Delta selling feeder carrier to raise cash
Trying to avoid bankruptcy, Delta Air Lines, is selling off its feeder carrier Atlantic Southeast Airlines Inc. for $425 million to SkyWest Inc., based in Utah, who supplies regional feeder service to both Delta and United Airlines.
As for the deal with SkyWest, ASA will continue to serve Delta customers under a new 15-year agreement, with ASA’s fleet of more than 150 aircraft continuing to fly Delta routes, the airline said in a statement.
Delta said Monday it will use the proceeds of the sale “for general corporate purposes and to pay down $100 million of outstanding borrowings under its credit facility with GE Commercial Finance and other lenders.”
The sale is subject approval by the board of both companies and regulatory review, is expected to close in September.
In a filing to the Securities & Exchange Commission, Delta said even with this sale it is running out of cash and may still need to file for bankruptcy. It has less than $2 billion in cash and more than $2 billion in expected obligations.
The filling additionally noted that it may not be able to meet cash and earnings levels required in prior loan agreements with GE and American Express and that is trying to negotiate an agreement with a new Visa/MasterCard credit card processor, as the current processor is currently holding back $750 million for not yet flown purchases…cash Delta badly needs.
Charles Kao
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