<PAGE> 1
Filed Pursuant to Rule 424b2
Registration No. 333-30974
Prospectus Supplement to Prospectus dated February 23, 2000.
$1,500,000,000
(Delta Air Lines Logo)
Pass Through Certificates, Series 2000-1
----------------------
This prospectus supplement relates to new pass through certificates to be
issued by four separate pass through trusts formed by Delta Air Lines, Inc. Each
pass through certificate will represent an interest in a pass through trust. The
proceeds from the sale of pass through certificates will be used by the trusts
to acquire equipment notes to be issued by Delta on a full recourse basis.
Payments on the equipment notes held in each trust will be passed through to the
holders of pass through certificates of such trust. The pass through
certificates do not represent interests in or obligations of Delta or any of its
affiliates. The pass through certificates will not be listed on any national
securities exchange.
The equipment notes will be issued for each of 44 Boeing aircraft delivered
new to Delta from January, 1999 through October, 2000. The equipment notes
issued for each aircraft will be secured by a security interest in the related
aircraft. Interest on the equipment notes will be payable semiannually on each
May 18 and November 18, beginning May 18, 2001. Principal payments on the
equipment notes held for the Class A-1 Certificates will be scheduled for
payment on May 18 and November 18 in certain years, beginning on May 18, 2001
and ending on May 18, 2010. The entire principal of the equipment notes held for
the Class A-2 and Class B Certificates will be scheduled for payment on November
18, 2010. The entire principal of the equipment notes held for the Class C
Certificates will be scheduled for payment on November 18, 2005.
The Class A-1 and Class A-2 Certificates will rank equally in right to
distributions and rank senior in right to distributions to the other
Certificates. The Class B Certificates will rank junior in right to
distributions to the Class A-1 and Class A-2 Certificates and will rank senior
in right to distributions to the Class C Certificates. The Class C Certificates
will rank junior in right to distributions to the other Certificates.
Westdeutsche Landesbank Girozentrale, New York Branch, will provide a
separate liquidity facility for each class of pass through certificates. Each
liquidity facility will be in an amount sufficient to make three semiannual
interest distributions on the related class of pass through certificates.
INVESTING IN THE PASS THROUGH CERTIFICATES INVOLVES RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE S-12.
<TABLE>
<CAPTION>
FACE INTEREST FINAL EXPECTED PRICE TO
PASS THROUGH CERTIFICATES AMOUNT RATE DISTRIBUTION DATE PUBLIC(1)
------------------------- -------------- -------- ----------------- ---------
<S> <C> <C> <C> <C>
Class A-1................................................. $ 341,094,000 7.379% May 18, 2010 100%
Class A-2................................................. 738,136,000 7.570 November 18, 2010 100
Class B................................................... 182,497,000 7.920 November 18, 2010 100
Class C................................................... 238,273,000 7.779 November 18, 2005 100
</TABLE>
---------------
(1) Plus accrued interest, if any, from the date of issuance.
The underwriters will purchase all of the pass through certificates if any
are purchased. The aggregate proceeds from the sale of the pass through
certificates will be $1,500,000,000. Delta will pay the underwriters a
commission of $9,750,000. Delivery of the pass through certificates in
book-entry form only will be made on or about November 16, 2000 against payment
in immediately available funds.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
Joint Bookrunners
GOLDMAN, SACHS & CO. MORGAN STANLEY DEAN WITTER
Joint Lead Managers
CHASE SECURITIES INC. SALOMON SMITH BARNEY
Co-Managers
BANC OF AMERICA SECURITIES LLC CREDIT LYONNAIS SECURITIES THE WILLIAMS CAPITAL
GROUP, L.P.
BNY CAPITAL MARKETS, INC. GUZMAN & COMPANY TOKYO-MITSUBISHI INTERNATIONAL PLC
Prospectus Supplement dated November 7, 2000.
<PAGE> 2
PRESENTATION OF INFORMATION
These offering materials consist of two documents: (a) this prospectus
supplement, which describes the terms of the pass through certificates that we
are currently offering, and (b) the accompanying prospectus, which provides
general information about our pass through certificates, some of which may not
apply to the pass through certificates that we are currently offering. The
information in this prospectus supplement replaces any inconsistent information
included in the accompanying prospectus.
We have given certain capitalized terms specific meanings for purposes of
this prospectus supplement. The Index of Terms attached as Appendix I to this
prospectus supplement lists the page in this prospectus supplement on which we
have defined each such term.
At varying places in this prospectus supplement and the prospectus, we
refer you to other sections of such documents for additional information by
indicating the caption heading of such other sections. The page on which each
principal caption included in this prospectus supplement and the prospectus can
be found is listed in the Table of Contents below. All such cross references in
this prospectus supplement are to captions contained in this prospectus
supplement and not in the prospectus, unless otherwise stated.
This prospectus supplement and the accompanying prospectus include
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended, which represent Delta's expectations or beliefs concerning future
events. When used in this prospectus supplement and the accompanying prospectus,
the words "expects", "plans", "anticipates" and similar expressions are intended
to identify forward-looking statements. All forward-looking statements in this
prospectus supplement are based upon information available to us on the date of
this prospectus supplement. We undertake no obligation to update publicly or
revise any forward-looking statement, whether as a result of new information,
future events or otherwise. Forward-looking statements are subject to a number
of factors that could cause actual results to differ materially from our
expectations. Additional information concerning these and other factors is
contained in our Securities and Exchange Commission filings, including but not
limited to the Form 10-K for the fiscal year ended June 30, 2000.
----------------------
S-i
<PAGE> 3
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PRESENTATION OF INFORMATION............... S-i
PROSPECTUS SUPPLEMENT SUMMARY............. S-1
EQUIPMENT NOTES AND THE AIRCRAFT.......... S-2
LOAN TO AIRCRAFT VALUE RATIOS............. S-3
CASH FLOW STRUCTURE....................... S-4
THE OFFERING.............................. S-5
SUMMARY FINANCIAL AND OPERATING DATA...... S-10
CONSOLIDATED RATIOS OF EARNINGS TO FIXED
CHARGES................................. S-11
RISK FACTORS.............................. S-12
Appraisals and Realizable Value of
Aircraft............................. S-12
Repossession............................ S-12
Priority of Distributions;
Subordination........................ S-12
Control Over Collateral; Sale of
Collateral........................... S-13
Ratings of the Certificates............. S-13
No Protection Against Highly Leveraged
or Extraordinary Transactions........ S-14
Limited Ability to Resell the
Certificates......................... S-14
THE COMPANY............................... S-14
USE OF PROCEEDS........................... S-14
DESCRIPTION OF THE CERTIFICATES........... S-15
General................................. S-15
Distribution of Payments on Equipment
Notes................................ S-16
Subordination........................... S-18
Pool Factors............................ S-18
Reports to Certificateholders........... S-19
Indenture Events of Default and Certain
Rights upon an Indenture Event of
Default.............................. S-20
Purchase Rights of Certificateholders... S-22
PTC Event of Default.................... S-22
Merger, Consolidation and Transfer of
Assets............................... S-23
Modification of the Pass Through Trust
Agreements and Certain Other
Agreements........................... S-23
Possible Issuance of Series D Equipment
Notes................................ S-25
Termination of the Trusts............... S-26
The Trustees............................ S-26
Book-Entry Registration; Delivery and
Form................................. S-26
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
DESCRIPTION OF THE LIQUIDITY FACILITIES... S-27
General................................. S-27
Drawings................................ S-27
Replacement of Liquidity Facilities..... S-28
Reimbursement of Drawings............... S-30
Interest Drawings and Final
Drawings........................... S-30
Downgrade Drawings and Non-Extension
Drawings........................... S-31
Liquidity Events of Default............. S-31
Liquidity Provider...................... S-32
DESCRIPTION OF THE INTERCREDITOR
AGREEMENT............................... S-32
Intercreditor Rights.................... S-32
General.............................. S-32
Controlling Party.................... S-32
Sale of Equipment Notes or
Aircraft........................... S-33
Priority of Distributions............... S-34
Before a Triggering Event............ S-34
After a Triggering Event............. S-35
Addition of Trustee for Class D
Certificates......................... S-37
The Subordination Agent................. S-38
DESCRIPTION OF THE AIRCRAFT AND THE
APPRAISALS.............................. S-38
The Aircraft............................ S-38
The Appraisals.......................... S-39
DESCRIPTION OF THE EQUIPMENT NOTES........ S-40
General................................. S-40
Subordination........................... S-40
Principal and Interest Payments......... S-41
Redemption.............................. S-41
Security................................ S-42
Loan to Value Ratios of Equipment
Notes................................ S-42
Defeasance.............................. S-43
Limitation of Liability................. S-43
Indenture Events of Default, Notice and
Waiver............................... S-43
Remedies................................ S-44
Modification of Indentures.............. S-46
Indemnification......................... S-46
Certain Provisions of the Indentures.... S-46
Maintenance and Operation............ S-46
Registration, Leasing and
Possession......................... S-47
Liens................................ S-48
</TABLE>
S-ii
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Insurance............................ S-48
Events of Loss....................... S-49
CERTAIN FEDERAL INCOME TAX CONSEQUENCES... S-50
General................................. S-51
Sales of Certificates................... S-52
Effect of Subordination on Subordinated
Certificate Owners................... S-52
Bond Premium............................ S-52
Original Issue Discount................. S-53
Certain Federal Income Tax Consequences
to Foreign Certificateholders........ S-53
Backup Withholding...................... S-53
CERTAIN CONNECTICUT TAXES................. S-54
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CERTAIN ERISA CONSIDERATIONS.............. S-54
General................................. S-54
Plan Assets Issues...................... S-55
Prohibited Transaction Exemptions....... S-55
Special Considerations Applicable to
Insurance Company General Accounts... S-56
UNDERWRITING.............................. S-57
LEGAL OPINIONS............................ S-59
EXPERTS................................... S-59
APPENDIX I: INDEX OF TERMS................ I-1
APPENDIX II: APPRAISAL LETTERS............ II-1
APPENDIX III: EQUIPMENT NOTE PRINCIPAL
PAYMENTS................................ III-1
APPENDIX IV: LOAN TO VALUE RATIOS OF
EQUIPMENT NOTES......................... IV-1
</TABLE>
PROSPECTUS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
About This Prospectus..................... 1
Delta Air Lines, Inc...................... 1
General Outline........................... 1
Use of Proceeds........................... 2
Consolidated Ratios of Earnings to Fixed
Charges................................. 3
Description of the Certificates........... 3
Description of the Equipment Notes........ 17
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Certain United States Federal Income Tax
Consequences............................ 24
ERISA Considerations...................... 27
Plan of Distribution...................... 27
Validity of the Certificates.............. 28
Experts................................... 28
Where You Can Find More Information....... 29
</TABLE>
----------------------
You should rely only on the information contained in this prospectus
supplement and the accompanying prospectus and the documents incorporated by
reference in this prospectus supplement and the prospectus or to which we have
referred you. We have not authorized anyone to provide you with information that
is different. If anyone provides you with different or inconsistent information,
you should not rely on it. This document may be used only where it is legal to
sell these securities. You should not assume that the information provided by
this prospectus supplement or the accompanying prospectus is accurate as of any
date other than the date of this prospectus supplement.
S-iii
<PAGE> 5
PROSPECTUS SUPPLEMENT SUMMARY
The following is a summary and does not contain all of the information that
may be important to you. You should read the more detailed information and
consolidated financial statements appearing elsewhere in this prospectus
supplement and accompanying prospectus, as well as the materials filed by Delta
with the Securities and Exchange Commission that are considered to be part of
the prospectus. See "Where You Can Find More Information" in the prospectus.
Unless otherwise indicated, "we", "us", "our" and similar terms, as well as
references to "Delta", refer to Delta Air Lines, Inc.
SUMMARY OF TERMS OF PASS THROUGH CERTIFICATES
<TABLE>
<CAPTION>
CLASS A-1 CLASS A-2 CLASS B CLASS C
CERTIFICATES CERTIFICATES CERTIFICATES CERTIFICATES
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Aggregate face amount.... $341,094,000 $738,136,000 $182,497,000 $238,273,000
Ratings:
Moody's.................. Aa2 Aa2 Aa3 A3
Standard & Poor's........ AAA AAA AA- A
Initial loan to Aircraft
value ratio
(cumulative)(1)........ 47.0% 47.0% 54.9% 65.3%
Expected maximum loan to
Aircraft value ratio
(cumulative)........... 47.0% 47.0% 56.5% 68.2%
Expected principal
distribution window (in
years)................. 0.5 - 9.5 10.0 10.0 5.0
Initial average life (in
years)................. 5.2 10.0 10.0 5.0
Regular Distribution
Dates.................. May 18 and May 18 and May 18 and May 18 and
November 18 November 18 November 18 November 18
Final expected Regular
Distribution Date...... May 18, 2010 November 18, 2010 November 18, 2010 November 18, 2005
Final Legal Distribution
Date................... November 18, 2011 May 18, 2012 May 18, 2012 May 18, 2007
Minimum denomination..... $1,000 $1,000 $1,000 $1,000
Section 1110
protection............. Yes Yes Yes Yes
Liquidity Facility
coverage............... 3 semiannual 3 semiannual 3 semiannual 3 semiannual
interest interest interest interest
payments payments payments payments
</TABLE>
---------------
(1) The initial aggregate appraised value of the Aircraft is $2,296,803,333. See
"Loan To Aircraft Value Ratios" in this prospectus supplement summary for
the method we used in calculating the loan to Aircraft value ratios.
S-1
<PAGE> 6
EQUIPMENT NOTES AND THE AIRCRAFT
The Trusts will hold secured Equipment Notes issued for each of 44 Boeing
aircraft, consisting of 20 Boeing 737-832 aircraft, 18 Boeing 757-232 aircraft
and 6 Boeing 767-332ER aircraft. All of the Aircraft have been delivered to and
are being operated by Delta. The Equipment Notes issued with respect to each
Aircraft will be secured by a security interest in such Aircraft. See
"Description of the Aircraft and the Appraisals" for a description of the
Aircraft. Set forth below is information about the Aircraft and the Equipment
Notes for those Aircraft.
<TABLE>
<CAPTION>
MANUFACTURER'S REGISTRATION DATE APPRAISED BASE PRINCIPAL AMOUNT OF
AIRCRAFT TYPE SERIAL NUMBER NUMBER DELIVERED VALUE(1) EQUIPMENT NOTES
------------- -------------- ------------ --------- -------------- -------------------
<S> <C> <C> <C> <C> <C>
Boeing 737-832........................... 29624 N376DA 01/14/99 $ 39,520,000 $ 25,891,947
Boeing 737-832........................... 29625 N377DA 05/10/99 40,180,000 26,067,464
Boeing 737-832........................... 30265 N378DA 08/13/99 40,680,000 26,671,768
Boeing 737-832........................... 30349 N379DA 08/23/99 40,680,000 26,672,699
Boeing 737-832........................... 30266 N380DA 09/20/99 40,850,000 26,786,679
Boeing 737-832........................... 30350 N381DN 09/13/99 40,850,000 26,786,028
Boeing 737-832........................... 30345 N382DA 10/12/99 41,010,000 26,893,646
Boeing 737-832........................... 30346 N383DN 10/19/99 41,010,000 26,894,297
Boeing 737-832........................... 30347 N384DA 11/22/99 41,180,000 27,008,851
Boeing 737-832........................... 30348 N385DN 11/19/99 41,180,000 27,008,573
Boeing 737-832........................... 30373 N386DA 12/20/99 41,340,000 27,116,391
Boeing 737-832........................... 30374 N387DA 01/14/00 41,510,000 27,230,129
Boeing 737-832........................... 30375 N388DA 02/01/00 41,600,000 27,290,744
Boeing 737-832........................... 30376 N389DA 04/15/00 41,770,000 27,138,566
Boeing 737-832........................... 30536 N390DA 04/28/00 41,770,000 27,140,056
Boeing 737-832........................... 30560 N391DA 05/08/00 41,860,000 27,199,680
Boeing 737-832........................... 30561 N392DA 05/30/00 41,860,000 27,202,196
Boeing 737-832........................... 30377 N393DA 06/30/00 41,940,000 27,257,604
Boeing 737-832........................... 30562 N394DA 06/29/00 41,940,000 27,257,490
Boeing 737-832........................... 30773 N395DN 07/17/00 42,600,000 27,318,032
Boeing 757-232........................... 29728 N696DL 01/27/99 51,816,667 33,949,837
Boeing 757-232........................... 30318 N697DL 08/01/99 52,740,000 34,577,434
Boeing 757-232........................... 29911 N698DL 08/31/99 52,816,667 34,631,205
Boeing 757-232........................... 29970 N699DL 09/13/99 52,950,000 34,720,200
Boeing 757-232........................... 30337 N6700 09/24/99 52,906,667 34,693,111
Boeing 757-232........................... 30187 N6701 10/07/99 53,150,000 34,854,245
Boeing 757-232........................... 30188 N6702 11/20/99 53,256,667 34,929,371
Boeing 757-232........................... 30234 N6703D 01/21/00 54,676,667 35,868,179
Boeing 757-232........................... 30396 N6704Z 04/04/00 55,216,667 35,873,388
Boeing 757-232........................... 30397 N6705Y 04/07/00 55,223,333 35,878,175
Boeing 757-232........................... 30422 N6706Q 05/03/00 55,296,667 35,929,765
Boeing 757-232........................... 30395 N6707A 05/31/00 55,320,000 35,949,008
Boeing 757-232........................... 30480 N6708D 07/20/00 55,823,333 36,283,670
Boeing 757-232........................... 30481 N6709 08/10/00 55,883,333 36,683,050
Boeing 757-232........................... 30482 N6710E 08/28/00 55,896,667 36,691,802
Boeing 757-232........................... 30483 N6711M 09/28/00 55,990,000 36,758,367
Boeing 757-232........................... 30484 N6712B 10/02/00 56,406,667 37,035,532
Boeing 757-232........................... 30777 N6713Y 10/31/00 56,406,667 37,037,334
Boeing 767-332ER......................... 29694 N1602 01/22/99 80,280,000 52,597,818
Boeing 767-332ER......................... 29695 N1603 02/05/99 80,620,000 52,823,063
Boeing 767-332ER......................... 30180 N1604R 04/28/99 81,150,000 52,644,617
Boeing 767-332ER......................... 30198 N1605 05/27/99 81,293,333 52,744,460
Boeing 767-332ER......................... 30199 N16065 06/10/99 81,403,333 52,818,897
Boeing 767-332ER......................... 30388 N1607B 04/21/00 84,950,000 55,194,630
Total:........................... 2,296,803,333 1,500,000,000
</TABLE>
---------------
(1) The appraised base value of each Aircraft set forth above is the lesser of
the average and median appraised base value of such Aircraft as appraised by
three independent appraisal and consulting firms. The appraisers based their
appraisals on varying assumptions (which may not reflect current market
conditions) and methodologies. See "Description of the Aircraft and the
Appraisals -- The Appraisals". An appraisal is only an estimate of value and
you should not rely on any appraisal as a measure of realizable value. See
"Risk Factors -- Appraisals and Realizable Value of Aircraft".
