-- Delta Air Lines Inc., which is struggling to avoid a bankruptcy filing as it faces persistently high fuel costs, said Monday it is selling feeder carrier Atlantic Southeast Airlines Inc. to SkyWest Inc. for $425 million in cash.
Delta, the nation's third-largest carrier, said the proceeds will be used for general corporate purposes and to pay down $100 million of debt under its loan agreement with GE Commercial Finance and other lenders.
Delta shares fell 22 cents, or 13.7 percent, to close at $1.39 in extremely heavy trading on the New York Stock Exchange on Monday. The close, Delta's lowest in at least 43 years, dropped the company's market capitalization to roughly $200 million. Standard & Poor's said that after the close of trading Thursday, it will replace Delta with Public Storage Inc. on the S&P 500 index.
Delta, hit by high fuel costs, has lost nearly $10 billion since January 2001.
In a quarterly filing Monday with the Securities and Exchange Commission, Delta said that even with the sale of ASA and other financing deals it is trying to work out, it could still be forced into bankruptcy protection. In its filing, released after the close of financial markets, the airline noted that it might not be able to maintain certain cash and earnings levels required by existing loan agreements with GE and American Express.
Atlanta-based Delta bought ASA in 1999. Today, ASA's fleet of more than 150 aircraft provides 957 daily connection flights for Delta. The transaction is not expected to result in any significant changes in ASA's flight schedules or locations served, Delta said.
Under the deal with SkyWest, ASA will continue to serve Delta customers under a new 15-year agreement, the airline said in a statement.
SkyWest Inc., based in St. George, Utah, is the parent company of SkyWest Airlines, which operates as an independently owned partner carrier to Delta and United Airlines. SkyWest has been a Delta Connection carrier since 1987.
The boards of both companies have approved the transaction, which is expected to close in September upon clearing regulatory review.
As part of the sale, 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.
In its SEC filing, Delta also updated investors on the airline's efforts to negotiate an agreement with a new Visa/MasterCard credit card processor. Its existing processing contract expires Aug. 29.
In the filing, Delta said it reached a letter of agreement Monday to extend the current contract to Oct. 31 at the latest and to initiate a cash holdback for Visa/MasterCard receivables for tickets sold beginning Monday. The holdback would be at least $750 million if Delta keeps its current processor to the last possible moment.
That's the amount of a cash reserve that Delta said it would be required to set up as part of an agreement it is still trying to work out with a new processor.
The extension with Delta's current processor is still subject to final approvals.