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Delta to Sell Regional Carrier Atlantic Southeast Airlines

Posted on: Tuesday, 16 August 2005, 06:00 CDT

Struggling to raise cash in a financial crisis, Delta Air Lines said Monday it's selling its Atlanta-based regional carrier, Atlantic Southeast Airlines, to SkyWest for $425 million.

But Delta, the USA's No. 3 airline, said in a securities filing Monday that the sale might not forestall an overwhelming cash crunch amid record fuel prices.

The acquisition of ASA nearly doubles the size of Utah-based SkyWest, which already flies for Delta as a feeder airline under contract at its Salt Lake City hub. Delta and SkyWest said Monday the deal will mean no significant changes in the flight schedules or cities served by Atlanta-based ASA.

Under SkyWest's ownership, ASA's regional jets will continue to feed Delta's larger jet flights from Atlanta.

Delta, which has warned that a cash crunch might force it into Chapter 11 bankruptcy protection soon, disclosed earlier this year that it was mulling the sale of one or both of its wholly owned regional carriers in order to raise cash.

J.T. Fisher, head of Delta's regional airline division, wouldn't say Monday whether the carrier is in talks to sell its other regional subsidiary, Cincinnati-based Comair. The securities filing said Delta is still exploring other transactions.

Delta posted net losses totaling $1.5 billion in the first half of this year, and lost $8.5 billion in the last four calendar years.

Monday's securities filing also said the airline has won an extension of its crucial contract with its credit card processor, without which no airline can accept credit cards for tickets. Delta last week delayed its security filing, pending a deal with the unnamed processor.

The agreement extends the contract to Oct. 31 from Aug. 29. But because of Delta's financial straits, it will have to advance $750 million to the processor to get that extension, further draining Delta's cash.

Delta said proceeds from the ASA deal will help pay down $100 million in outstanding debt to General Electric Commercial Finance and others.

If Delta is forced into Chapter 11 this fall, it would need to raise bankruptcy financing, possibly from GE and other lenders that have lent to Delta in the past.

Subject to reviews by federal regulators, the SkyWest deal will close in about 30 days.

Delta bought ASA in 1999 for $700 million, and acquired Comair the following year for $1.8 billion. Since 1999, ASA has more than doubled in size, adding more than 100 new regional jets and nearly 3,000 employees.

But because of costly labor contracts, Comair and ASA cost Delta more to operate today than it pays to contract with independent regional carriers.

Source: USA TODAY

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