AP
Delta Creditors Push for Jet Maintenance
Tuesday February 7, 9:03 pm ET
By Aleksandrs Rozens, AP Business Writer
Delta Creditors Seek Pledge That Jets Used As Collateral Will Be Maintained
NEW YORK (AP) -- A trustee for Delta Air Lines Inc. bond investors asked a bankruptcy court judge Tuesday to force the carrier to ensure proper maintenance of jets that are pledged as collateral for debt.
Wells Fargo Bank N.A., the bank serving as trustee for investors who purchased the carrier's debt, said it wants a guarantee that Delta will keep up with regular maintenance of 32 planes it used as collateral for a 2004 debt offering so the aircraft do not lose their value. The trustee wants Delta to keep using the planes for passenger service, to ensure they remain airworthy.
As a trustee, Wells Fargo ensures that Delta bond holders receive timely principal and interest payments each month. The securities were sold with a 9.5 percent interest rate. The bond holders have not received any of their principal and interest payments -- about $250 million to date -- after Delta declared bankruptcy in September 2005. That money is not expected to be paid back until the Atlanta-based company emerges from bankruptcy.
The trustee's attorney expressed concern in court that without proper maintenance, the planes' value would diminish and be worth less than the amount Delta owes the bondholders. Delta owns the 32 planes, a mix of Boeing 757s and 767s as well as MD-80 and MD-90 models.
Delta has maintained in court documents that it continues to keep up with the needed maintenance on the planes and estimated it has spent "tens of millions of dollars" on repairs and maintenance required by the Federal Aviation Administration.
The hearing on the issue will resume Wednesday, but U.S. Bankruptcy Judge Adlai Hardin said both sides should try to come to an agreement on their own.
Judge Lets Grinstein's Delta Tap Disability Fund
Greg Levine, 02.06.06, 5:16 PM ET
That sound bite from Al Gore's presidential campaign--and a standby on General Electric's Saturday Night Live--looks like, in the apocryphally misquoted words of Ronald Reagan, an idea whose time has passed.
At least on Gerald Grinstein's watch. He's the chief executive of Delta Air Lines, and the bankrupt firm won permission from a judge Monday to further raid coffers earmarked for a disability and survivors' trust. The CEO's plans to revamp the firm include harnessing such funds to meet other financial obligations.
A court-appointed committee speaking for retirees wanted Delta to seek said retirees' OK before it used the trust funds. Delta filed for Chapter 11 protection on Sept. 14, the same day as Northwest Airlines. An attorney for the committee claimed Delta had already siphoned off $83 million of the trust's money prior to the filing.
But Bankruptcy Judge Adlai Hardin, in his first hearing since taking over the case, agreed with Delta's attorney: Hardin said the committee had no authority to control how Delta makes its payments--providing retiree claims are paid as scheduled. If Grinstein & company alter the payments, then the retirees' advocates may present a payment plan.
As to whether Delta inappropriately used the trust's money before Sept. 14? Hardin noted that that matter was still unresolved--but beyond the jurisdiction of the bankruptcy hearings.
Elsewhere in the industry, discount carriers like easyJet, JetBlue, and Southwest Airlines are getting more competition, albeit from far afield.
While billionaire investor Prince Alwaleed may not need it, Saudi Arabia is launching its first low-cost airline, Sama. According to Sama CEO Andrew Cowen, it'll begin serving mainly Riyadh, Dammam and Jeddah, carrying frequent fliers and pilgrims. The carrier seeks profit by 2007's end at the latest, Cowen said.
If only Delta could say the same.
