Delta Airlines 2002 Annual Report Download - page 19

other infrastructure improvements. If fully implemented, the CIP is currently
estimated to cost approximately $5.4 billion. The CIP runs through 2010, with
individual projects scheduled to be constructed at different times. A
combination of federal grants, passenger facility charge revenues, increased
user rentals and fees, and other airport funds are expected to be used to pay
CIP costs directly and through the payment of debt service on bonds. There is no
assurance the CIP will be implemented on schedule and within budget, or that it
will be fully implemented. Failure to implement certain portions of the CIP in a
timely manner could adversely impact Delta's operations at Hartsfield Atlanta
International Airport.
During 2001, Delta entered into lease and financing agreements with the
Massachusetts Port Authority ("Massport") for the redevelopment and expansion of
Terminal A at Boston's Logan International Airport. The completion of this
project will enable Delta to consolidate all of its domestic operations at that
airport into one location. Construction began in the June 2002 quarter and is
scheduled to be completed during 2005. Project costs will be funded with $498
million in proceeds from Special Facilities Revenue Bonds issued by Massport on
August 16, 2001. Delta agreed to pay the debt service on the bonds under a
long-term lease agreement with Massport and issued a guarantee to the bond
trustee covering the payment of the debt service on the bonds. Additional
information about these bonds is set forth in Note 6 of the Notes to the
Consolidated Financial Statements on pages 43-46 of Delta's 2002 Annual Report
to Shareowners, and is incorporated by reference.
ITEM 3. LEGAL PROCEEDINGS
In Re Northwest Airlines, et al. Antitrust Litigation. In June 1999,
two purported class action antitrust lawsuits were filed in the U.S. District
Court for the Eastern District of Michigan against Delta, US Airways, Northwest
Airlines and the Airlines Reporting Corporation, an airline-owned company that
operates a centralized clearinghouse for travel agents to report and account for
airline ticket sales.
In the first case, the plaintiffs allege, among other things: (1) that
the defendants and certain other airlines conspired with Delta in violation of
Section 1 of the Sherman Act to restrain competition and assist Delta in fixing
and maintaining anticompetitive prices for air passenger service to and from its
Atlanta and Cincinnati hubs; and (2) that Delta violated Section 2 of the
Sherman Act by exercising monopoly power to establish such prices in an
anticompetitive or exclusionary manner. The complaint asserts that, for purposes
of plaintiffs' damages claims, the purported plaintiff class consists of all
persons who purchased a Delta full-fare ticket between June 11, 1995 and the
present on routes (1) that start or end at Delta's hubs in Atlanta or
Cincinnati; (2) on which Delta has over a 50% market share; (3) that are longer
than 150 miles; and (4) that have total annual traffic of over 30,000
passengers.
In the second case, the plaintiffs assert similar allegations and
claims under Sections 1 and 2 of the Sherman Act with respect to US Airways'
pricing practices at its Pittsburgh and Charlotte hubs ("US Airways Hubs"). The
complaint asserts, among other things, that Delta, the other defendants and
certain other airlines conspired with US Airways to restrain competition and
assist US Airways in fixing and maintaining prices for air passenger service to
and from the US Airways Hubs.
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