S-2
<PAGE> 7
LOAN TO AIRCRAFT VALUE RATIOS
The following table provides loan to Aircraft value ratios ("LTVs") for
each Class of Certificates as of the issuance date of the Certificates and each
November 18 Regular Distribution Date. The table is not a forecast or prediction
of expected or likely LTVs, but a mathematical calculation based upon one set of
assumptions. See "Risk Factors -- Appraisals and Realizable Value of Aircraft".
We compiled the following table on an aggregate basis. However, the
Equipment Notes secured by an Aircraft will not be secured by any other
Aircraft. This means that any excess proceeds realized from the sale of an
Aircraft or other exercise of default remedies would not be available to cover
any shortfalls on the Equipment Notes relating to any other Aircraft. See
"Description of the Equipment Notes -- Loan to Value Ratios of Equipment Notes"
and Appendix IV for LTVs for the Equipment Notes issued in respect of individual
Aircraft, which may be more relevant in a default situation than the aggregate
values shown below.
<TABLE>
<CAPTION>
ASSUMED OUTSTANDING BALANCE(2) LTV(3)
AGGREGATE --------------------------------------------------------- ---------------------------
AIRCRAFT CLASS A-1 CLASS A-2 CLASS B CLASS C CLASS A-1 CLASS A-2
DATE VALUE(1) CERTIFICATES CERTIFICATES CERTIFICATES CERTIFICATES CERTIFICATES CERTIFICATES
---- -------------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
November 16, 2000...... $2,296,803,333 $341,094,000 $738,136,000 $182,497,000 $238,273,000 47.0% 47.0%
November 18, 2001...... 2,225,910,043 307,779,873 738,136,000 182,497,000 238,273,000 47.0 47.0
November 18, 2002...... 2,155,016,752 274,465,746 738,136,000 182,497,000 238,273,000 47.0 47.0
November 18, 2003...... 2,084,123,462 241,151,620 738,136,000 182,497,000 238,273,000 47.0 47.0
November 18, 2004...... 2,013,230,171 207,837,493 738,136,000 182,497,000 238,273,000 47.0 47.0
November 18, 2005...... 1,942,336,881 173,845,512 738,136,000 182,497,000 0 47.0 47.0
November 18, 2006...... 1,871,443,590 136,374,973 738,136,000 182,497,000 0 46.7 46.7
November 18, 2007...... 1,800,550,299 96,404,237 738,136,000 182,497,000 0 46.3 46.3
November 18, 2008...... 1,729,657,009 56,356,403 738,136,000 182,497,000 0 45.9 45.9
November 18, 2009...... 1,658,763,718 16,308,570 738,136,000 182,497,000 0 45.5 45.5
November 18, 2010...... 0 0 0 0 0 NA NA
<CAPTION>
LTV(3)
---------------------------
CLASS B CLASS C
DATE CERTIFICATES CERTIFICATES
---- ------------ ------------
<S> <C> <C>
November 16, 2000...... 54.9% 65.3%
November 18, 2001...... 55.2 65.9
November 18, 2002...... 55.5 66.5
November 18, 2003...... 55.7 67.2
November 18, 2004...... 56.1 67.9
November 18, 2005...... 56.3 NA
November 18, 2006...... 56.5 NA
November 18, 2007...... 56.5 NA
November 18, 2008...... 56.5 NA
November 18, 2009...... 56.5 NA
November 18, 2010...... NA NA
</TABLE>
---------------
(1) In calculating the aggregate Assumed Aircraft Value, we assumed that the
appraised base value of each Aircraft determined as described under
"Equipment Notes and the Aircraft" declines by 3% annually from the date of
delivery by the manufacturer of such Aircraft. Other rates or methods of
depreciation may result in materially different LTVs. We cannot assure you
that the depreciation rate and method assumed for purposes of the table are
the ones most likely to occur or predict the actual future value of any
Aircraft. See "Risk Factors -- Appraisals and Realizable Value of Aircraft".
(2) The "pool balance" for each Class of Certificates indicates, as of any date,
the portion of the original face amount of such Class of Certificates that
has not been distributed to Certificateholders.
(3) We obtained the LTVs for each Class of Certificates for each November 18
Regular Distribution Date by dividing (i) the expected outstanding pool
balance of such Class together with the expected outstanding pool balance of
all other Classes ranking equal or senior in right to distributions to such
Class after giving effect to the distributions expected to be made on such
date, by (ii) the assumed value of all of the Aircraft on such date based on
the assumptions described above.
S-3
<PAGE> 8
CASH FLOW STRUCTURE
This diagram illustrates the structure for the offering of the Certificates
and cash flows.
(Cash Flow Structure Chart)
---------------
(1) Delta will issue Series A-1, Series A-2, Series B and Series C Equipment
Notes in respect of each Aircraft. The Equipment Notes with respect to each
Aircraft will be subject to a separate Indenture.
(2) Separate Liquidity Facilities will be available with respect to each Class
of Certificates for up to three semiannual interest distributions on the
Certificates of such Class.
S-4
<PAGE> 9
THE OFFERING
Trusts.....................
The Class A-1 Trust, the Class A-2 Trust, the Class B
Trust and the Class C Trust each will be formed
pursuant to a separate trust supplement to a basic
pass through trust agreement between Delta and State
Street Bank and Trust Company of Connecticut, National
Association, as Trustee under each Trust.
Certificates Offered.......
- Class A-1 Certificates
- Class A-2 Certificates
- Class B Certificates
- Class C Certificates
Each Class of Certificates will represent fractional
undivided interests in the related Trust.
Use of Proceeds............
The proceeds from the sale of the Certificates of each
Trust will be used to acquire the Equipment Notes to
be held by such Trust. The Equipment Notes will be
full recourse obligations of Delta. Delta will use the
proceeds from the issuance of the Equipment Notes for
general corporate purposes including, among other
possible uses, the repayment of all or a portion of
certain indebtedness of Delta incurred in fiscal year
1999 pursuant to a $500 million credit agreement
entered into between Delta and a group of banks.
Subordination Agent,
Trustee and Loan Trustee...
State Street Bank and Trust Company of Connecticut,
National Association.
Liquidity Provider.........
Initially, Westdeutsche Landesbank Girozentrale, New
York Branch.
Trust Property.............
The property of each Trust will include:
- Equipment Notes acquired by such Trust;
- All rights of such Trust under the Intercreditor
Agreement described below (including all monies
receivable pursuant to such rights);
- All monies receivable under the Liquidity Facility
for such Trust; and
- Funds from time to time deposited with the Trustee
in accounts relating to such Trust.
Regular Distribution
Dates......................
May 18 and November 18 of each year, commencing on May
18, 2001.
Record Dates...............
The fifteenth day preceding the related Distribution
Date.
Distributions..............
The Trustee will distribute all payments of principal,
Make-Whole Amount (if any) and interest received on
the Equipment Notes held in each Trust to the holders
of the Certificates of such Trust, subject to the
subordination provisions applicable to the
Certificates.
Subject to the subordination provisions applicable to
the Certificates, scheduled payments of principal and
interest made on the Equipment Notes will be
distributed on the applicable Regular Distribution
Dates. Subject to the subordination provisions
applicable to the Certificates, payments of principal,
Make-Whole Amount (if any) and interest made on the
Equipment Notes resulting from any early redemption of
such
S-5
<PAGE> 10
Equipment Notes will be distributed on a Special
Distribution Date after not less than 15 days' notice
to Certificateholders.
Intercreditor Agreement....
The Trusts, the Liquidity Provider and the
Subordination Agent will enter into the Intercreditor
Agreement. The Intercreditor Agreement states how
payments made on the Equipment Notes and the Liquidity
Facilities will be distributed among the Trusts and
the Liquidity Provider. The Intercreditor Agreement
also sets forth agreements among the Trusts and the
Liquidity Provider relating to who will control the
exercise of remedies under the Equipment Notes and the
Indentures.
Subordination..............
Under the Intercreditor Agreement, after the Liquidity
Provider is reimbursed (if necessary) and certain
other fees and expenses are paid, distributions on the
Certificates generally will be made in the following
order:
- First, to the holders of the Class A-1 and Class A-2
Certificates;
- Second, to the holders of the Class B Certificates;
and
- Third, to the holders of the Class C Certificates.
However, if Delta is in bankruptcy or other specified
defaults have occurred but Delta is continuing to meet
certain of its payment obligations, the subordination
provisions applicable to the Certificates permit
distributions to be made on junior Certificates prior
to making distributions in full on the more senior
Certificates.
Control of Loan Trustee....
The holders of at least a majority of the outstanding
principal amount of Equipment Notes issued under each
Indenture will be entitled to direct the Loan Trustee
under such Indenture in taking action as long as no
Indenture Event of Default is continuing thereunder.
If an Indenture Event of Default is continuing under
such Indenture, subject to certain conditions, the
Controlling Party will direct the Loan Trustee in
taking action under such Indenture (including in
exercising remedies, such as accelerating such
Equipment Notes or foreclosing the lien on the
Aircraft securing such Equipment Notes).
The Controlling Party will be:
- The Class A-1 Trustee or Class A-2 Trustee,
whichever represents the Class with the larger Pool
Balance of Certificates outstanding at the time the
Indenture Event of Default occurs;
- Upon payment of Final Distributions to the holders
of such larger Class, the other of the Class A-1
Trustee or Class A-2 Trustee;
- Upon payment of Final Distributions to the holders
of Class A-1 and Class A-2 Certificates, the Class B
Trustee;
- Upon payment of Final Distributions to the holders
of Class B Certificates, the Class C Trustee; and
- Under certain circumstances, and notwithstanding the
foregoing, the Liquidity Provider with the greatest
amount owed to it.
In exercising remedies during the nine months after
the earlier of (a) the acceleration of the Equipment
Notes issued pursuant to any Indenture or (b) the
bankruptcy of Delta, the Controlling Party may not,
without the
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<PAGE> 11
consent of each Trustee, sell such Equipment Notes or
the Aircraft subject to the lien of such Indenture for
less than certain specified minimums.
Right to Buy Other Classes
of Certificates............
If Delta is in bankruptcy or certain other specified
events have occurred, Certificateholders will have the
right to buy certain other Classes of Certificates on
the following basis:
- If either the Class A-1 or Class A-2
Certificateholders are then represented by the
Controlling Party, the Certificateholders of such
Class that is not so represented will have the right
to purchase all, but not less than all, of the
Certificates of such Class that is so represented.
- The Class B Certificateholders will have the right
to purchase all, but not less than all, of the Class
A-1 and Class A-2 Certificates.
- The Class C Certificateholders will have the right
to purchase all, but not less than all, of the Class
A-1, Class A-2 and Class B Certificates.
The purchase price in each case described above will
be the outstanding principal balance of the applicable
Class of Certificates plus accrued and undistributed
interest.
Liquidity Facilities.......
Under the Liquidity Facility for each Trust, the
Liquidity Provider will, if necessary, make advances
in an aggregate amount sufficient to pay interest
distributions on the applicable Class of Certificates
on up to three successive semiannual Regular
Distribution Dates at the applicable interest rate for
such Certificates. The Liquidity Facilities cannot be
used to pay any other amount in respect of the
Certificates.
Notwithstanding the subordination provisions
applicable to the Certificates, the holders of the
Certificates issued by each Trust will be entitled to
receive and retain the proceeds of drawings under the
Liquidity Facility for such Trust.
Upon each drawing under any Liquidity Facility to pay
interest distributions on any of the Certificates, the
Subordination Agent will be obligated to reimburse the
applicable Liquidity Provider for the amount of such
drawing, together with interest on such drawing. Such
reimbursement obligation and all interest, fees and
other amounts owing to the Liquidity Provider under
each Liquidity Facility will rank senior to all of the
Certificates in right of payment.
Equipment Notes
(a) Issuer...............
Under each Indenture, Delta will issue Series A-1,
Series A-2, Series B and Series C Equipment Notes,
which will be acquired, respectively, by the Class
A-1, Class A-2, Class B and Class C Trusts.
(b) Interest.............
The Equipment Notes held in each Trust will accrue
interest at the rate per annum for the Certificates
issued by such Trust set forth on the cover page of
this prospectus supplement. Interest on the Equipment
Notes will be payable on May 18 and November 18 of
each year, commencing on May 18, 2001. Interest will
be calculated on the basis of a 360-day year
consisting of twelve 30-day months.
(c) Principal............
Amortizing Notes. Principal payments on the Series
A-1 Equipment Notes are scheduled to be received in
specified amounts on May 18 and
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<PAGE> 12
November 18 in certain years, commencing on May 18,
2001 and ending on May 18, 2010.
Bullet Maturity Notes. The entire principal amounts
of the Series A-2 and Series B Equipment Notes are
scheduled to be paid on November 18, 2010. The entire
principal amount of the Series C Equipment Notes is
scheduled to be paid on November 18, 2005.
(d) Redemption...........
Aircraft Event of Loss. If an Event of Loss occurs
with respect to an Aircraft, all of the Equipment
Notes issued with respect to such Aircraft will be
redeemed, unless such Aircraft is replaced by Delta
under the related Indenture. The redemption price in
such case will be the unpaid principal amount of such
Equipment Notes, together with accrued interest, but
without any Make-Whole Amount. See "Description of the
Equipment Notes -- Redemption".
Optional Redemption. Delta may elect to redeem at any
time all of the Equipment Notes issued with respect to
an Aircraft prior to maturity. The redemption price in
such case will be the unpaid principal amount of such
Equipment Notes, together with accrued interest, plus
a Make-Whole Amount. See "Description of the Equipment
Notes -- Redemption".
(e) Security.............
The Equipment Notes issued with respect to each
Aircraft will be secured by a security interest in
such Aircraft.
The Equipment Notes will not be cross-collateralized.
This means that the Equipment Notes secured by an
Aircraft will not be secured by any other Aircraft.
Any excess proceeds from the sale of an Aircraft or
other exercise of default remedies with respect to
such Aircraft will not be available to cover any
shortfalls on the Equipment Notes relating to any
other Aircraft.
By virtue of the Intercreditor Agreement, the
Equipment Notes will be effectively
cross-subordinated. This means that payments received
on a junior series of Equipment Notes issued in
respect of one Aircraft may be applied in accordance
with the priority of payment provisions set forth in
the Intercreditor Agreement to make distributions in
respect of a more senior Class of Certificates.
There will be no cross-default provisions in the
Indentures. This means that if the Equipment Notes
issued with respect to one or more Aircraft are in
default and the Equipment Notes issued with respect to
the remaining Aircraft are not in default, no remedies
will be exercisable with respect to the Aircraft
securing Equipment Notes that are not in default.
(f) Section 1110
Protection...........
Cadwalader, Wickersham & Taft, special counsel to
Delta, will provide an opinion to the Trustees that
the benefits of Section 1110 of the Bankruptcy Code
will be available with respect to each of the
Aircraft.
Certain Federal Income Tax
Consequences.............
The Trusts themselves will not be subject to federal
income tax. Each Certificate Owner should report on
its federal income tax return its pro rata share of
the income from the Equipment Notes and other property
held by the relevant Trust, in accordance with such
Certificate Owner's method of accounting. See "Certain
Federal Income Tax Consequences".
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<PAGE> 13
Certain ERISA
Considerations...........
Each person who acquires a Certificate will be deemed
to have represented that either:
- no assets of an employee benefit plan or an
individual retirement account or of any trust
established under such a plan or account have been
used to purchase such Certificate; or
- the purchase and holding of such Certificate by such
person are exempt from the prohibited transaction
restrictions of the Employee Retirement Income
Security Act of 1974 and the Internal Revenue Code
of 1986 pursuant to one or more prohibited
transaction statutory or administrative exemptions.
See "Certain ERISA Considerations".
Ratings of the
Certificates...............
It is a condition to the issuance of the Certificates
that the Certificates be rated by Moody's and Standard
& Poor's at not less than the ratings set forth below:
<TABLE>
<CAPTION>
CERTIFICATES MOODY'S STANDARD & POOR'S
------------ -------- -----------------
<S> <C> <C>
Class A-1................................... Aa2 AAA
Class A-2................................... Aa2 AAA
Class B..................................... Aa3 AA-
Class C..................................... A3 A
</TABLE>
A rating is not a recommendation to purchase, hold or
sell Certificates; and such rating does not address
market price or suitability for a particular investor.
There can be no assurance that such ratings will not
be lowered or withdrawn by a Rating Agency. See "Risk
Factors -- Ratings of the Certificates".
<TABLE>
<CAPTION>
Threshold Rating
Requirements for the CERTIFICATES MOODY'S STANDARD & POOR'S
Liquidity Provider. ------------ ------- -----------------
<S> <C> <C> <C>
Class A-1..................................... P-1 A-1+
Class A-2..................................... P-1 A-1+
Class B....................................... P-1 A-1+
Class C....................................... P-1 A-1
</TABLE>
Liquidity Provider
Rating.....................
The Liquidity Provider meets the Threshold Rating
requirement for each Class of Certificates.
