Delta Air Lines

Company Description

Delta Air Lines, Inc. (“Delta” or the “Company”) is one of the world’s largest airlines in terms of passengers carried.  Delta provides scheduled air transportation for passengers and cargo throughout the United States and around the world, serving over 300 worldwide destinations in more than 50 countries.

Situation Overview

A number of industry trends negatively impacted legacy carriers such as Delta. These industry trends included significant overcapacity, volatility in fuel costs and the dramatic expansion of low cost carriers. Low cost carriers possess significant advantages including a point-to-point structure, little to no leverage, and a younger workforce with fewer structured benefits.

At the time Blackstone was retained, Delta's cost structure was among the highest in the industry given its expensive labor contract, out-of-market aircraft and facility lease expenses, and over-levered balance sheet (over $18 billion in debt and capital leases). Other legacy carriers, through the use of bankruptcy or the threat of bankruptcy, were able to reduce debt, reschedule maturities, renegotiate leases and obtain labor and pension concessions - enabling these legacy airlines to become viable and competitive. In addition to Delta's operational issues, the Company faced the challenge of record high oil prices. In September 2005, Delta was forced to file for Chapter 11 protection.

Transaction Summary

Blackstone was involved in all aspects of Delta’s restructuring.  Blackstone negotiated and raised major financings, including a pre-petition loan from GE, DIP financing and exit financing, which in aggregate totaled over $5.3 billion, assisted in the development of Delta’s business plan, advised with respect to merger / acquisition related matters, (including US Airways’ proposed offer to acquire Delta), prepared valuation analyses and negotiated with various creditors including the Official Unsecured Creditors’ Committee, an Ad Hoc Committee of Bondholders, aircraft lessors, the Airline Pilot Association, the Pension Benefit Guaranty Corporation, retirees and other major creditors.  Additionally, Blackstone provided expert witness testimony in connection with creditor resolutions critical to the Plan of Reorganization, including the termination of the defined benefit pilot pension plan.

With Blackstone’s assistance, Delta turned its business around, removing $3 billion of annual costs and over $9 billion of net debt and lease obligations.  Delta successfully raised $2.5 billion in exit financing from six major financial institutions and filed a Plan of Reorganization that was approved by more than 95% of its creditors.

Delta successfully emerged from Chapter 11 protection in April 2007, and its stock now trades on the NYSE under the ticker symbol DAL.