TWFirst From Vatican City, joined Apr 2000, 6346 posts, RR: 52 Reply 1, posted (8 years 2 months 4 weeks 1 day 19 hours ago) and read 1688 times:
M E M O R A N D U M
Subject: DELTA AIR LINES FILES CHAPTER 11
Date: September 15, 2005
To: American Express Employees in the U.S.
From: Al Kelly, Group President
Yesterday, both Delta Air Lines and Northwest Airlines announced that they have filed for Chapter 11 bankruptcy protection. Given our relationship with Delta, I am writing to address questions some of you may have about this development.
As you know, the news about Delta has been widely anticipated for some time. Delta has been dealing with severe financial pressure and large operating losses due to many factors, including record fuel costs, pricing pressures, pension costs and debt expense. Although they have made progress on an aggressive transformation plan to reduce expenses and increase revenues, Delta has decided that the best way to restructure and get back on a strong financial footing is to file for bankruptcy.
Delta will continue normal business operations while under bankruptcy protection. The airline has stated it is operating its full schedule of flights, honoring tickets and reservations as usual, and making normal refunds and exchanges. Delta's management and employees are working hard to advance their restructuring efforts and restore the airline to health.
We do not expect Delta's announcement to impact our business relationship with them:
- Card acceptance remains unchanged, as Delta continues to fly.
- Delta SkyMiles and SkyPoints cardmembers will not experience any changes to their accounts, and they can continue to earn and redeem points for awards on travel.
- Cardmembers can continue to redeem Membership Rewards points for flights on Delta.
- Employees and customers can continue to book travel on Delta, which remains a key member of our travel program.
However, the filing will likely change some aspects of our financial relationship with Delta. As you may recall, last year American Express began participating in Delta's restructuring program by pre-paying $500 million for future purchases of Delta SkyMiles rewards points and providing a $100 million loan as part of a new credit facility with other lenders. As Delta said in its announcement, they are now repaying those debts, and we are working towards an agreement for us to replace the previous financing with a new $350 million prepayment as part of what is known as debtor in possession (DIP) financing. While there is always uncertainty and risk associated with a bankruptcy filing, we are comfortable with our level of exposure and continue to believe that we have an adequate level of protection.
American Express has a great deal of experience working with airlines through all kinds of economic conditions, including bankruptcy. We have not had any significant losses from partners experiencing financial challenges. Our partnership with Delta continues to bring substantial value to both organizations, and we look forward to continuing our relationship.