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<PAGE> 14
SUMMARY FINANCIAL AND OPERATING DATA
The following table presents summary consolidated financial data and
certain operating data of Delta. We derived the annual historical financial data
from our audited consolidated financial statements and the notes to those
financial statements. Our audited consolidated financial statements are
incorporated by reference in the prospectus accompanying this prospectus
supplement. The consolidated financial data include the results of ASA Holdings,
Inc. and Comair Holdings, Inc. since April 1, 1999 and November 22, 1999,
respectively.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEARS ENDED JUNE 30, SEPTEMBER 30,
---------------------------------------------------- -----------------
1996(1) 1997(2) 1998 1999 2000(3) 1999(4) 2000(5)
-------- -------- -------- -------- -------- ------- -------
(UNAUDITED)
(IN MILLIONS, EXCEPT OPERATING DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
FINANCIAL DATA:
Operating revenues........................ $ 12,418 $ 13,517 $ 14,057 $ 14,597 $ 15,888 $ 3,829 $ 4,345
Operating expenses........................ 11,953 11,986 12,363 12,727 14,600 3,493 3,835
Operating income.......................... 465 1,531 1,694 1,870 1,288 336 510
Interest expense, net..................... (243) (174) (148) (153) (305) (53) (93)
Miscellaneous income, net(6).............. 54 58 102 109 1,300 286 (25)
Income before income taxes................ 276 1,415 1,648 1,826 2,283 569 392
Income tax (provision).................... (120) (561) (647) (725) (914) (225) (159)
Net income (before cumulative effect of
change in accounting principle, net of
tax).................................... 156 854 1,001 1,101 1,369 344 233
Net income (after cumulative effect of
change in accounting principle, net of
tax).................................... 156 854 1,001 1,101 1,303 278 133
Total assets at period end................ 12,226 12,741 14,603 16,750 20,566 17,417 21,805
Long-term debt and capital leases
(excluding current maturities) at end of
period.................................. 2,175 1,797 1,782 1,952 4,525 2,455 4,602
OPERATING DATA:
Revenue passengers enplaned (thousands)... 91,341 101,147 104,148 106,902 116,595 28,519 31,131
Available seat miles (millions)(7)........ 130,751 136,821 140,149 144,003 151,913 38,347 40,155
Revenue passenger miles (millions)(8)..... 88,673 97,758 101,136 104,575 110,347 28,680 30,643
Operating revenue per available seat
mile.................................... 9.50c 9.88c 10.03c 10.14c 10.46c 9.99c 10.82c
Passenger mile yield(9)................... 13.19c 12.98c 13.03c 13.09c 13.48c 12.53c 13.22c
Operating cost per available seat mile.... 9.14c 8.76c 8.82c 8.84c 9.61c 9.11c 9.55c
Passenger load factor(10)................. 67.8% 71.4% 72.2% 72.6% 72.6% 74.8% 76.3%
Breakeven passenger load factor........... 65.1% 62.8% 62.9% 62.7% 66.4% 67.8% 66.7%
</TABLE>
---------------
(1) Includes $829 million in pretax restructuring and other nonrecurring
charges.
(2) Includes $52 million in pretax restructuring and other nonrecurring
charges.
(3) Includes pretax income of $574 million, net of nonrecurring items.
(4) Includes $149 million in pretax, nonrecurring charges comprised of asset
impairment losses and costs to streamline certain operations.
(5) Includes pretax, unusual charges of $73 million, net.
(6) Includes interest income and, for the quarter ended September 30, 1999,
pretax gains of $252 million from the sale of our equity investment in
Singapore Airlines and a portion of our equity investment in priceline.com.
Also included, for the quarter ended September 30, 2000, are pretax charges
of $66 million related to the adoption of Statement of Financial Accounting
Standards No. 133, offset by a $16 million one-time gain related to our
equity investment in WORLDSPAN, L.P.
(7) "Available seat miles" is a measure of capacity which is calculated by
multiplying the total number of seats available for transporting passengers
by the total number of miles flown during a reporting period.
(8) "Revenue passenger mile" means one revenue-paying passenger transported one
mile.
(9) "Passenger mile yield" means the amount of passenger revenue earned per
revenue passenger mile during a reporting period.
(10) "Passenger load factor" is a measure of aircraft utilization which is
calculated by dividing revenue passenger miles by available seat miles for
a reporting period.
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<PAGE> 15
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the historical ratios of earnings to fixed
charges of Delta and its consolidated subsidiaries for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED JUNE 30, SEPTEMBER 30,
-------------------------------- -------------------
1996 1997 1998 1999 2000 1999 2000
---- ---- ---- ---- ---- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
1.43 3.05 3.41 3.45 3.35 3.75 2.45
</TABLE>
Earnings represent:
- income before income taxes, excluding the cumulative effect of accounting
changes;
plus
- fixed charges, excluding capitalized interest and interest offset on the
Guaranteed Serial ESOP Notes of the Delta Family-Care Savings Plan, which
are guaranteed by Delta.
Fixed charges include:
- interest whether expensed or capitalized, including gross interest on the
Guaranteed Serial ESOP Notes;
- amortization of debt issuance costs; and
- one-half of rental expense, except for the years ended June 30, 1997 and
1996, where one-third of the rentals were included in fixed charges.
Management of Delta believes this is representative of the interest
factor in those periods.
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<PAGE> 16
RISK FACTORS
You should carefully consider the following risk factors as well as other
information contained in this prospectus supplement and the accompanying
prospectus.
APPRAISALS AND REALIZABLE VALUE OF AIRCRAFT
Three independent appraisal and consulting firms have prepared appraisals
of the Aircraft. The appraisal letters are annexed to this prospectus supplement
as Appendix II. The appraisals are based on varying assumptions and
methodologies (which may differ among the appraisers), and may not reflect
current market conditions that could affect the current market value of the
Aircraft. Base value is the theoretical value for an aircraft that assumes a
balanced market, while current market value is the value for an aircraft in the
actual market. The appraisals were prepared without a physical inspection of the
Aircraft. Appraisals that are based on other assumptions and methodologies may
result in valuations that are materially different from those contained in the
appraisals. See "Description of the Aircraft and the Appraisals -- The
Appraisals".
An appraisal is only an estimate of value. It does not necessarily indicate
the price at which an aircraft may be purchased from the aircraft manufacturer.
Nor should an appraisal be relied upon as a measure of realizable value. The
proceeds realized upon a sale of any Aircraft may be less than its appraised
value. The value of an Aircraft if remedies are exercised under the applicable
Indenture will depend on various factors, including: market and economic
conditions; the supply of similar aircraft; the availability of buyers; the
condition of the Aircraft; and whether the Aircraft are sold separately or as a
block. Accordingly, we cannot assure you that the proceeds realized upon any
such exercise of remedies would be sufficient to satisfy in full payments due on
the Equipment Notes relating to such Aircraft or the full amount of
distributions expected on the Certificates.
REPOSSESSION
There will be no general geographic restrictions on our ability to operate
the Aircraft. Although we do not currently intend to do so, we will be permitted
to register the Aircraft in certain foreign jurisdictions and to lease the
Aircraft. It may be difficult, time-consuming and expensive for the Loan Trustee
to exercise its repossession rights if an Aircraft is located outside the United
States, is registered in a foreign jurisdiction or is leased to a foreign or
domestic operator. Additional difficulties may exist when a lessee is the
subject of a bankruptcy, insolvency or similar event.
In addition, certain jurisdictions may allow for certain other liens or
other third party rights to have priority over the related Loan Trustee's
security interest in an Aircraft. As a result, the benefits of the related Loan
Trustee's security interest in an Aircraft may be less than they would be if
such Aircraft were located or registered in the United States.
PRIORITY OF DISTRIBUTIONS; SUBORDINATION
Under the Intercreditor Agreement, the Liquidity Provider will receive
payment of all amounts owed to it (including reimbursement of drawings made to
pay interest on more junior Classes of Certificates) before the holders of any
Class of Certificates receive any funds. In addition, in certain default
situations the Subordination Agent and the Trustees will receive certain
payments before the holders of any Class of Certificates receive distributions.
See "Description of the Intercreditor Agreement -- Priority of Distributions".
Certain Classes of Certificates are subordinated to other Classes in rights
to distributions. See "Description of the Certificates -- Subordination".
Consequently, a payment default under any Equipment Note or a Triggering Event
may cause the distribution to more senior Classes of Certificates of payments
received on one or more junior series of Equipment Notes. If this occurs, the
interest accruing on the remaining Equipment Notes may be less than the amount
of interest expected to be distributed on the
S-12
<PAGE> 17
remaining Certificates of more junior Classes. This is because the interest that
Certificates of junior Classes are expected to receive may accrue at a higher
rate than interest on the remaining Equipment Notes. As a result of this
possible interest shortfall, the holders of one or more junior Classes of
Certificates may not receive the full amount expected after a payment default
under any Equipment Note even if all Equipment Notes are eventually paid in
full.
However, if Delta is in bankruptcy or other specified defaults have
occurred but Delta is continuing to meet certain of its payment obligations and
the applicable loan to Aircraft value tests are met, the subordination
provisions applicable to the Certificates permit distributions to be made to
junior Certificates prior to making distributions in full on more senior
Certificates. This could include distributions in respect of the principal paid
at maturity of the Series C Equipment Notes held in the Class C Trust.
CONTROL OVER COLLATERAL; SALE OF COLLATERAL
If an Indenture Event of Default is continuing, subject to certain
conditions, the Loan Trustee under the related Indenture will be directed by the
Controlling Party in exercising remedies under such Indenture, including
accelerating the applicable Equipment Notes or foreclosing the lien on the
Aircraft securing such Equipment Notes. See "Description of the
Certificates -- Indenture Events of Default and Certain Rights upon an Indenture
Event of Default".
The Controlling Party will be:
- the Class A-1 Trustee or Class A-2 Trustee, whichever represents the
Class with the larger Pool Balance of Certificates outstanding at the
time the Indenture Event of Default occurs;
- upon payment of Final Distributions to the holders of such larger Class,
the other of the Class A-1 Trustee or Class A-2 Trustee;
- upon payment of Final Distributions to the holders of Class A-1 and Class
A-2 Certificates, the Class B Trustee;
- upon payment of Final Distributions to the holders of Class B
Certificates, the Class C Trustee; and
- under certain circumstances, and notwithstanding the foregoing, the
Liquidity Provider with the greatest amount owed to it.
During the continuation of any Indenture Event of Default, the Controlling
Party may accelerate the Equipment Notes issued under the related Indenture and
sell such Equipment Notes or the related Aircraft, subject to certain
limitations. See "Description of the Intercreditor Agreement -- Intercreditor
Rights -- Sale of Equipment Notes or Aircraft". The market for Equipment Notes
during any Indenture Event of Default may be very limited, and we cannot assure
you as to whether they could be sold or the price at which they could be sold.
If the Controlling Party sells any Equipment Notes for less than their
outstanding principal amount, certain Certificateholders will receive a smaller
amount of principal distributions than anticipated and will not have any claim
for the shortfall against us or any Trustee.
In addition, the Equipment Notes will not be cross-collateralized. This
means that the Equipment Notes secured by an Aircraft will not be secured by any
other Aircraft. Accordingly, any proceeds realized from the sale of an Aircraft
or other exercise of default remedies with respect to an Aircraft in excess of
the outstanding principal amount of the related Equipment Notes will not be
available to cover shortfalls, if any, on the Equipment Notes related to any
other Aircraft. See "Description of the Equipment Notes -- Remedies".
RATINGS OF THE CERTIFICATES
It is a condition to the issuance of the Certificates that the Class A-1
and Class A-2 Certificates be rated not lower than Aa2 by Moody's Investors
Service, Inc. ("Moody's") and AAA by Standard & Poor's Ratings Services, a
division of the McGraw-Hill Companies, Inc. ("Standard & Poor's", and together
with
S-13
<PAGE> 18
Moody's, the "Rating Agencies"), the Class B Certificates be rated not lower
than Aa3 by Moody's and AA-by Standard & Poor's and the Class C Certificates be
rated not lower than A3 by Moody's and A by Standard & Poor's. A rating is not a
recommendation to purchase, hold or sell Certificates and does not address
market price or suitability for a particular investor. A rating may not remain
for any given period of time and may be lowered or withdrawn entirely by a
Rating Agency if in its judgment circumstances in the future (including the
downgrading of Delta or the Liquidity Provider) so warrant.
The rating of each Class of the Certificates is based primarily on the
default risk of the Equipment Notes held for such Class, the availability of the
Liquidity Facility for the benefit of holders of such Certificates, the
collateral value provided by the Aircraft securing such Equipment Notes and the
subordination provisions applicable to such Certificates. The foregoing ratings
address the likelihood of timely payment of interest when due on the
Certificates and the ultimate payment of principal of the Certificates by the
Final Legal Distribution Date. Such ratings do not address the possibility of
certain defaults, voluntary redemptions or other circumstances (such as an Event
of Loss to an Aircraft) which could result in the payment of the outstanding
principal amount of the Certificates prior to the Final Legal Distribution Date.
See "Description of the Certificates".
The reduction, suspension or withdrawal of the ratings of the Certificates
will not, by itself, constitute an Event of Default.
NO PROTECTION AGAINST HIGHLY LEVERAGED OR EXTRAORDINARY TRANSACTIONS
The Certificates, the Equipment Notes and the underlying agreements will
not contain any financial or other covenants or "event risk" provisions
protecting the Certificateholders in the event of a highly leveraged or other
extraordinary transaction affecting Delta or its affiliates.
LIMITED ABILITY TO RESELL THE CERTIFICATES
Prior to this offering, there has been no public market for the
Certificates. Neither Delta nor any Trust intends to apply for listing of the
Certificates on any securities exchange or otherwise. The Underwriters may
assist in resales of the Certificates, but they are not required to do so. A
secondary market for the Certificates may not develop. If a secondary market
does develop, it might not continue or it might not be sufficiently liquid to
allow you to resell any of your Certificates. If an active public market does
not develop, the market price and liquidity of the Certificates may be adversely
affected.
THE COMPANY
Delta is a major air carrier that provides air transportation for
passengers and freight throughout the United States and around the world. Based
on calendar year 1999 data, Delta is the largest United States airline in terms
of aircraft departures and passengers enplaned, and the third largest United
States airline as measured by operating revenues and revenue passenger miles
flown. In the transatlantic market, Delta offers the most daily flight
departures, serves the largest number of nonstop routes and carries more
passengers than any other United States airline. We operate hubs at Atlanta,
Cincinnati, Dallas/Fort Worth and Salt Lake City. We also operate an
international gateway at New York's John F. Kennedy International Airport.
Delta is incorporated under the laws of the State of Delaware. Delta's
principal executive offices are located at Hartsfield Atlanta International
Airport, Atlanta, Georgia 30320, and Delta's telephone number is (404) 715-2600.
USE OF PROCEEDS
The proceeds from the sale of the Certificates of each Trust will be used
to purchase the Equipment Notes to be held by such Trust. The Equipment Notes
will be full recourse obligations of Delta. Delta will
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<PAGE> 19
use the proceeds from the issuance of the Equipment Notes for general corporate
purposes including, among other possible uses, the repayment of all or a portion
of the indebtedness incurred in fiscal year 1999 when Delta entered into a
credit agreement with a group of banks pursuant to which Delta borrowed $500
million to finance a portion of the cost of Delta's acquisition of ASA Holdings,
Inc. The loan bears interest at LIBOR or the prime rate, at Delta's election,
plus a margin that is dependent on Delta's long-term debt ratings. The interest
rate for the loan as of the date of this prospectus supplement is 7.6% per
annum. The loan matures on March 22, 2001, and may be repaid at any time. As of
the date of this prospectus supplement, $500 million is outstanding under this
credit agreement.
DESCRIPTION OF THE CERTIFICATES
The following summary of particular terms of the Certificates supplements
(and, to the extent inconsistent therewith, replaces) the description of the
general terms and provisions of the Certificates set forth in the prospectus
accompanying this prospectus supplement (the "Prospectus"). The summary does not
purport to be complete and is qualified in its entirety by reference to all of
the provisions of the Basic Agreement, the Certificates, the Trust Supplements,
the Liquidity Facilities and the Intercreditor Agreement, each of which will be
filed as an exhibit to a Current Report on Form 8-K to be filed by Delta with
the Securities and Exchange Commission (the "Commission").
Except as otherwise indicated, the following summary relates to each of the
Trusts and the Certificates issued by each Trust. The terms and conditions
governing each of the Trusts will be substantially the same, except as described
under "-- Subordination" below and except that the principal amount and
scheduled principal repayments of the Equipment Notes held by each Trust and the
interest rate and maturity date of the Equipment Notes held by each Trust will
differ. The references to Sections in parentheses in the following summary are
to the relevant Sections of the Basic Agreement unless otherwise indicated.
GENERAL
Each pass through certificate (collectively, the "Certificates") will
represent a fractional undivided interest in one of the four Delta Air Lines
2000-1 Pass Through Trusts: the "Class A-1 Trust", the "Class A-2 Trust", the
"Class B Trust" and the "Class C Trust", and, collectively, the "Trusts". The
Trusts will be formed pursuant to an amended and restated pass through trust
agreement between Delta and State Street Bank and Trust Company of Connecticut,
National Association, as trustee, to be dated as of the date of initial issuance
of the Certificates (the "Basic Agreement"), and four separate supplements
thereto (each, a "Trust Supplement" and, together with the Basic Agreement,
collectively, the "Pass Through Trust Agreements"). The trustee under the Class
A-1 Trust, the Class A-2 Trust, the Class B Trust and the Class C Trust is
referred to herein, respectively, as the "Class A-1 Trustee", the "Class A-2
Trustee", the "Class B Trustee" and the "Class C Trustee", and collectively as
the "Trustees". The Certificates to be issued by the Class A-1 Trust, the Class
A-2 Trust, the Class B Trust and the Class C Trust are referred to herein,
respectively, as the "Class A-1 Certificates", the "Class A-2 Certificates", the
"Class B Certificates" and the "Class C Certificates". The Class A-1 Trust will
purchase all of the Series A-1 Equipment Notes, the Class A-2 Trust will
purchase all of the Series A-2 Equipment Notes, the Class B Trust will purchase
all of the Series B Equipment Notes, and the Class C Trust will purchase all of
the Series C Equipment Notes. The holders of the Class A-1 Certificates, the
Class A-2 Certificates, the Class B Certificates and the Class C Certificates
are referred to herein, respectively, as the "Class A-1 Certificateholders", the
"Class A-2 Certificateholders", the "Class B Certificateholders" and the "Class
C Certificateholders", and collectively as the "Certificateholders". The sum of
the initial principal balances of the Equipment Notes held by each Trust will
equal the initial aggregate face amount of the Certificates issued by such
Trust.
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<PAGE> 20
Each Certificate will represent a fractional undivided interest in the
Trust created by the Basic Agreement and the applicable Trust Supplement
pursuant to which such Certificate is issued. (Section 2.01) The property of
each Trust (the "Trust Property") will consist of:
- subject to the Intercreditor Agreement, the Equipment Notes acquired by
such Trust, all monies at any time paid thereon and all monies due and to
become due thereunder;
- the rights of such Trust under the Intercreditor Agreement (including all
rights to receive monies receivable in respect of such rights);
- all monies receivable under the Liquidity Facility for such Trust; and
- funds from time to time deposited with the Trustee in accounts relating
to such Trust.
The Certificates represent interests in the respective Trusts only, and all
payments and distributions thereon will be made only from the Trust Property of
the related Trust. (Section 3.09) The Certificates do not represent indebtedness
of the Trusts, and references in this prospectus supplement to interest accruing
on the Certificates are included for purposes of computation only. The
Certificates do not represent an interest in or obligation of Delta, the
Trustees, the Subordination Agent, any of the Loan Trustees or any affiliate of
any thereof. Each Certificateholder by its acceptance of a Certificate agrees to
look solely to the income and proceeds from the Trust Property of the related
Trust for payments and distributions on such Certificate.
