency had no comment.

A Delta spokeswoman, Betsy Talton, said the government owed the airline $14.6 million as of June 5 for flights provided after Delta's bankruptcy filing.

Delta sued the government in February, complaining that the GSA had instructed all federal agencies not to pay the airline for flights provided mainly to U.S. Army personnel. Delta said it agreed to provide those flights under an annual contract with the government. It said the blocked payments were accumulating at an average rate of $117,000 a day.

The government, however, contended that it had the right to withhold payments because it said Delta previously had overcharged it by $26.2 million and hadn't repaid that amount.

The overcharges involved a faulty Defense Department billing system that paid travelers for airline tickets they didn't purchase, the General Accounting Office found in 2004.

The Defense Department asked five airlines, including Delta, to return payments for unused tickets.

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