August 16, 2005
At bankruptcys doorstep, Delta Air Lines says it will sell its subsidiary, regional carrier Atlantic Southeast Airlines, to SkyWest for $425 million cash. Company executives say theyll use the money to pay off some of its mountain of debt.
The company said ASA will continue to serve Delta customers under a new 15-year Delta Connection agreement, with ASAs fleet of more than 150 aircraft continuing to fly Delta routes. Delta Chief Executive Officer Gerald Grinstein characterized the sale as a way to strengthen Deltas relationship with SkyWest, put money to the bottom line, and continue much of the same service now being provided.
As part of the deal, 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. Delta said its agreement with ASA includes strong incentives for ASA to meet or exceed specific performance benchmarks and enhance cost efficiency.
Since the time of Deltas purchase in 1999, ASA has more than doubled in size, adding more than 100 new regional jets, serving 126 destinations. At the same time, ASA added nearly 3,000 employees to the Delta payroll.
The company said the sale of ASA to SkyWest for a purchase price of $425 million is subject to certain closing conditions, including regulatory reviews, and is expected to close in September. As per the terms of the agreement, $350 million in cash will be payable at closing, representing $330 million of the purchase price and $20 million relating to certain aircraft financing deposits.
As we continue to implement Deltas transformation plan, this transaction not only enhances our ability to operate our business as efficiently and cost effectively as we can, it also improves Deltas liquidity position, Grinstein said.