The Certificates of each Trust will be issued in fully registered form only
and will be subject to the provisions described below under "-- Book-Entry
Registration; Delivery and Form". Certificates will be issued only in minimum
denominations of $1,000 or integral multiples thereof. (Section 3.01)
DISTRIBUTION OF PAYMENTS ON EQUIPMENT NOTES
The following description of distributions on the Certificates should be
read in conjunction with the description of the Intercreditor Agreement because
the Intercreditor Agreement may alter the following provisions in a default
situation. See "-- Subordination" and "Description of the Intercreditor
Agreement".
Payments of principal, Make-Whole Amount (if any) and interest on the
Equipment Notes or with respect to other Trust Property held in each Trust will
be distributed by the Trustee to Certificateholders of such Trust on the date
receipt of such payment is confirmed, except in the case of certain types of
Special Payments.
The Equipment Notes held in each Trust will accrue interest at the
applicable rate per annum for Certificates to be issued by such Trust set forth
on the cover page of this prospectus supplement, payable on May 18 and November
18 of each year, commencing on May 18, 2001. Such interest payments will be
distributed to Certificateholders of such Trust on each such date until the
final Distribution Date for such Trust, subject to the Intercreditor Agreement.
Interest will be calculated on the basis of a 360-day year consisting of twelve
30-day months.
Distributions of interest applicable to the Certificates to be issued by
each of the Trusts will be supported by a separate Liquidity Facility to be
provided by the Liquidity Provider for the benefit of the holders of such
Certificates. Each Liquidity Facility will provide an aggregate amount
sufficient to distribute interest on the Pool Balance thereof at the Stated
Interest Rate for such Trust on up to three successive Regular Distribution
Dates (without regard to any future distributions of principal on such
Certificates). The Liquidity Facility for any Class of Certificates does not
provide for drawings thereunder to pay for principal of or Make-Whole Amount on
the Certificates of such Class, any interest with respect to the Certificates of
such Class in excess of the Stated Interest Rate, or, notwithstanding the
subordination provisions of the Intercreditor Agreement, principal of or
interest or Make-Whole Amount with respect to the Certificates of any other
Class. Therefore, only the holders of the Certificates to be issued by a
particular Trust will be entitled to receive and retain the proceeds of drawings
under the Liquidity Facility for such Trust. See "Description of the Liquidity
Facilities".
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<PAGE> 21
Payments of principal of the Series A-1 Equipment Notes are scheduled to be
received by the Trustee in installments on May 18 and November 18 in certain
years, commencing on May 18, 2001 and ending on May 18, 2010. The entire
principal amount of the Series A-2 Equipment Notes is scheduled for payment on
November 18, 2010; the entire principal amount of the Series B Equipment Notes
is scheduled for payment on November 18, 2010; and the entire principal amount
of the Series C Equipment Notes is scheduled for payment on November 18, 2005.
Scheduled payments of interest or principal on the Equipment Notes are
referred to herein as "Scheduled Payments", and May 18 and November 18 of each
year are referred to herein as "Regular Distribution Dates" (each Regular
Distribution Date and Special Distribution Date, a "Distribution Date"). See
"Description of the Equipment Notes -- Principal and Interest Payments". The
"Final Legal Distribution Date" for the Class A-1 Certificates is November 18,
2011, for the Class A-2 Certificates is May 18, 2012, for the Class B
Certificates is May 18, 2012 and for the Class C Certificates is May 18, 2007.
Subject to the Intercreditor Agreement, on each Regular Distribution Date
the Trustee of each Trust will distribute to the Certificateholders of such
Trust all Scheduled Payments received in respect of Equipment Notes held on
behalf of such Trust, the receipt of which is confirmed by the Trustee on such
Regular Distribution Date. Each Certificateholder of each Trust will be entitled
to receive, subject to the Intercreditor Agreement, its proportionate share,
based upon its fractional interest in such Trust, of any distribution in respect
of Scheduled Payments of principal or interest on Equipment Notes held on behalf
of such Trust. Each such distribution of Scheduled Payments will be made by the
applicable Trustee to the Certificateholders of record of the relevant Trust on
the record date applicable to such Scheduled Payment (15 days prior to each
Regular Distribution Date) subject to certain exceptions. (Section 4.02(a)) If a
Scheduled Payment is not received by the applicable Trustee on a Regular
Distribution Date but is received within five days thereafter, it will be
distributed on the date received to such holders of record. If it is received
after such five-day period, it will be treated as a Special Payment and
distributed as described below.
Any payment in respect of, or any proceeds of, any Equipment Note or the
Trust Indenture Estate under, and as defined in, any Indenture other than a
Scheduled Payment (each, a "Special Payment") will be distributed on, in the
case of an early redemption of any Equipment Note, the date of such early
redemption (which shall be a Business Day), and otherwise on the Business Day
specified for distribution of such Special Payment pursuant to a notice
delivered by each Trustee as soon as practicable after the Trustee has received
notice of such Special Payment, or has received the funds for such Special
Payment (each a "Special Distribution Date"), as described below. Any such
distribution will be subject to the Intercreditor Agreement.
The Trustee of each Trust will mail a notice to the Certificateholders of
such Trust stating the scheduled Special Distribution Date, the related record
date, the amount of the Special Payment and the reason for the Special Payment.
In the case of a redemption of the Equipment Notes held in the related Trust,
such notice will be mailed not less than 15 days prior to the date such Special
Payment is scheduled to be distributed, and in the case of any other Special
Payment, such notice will be mailed as soon as practicable after the Trustee has
confirmed that it has received funds for such Special Payment. (Section 4.02(c))
Each distribution of a Special Payment, other than a Final Distribution, on a
Special Distribution Date for any Trust will be made by the Trustee to the
Certificateholders of record of such Trust on the record date applicable to such
Special Payment. (Section 4.02(b)) See "-- Indenture Events of Default and
Certain Rights upon an Indenture Event of Default" and "Description of the
Equipment Notes -- Redemption".
Each Pass Through Trust Agreement requires that the Trustee establish and
maintain, for the related Trust and for the benefit of the Certificateholders of
such Trust, one or more non-interest bearing accounts (the "Certificate
Account") for the deposit of payments representing Scheduled Payments received
by such Trustee. Each Pass Through Trust Agreement requires that the Trustee
establish and maintain, for the related Trust and for the benefit of the
Certificateholders of such Trust, one or more accounts (the
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<PAGE> 22
"Special Payments Account") for the deposit of payments representing Special
Payments received by such Trustee, which will be non-interest bearing except in
certain circumstances where the Trustee may invest amounts in such account in
certain Permitted Investments. Pursuant to the terms of each Pass Through Trust
Agreement, the Trustee is required to deposit any Scheduled Payments relating to
the applicable Trust received by it in the Certificate Account of such Trust and
to deposit any Special Payments so received by it in the Special Payments
Account of such Trust. (Section 4.01) All amounts so deposited will be
distributed by the Trustee on a Regular Distribution Date or a Special
Distribution Date, as appropriate. (Section 4.02)
The Final Distribution for each Trust will be made only upon presentation
and surrender of the Certificates for such Trust at the office or agency of the
Trustee specified in the notice given by the Trustee of such Final Distribution.
See "-- Termination of the Trusts" below. Distributions in respect of
Certificates issued in global form will be made as described in "-- Book-Entry
Registration; Delivery and Form" below.
If any Distribution Date is a Saturday, a Sunday or other day on which
commercial banks are authorized or required to close in New York, New York,
Atlanta, Georgia, or the city and state in which the Trustee or any Loan Trustee
is located (any other day being a "Business Day"), distributions scheduled to be
made on such Regular Distribution Date or Special Distribution Date will be made
on the next succeeding Business Day without additional interest.
SUBORDINATION
The Certificates are subject to subordination terms set forth in the
Intercreditor Agreement which vary depending upon whether a Triggering Event has
occurred. See "Description of the Intercreditor Agreement -- Priority of
Distributions".
POOL FACTORS
The "Pool Balance" of the Certificates issued by any Trust indicates, as of
any date, the original aggregate face amount of the Certificates of such Trust
less the aggregate amount of all payments made in respect of the Certificates of
such Trust other than payments made in respect of interest or Make-Whole Amount
thereon or reimbursement of any costs and expenses incurred in connection
therewith. The Pool Balance of the Certificates issued by any Trust as of any
Distribution Date will be computed after giving effect to any payment of
principal on the Equipment Notes or other Trust Property held in such Trust and
the distribution thereof to be made on that date. (Section 1.01)
The "Pool Factor" for each Trust as of any date is the quotient (rounded to
the seventh decimal place) computed by dividing (i) the Pool Balance as at such
date by (ii) the original aggregate face amount of the Certificates of such
Trust. The Pool Factor for each Trust as of any Distribution Date will be
computed after giving effect to any payment of principal on the Equipment Notes
or other Trust Property held in such Trust and the distribution thereof to be
made on that date. (Section 1.01) The Pool Factor for each Trust will be
1.0000000 on the date of issuance of the Certificates; thereafter, the Pool
Factor for each Trust will decline as described herein to reflect reductions in
the Pool Balance of such Trust. The amount of a Certificateholder's pro rata
share of the Pool Balance of a Trust can be determined by multiplying the
original denomination of the Certificateholder's Certificate of such Trust by
the Pool Factor for such Trust as of the applicable Distribution Date. Notice of
the Pool Factor and the Pool Balance for each Trust will be mailed to
Certificateholders of such Trust on each Distribution Date. (Section 4.03)
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<PAGE> 23
The following table sets forth the aggregate principal amortization
schedule for the Equipment Notes held in each Trust and resulting Pool Factors
with respect to such Trust. The actual aggregate principal amortization schedule
applicable to a Trust and the resulting Pool Factors with respect to such Trust
may differ from those set forth below because the scheduled distribution of
principal payments for any Trust would be affected if any Equipment Notes held
in such Trust are redeemed or if a default in payment of the principal of such
Equipment Notes occurred.
<TABLE>
<CAPTION>
CLASS A-1 TRUST CLASS A-2 TRUST CLASS B TRUST
-------------------------- --------------------------- ---------------------------
SCHEDULED EXPECTED SCHEDULED EXPECTED SCHEDULED EXPECTED
PRINCIPAL POOL PRINCIPAL POOL PRINCIPAL POOL
DATE PAYMENTS FACTOR PAYMENTS FACTOR PAYMENTS FACTOR
---- -------------- --------- --------------- --------- --------------- ---------
<S> <C> <C> <C> <C> <C> <C>
May 18, 2001......... $13,566,491.40 0.9602265 $ 0.00 1.0000000 $ 0.00 1.0000000
November 18, 2001.... 19,747,635.36 0.9023315 0.00 1.0000000 0.00 1.0000000
May 18, 2002......... 13,566,491.40 0.8625581 0.00 1.0000000 0.00 1.0000000
November 18, 2002.... 19,747,635.36 0.8046631 0.00 1.0000000 0.00 1.0000000
May 18, 2003......... 13,566,491.40 0.7648896 0.00 1.0000000 0.00 1.0000000
November 18, 2003.... 19,747,635.36 0.7069946 0.00 1.0000000 0.00 1.0000000
May 18, 2004......... 13,566,491.40 0.6672211 0.00 1.0000000 0.00 1.0000000
November 18, 2004.... 19,747,635.36 0.6093261 0.00 1.0000000 0.00 1.0000000
May 18, 2005......... 13,566,491.40 0.5695527 0.00 1.0000000 0.00 1.0000000
November 18, 2005.... 20,425,489.87 0.5096704 0.00 1.0000000 0.00 1.0000000
May 18, 2006......... 13,731,360.15 0.4694136 0.00 1.0000000 0.00 1.0000000
November 18, 2006.... 23,739,178.67 0.3998164 0.00 1.0000000 0.00 1.0000000
May 18, 2007......... 16,231,557.69 0.3522296 0.00 1.0000000 0.00 1.0000000
November 18, 2007.... 23,739,178.67 0.2826325 0.00 1.0000000 0.00 1.0000000
May 18, 2008......... 16,308,654.55 0.2348197 0.00 1.0000000 0.00 1.0000000
November 18, 2008.... 23,739,178.67 0.1652225 0.00 1.0000000 0.00 1.0000000
May 18, 2009......... 16,308,654.55 0.1174097 0.00 1.0000000 0.00 1.0000000
November 18, 2009.... 23,739,178.67 0.0478125 0.00 1.0000000 0.00 1.0000000
May 18, 2010......... 16,308,570.07 0.0000000 0.00 1.0000000 0.00 1.0000000
November 18, 2010.... 0.00 0.0000000 738,136,000.00 0.0000000 182,497,000.00 0.0000000
<CAPTION>
CLASS C TRUST
---------------------------
SCHEDULED EXPECTED
PRINCIPAL POOL
DATE PAYMENTS FACTOR
---- --------------- ---------
<S> <C> <C>
May 18, 2001......... $ 0.00 1.0000000
November 18, 2001.... 0.00 1.0000000
May 18, 2002......... 0.00 1.0000000
November 18, 2002.... 0.00 1.0000000
May 18, 2003......... 0.00 1.0000000
November 18, 2003.... 0.00 1.0000000
May 18, 2004......... 0.00 1.0000000
November 18, 2004.... 0.00 1.0000000
May 18, 2005......... 0.00 1.0000000
November 18, 2005.... 238,273,000.00 0.0000000
May 18, 2006......... 0.00 0.0000000
November 18, 2006.... 0.00 0.0000000
May 18, 2007......... 0.00 0.0000000
November 18, 2007.... 0.00 0.0000000
May 18, 2008......... 0.00 0.0000000
November 18, 2008.... 0.00 0.0000000
May 18, 2009......... 0.00 0.0000000
November 18, 2009.... 0.00 0.0000000
May 18, 2010......... 0.00 0.0000000
November 18, 2010.... 0.00 0.0000000
</TABLE>
The Pool Factor and Pool Balance of each Trust will be recomputed if there
has been an early redemption or default in the payment of principal or interest
in respect of one or more of the Equipment Notes held in a Trust, as described
in "-- Indenture Events of Default and Certain Rights upon an Indenture Event of
Default" and "Description of the Equipment Notes -- Redemption". Notice of the
Pool Factors and Pool Balances of each Trust as so recomputed after giving
effect to any Special Payment to Certificateholders resulting from such an early
redemption or default in respect of one more Equipment Notes will be mailed to
Certificateholders of Certificates of the related Trust with such Special
Payment, as described in "-- Reports to Certificateholders".
REPORTS TO CERTIFICATEHOLDERS
On each Distribution Date, the applicable Trustee will include with each
distribution of a Scheduled Payment or Special Payment to Certificateholders of
the related Trust a statement, giving effect to such distribution to be made on
such Distribution Date, setting forth the following information (per $1,000
aggregate principal amount of Certificates as to items (1) and (2) below):
(1) the amount of such distribution allocable to principal and the
amount allocable to Make-Whole Amount, if any;
(2) the amount of such distribution allocable to interest; and
(3) the Pool Balance and the Pool Factor for such Trust. (Section 4.03)
As long as the Certificates are registered in the name of Cede & Co.
("Cede"), as nominee for The Depository Trust Company ("DTC"), on the record
date prior to each Distribution Date, the applicable Trustee will request from
DTC a securities position listing setting forth the names of all DTC
Participants reflected on DTC's books as holding interests in the Certificates
on such record date. On each Distribution
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<PAGE> 24
Date, the applicable Trustee will mail to each such DTC Participant the
statement described above and will make available additional copies as requested
by such DTC Participant for forwarding to Certificate Owners. (Section 4.03(a))
In addition, after the end of each calendar year, the applicable Trustee
will prepare for each Certificateholder of each Trust at any time during the
preceding calendar year a report containing the sum of the amounts determined
pursuant to clauses (1) and (2) above with respect to the Trust for such
calendar year or, if such person was a Certificateholder during only a portion
of such calendar year, for the applicable portion of such calendar year, and
such other items as are readily available to such Trustee and which a
Certificateholder reasonably requests as necessary for the purpose of such
Certificateholder's preparation of its U.S. federal income tax returns. Such
report and such other items will be prepared on the basis of information
supplied to the applicable Trustee by the DTC Participants and will be delivered
by such Trustee to such DTC Participants to be available for forwarding by such
DTC Participants to Certificate Owners. (Section 4.03(b))
At such time, if any, as the Certificates are issued in the form of
definitive certificates, the applicable Trustee will prepare and deliver the
information described above to each Certificateholder of record of each Trust as
the name and period of record ownership of such Certificateholder appears on the
records of the registrar of the Certificates.
INDENTURE EVENTS OF DEFAULT AND CERTAIN RIGHTS UPON AN INDENTURE EVENT OF
DEFAULT
Because the Equipment Notes issued under an Indenture will be held in more
than one Trust, a continuing Indenture Event of Default under such Indenture
would affect the Equipment Notes held by each such Trust. For a description of
the Indenture Events of Default under each Indenture, see "Description of the
Equipment Notes -- Indenture Events of Default, Notice and Waiver". There are no
cross-default or cross-acceleration provisions in the Indentures. Consequently,
events resulting in an Indenture Event of Default under any particular Indenture
may or may not result in an Indenture Event of Default under any other
Indenture. If an Indenture Event of Default occurs in fewer than all of the
Indentures related to a Trust, notwithstanding the treatment of Equipment Notes
issued under those Indentures under which an Indenture Event of Default has
occurred, payments of principal and interest on those Equipment Notes issued
pursuant to Indentures with respect to which an Indenture Event of Default has
not occurred will continue to be made as originally scheduled and distributed to
the holders of the Certificates, subject to the Intercreditor Agreement. See
"Description of the Intercreditor Agreement -- Priority of Distributions".
If the same institution acts as Trustee of multiple Trusts, in the absence
of instructions from the Certificateholders of any such Trust, such Trustee
could be faced with a potential conflict of interest upon an Indenture Event of
Default. In such event, each Trustee has indicated that it would resign as
Trustee of some or all such Trusts, and a successor trustee would be appointed
in accordance with the terms of the applicable Pass Through Trust Agreement.
State Street Bank and Trust Company of Connecticut, National Association, will
be the initial Trustee under each Trust.
Upon the occurrence and continuation of an Indenture Event of Default under
any Indenture, the Controlling Party will direct the Loan Trustee under such
Indenture in the exercise of remedies and may accelerate the Equipment Notes
issued under such Indenture and sell all (but not less than all) of such
Equipment Notes or the related Aircraft to any person, subject to certain
limitations. See "Description of the Intercreditor Agreement -- Intercreditor
Rights -- Sale of Equipment Notes or Aircraft". The proceeds of such sale will
be distributed pursuant to the provisions of the Intercreditor Agreement. Any
proceeds so distributed to any Trustee upon any such sale will be deposited in
the applicable Special Payments Account and will be distributed to the
Certificateholders of the applicable Trust on a Special Distribution Date.
