GE allows Delta Air Lines to maintain financing pacts

General Electric Co.'s finance unit agreed to waive any current defaults by Delta Air Lines Inc. under several financing agreements and provide the carrier with an additional $5 million of letters of credit.

Delta, the third-biggest U.S. carrier and operator of a hub at Salt Lake City International Airport, finances its use of jets, engines and other equipment under agreements with General Electric Capital Corp., based in Stamford, Conn.

The accord, disclosed Monday in bankruptcy court papers in New York, allows Delta to maintain the financing agreements, including $409 million in letters of credit under a 2003 pact, without the possibility that GE Capital will claim a default under one or more of the financings. The agreement also extends Delta's use of the letters of credit from 2008 through 2011.

"GE Capital might be able to declare certain defaults," Delta lawyer Marshall Huebner said in a U.S. Bankruptcy Court filing, adding that the airline doesn't admit any defaults. "Delta believes that maintaining the GECC agreements would be of substantial assistance in managing its business."

Bankruptcy Judge Adlai Hardin will consider approval of the agreement in February.

Delta filed for bankruptcy protection Sept. 14 with $21.6 billion in assets and $28.3 billion in debt. It was the second-largest bankruptcy filing of the year by assets, behind Calpine Corp.'s Dec. 20 filing, in which the power-plant owner reported $26.6 billion in assets and $22.5 billion in debt.

Delta will pay what it owes to GE Capital under the financing pacts. The Atlanta-based airline didn't disclose how much it expects to pay. Additionally, GE Capital has the right to force Delta to lease 15 CRJ-200 aircraft from it or its affiliates, according to court documents.

Separately, Delta is asking Hardin to authorize it to make up to $13.6 million in severance and retention payments to critical employees with its Delta Technology LLC subsidiary. The unit provides technology support to the airline.

"The employees provide essential technological support to Delta's operations, and their technical experience and skills are in great demand," Huebner said. "In the last several months, Delta Technology has experienced unprecedented attrition rates that, if not addressed, will continue to adversely affect the debtors' ongoing operations."

Delta on Monday told employees it is cutting as many as 1,000 plane-maintenance jobs and closing a hangar in Atlanta to reduce expenses. The cuts are part of a previously announced plan to eliminate 9,000 jobs.

Contributing: Lynne Marek

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