Delta Airlines 2005 Annual Report Download - page 34

Table of Contents
On March 27, 2006 we executed an amended and restated credit agreement with a syndicate of lenders led by GECC and Morgan
Stanley that replaced the DIP Credit facility in its entirety.
In September 2005, we entered into an amendment to our Visa/MasterCard credit card processing agreement to extend its term to
October 2007. On January 26, 2006, with the authorization from the Bankruptcy Court, we entered into a letter of credit facility with
Merrill Lynch. Under the Letter of Credit Reimbursement Agreement, Merrill Lynch issued a $300 million irrevocable standby letter
of credit ("Merrill Lynch Letter of Credit") for the benefit of our Visa/MasterCard credit card processor ("Processor"). As
contemplated in our Visa/MasterCard credit card processing agreement ("Processing Agreement"), we are providing the Merrill Lynch
Letter of Credit as a substitution for a portion of the cash reserve that the Processor maintains. Under the Processing Agreement, the
Processor is permitted to maintain a reserve from our receivables that is equal to the Processor's potential liability for tickets
purchased with Visa or MasterCard that have not yet been used for travel (the "unflown ticket liability"). We estimate that the reserve,
which adjusts daily, will range between $450 million and $850 million during the term of the Processing Agreement. The Processing
Agreement allows us to substitute the Merrill Lynch Letter of Credit for a portion of the cash reserve equal to the lesser of
$300 million and 45% of the unflown ticket liability. The Merrill Lynch letter of credit will expire in January 2008.
For further information about these liquidity initiatives, see "Financial Condition and Liquidity" in this Item 7 and Note 8 of the
Notes to the Consolidated Financial Statements.
In December 2005, the Bankruptcy Court authorized us to enter into fuel hedging contracts for up to 30% of our monthly
estimated fuel consumption, with hedging allowed in excess of that level if we obtained approval of the Creditors Committee or the
Bankruptcy Court. In February 2006, we received approval from the Creditors Committee to hedge up to 50% of our estimated 2006
aggregate fuel consumption, with no single month exceeding 80% of our estimated fuel consumption. We also agreed we would not
enter into any fuel hedging contracts that extend beyond December 31, 2006 without additional approval from the Creditors
Committee or the Bankruptcy Court. See Notes 5 and 6 of the Notes to the Consolidated Financial Statements for further information
about fuel hedging.
Pilot Labor Cost Reductions. We have been in and continue to be in negotiations with ALPA to reduce our pilot labor costs as
required under our business plan. Because we were not able to reach a consensual agreement with ALPA, on November 1, 2005, we
filed a motion with the Bankruptcy Court under Section 1113 of the Bankruptcy Code to reject our collective bargaining agreement
with ALPA.
In December 2005, we reached an interim agreement with ALPA, which was approved by the Bankruptcy Court and ratified by
Delta's pilots. The interim agreement provides for, among other things, a reduction in (1) hourly pilot wage rates of 14% and (2) other
pilot pay and cost items equivalent to approximately an additional 1% hourly wage reduction. These reductions became effective
December 15, 2005, and remain in effect until the earlier of (1) our entering into a comprehensive agreement with ALPA on changes
to the pilot collective bargaining agreement; or (2) the time that the neutral panel described below issues its final order as to whether
Delta is authorized to reject the pilot collective bargaining agreement under the legal standards of Section 1113 of the Bankruptcy
Code.
The interim agreement provides that Delta and ALPA will seek to negotiate a tentative comprehensive agreement, and establishes
the following time limits ("March 2006 time limits") for reaching that agreement: (1) March 1, 2006, for the parties' negotiating
committees to reach a tentative agreement; (2) March 8, 2006, for approval by the ALPA Master Executive Council; and
(3) March 22, 2006, for pilot ratification. Because the first of the March 2006 time limits was not met, pursuant to our interim
agreement with ALPA, the matter at issue in Delta's Section 1113 motion has been submitted to a mutually agreed upon, neutral panel
of three experts in airline labor matters for a binding decision on that issue. The interim agreement provides that the panel's decision
must be issued no later than 45 days after the failure to meet the applicable March 2006 time limit, which is April 15, 2006. We cannot
predict the outcome of the neutral panel's decision as to whether or not we would be authorized to reject the collective bargaining
agreement.
If the neutral panel determines that we are authorized to reject the collective bargaining agreement, ALPA has threatened to
initiate a strike, which we believe should not be permitted under the Railway Labor
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