(Sections 4.01 and 4.02) The market for Equipment Notes at the time of the
existence of an Indenture Event of Default may be very limited, and there can be
no assurance whether they could be sold or as to the price at which they could
be sold. If a Loan Trustee sells any such Equipment Notes for less than their
outstanding principal amount, certain Certificateholders will receive a smaller
amount of principal
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<PAGE> 25
distributions than anticipated and will not have any claim for the shortfall
against Delta, any Liquidity Provider or any Trustee. Neither such Trustee nor
the Certificateholders of such Trust, furthermore, could take action with
respect to any remaining Equipment Notes held in such Trust as long as no
Indenture Events of Default existed with respect thereto.
Any amount, other than Scheduled Payments received on a Regular
Distribution Date or within five days thereafter, distributed to the Trustee of
any Trust by the Subordination Agent on account of the Equipment Notes or other
Trust Property held in such Trust following an Indenture Event of Default under
any Indenture will be deposited in the Special Payments Account for such Trust
and will be distributed to the Certificateholders of such Trust on a Special
Distribution Date. (Sections 4.01 and 4.02)
Any funds representing payments received with respect to any defaulted
Equipment Notes held in a Trust, or the proceeds from the sale of any Equipment
Notes, held by the Trustee in the Special Payments Account for such Trust will,
to the extent practicable, be invested and reinvested by such Trustee in certain
Permitted Investments pending the distribution of such funds on a Special
Distribution Date. (Section 4.04) "Permitted Investments" are defined as
obligations of the United States or agencies or instrumentalities thereof the
payment of which is backed by the full faith and credit of the United States and
which mature in not more than 60 days or such lesser time as is required for the
distribution of any such funds on a Special Distribution Date. (Section 1.01)
Each Pass Through Trust Agreement provides that the Trustee of the related
Trust will, within 90 days after the occurrence of a default (as defined below)
known to it, give to the Certificateholders of such Trust notice, transmitted by
mail, of such default, unless such default shall have been cured or waived;
provided that, except in the case of default in a payment of principal,
Make-Whole Amount, if any, or interest on any of the Equipment Notes held in
such Trust, the applicable Trustee will be protected in withholding such notice
if it in good faith determines that the withholding of such notice is in the
interests of such Certificateholders. (Section 7.02) The term "default" with
respect to a Trust, for the purpose of the provision described in this paragraph
only, means an event that is, or after notice or lapse of time or both would
become, an event of default with respect to such Trust. The term "event of
default" with respect to a Trust means an Indenture Event of Default under any
Indenture pursuant to which Equipment Notes held by such Trust were issued.
Subject to certain qualifications set forth in each Pass Through Trust
Agreement and to the Intercreditor Agreement, the Certificateholders of each
Trust holding Certificates evidencing fractional undivided interests aggregating
not less than a majority in interest in such Trust will have the right to direct
the time, method and place of conducting any proceeding for any remedy available
to the Trustee with respect to such Trust or pursuant to the terms of the
Intercreditor Agreement, or exercising any trust or power conferred on such
Trustee under such Pass Through Trust Agreement or the Intercreditor Agreement,
including any right of such Trustee as Controlling Party under the Intercreditor
Agreement or as holder of the Equipment Notes (the "Note Holder"). (Section
6.04)
Subject to the Intercreditor Agreement, the holders of the Certificates of
a Trust evidencing fractional undivided interests aggregating not less than a
majority in interest of such Trust may on behalf of the holders of all of the
Certificates of such Trust waive any past "default" or "event of default" under
the related Pass Through Trust Agreement and its consequences or, if the Trustee
of such Trust is the Controlling Party, may direct the Trustee to instruct the
applicable Loan Trustee to waive any past Indenture Event of Default and its
consequences; provided, however, the consent of each holder of a Certificate of
a Trust is required to waive (i) a default in the deposit of any Scheduled
Payment or Special Payment or in the distribution thereof, (ii) a default in
payment of the principal, Make-Whole Amount, if any, or interest with respect to
any of the Equipment Notes held in such Trust and (iii) a default in respect of
any covenant or provision of the related Pass Through Trust Agreement that
cannot be modified or amended without the consent of each Certificateholder of
such Trust affected thereby. (Section 6.05) Each Indenture will provide that,
with certain exceptions, the holders of the majority in aggregate unpaid
principal amount of the Equipment Notes issued thereunder may on behalf of all
such Note Holders waive any past
S-21
<PAGE> 26
default or Indenture Event of Default thereunder. Notwithstanding the foregoing
provisions of this paragraph, however, pursuant to the Intercreditor Agreement
only the Controlling Party will be entitled to waive any such past default or
Indenture Event of Default.
PURCHASE RIGHTS OF CERTIFICATEHOLDERS
After the occurrence and during the continuation of a Triggering Event,
with ten days' prior written notice to the Trustee and each Certificateholder of
the same Class:
- if either the Class A-1 or Class A-2 Certificateholders are then
represented by the Controlling Party, the Certificateholders of such
Class that is not so represented will have the right to purchase all, but
not less than all, of the Certificates of such Class that is so
represented;
- the Class B Certificateholders will have the right to purchase all, but
not less than all, of the Class A-1 and Class A-2 Certificates;
- the Class C Certificateholders will have the right to purchase all, but
not less than all, of the Class A-1, Class A-2 and Class B Certificates;
and
- if the Class D Certificates are issued, the Class D Certificateholders
will have the right to purchase all, but not less than all, of the Class
A-1, Class A-2, Class B and Class C Certificates.
In each case the purchase price for a Class of Certificates will be equal
to the Pool Balance of such Class plus accrued and undistributed interest
thereon to the date of purchase, without Make-Whole Amount but including any
other amounts then due and payable to the Certificateholders of such Class. Such
purchase right may be exercised by any Certificateholder of the Class or Classes
entitled to such right. In each case, if prior to the end of the ten-day notice
period, any other Certificateholder of the same Class notifies the purchasing
Certificateholder that the other Certificateholder wants to participate in such
purchase, then such other Certificateholder may join with the purchasing
Certificateholder to purchase the Certificates pro rata based on the interest in
the Trust held by each Certificateholder. (Trust Supplements, Section 4.01)
PTC EVENT OF DEFAULT
A "PTC Event of Default" with respect to any Class of Certificates means
the failure to distribute within ten Business Days after the applicable
Distribution Date either:
- the outstanding Pool Balance of such Class of Certificates on the Final
Legal Distribution Date for such Class; or
- interest scheduled for distribution on such Class of Certificates on any
Distribution Date (unless the Subordination Agent has made an Interest
Drawing, or a withdrawal from the Cash Collateral Account for such Class
of Certificates, in an amount sufficient to pay such interest and has
distributed such amount to the Trustee entitled thereto).
Any failure to make expected principal distributions with respect to any
Class of Certificates on any Regular Distribution Date (other than the Final
Legal Distribution Date) will not constitute a PTC Event of Default with respect
to such Certificates.
A PTC Event of Default with respect to the most senior outstanding Class of
Certificates resulting from an Indenture Event of Default under all Indentures
will constitute a Triggering Event. For a discussion of the consequences of the
occurrence of a Triggering Event, see "Description of the Intercreditor
Agreement -- Priority of Distributions".
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<PAGE> 27
MERGER, CONSOLIDATION AND TRANSFER OF ASSETS
Delta will be prohibited from consolidating with or merging into any other
corporation or transferring substantially all of its assets as an entirety to
any other person unless:
- the successor or transferee entity is organized and validly existing
under the laws of the United States or any state thereof or the District
of Columbia;
- the successor or transferee entity shall, if and to the extent required
under Section 1110 of the United States Bankruptcy Code (the "Bankruptcy
Code") in order that the Loan Trustee shall continue to be entitled to
any benefits of Section 1110 with respect to an Aircraft, be a "citizen
of the United States" (as defined in Title 49 of the United States Code
relating to aviation (the "Transportation Code")) holding an air carrier
operating certificate issued by the Secretary of Transportation pursuant
to Chapter 447 of the Transportation Code;
- the successor or transferee entity expressly assumes all of the
obligations of Delta contained in the Basic Agreement and any Trust
Supplement, the Indentures and the Participation Agreements; and
- Delta has delivered a certificate and an opinion or opinions of counsel
indicating that such transaction, in effect, complies with such
conditions.
In addition, after giving effect to such transaction, no Indenture Event of
Default shall have occurred and be continuing. (Section 5.02; Participation
Agreements, Section 6.02)
MODIFICATION OF THE PASS THROUGH TRUST AGREEMENTS AND CERTAIN OTHER AGREEMENTS
Each Pass Through Trust Agreement contains provisions permitting Delta and
the Trustee to enter into a supplement to such Pass Through Trust Agreement or,
if applicable, to the Intercreditor Agreement or any Liquidity Facility, without
the consent of the holders of any of the Certificates of such Trust to, among
other things:
- evidence the succession of another corporation or entity to Delta and the
assumption by such corporation or entity of Delta's obligations under
such Pass Through Trust Agreement, the Intercreditor Agreement or any
Liquidity Facility;
- add to the covenants of Delta for the benefit of holders of such
Certificates or surrender any right or power conferred upon Delta in such
Pass Through Trust Agreement, the Intercreditor Agreement or any
Liquidity Facility;
- correct any mistake in such Pass Through Trust Agreement, the
Intercreditor Agreement or any Liquidity Facility;
- make or modify any other provision with respect to matters or questions
arising under such Pass Through Trust Agreement, the Intercreditor
Agreement or any Liquidity Facility as Delta may deem necessary or
desirable and that will not materially adversely affect the interests of
the holders of such Certificates;
- comply with any requirement of the Commission, any applicable law, rules
or regulations of any exchange or quotation system on which the
Certificates are listed or of any regulatory body;
- modify, eliminate or add to the provisions of such Pass Through Trust
Agreement, the Intercreditor Agreement or any Liquidity Facility to the
extent necessary to continue the qualification of such Pass Through Trust
Agreement (including any supplemental agreement), the Intercreditor
Agreement or Liquidity Facility under the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act") and add to such Pass Through Trust
Agreement, the Intercreditor Agreement or any Liquidity Facility such
other provisions as may be expressly permitted by the Trust Indenture
Act;
- provide for a successor Trustee under such Pass Through Trust Agreement
and add to or change any of the provisions of such Pass Through Trust
Agreement, the Intercreditor Agreement or any
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Liquidity Facility as necessary to facilitate the administration of the
Trusts under such Pass Through Trust Agreement by more than one Trustee
or, as provided in the Intercreditor Agreement, to provide for multiple
Liquidity Facilities for such Trust;
- provide certain information to the Trustee as required in such Pass
Through Trust Agreement;
- add to or change the Basic Agreement and any Trust Supplement to
facilitate the issuance of any Certificates in bearer form or to
facilitate or provide for the issuance of any Certificates in global form
in addition to or in place of Certificates in certificated form;
- provide for the delivery of Certificates or any supplement to such Pass
Through Trust Agreement in or by means of any computerized, electronic or
other medium, including computer diskette;
- correct or supplement the description of any property of any Trust; and
- modify, eliminate or add to the provisions of such Pass Through Trust
Agreement to reflect the substitution of a substitute aircraft for any
Aircraft;
provided, however, that no such supplement shall cause any Trust to become an
association taxable as a corporation for U.S. federal income tax purposes.
(Section 9.01)
Each Pass Through Trust Agreement also contains provisions permitting Delta
and the Trustee, with the consent of the holders of the Certificates of the
related Trust evidencing fractional undivided interests aggregating not less
than a majority in interest of such Trust, to enter into supplemental agreements
adding any provisions to or changing or eliminating any of the provisions of
such Pass Through Trust Agreement, the Intercreditor Agreement or any Liquidity
Facility or modifying the rights of the Certificateholders of such Trust, except
that no such supplemental agreement may, without the consent of the holder of
each outstanding Certificate adversely affected thereby:
- reduce in any manner the amount of, or delay the timing of, any receipt
by the Trustee of payments on the Equipment Notes held in such Trust, or
distributions in respect of any Certificate of such Trust, or change the
date or place of any payment or change the coin or currency in which such
Certificate is payable, or impair the right of any Certificateholder of
such Trust to institute suit for the enforcement of any such payment when
due;
- permit the disposition of any Equipment Note held in such Trust, except
as provided in such Pass Through Trust Agreement, the Intercreditor
Agreement or the Liquidity Facility;
- alter the priority of distributions specified in the Intercreditor
Agreement in a manner materially adverse to such Certificateholders;
- reduce the percentage of the aggregate fractional undivided interests of
the Trust provided for in such Pass Through Trust Agreement, the consent
of the holders of which is required for any such supplemental agreement
or for any waiver provided for in such Pass Through Trust Agreement; or
- cause such Trust to become an association taxable as a corporation for
U.S. Federal income tax purposes.
If a Trustee, as holder (or beneficial owner through the Subordination
Agent) of any Equipment Note in trust for the benefit of the Certificateholders
of the relevant Trust or as Controlling Party under the Intercreditor Agreement,
receives (directly or indirectly through the Subordination Agent) a request for
a consent to any amendment, modification, waiver or supplement under any
Indenture, any Participation Agreement, any Equipment Note or any other related
document, the Trustee will forthwith send a notice of such proposed amendment,
modification, waiver or supplement to each Certificateholder of the relevant
Trust registered on the register of such Trust as of the date of such notice.
The Trustee will request from the Certificateholders a direction as to:
- whether or not to take or refrain from taking (or direct the
Subordination Agent to take or refrain from taking) any action that a
Note Holder or the Controlling Party has the option to take or direct;
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- whether or not to give or execute (or direct the Subordination Agent to
give or execute) any waivers, consents, amendments, modifications or
supplements as a Note Holder or as Controlling Party; and
- how to vote (or direct the Subordination Agent to vote) any Equipment
Note if a vote has been called for with respect thereto.
(Section 10.01; Intercreditor Agreement, Section 8.01(b))
Provided such a request for Certificateholder direction has been made, in
directing any action or casting any vote or giving any consent as the holder of
any Equipment Note (or in directing the Subordination Agent in any of the
foregoing):
- other than as the Controlling Party, the Trustee will vote for or give
consent to any such action with respect to such Equipment Note in the
same proportion as that of (x) the aggregate face amount of all
Certificates actually voted in favor of or for giving consent to such
action by such direction of Certificateholders to (y) the aggregate face
amount of all outstanding Certificates of the relevant Trust; and
- as the Controlling Party, the Trustee will vote as directed in such
Certificateholder direction by the Certificateholders evidencing
fractional undivided interests aggregating not less than a majority in
interest in the relevant Trust.
(Section 10.01)
For purposes of the preceding paragraph, a Certificate is deemed "actually
voted" if the Certificateholder has delivered to the Trustee an instrument
evidencing such Certificateholder's consent to such direction prior to one
Business Day before the Trustee directs such action or casts such vote or gives
such consent. Notwithstanding the foregoing, but subject to certain rights of
the Certificateholders under the relevant Pass Through Trust Agreement and
subject to the Intercreditor Agreement, the Trustee may, in its own discretion
and at its own direction, consent and notify the relevant Loan Trustee of such
consent (or direct the Subordination Agent to consent and notify the relevant
Loan Trustee of such consent) to any amendment, modification, waiver or
supplement under the relevant Indenture, Participation Agreement, Equipment Note
or any other related document, if an Indenture Event of Default under any
Indenture has occurred and is continuing, or if such amendment, modification,
waiver or supplement will not materially adversely affect the interests of the
Certificateholders. (Section 10.01)
POSSIBLE ISSUANCE OF SERIES D EQUIPMENT NOTES
Delta may elect to issue Series D Equipment Notes in connection with some
or all of the Aircraft, which would be funded from sources other than this
offering. Delta may elect to fund the sale of the Series D Equipment Notes
through the sale of Pass Through Certificates (the "Class D Certificates")
issued by a Class D Delta Air Lines 2000-1 Pass Through Trust (the "Class D
Trust"). Delta will not issue any Series D Equipment Notes at any time prior to
the consummation of this offering. Delta's ability to issue any Series D
Equipment Notes is contingent upon its obtaining written confirmation from each
Rating Agency that the issuance of such Series D Equipment Notes would not
result in a withdrawal or downgrading of the rating of any Class of
Certificates. If the Class D Certificates are issued, the trustee under the
Class D Trust (the "Class D Trustee") will become a party to the Intercreditor
Agreement, and the Class D Certificates would be subordinated in right of
distribution to the Class A-1, Class A-2, Class B and Class C Certificates. See
"Description of the Intercreditor Agreement". In addition, after the occurrence
and during the continuance of a Triggering Event, the Class D Certificateholders
would have certain rights to purchase the Class A-1, Class A-2, Class B and
Class C Certificates. See "-- Purchase Rights of Certificateholders". If Series
D Equipment Notes are issued to any person or entity other than the Class D
Trust, such Series D Equipment Notes will nevertheless be subject to the
provisions of the Intercreditor Agreement that allow the Controlling Party,
during the continuance of an Indenture Event of Default, to
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direct the Loan Trustee in taking action under the applicable Indenture.
(Intercreditor Agreement, Section 8.01(c))
TERMINATION OF THE TRUSTS
The obligations of Delta and the applicable Trustee with respect to a Trust
will terminate upon the distribution to Certificateholders of such Trust of all
amounts required to be distributed to them pursuant to the applicable Pass
Through Trust Agreement and the disposition of all property held in such Trust.
The applicable Trustee will mail to each Certificateholder of record of such
Trust notice of the termination of such Trust, the amount of the proposed final
payment and the proposed date for the distribution of such final payment for
such Trust. The Final Distribution to any Certificateholder of such Trust will
be made only upon surrender of such Certificateholder's Certificates at the
office or agency of the applicable Trustee specified in such notice of
termination. (Section 11.01)
THE TRUSTEES
The Trustee for each Trust initially will be State Street Bank and Trust
Company of Connecticut, National Association. The Trustee's address is State
Street Bank and Trust Company of Connecticut, National Association, 225 Asylum
Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate Trust
Division.
With certain exceptions, the Trustee makes no representations as to the
validity or sufficiency of the Basic Agreement, the Trust Supplements, the
Certificates, the Equipment Notes, the Indentures, the Intercreditor Agreement,
the Participation Agreements or other related documents. (Sections 7.04 and
7.15) The Trustee of any Trust will not be liable to the Certificateholders of
such Trust for any action taken or omitted to be taken by it in good faith in
accordance with the direction of the holders of a majority in face amount of
outstanding Certificates of such Trust. Subject to certain provisions, the
Trustee will be under no obligation to exercise any of its rights or powers
under any Pass Through Trust Agreement at the request of any holders of
Certificates issued thereunder unless there has been offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
which might be incurred by such Trustee in exercising such rights or powers.
