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Delta Sells Regional Carrier To Raise Cash

August 16, 2005
At bankruptcy’s doorstep, Delta Air Lines says it will sell its subsidiary, regional carrier Atlantic Southeast Airlines, to SkyWest for $425 million cash. Company executives say they’ll use the money to pay off some of its mountain of debt.

Delta Airlines • SkyMiles • Travel vouchers • Delta/AmEx promotions • European promotions • Reservations & itinerary changes • Lost/damaged luggage • Unaccompanied children • Puerto Rico USA • Miscellaneous --- News • Delta Reduces Capacity As Fuel Prices Rise • Delta Cuts Flights in Slowing Economy • Delta Alters Fees to Conform to Northwest's • Delta, Northwest Complete Merger • Delta Adding Wi-Fi to All Flights • Delta Raises Second Checked Bag Fee to $50 • Delta Passengers Stranded 7 Hours on Plane • Delta Sells Ads on Boarding Passes • Delta, Northwest Merger Faces Heavy Chop • US Airways Makes Bid for Delta • Delta Beefs Up Routes, Retrofits Its Jets • Delta Begins Passing On Airport Fees To Passengers • Delta Writes Coda to Song • Delta Files for Bankruptcy • Delta Sells Regional Carrier To Raise Cash • Delta Abandons $499 Fare Cap • Delta Warns of Bankruptcy • Delta Passengers To Brown Bag It • Delta Cuts Fares

The company said ASA will continue to serve Delta customers under a new 15-year Delta Connection agreement, with ASA’s fleet of more than 150 aircraft continuing to fly Delta routes. Delta Chief Executive Officer Gerald Grinstein characterized the sale as a way to strengthen Delta’s relationship with SkyWest, put money to the bottom line, and continue much of the same service now being provided.

As part of the deal, Delta will enter into two new Delta Connection agreements under which ASA and SkyWest Airlines will continue to serve as Delta Connection regional carriers through 2020. Delta said its agreement with ASA includes strong incentives for ASA to meet or exceed specific performance benchmarks and enhance cost efficiency.

Current plans are for ASA and SkyWest Airlines to operate as wholly owned subsidiaries of SkyWest, Inc. As a result, Delta said the sale transaction is not expected to result in any significant changes in ASA’s flight schedules or locations served.

Since the time of Delta’s purchase in 1999, ASA has more than doubled in size, adding more than 100 new regional jets, serving 126 destinations. At the same time, ASA added nearly 3,000 employees to the Delta payroll.

The company said the sale of ASA to SkyWest for a purchase price of $425 million is subject to certain closing conditions, including regulatory reviews, and is expected to close in September. As per the terms of the agreement, $350 million in cash will be payable at closing, representing $330 million of the purchase price and $20 million relating to certain aircraft financing deposits.

“As we continue to implement Delta’s transformation plan, this transaction not only enhances our ability to operate our business as efficiently and cost effectively as we can, it also improves Delta’s liquidity position,” Grinstein said.

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