(Section 7.03(e)) Each Pass Through Trust Agreement provides that the applicable
Trustee in its individual or any other capacity may acquire and hold
Certificates issued thereunder and, subject to certain conditions, may otherwise
deal with Delta with the same rights it would have if it were not the Trustee.
(Section 7.05)
BOOK-ENTRY REGISTRATION; DELIVERY AND FORM
Upon issuance, each Class of Certificates will be represented by one or
more fully registered global certificates. Each global certificate will be
deposited with, or on behalf of, DTC and registered in the name of Cede, the
nominee of DTC. DTC was created to hold securities for its participants ("DTC
Participants") and to facilitate the clearance and settlement of securities
transactions between DTC Participants through electronic book-entry changes in
accounts of the DTC Participants, thereby eliminating the need for physical
movement of certificates. DTC Participants include securities brokers and
dealers, banks, trust companies and clearing corporations and certain other
organizations. Indirect access to the DTC system is available to others such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly
("Indirect Participants"). See "Description of the Pass Through
Certificates -- Book-Entry Registration" in the Prospectus for a discussion of
the book-entry procedures applicable to the Certificates and the limited
circumstances under which definitive certificates may be issued for the
Certificates.
So long as such book-entry procedures are applicable, no person acquiring
an interest in such Certificates ("Certificate Owner") will be entitled to
receive a certificate representing such person's interest in such Certificates.
Unless and until definitive certificates are issued under the limited
circumstances described in the Prospectus, all references in this prospectus
supplement to actions by Certificateholders
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shall refer to actions taken by DTC upon instructions from DTC Participants, and
all references to distributions, notices, reports and statements to
Certificateholders will refer, as the case may be, to distributions, notices,
reports and statements to DTC or Cede, as the registered holder of such
Certificates, or to DTC Participants for distribution to Certificate Owners in
accordance with DTC procedures.
Neither Delta nor the Trustee will have any responsibility or liability for
any aspect of the records relating to or payments made on account of beneficial
ownership interests in the Certificates held by Cede, as nominee for DTC, or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests or for the performance by DTC, any DTC Participant or any
Indirect Participant of their respective obligations under the rules,
regulations and procedures creating and affecting DTC and its operations or any
other statutory, regulatory, contractual or customary procedures governing their
obligations.
DESCRIPTION OF THE LIQUIDITY FACILITIES
The following summary describes certain terms of the Liquidity Facilities
and certain provisions of the Intercreditor Agreement relating to the Liquidity
Facilities. The summary supplements (and, to the extent inconsistent therewith,
replaces) the description of the general terms and provisions relating to the
Liquidity Facilities and the Intercreditor Agreement and the description of
credit enhancements set forth in the Prospectus. The summary does not purport to
be complete and is qualified in its entirety by reference to all of the
provisions of the Liquidity Facilities and the Intercreditor Agreement, each of
which will be filed as an exhibit to a Current Report on Form 8-K to be filed by
Delta with the Commission. The provisions of the Liquidity Facilities are
substantially identical except as otherwise indicated.
GENERAL
The liquidity provider for each Trust (the "Liquidity Provider") will enter
into a separate revolving credit agreement (each, a "Liquidity Facility") with
the Subordination Agent with respect to such Trust. Under each Liquidity
Facility, the Liquidity Provider will, if necessary, make one or more advances
("Interest Drawings") to the Subordination Agent in an aggregate amount (the
"Required Amount") sufficient to pay interest on the Pool Balance of the related
Certificates on up to three consecutive semiannual Regular Distribution Dates at
the respective interest rates shown on the cover page of this prospectus
supplement for such Certificates (the "Stated Interest Rates"). If interest
payment defaults occur which exceed the amount covered by or available under the
Liquidity Facility for any Trust, the Certificateholders of such Trust will bear
their allocable share of the deficiencies to the extent that there are no other
sources of funds. The initial Liquidity Provider with respect to each Trust may
be replaced by one or more other entities with respect to any of such Trusts
under certain circumstances. Therefore, the Liquidity Provider for the Trusts
may differ.
DRAWINGS
The initial amount available under the Liquidity Facility for each Trust
will be as follows:
<TABLE>
<CAPTION>
AVAILABLE
TRUST AMOUNT
----- -----------
<S> <C>
Class A-1................................................... $37,893,819
Class A-2................................................... 84,125,770
Class B..................................................... 21,760,942
Class C..................................................... 27,905,859
</TABLE>
Except as otherwise provided below, the Liquidity Facility for each Trust
will enable the Subordination Agent to make Interest Drawings thereunder on any
Regular Distribution Date in order to make interest distributions then scheduled
for the Certificates of such Trust at the Stated Interest Rate for such Trust to
the extent that the amount, if any, available to the Subordination Agent on such
Regular Distribution Date is
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not sufficient to pay such interest. The maximum amount available to be drawn
under a Liquidity Facility with respect to any Trust on any Regular Distribution
Date to fund any shortfall of interest on Certificates of such Trust will not
exceed the then Maximum Available Commitment under such Liquidity Facility. The
"Maximum Available Commitment" at any time under each Liquidity Facility is an
amount equal to the then Required Amount of such Liquidity Facility less the
aggregate amount of each Interest Drawing then outstanding under such Liquidity
Facility at such time, provided that following a Downgrade Drawing, a Final
Drawing or a Non-Extension Drawing under a Liquidity Facility, the Maximum
Available Commitment under such Liquidity Facility shall be zero.
The Liquidity Facility for any Class of Certificates does not provide for
drawings thereunder to pay for principal of or Make-Whole Amount on the
Certificates of such Class or any interest with respect to the Certificates of
such Class in excess of the Stated Interest Rate for such Class or for more than
three semiannual installments of interest or to pay principal of or interest or
Make-Whole Amount with respect to the Certificates of any other Class.
(Liquidity Facilities, Section 2.02; Intercreditor Agreement, Section 3.06)
Each payment by the Liquidity Provider will reduce by the same amount the
Maximum Available Commitment under the related Liquidity Facility, subject to
reinstatement as hereinafter described. With respect to any Interest Drawings,
upon reimbursement of the Liquidity Provider in full or in part for the amount
of such Interest Drawings plus accrued interest thereon, the Maximum Available
Commitment under such Liquidity Facility will be reinstated by the amount
reimbursed but not to exceed the then Required Amount of such Liquidity
Facility; provided, however, such Liquidity Facility will not be so reinstated
at any time if (i) a Liquidity Event of Default has occurred and is continuing
and (ii) less than 65% of the then aggregate outstanding principal amount of all
Equipment Notes are Performing Equipment Notes. With respect to any other
drawings under such Liquidity Facility, amounts available to be drawn thereunder
are not subject to reinstatement. (Liquidity Facilities, Section 2.02(a);
Intercreditor Agreement, Section 3.06(g)). Following each reduction of the Pool
Balance for the applicable Trust, the Required Amount of the Liquidity Facility
for any Trust will be reduced automatically to an amount sufficient to pay
interest on the relevant Pool Balance thereof on the next three successive
semiannual Regular Distribution Dates (without regard to expected future
distributions of principal of such Certificates) at the Stated Interest Rate for
such Trust. (Liquidity Facilities, Section 2.04)
"Performing Equipment Note" means an Equipment Note issued pursuant to an
Indenture with respect to which no payment default has occurred and is
continuing (without giving effect to any acceleration); provided that in the
event of a bankruptcy proceeding in which Delta is a debtor under the Bankruptcy
Code, (i) any payment default existing during the 60-day period under Section
1110(a)(2)(A) of the Bankruptcy Code (or such longer period as may apply under
Section 1110(b) of the Bankruptcy Code) (the "Section 1110 Period") will not be
taken into consideration, unless during the Section 1110 Period the trustee in
such proceeding or Delta refuses to assume or agree to perform its obligations
under the Indenture related to such Equipment Note and (ii) any payment default
occurring after the date of the order for relief in such proceeding will not be
taken into consideration if such payment default is cured under Section
1110(a)(2)(B) of the Bankruptcy Code before the later of 30 days after the date
of such default or the expiration of the Section 1110 Period. (Intercreditor
Agreement, Section 1.01)
REPLACEMENT OF LIQUIDITY FACILITIES
If at any time the short-term unsecured debt rating of the Liquidity
Provider for any Trust issued by either Rating Agency (or if such Liquidity
Provider does not have a short-term unsecured debt rating issued by a given
Rating Agency, the long-term unsecured debt rating of such Liquidity Provider
issued by such Rating Agency) is lower than the Threshold Rating applicable to
such Trust, then the Liquidity Facility for such Class may be replaced by a
Replacement Facility. If such Liquidity Facility is not replaced with a
Replacement Facility within 10 days after the Liquidity Provider receives notice
of the downgrading (or within 30 days after its receipt of such notice solely in
the event of a downgrading of such Liquidity Provider's short-term unsecured
debt rating by Standard & Poor's from A-1+ to A-1), the Subordination Agent will
draw the then Maximum Available Commitment under such Liquidity Facility (the
"Downgrade
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<PAGE> 33
Drawing"). The Subordination Agent will deposit the proceeds of any Downgrade
Drawing into a cash collateral account (the "Cash Collateral Account") for such
Class of Certificates and will use these proceeds for the same purposes and
under the same circumstances and subject to the same conditions as cash payments
of Interest Drawings under such Liquidity Facility would be used. (Liquidity
Facilities, Section 2.02(c); Intercreditor Agreement, Section 3.06(c))
A "Replacement Facility" for any Liquidity Facility will mean an
irrevocable revolving credit agreement (or agreements) in substantially the form
of the replaced Liquidity Facility, including reinstatement provisions, or in
such other form (which may include a letter of credit, surety bond, financial
insurance policy or guaranty) as will permit the Rating Agencies to confirm in
writing their respective ratings then in effect for the Certificates with
respect to which such Liquidity Facility was issued (before downgrading of such
ratings, if any, as a result of the downgrading of the Liquidity Provider), in a
face amount (or in an aggregate face amount) equal to the amount sufficient to
pay interest on the Pool Balance of the Certificates of such Trust (at the
Stated Interest Rate for such Certificates, and without regard to expected
future principal distributions) on the three Regular Distribution Dates
following the date of replacement of such Liquidity Facility, or, if such date
is a Regular Distribution Date, on such day and the two Regular Distribution
Dates following such day, and issued by a person (or persons) having debt
ratings issued by both Rating Agencies that are equal to or higher than the
Threshold Rating for the relevant Class. (Intercreditor Agreement, Section 1.01)
The provider of any Replacement Facility will have the same rights (including,
without limitation, priority distribution rights and rights as Controlling
Party) under the Intercreditor Agreement as the replaced Liquidity Provider.
"Threshold Rating" means (i) with respect to the Class A-1 Liquidity
Provider, the Class A-2 Liquidity Provider and the Class B Liquidity Provider, a
short-term unsecured debt rating of P-1 in the case of Moody's and A-1+ in the
case of Standard & Poor's, and with respect to the Class C Liquidity Provider, a
short-term unsecured debt rating of P-1 in the case of Moody's and A-1 in the
case of Standard & Poor's and (ii) in the case of any person who does not have a
short-term unsecured debt rating from either or both such Rating Agencies, then
in lieu of such short-term unsecured debt rating from such Rating Agency or
Rating Agencies, with respect to the Class A-1 Liquidity Provider, Class A-2
Liquidity Provider and the Class B Liquidity Provider, a long-term unsecured
debt rating of A1 in the case of Moody's and AA- in the case of Standard &
Poor's, and with respect to the Class C Liquidity Provider, a long-term
unsecured debt rating of A1 in the case of Moody's and A in the case of Standard
& Poor's.
The Liquidity Facility for each Trust provides that the Liquidity
Provider's obligations thereunder will expire on the earliest of:
- 364 days after the initial issuance date of the Certificates (counting
from, and including, such issuance date);
- the date on which the Subordination Agent delivers to such Liquidity
Provider a certification that Final Distributions on all of the
Certificates of such Trust have been paid in full or provision has been
made for such payment;
- the date on which the Subordination Agent delivers to such Liquidity
Provider a certification that a Replacement Facility has been substituted
for such Liquidity Facility;
- the fifth Business Day following receipt by the Subordination Agent of a
Termination Notice from such Liquidity Provider (see "-- Liquidity Events
of Default"); and
- the date on which no amount is or may (including by reason of
reinstatement) become available for drawing under such Liquidity
Facility.
Each Liquidity Facility provides that it may be extended for additional
364-day periods by mutual agreement of the relevant Liquidity Provider and the
Subordination Agent.
The Intercreditor Agreement will provide for the replacement of the
Liquidity Facility for any Trust if such Liquidity Facility is scheduled to
expire earlier than 15 days after the Final Legal Distribution Date for
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the Certificates of such Trust and such Liquidity Facility is not extended at
least 25 days prior to its then scheduled expiration date. If such Liquidity
Facility is not so extended or replaced by the 25th day prior to its then
scheduled expiration date, the Subordination Agent shall request a drawing in
full up to the then Maximum Available Commitment under such Liquidity Facility
(the "Non-Extension Drawing"). The Subordination Agent will hold the proceeds of
the Non-Extension Drawing in the Cash Collateral Account for the related Trust
as cash collateral to be used for the same purposes and under the same
circumstances, and subject to the same conditions, as cash payments of Interest
Drawings under such Liquidity Facility would be used. (Liquidity Facilities,
Section 2.02(b); Intercreditor Agreement, Section 3.06(d))
Subject to certain limitations, Delta may, at its option, arrange for a
Replacement Facility at any time after 5 years (or earlier upon the occurrence
of certain events) to replace the Liquidity Facility for any Trust (including
without limitation any Replacement Facility described in the following
sentence). In addition, if any Liquidity Provider determines not to extend any
Liquidity Facility, then such Liquidity Provider may, at its option, arrange for
a Replacement Facility, which must be acceptable to Delta, to replace such
Liquidity Facility during the period no earlier than 40 days and no later than
25 days prior to the then scheduled expiration date of such Liquidity Facility.
If a Replacement Facility is provided at any time after a Downgrade Drawing or a
Non-Extension Drawing under any Liquidity Facility, the funds with respect to
such Liquidity Facility on deposit in the Cash Collateral Account for such Trust
will be returned to the Liquidity Provider being replaced. (Intercreditor
Agreement, Section 3.06(e))
Upon receipt by the Subordination Agent of a Termination Notice with
respect to any Liquidity Facility from the relevant Liquidity Provider, the
Subordination Agent shall request a final drawing (a "Final Drawing") under such
Liquidity Facility in an amount equal to the then Maximum Available Commitment
thereunder. The Subordination Agent will hold the proceeds of the Final Drawing
in the Cash Collateral Account for the related Trust as cash collateral to be
used for the same purposes and under the same circumstances, and subject to the
same conditions, as cash payments of Interest Drawings under such Liquidity
Facility would be used. (Liquidity Facilities, Section 2.02(d); Intercreditor
Agreement, Section 3.06(i))
Drawings under any Liquidity Facility will be made by delivery by the
Subordination Agent of a certificate in the form required by such Liquidity
Facility. Upon receipt of such a certificate, the relevant Liquidity Provider is
obligated to make payment of the drawing requested thereby in immediately
available funds. Upon payment by the relevant Liquidity Provider of the amount
specified in any drawing under any Liquidity Facility, such Liquidity Provider
will be fully discharged of its obligations under such Liquidity Facility with
respect to such drawing and will not thereafter be obligated to make any further
payments under such Liquidity Facility in respect of such drawing to the
Subordination Agent or any other person.
REIMBURSEMENT OF DRAWINGS
The Subordination Agent must reimburse amounts drawn under any Liquidity
Facility by reason of an Interest Drawing, Final Drawing, Downgrade Drawing or
Non-Extension Drawing and interest thereon, but only to the extent that the
Subordination Agent has funds available therefor.
Interest Drawings and Final Drawings
Amounts drawn under any Liquidity Facility by reason of an Interest Drawing
or Final Drawing (each, a "Drawing") will be immediately due and payable,
together with interest on the amount of such drawing. From the date of such
drawing to (but excluding) the third business day following the Liquidity
Provider's receipt of the notice of such Interest Drawing, interest will accrue
at the Base Rate plus 2.00% per annum. Thereafter, interest will accrue at LIBOR
for the applicable interest period plus 2.00% per annum. In the case of a Final
Drawing, however, the Subordination Agent may convert the Final Drawing into a
drawing bearing interest at the Base Rate plus 2.00% per annum on the last day
of an interest period for such Drawing.
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"Base Rate" means a fluctuating interest rate per annum in effect from time
to time, which rate per annum shall at all times be equal to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as published for each
day of the period for which the Base Rate is to be determined (or, if such day
is not a Business Day, for the next preceding Business Day) by the Federal
Reserve Bank of New York, or if such rate is not so published for any day that
is a Business Day, the average of the quotations for such day for such
transactions received by the applicable Liquidity Provider from three Federal
funds brokers of recognized standing selected by it (and reasonably satisfactory
to Delta) plus one quarter of one percent (0.25%).
"LIBOR" means, with respect to any interest period, the rate per annum at
which U.S. dollars are offered in the London interbank market as shown on Page
3750 of the Telerate Systems Incorporated screen service (or any successor
thereto), or if such service is not available, Page LIBO of the Reuters Money
Service Monitor System (or any successor thereto) at approximately 11:00 A.M.
(London time) two Business Days before the first day of such interest period,
for a period comparable to such interest period, or if such rate is not
available, a rate per annum determined by certain alternative methods.
Downgrade Drawings and Non-Extension Drawings
The amount drawn under any Liquidity Facility by reason of a Downgrade
Drawing or a Non-Extension Drawing and deposited in a Cash Collateral Account
will be treated as follows:
- such amount will be released on any Distribution Date to the Liquidity
Provider to pay any obligations to the Liquidity Provider to the extent
such amount exceeds the Required Amount;
- any portion of such amount withdrawn from the Cash Collateral Account for
such Certificates to pay interest distributions on such Certificates will
be treated in the same way as Interest Drawings; and
- the balance of such amount will be invested in certain specified eligible
investments.
Any Downgrade Drawing or Non-Extension Drawing under any of the Liquidity
Facilities, other than any portion thereof applied to the payment of interest
distributions on the Certificates, will bear interest (x) subject to clause (y)
below, in an amount equal to the investment earnings on amounts deposited in the
Cash Collateral Account attributable to such Liquidity Facility (and will
continue to be subject to payment of a commitment fee on the amount of such
Downgrade Drawing or Non-Extension Drawing) and (y) from and after the date, if
any, on which it is converted into a Final Drawing as described below under
"-- Liquidity Events of Default", at a rate equal to LIBOR for the applicable
interest period (or, as described in the first paragraph under "-- Interest
Drawings and Final Drawings", the Base Rate) plus 2.00% per annum.
LIQUIDITY EVENTS OF DEFAULT
Events of default under each Liquidity Facility (each, a "Liquidity Event
of Default") will consist of:
- the acceleration of all the Equipment Notes; or
- certain bankruptcy or similar events involving Delta. (Liquidity
Facilities, Section 1.01)
If (i) any Liquidity Event of Default under any Liquidity Facility has
occurred and is continuing and (ii) less than 65% of the aggregate outstanding
principal amount of all Equipment Notes are Performing Equipment Notes, the
applicable Liquidity Provider may, in its discretion, give a notice of
termination of such Liquidity Facility (a "Termination Notice"). The Termination
Notice will have the following consequences:
- the related Liquidity Facility will expire on the fifth Business Day
after the date on which such Termination Notice is received by the
Subordination Agent;
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- the Subordination Agent will request promptly, and the Liquidity Provider
will honor, a Final Drawing thereunder in an amount equal to the then
Maximum Available Commitment thereunder;
- any Drawing remaining unreimbursed as of the date of termination will be
converted automatically into a Final Drawing under such Liquidity
Facility; and
- all amounts owing to the Liquidity Provider will become immediately due
and payable.
Notwithstanding the foregoing, the Subordination Agent will be obligated to
pay amounts owing to the applicable Liquidity Provider only to the extent of
funds available therefor after giving effect to the payments in accordance with
the provisions set forth under "Description of the Intercreditor
Agreement -- Priority of Distributions". (Liquidity Facilities, Section 6.01)
Upon the circumstances described under "Description of the Intercreditor
Agreement -- Intercreditor Rights", a Liquidity Provider may become the
Controlling Party with respect to the exercise of remedies under the Indentures.
(Intercreditor Agreement, Section 2.06(c))
LIQUIDITY PROVIDER
The initial Liquidity Provider for each Trust will be Westdeutsche
Landesbank Girozentrale, a German banking institution organized under the laws
of the State of North Rhine-Westphalia, acting through its New York Branch.
Westdeutsche Landesbank Girozentrale has short-term debt ratings of P-1 from
Moody's and A-1+ from Standard & Poor's.
DESCRIPTION OF THE INTERCREDITOR AGREEMENT
The following summary describes certain provisions of the Intercreditor
Agreement (the "Intercreditor Agreement") among the Trustees, the Liquidity
Provider and State Street Bank and Trust Company of Connecticut, National
Association, as subordination agent (the "Subordination Agent"). The summary
supplements (and, to the extent inconsistent therewith, replaces) the
description of the general terms and provisions relating to the Intercreditor
Agreement and the description of credit enhancements set forth in the
Prospectus. The summary does not purport to be complete and is qualified in its
entirety by reference to all of the provisions of the Intercreditor Agreement,
which will be filed as an exhibit to a Current Report on Form 8-K to be filed by
Delta with the Commission.
INTERCREDITOR RIGHTS
General
The Equipment Notes relating to each Trust will be issued to and registered
in the name of the Subordination Agent as agent and trustee for the Trustee of
such Trust.
Controlling Party
With respect to any Indenture at any given time, the Loan Trustee under
such Indenture will be directed in taking, or refraining from taking, any action
thereunder or with respect to the Equipment Notes issued under such Indenture by
the holders of at least a majority of the outstanding principal amount of the
Equipment Notes issued under such Indenture, so long as no Indenture Event of
Default shall have occurred and be continuing thereunder. For so long as the
Subordination Agent is the registered holder of the Equipment Notes, the
Subordination Agent will act with respect to the preceding sentence in
accordance with the directions of the Trustees of the Trusts in the Trust
Property of which are Equipment Notes constituting, in the aggregate, the
required principal amount of Equipment Notes. (Intercreditor Agreement, Section
2.06)
At any time after an Indenture Event of Default has occurred and is
continuing under an Indenture, the Loan Trustee under such Indenture will be
directed in taking, or refraining from taking, any action
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<PAGE> 37
thereunder or with respect to the Equipment Notes issued under such Indenture,
including acceleration of such Equipment Notes or foreclosing the lien on the
related Aircraft, by the Controlling Party, subject to the limitations described
below. (Intercreditor Agreement, Section 2.06) See "Description of the
Certificates -- Indenture Events of Default and Certain Rights upon an Indenture
Event of Default" for a description of the rights of the Certificateholders of
each Trust to direct the respective Trustees.
The "Controlling Party" will be:
- the Class A-1 Trustee or Class A-2 Trustee, whichever represents the
Class with the larger Pool Balance of Certificates outstanding at the
time that the Indenture Event of Default occurs;
- upon payment of Final Distributions to the holders of such larger Class
of Certificates, the other of the Class A-1 Trustee or Class A-2 Trustee;
- upon payment of Final Distributions to the holders of Class A-1 and Class
A-2 Certificates, the Class B Trustee;
- upon payment of Final Distributions to the holders of Class B
Certificates, the Class C Trustee; and
- under certain circumstances, and notwithstanding the foregoing, the
Liquidity Provider with the greatest amount owed to it, as discussed in
the next paragraph.
At any time after 18 months from the earliest to occur of (x) the date on
which the entire available amount under any Liquidity Facility has been drawn
(for any reason other than a Downgrade Drawing or a Non-Extension Drawing) and
remains unreimbursed, (y) the date on which the entire amount of any Downgrade
Drawing or Non-Extension Drawing has been withdrawn from the relevant Cash
Collateral Account to pay interest on the relevant Class of Certificates and
remains unreimbursed and (z) the date on which all Equipment Notes have been
accelerated, the Liquidity Provider with the greatest amount of Liquidity
Obligations will have the right to become the Controlling Party with respect to
any Indenture. (Intercreditor Agreement, Section 2.06)
For purposes of giving effect to the rights of the Controlling Party, the
Trustees (other than the Controlling Party) shall irrevocably agree, and the
Certificateholders (other than the Certificateholders represented by the
Controlling Party) will be deemed to agree by virtue of their purchase of
Certificates, that the Subordination Agent, as record Note Holder, will exercise
its voting rights in respect of the Equipment Notes as directed by the
Controlling Party. (Intercreditor Agreement, Sections 2.06 and 8.01(b)) For a
description of certain limitations on the Controlling Party's rights to exercise
remedies, see "-- Sale of Equipment Notes or Aircraft and Description of the
Equipment Notes -- Remedies".
"Final Distributions" means, with respect to the Certificates of any Trust
on any Distribution Date, the sum of (x) the aggregate amount of all accrued and
unpaid interest in respect of such Certificates and (y) the Pool Balance of such
Certificates as of the immediately preceding Distribution Date. For purposes of
calculating Final Distributions with respect to the Certificates of any Trust,
any Make-Whole Amount paid on the Equipment Notes held in such Trust that has
not been distributed to the Certificateholders of such Trust (other than such
Make-Whole Amount or a portion thereof applied to the distributions of interest
on the Certificates of such Trust or the reduction of the Pool Balance of such
Trust) shall be added to the amount of such Final Distributions. (Intercreditor
Agreement, Section 1.01)
Sale of Equipment Notes or Aircraft
Following the occurrence and during the continuation of any Indenture Event
of Default under any Indenture, the Controlling Party may direct the
Subordination Agent to accelerate the Equipment Notes issued under such
Indenture and, subject to the provisions of the immediately following sentence,
sell all (but not less than all) of such Equipment Notes or the related Aircraft
to any person. So long as any Certificates are outstanding, during the nine
months after the earlier of (x) the acceleration of the Equipment Notes issued
under any Indenture and (y) the bankruptcy or insolvency of Delta, no Aircraft
subject to the lien of such Indenture or such Equipment Notes may be sold
without the consent of each
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<PAGE> 38
Trustee, if the net proceeds from such sale would be less than the Minimum Sale
Price for such Aircraft or such Equipment Notes.
"Minimum Sale Price" means, with respect to any Aircraft or the Equipment
Notes issued in respect of such Aircraft, at any time, the lesser of (i) 75% of
the Appraised Current Market Value of such Aircraft and (ii) the aggregate
outstanding principal amount of such Equipment Notes, plus accrued and unpaid
interest thereon.
PRIORITY OF DISTRIBUTIONS
The subordination terms applicable to the Certificates vary depending upon
whether a Triggering Event has occurred. "Triggering Event" means (i) the
occurrence of an Indenture Event of Default under all Indentures resulting in a
PTC Event of Default with respect to the most senior Class of Certificates then
outstanding, (ii) the acceleration of all of the outstanding Equipment Notes or
(iii) certain bankruptcy or insolvency events involving Delta.
Before a Triggering Event
So long as no Triggering Event has occurred (whether or not continuing),
all payments made in respect of the Equipment Notes and certain other payments
received on any Distribution Date will be distributed promptly by the
Subordination Agent on such Distribution Date in the following order of
priority:
- to each Liquidity Provider to the extent required to pay Liquidity
Expenses;
- to each Liquidity Provider to the extent required to pay accrued and
unpaid interest on the Liquidity Obligations;
- to each Liquidity Provider to the extent required to pay or reimburse the
Liquidity Provider for certain Liquidity Obligations (other than amounts
payable pursuant to the two preceding clauses) and/or, if applicable, to
replenish each Cash Collateral Account up to the Required Amount;
- to the Class A-1 Trustee and the Class A-2 Trustee to the extent required
to pay Expected Distributions on the Class A-1 Certificates and the Class
A-2 Certificates, except that if available funds are insufficient to pay
Expected Distributions to each such Class in full, available funds will
be distributed to each of the Class A-1 Trustee and the Class A-2 Trustee
in the same proportion as such Trustee's proportionate share of the
aggregate amount of such Expected Distributions;
- to the Class B Trustee to the extent required to pay Expected
Distributions on the Class B Certificates;
- to the Class C Trustee to the extent required to pay Expected
Distributions on the Class C Certificates;
- if the Class D Certificates have been issued, to the Class D Trustee to
the extent required to pay Expected Distributions on the Class D
Certificates; and
- to the Subordination Agent and each Trustee for the payment of certain
fees and expenses.
"Liquidity Expenses" means the Liquidity Obligations other than (i) the
principal amount of any drawing under the Liquidity Facilities and (ii) any
interest accrued on any Liquidity Obligations.
"Liquidity Obligations" means the obligations to reimburse or to pay the
Liquidity Provider all principal, interest, fees and other amounts owing to it
under each Liquidity Facility or certain other agreements.
"Expected Distributions" means, with respect to the Certificates of any
Trust on any Distribution Date (the "Current Distribution Date"), the sum of (1)
accrued and unpaid interest in respect of such Certificates and (2) the
difference between:
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(a) the Pool Balance of such Certificates as of the immediately
preceding Distribution Date (or, if the Current Distribution Date is the
first Distribution Date, the original aggregate face amount of the
Certificates of such Trust); and
(b) the Pool Balance of such Certificates as of the Current Distribution
Date calculated on the basis that (i) the principal of the Equipment Notes
held in such Trust has been paid when due (whether at stated maturity, upon
redemption, prepayment, purchase, acceleration or otherwise) and such
payments have been distributed to the holders of such Certificates and (ii)
the principal of any Equipment Notes formerly held in such Trust that have
been sold pursuant to the Intercreditor Agreement has been paid in full and
such payments have been distributed to the holders of such Certificates.
(Intercreditor Agreement, Section 1.01)
For purposes of calculating Expected Distributions with respect to the
Certificates of any Trust, any Make-Whole Amount paid on the Equipment Notes
held in such Trust that has not been distributed to the Certificateholders of
such Trust (other than such Make-Whole Amount or a portion thereof applied to
distributions of interest on the Certificates of such Trust or the reduction of
the Pool Balance of such Trust) will be added to the amount of Expected
Distributions.
For purposes of determining the priority of distributions on account of the
redemption of Equipment Notes issued pursuant to an Indenture, clause (1) of the
definition of Expected Distributions set forth above shall be deemed to read as
follows: "(1) accrued, due and unpaid interest on such Certificates together
with (without duplication) accrued and unpaid interest on a portion of such
Certificates equal to the outstanding principal amount of the Equipment Notes
being redeemed or prepaid (immediately prior to such redemption or prepayment)".
After a Triggering Event
Subject to the terms of the Intercreditor Agreement, upon the occurrence of
a Triggering Event and at all times thereafter, all funds received by the
Subordination Agent in respect of the Equipment Notes and certain other payments
received by the Subordination Agent will be distributed promptly by the
Subordination Agent in the following order of priority:
- to the Subordination Agent and any Trustee, to the extent required to pay
certain out-of-pocket costs and expenses actually incurred by the
Subordination Agent or such Trustee in protection of, or realization of
the value of, the Equipment Notes or any Collateral under (and as defined
in) any Indenture, or to any Certificateholder or the Liquidity Provider
for payments made to the Subordination Agent or any Trustee in respect of
such amounts;
- to each Liquidity Provider to the extent required to pay Liquidity
Expenses;
- to each Liquidity Provider to the extent required to pay accrued and
unpaid interest on the Liquidity Obligations;
- to each Liquidity Provider to the extent required to pay the outstanding
amount of all Liquidity Obligations and/or, (ii) if applicable with
respect to any particular Liquidity Facility (unless (x) less than 65% of
the aggregate outstanding principal amount of all Equipment Notes are
Performing Equipment Notes and a Liquidity Event of Default has occurred
and is continuing under such Liquidity Facility or (y) a Final Drawing
has occurred under such Liquidity Facility), to replenish the Cash
Collateral Account with respect to such Liquidity Facility up to the
Required Amount for the related Class of Certificates (less the amount of
any repayments of Interest Drawings under such Liquidity Facility while
sub-clause (x) of this clause is applicable);
- to the Subordination Agent and any Trustee to the extent required to pay
certain fees, taxes, charges and other amounts payable or to any
Certificateholder for payments made to the Subordination Agent or any
Trustee in respect of such amounts;
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<PAGE> 40
- to the Class A-1 Trustee and the Class A-2 Trustee to the extent required
to pay Adjusted Expected Distributions on the Class A-1 Certificates and
the Class A-2 Certificates, except that if available funds are
insufficient to pay Adjusted Expected Distributions to each such Class in
full, available funds will be distributed to each of the Class A-1
Trustee and the Class A-2 Trustee in the same proportion as such
Trustee's proportionate share of the aggregate amount of such Adjusted
Expected Distributions;
- to the Class B Trustee to the extent required to pay Adjusted Expected
Distributions on the Class B Certificates;
- to the Class C Trustee to the extent required to pay Adjusted Expected
Distributions on the Class C Certificates;
- if the Class D Certificates have been issued, to the Class D Trustee to
the extent required to pay Adjusted Expected Distributions on the Class D
Certificates;
- to the Class A-1 Trustee and the Class A-2 Trustee to the extent required
to pay Final Distributions on the Class A-1 Certificates and the Class
A-2 Certificates in full, except that if available funds are insufficient
so to pay each such Class in full, available funds will be distributed to
each of the Class A-1 Trustee and the Class A-2 Trustee in the same
proportion as such Trustee's proportionate share of such amount;
- to the Class B Trustee to the extent required to pay Final Distributions
on the Class B Certificates in full;
- to the Class C Trustee to the extent required to pay Final Distributions
on the Class C Certificates in full; and
- if the Class D Certificates have been issued, to the Class D Trustee to
the extent required to pay Final Distributions on the Class D
Certificates in full.
"Adjusted Expected Distributions" means, with respect to the Certificates
of any Trust on any Current Distribution Date, the sum of (1) accrued and unpaid
interest in respect of such Certificates and (2) the greater of:
(a) the difference between (x) the Pool Balance of such Certificates as
of the immediately preceding Distribution Date (or, if the Current
Distribution Date is the first Distribution Date, the original aggregate
face amount of the Certificates of such Trust) and (y) the Pool Balance of
such Certificates as of the Current Distribution Date calculated on the
basis that (i) the principal of the Equipment Notes other than Performing
Equipment Notes (the "Non-Performing Equipment Notes") held in such Trust
has been paid in full and such payments have been distributed to the
holders of such Certificates, (ii) the principal of the Performing
Equipment Notes held in such Trust has been paid when due (but without
giving effect to any acceleration of Performing Equipment Notes) and such
payments have been distributed to the holders of such Certificates and
(iii) the principal of any Equipment Notes formerly held in such Trust that
have been sold pursuant to the Intercreditor Agreement has been paid in
full and such payments have been distributed to the holders of such
Certificates; and
(b) the amount of the excess, if any, of (i) the Pool Balance of such
Class of Certificates as of the immediately preceding Distribution Date
(or, if the Current Distribution Date is the first Distribution Date, the
original aggregate face amount of the Certificates of such Trust), over
(ii) the Aggregate LTV Collateral Amount for such Class of Certificates for
the Current Distribution Date;
provided that, until the date of the initial LTV Appraisals for all of the
Aircraft, clause (b) shall not apply.
For purposes of calculating Adjusted Expected Distributions with respect to
the Certificates of any Trust, any Make-Whole Amount paid on the Equipment Notes
held in such Trust that has not been distributed to the Certificateholders of
such Trust (other than such Make-Whole Amount or a portion
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thereof applied to distributions of interest on the Certificates of such Trust
or the reduction of the Pool Balance of such Trust) will be added to the amount
of Adjusted Expected Distributions.
"Aggregate LTV Collateral Amount" for any Class of Certificates for any
Distribution Date means an amount, not less than zero, equal to the product of
(i) the sum of the applicable LTV Collateral Amounts for such Class of
Certificates for all Aircraft, minus the Pool Balance for each Class of
Certificates, if any, senior to such Class, after giving effect to any
distribution of principal on such Distribution Date with respect to such senior
Class or Classes multiplied by (ii) (a) in the case of Class A-1 Certificates or
Class A-2 Certificates, a fraction the numerator of which equals the Pool
Balance for the Class A-1 Certificates or Class A-2 Certificates, as the case
may be, and the denominator of which equals the aggregate Pool Balances for the
Class A-1 Certificates and the Class A-2 Certificates, in each case prior to
giving effect to any distribution of principal on such Distribution Date with
respect to either such Class of Certificates, and (b) in the case of the Class B
and Class C Certificates, 1.0.
"LTV Collateral Amount" of any Aircraft for any Class of Certificates
means, as of any Distribution Date, the lesser of (i) the LTV Ratio for such
Class of Certificates multiplied by the Appraised Current Market Value of such
Aircraft (or with respect to any such Aircraft that has suffered an Event of
Loss under and as defined in the relevant Indenture, the amount of the insurance
proceeds paid to the related Loan Trustee in respect thereof to the extent then
held by such Loan Trustee (and/or on deposit in the Special Payments Account) or
payable to such Loan Trustee in respect thereof or with respect to any such
Aircraft that has been released from the related Indenture pursuant to the
defeasance provisions thereof, the amount of money and U.S. Government
Obligations deposited with the Loan Trustee pursuant thereto as of such
Distribution Date) and (ii) the outstanding principal amount of the Equipment
Notes secured by such Aircraft after giving effect to any principal payments of
such Equipment Notes on or before such Distribution Date.
"LTV Ratio" means for the Class A-1 Certificates and the Class A-2
Certificates 47.0%, for the Class B Certificates 56.5% and for the Class C
Certificates 69.0%.
"Appraised Current Market Value" of any Aircraft means the lower of the
average and the median of the three most recent LTV Appraisals of such Aircraft.
After a Triggering Event occurs and any Equipment Note becomes a
Non-Performing Equipment Note, the Subordination Agent will obtain LTV
Appraisals of all of the Aircraft as soon as practicable and additional LTV
Appraisals on or prior to each anniversary of the date of such initial LTV
Appraisals; provided that if the Controlling Party reasonably objects to the
appraised value of the Aircraft shown in such LTV Appraisals, the Controlling
Party shall have the right to obtain or cause to be obtained substitute LTV
Appraisals (including LTV Appraisals based upon physical inspection of such
Aircraft).
"LTV Appraisal" means a current fair market value appraisal (which may be a
"desk-top" appraisal) performed by any Appraiser or any other nationally
recognized appraiser on the basis of an arm's-length transaction between an
informed and willing purchaser under no compulsion to buy and an informed and
willing seller under no compulsion to sell and both having knowledge of all
relevant facts.
Interest Drawings under the Liquidity Facility and withdrawals from the
Cash Collateral Account, in each case in respect of interest distributable on
the Certificates of any Trust, will be distributed to the Trustee for such
Trust, notwithstanding the priority of distributions set forth in the
Intercreditor Agreement and otherwise described herein.
ADDITION OF TRUSTEE FOR CLASS D CERTIFICATES
If the Class D Certificates are issued, the Class D Trustee will become a
party to the Intercreditor Agreement and the Intercreditor Agreement will be
appropriately amended. (Intercreditor Agreement, Section 8.01(c)).
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THE SUBORDINATION AGENT
State Street Bank and Trust Company of Connecticut, National Association,
initially will be the Subordination Agent under the Intercreditor Agreement.
Delta and its affiliates may from time to time enter into banking and trustee
relationships with the Subordination Agent and its affiliates. The Subordination
Agent's address is State Street Bank and Trust Company of Connecticut, National
Association, 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103,
Attention: Corporate Trust Division.
The Subordination Agent may resign at any time, in which event a successor
Subordination Agent will be appointed as provided in the Intercreditor
Agreement. Delta or the Controlling Party may at any time remove the
Subordination Agent as provided in the Intercreditor Agreement. In such
circumstances, a successor Subordination Agent will be appointed as provided in
the Intercreditor Agreement. Any resignation or removal of the Subordination
Agent and appointment of a successor Subordination Agent does not become
effective until acceptance of the appointment by the successor Subordination
Agent. (Intercreditor Agreement, Section 7.01)
DESCRIPTION OF THE AIRCRAFT AND THE APPRAISALS
THE AIRCRAFT
The Aircraft consist of 20 Boeing 737-832 aircraft, 18 Boeing 757-232
aircraft and 6 Boeing 767-332ER aircraft (collectively, the "Aircraft"), all of
which have been delivered new to Delta by the manufacturer. The Aircraft have
been designed to be in compliance with Stage 3 noise level standards, which are
the most restrictive regulatory standards currently in effect in the United
States for aircraft noise abatement.
The Boeing 737-832 is a single aisle commercial jet aircraft. Seating
capacity is 154 seats in Delta's standard configuration and 156 seats in Delta's
Shuttle configuration. The 737-832 is deployed on Delta's North American routes,
as well as to points in the Caribbean, Central America and the northern rim of
South America. The 737-832 is powered by two CFM56-7B26 jet engines manufactured
by CFM International, Inc.
The Boeing 757-232 is a single aisle commercial jet aircraft. Seating
capacity in Delta's configuration is 186 seats. The 757-232 is deployed on
Delta's North American routes, as well as to points in Central and South America
and the Caribbean. The 757-232 is powered by two PW2037 jet engines manufactured
by United Technologies Corporation.
The Boeing 767-332ER is a twin aisle commercial jet aircraft. Seating
capacities are 190 and 195 seats for Delta's transatlantic configuration, which
applies to the Aircraft in this transaction. The 767-332ER is powered by two
CF6-80C2B6F jet engines manufactured by General Electric Company.
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THE APPRAISALS
The table below sets forth the appraised base values of the Aircraft as
determined by Aircraft Information Systems, Inc. ("AISI"), Avitas, Inc.
("AVITAS") and Morten Beyer & Agnew, Inc. ("MBA", and together with AISI and
AVITAS, the "Appraisers"), independent aircraft appraisal and consulting firms,
and certain additional information regarding the Aircraft.
<TABLE>
<CAPTION>
APPRAISERS' VALUATIONS
REGISTRATION AIRCRAFT DATE --------------------------------------- APPRAISED
NUMBER TYPE DELIVERED AISI AVITAS MBA BASE VALUE(1)
------------ ----------------- -------------- ----------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
N376DA Boeing 737-832 01/14/99 $43,650,000 $38,500,000 $39,520,000 $ 39,520,000
N377DA Boeing 737-832 05/10/99 43,890,000 39,000,000 40,180,000 40,180,000
N378DA Boeing 737-832 08/13/99 43,780,000 39,600,000 40,680,000 40,680,000
N379DA Boeing 737-832 08/23/99 43,780,000 39,600,000 40,680,000 40,680,000
N380DA Boeing 737-832 09/20/99 43,900,000 39,600,000 40,850,000 40,850,000
N381DN Boeing 737-832 09/13/99 43,890,000 39,600,000 40,850,000 40,850,000
N382DA Boeing 737-832 10/12/99 43,930,000 40,100,000 41,010,000 41,010,000
N383DN Boeing 737-832 10/19/99 43,950,000 40,100,000 41,010,000 41,010,000
N384DA Boeing 737-832 11/22/99 43,980,000 40,100,000 41,180,000 41,180,000
N385DN Boeing 737-832 11/19/99 43,980,000 40,100,000 41,180,000 41,180,000
N386DA Boeing 737-832 12/20/99 44,040,000 40,100,000 41,340,000 41,340,000
N387DA Boeing 737-832 01/14/00 47,030,000 40,900,000 41,510,000 41,510,000
N388DA Boeing 737-832 02/01/00 47,060,000 40,900,000 41,600,000 41,600,000
N389DA Boeing 737-832 04/15/00 47,190,000 41,700,000 41,770,000 41,770,000
N390DA Boeing 737-832 04/28/00 47,220,000 41,700,000 41,770,000 41,770,000
N391DA Boeing 737-832 05/08/00 47,330,000 41,700,000 41,860,000 41,860,000
N392DA Boeing 737-832 05/30/00 47,280,000 41,700,000 41,860,000 41,860,000
N393DA Boeing 737-832 06/30/00 47,340,000 41,700,000 41,940,000 41,940,000
N394DA Boeing 737-832 06/29/00 47,330,000 41,700,000 41,940,000 41,940,000
N395DN Boeing 737-832 07/17/00 47,350,000 42,600,000 42,030,000 42,600,000
N696DL Boeing 757-232 01/27/99 53,530,000 47,700,000 54,220,000 51,816,667
N697DL Boeing 757-232 08/01/99 53,840,000 48,600,000 55,780,000 52,740,000
N698DL Boeing 757-232 08/31/99 54,070,000 48,600,000 55,780,000 52,816,667
N699DL Boeing 757-232 09/13/99 54,240,000 48,600,000 56,010,000 52,950,000
N6700 Boeing 757-232 09/24/99 54,110,000 48,600,000 56,010,000 52,906,667
N6701 Boeing 757-232 10/07/99 54,120,000 49,100,000 56,230,000 53,150,000
N6702 Boeing 757-232 11/20/99 54,220,000 49,100,000 56,450,000 53,256,667
N6703D Boeing 757-232 01/21/00 57,030,000 50,100,000 56,900,000 54,676,667
N6704Z Boeing 757-232 04/04/00 57,290,000 51,100,000 57,260,000 55,216,667
N6705Y Boeing 757-232 04/07/00 57,310,000 51,100,000 57,260,000 55,223,333
N6706Q Boeing 757-232 05/03/00 57,410,000 51,100,000 57,380,000 55,296,667
N6707A Boeing 757-232 05/31/00 57,480,000 51,100,000 57,380,000 55,320,000
N6708D Boeing 757-232 07/20/00 57,650,000 52,200,000 57,620,000 55,823,333
N6709 Boeing 757-232 08/10/00 57,720,000 52,200,000 57,730,000 55,883,333
N6710E Boeing 757-232 08/28/00 57,760,000 52,200,000 57,730,000 55,896,667
N6711M Boeing 757-232 09/28/00 57,920,000 52,200,000 57,850,000 55,990,000
N6712B Boeing 757-232 10/02/00 57,950,000 53,300,000 57,970,000 56,406,667
N6713Y Boeing 757-232 10/31/00 57,950,000 53,300,000 57,970,000 56,406,667
N1602 Boeing 767-332ER 01/22/99 87,510,000 73,900,000 80,280,000 80,280,000
N1603 Boeing 767-332ER 02/05/99 87,620,000 73,900,000 80,620,000 80,620,000
N1604R Boeing 767-332ER 04/28/99 87,450,000 74,700,000 81,300,000 81,150,000
N1605 Boeing 767-332ER 05/27/99 87,540,000 74,700,000 81,640,000 81,293,333
N16065 Boeing 767-332ER 06/10/99 87,530,000 74,700,000 81,980,000 81,403,333
N1607B Boeing 767-332ER 04/21/00 92,570,000 79,800,000 84,950,000 84,950,000
Total: 2,296,803,333
</TABLE>
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(1) The appraised base value of each Aircraft is the lesser of the average and
median base values of such Aircraft as determined by the Appraisers.
According to the International Society of Transport Aircraft Trading,
"appraised base value" is defined as each Appraiser's opinion of the underlying
economic value of an Aircraft in an open, unrestricted, stable market
environment with a reasonable balance of supply and demand, and assumes full
consideration of its "highest and best use". An Aircraft's appraised base value
is founded in the historical trend of values and in the projection of value
trends and presumes an arm's length, cash transaction between willing, able and
knowledgeable parties, acting prudently, with an absence of duress and with a
reasonable period of time available for marketing.
Each Appraiser was asked to provide its opinion as to the appraised base
value of each Aircraft. All three Appraisers performed "desk-top" appraisals
without any physical inspection of the Aircraft. The Appraisals are based on
various assumptions and methodologies which vary among the Appraisals and may
not reflect current market conditions. Appraisals that are based on different
assumptions and methodologies may result in valuations that are materially
different from those contained in the Appraisals.
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The Appraisers have delivered letters setting forth their respective
appraisals, copies of which are annexed to this prospectus supplement as
Appendix II. For a discussion of the assumptions and methodologies used in each
of the Appraisals, you should read such letters.
An appraisal is only an estimate of value. It does not necessarily indicate
the price at which an aircraft may be purchased from the manufacturer or any
other seller. Nor should it be relied upon as a measure of realizable value. The
proceeds realized upon a sale of any Aircraft may be less than its appraised
value. In addition, the value of the Aircraft in the event of the exercise of
remedies under the applicable Indenture will depend on market and economic
conditions at the time, the availability of buyers, the condition of the
Aircraft, whether the Aircraft are sold separately or in one or more groups and
other factors. Accordingly, there can be no assurance that the proceeds realized
upon any such exercise of remedies with respect to the Aircraft pursuant to the
applicable Indenture would equal the appraised value of such Aircraft or be
sufficient to satisfy in full payments due on the Equipment Notes relating to
such Aircraft or the Certificates.
DESCRIPTION OF THE EQUIPMENT NOTES
The following summary describes certain terms of the Equipment Notes and
supplements (and, to the extent inconsistent therewith, replaces) the
description of the general terms and provisions relating to the Equipment Notes,
the Indentures and the Participation Agreements set forth in the Prospectus. The
summaries do not purport to be complete and make use of terms defined in and are
qualified in their entirety by reference to all of the provisions of the
Equipment Notes, the Indentures and the Participation Agreements, forms of each
of which will be filed as exhibits to a Current Report on Form 8-K to be filed
by Delta with the Commission. Except as otherwise indicated, the following
summaries relate to the Equipment Notes, the Indenture and the Participation
Agreement applicable to each Aircraft.
GENERAL
Pursuant to the terms of a Participation Agreement among Delta, the
Trustees, the Subordination Agent and the Loan Trustee with respect to each
Aircraft (each, a "Participation Agreement"), the Trusts will purchase from
Delta the Equipment Notes to be issued under the related Indenture. Equipment
Notes will be issued in four series with respect to each Aircraft: the "Series
A-1 Equipment Notes", the "Series A-2 Equipment Notes", the "Series B Equipment
Notes" and the "Series C Equipment Notes" (collectively, the "Equipment Notes").
Delta may elect to issue an additional series with respect to some or all of the
Aircraft (the "Series D Equipment Notes"), which would be funded from sources
other than this offering. See "Description of the Certificates -- Possible
Issuance of Class D Certificates". The Equipment Notes with respect to each
Aircraft will be issued under a separate indenture (each, an "Indenture")
between Delta and State Street Bank and Trust Company of Connecticut, National
Association, as loan trustee thereunder (each, a "Loan Trustee"). The Equipment
Notes will be direct, full recourse obligations of Delta.
SUBORDINATION
The Indentures provide for the following subordination provisions
applicable to the Equipment Notes:
- Series A-1 and Series A-2 Equipment Notes issued in respect of an
Aircraft will rank equally in right of payment and will rank senior in
right of payment to other Equipment Notes issued in respect of such
Aircraft;
- Series B Equipment Notes issued in respect of an Aircraft will rank
junior in right of payment to the Series A-1 and Series A-2 Equipment
Notes issued in respect of such Aircraft and will rank senior in right of
payment to the Series C and, if applicable, Series D Equipment Notes
issued in respect of such Aircraft;
- Series C Equipment Notes issued in respect of an Aircraft will rank
junior in right of payment to the Series A-1, Series A-2 and Series B
Equipment Notes issued in respect of such Aircraft and, if
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Series D Equipment Notes are issued with respect to such Aircraft, senior
in right of payment to such Series D Equipment Notes; and
- if Delta elects to issue Series D Equipment Notes with respect to an
Aircraft, they will be subordinated in right of payment to the Series
A-1, Series A-2, Series B and Series C Equipment Notes issued with
respect to such Aircraft.
PRINCIPAL AND INTEREST PAYMENTS
Subject to the provisions of the Intercreditor Agreement, scheduled
installments of interest paid on the Equipment Notes held in each Trust will be
passed through to the Certificateholders of such Trust on the dates and at the
rate per annum set forth on the cover page of this prospectus supplement until
the final expected Regular Distribution Date for such Trust. Subject to the
provisions of the Intercreditor Agreement, principal paid on the Equipment Notes
held in each Trust will be passed through to the Certificateholders of such
Trust in scheduled amounts on the dates set forth herein until the final
expected Regular Distribution Date for such Trust.
Interest will be payable on the unpaid principal amount of each Equipment
Note at the rate applicable to such Equipment Note on May 18 and November 18 of
each year, commencing on May 18, 2001. Such interest will be computed on the
basis of a 360-day year of twelve 30-day months. Overdue amounts of principal,
Make-Whole Amount (if any) and interest on such series of Equipment Notes will,
to the extent permitted by applicable law, bear interest at the interest rate
applicable to such series of Equipment Notes, which interest rate will be equal
to the rate per annum applicable to the Certificates issued by the Trust that
will hold such series of Equipment Notes set forth on the cover page of this
prospectus supplement plus 1.00%.
Scheduled principal payments on the Series A-1 Equipment Notes will be made
on May 18 and November 18 in certain years, commencing on May 18, 2001 and
ending on May 18, 2010. The entire principal amounts of the Series A-2, Series B
and Series C Equipment Notes are scheduled to be paid on November 18, 2010,
November 18, 2010 and November 18, 2005, respectively. See "Description of the
Certificates -- Pool Factors" for a discussion of the scheduled payments of
principal of the Equipment Notes and Appendix III for the schedule of payments
of principal of each Equipment Note issued with respect to each Aircraft.
If any due date for a payment of principal, Make-Whole Amount (if any) or
interest with respect to the Equipment Notes is not a Business Day, such payment
will be due on the next succeeding Business Day without any additional interest.
REDEMPTION
If an Event of Loss occurs with respect to an Aircraft and such Aircraft is
not replaced by Delta under the related Indenture, Delta is required to redeem
the Equipment Notes issued with respect to such Aircraft, in whole, at a price
equal to the aggregate unpaid principal amount thereof, together with accrued
and unpaid interest thereon to (but excluding) the date of redemption, but
without any Make-Whole Amount. Any amount paid by Delta in connection with such
redemption will be distributed to the Certificateholders on a Special
Distribution Date. (Indentures, Section 2.10)
All of the Equipment Notes issued with respect to an Aircraft may be
redeemed in whole prior to maturity at any time at the option of Delta, at a
price equal to the aggregate unpaid principal amount thereof, together with
accrued and unpaid interest thereon to (but excluding) the date of redemption,
plus the Make-Whole Amount for the applicable series of Equipment Notes.
(Indentures, Section 2.11)
Notice of redemption will be given to each holder of Equipment Notes not
less than 15 nor more than 60 days prior to the applicable redemption date. A
notice of optional redemption may be revoked not later than three days before
the proposed redemption date. (Indentures, Sections 2.11 and 2.12)
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"Make-Whole Amount" means, with respect to any Equipment Note, the amount
(as determined by an independent investment bank selected by Delta), if any, by
which (a) the present value of the remaining scheduled payments of principal and
interest from the redemption date to maturity of such Equipment Note computed by
discounting each such payment on a semiannual basis from its respective payment
date under the applicable Indenture (assuming a 360-day year of twelve 30-day
months) using a discount rate equal to the Treasury Yield exceeds (b) the
outstanding principal amount of such Equipment Note plus accrued but unpaid
interest thereon to the redemption date. (Indentures, Annex A)
For purposes of determining the Make-Whole Amount, "Treasury Yield" means,
at the date of determination with respect to any Equipment Note, the interest
rate (expressed as a semiannual equivalent and as a decimal and, in the case of
United States Treasury bills, converted to a bond equivalent yield) determined
to be the per annum rate equal to the semiannual yield to maturity for United
States Treasury securities maturing on the Average Life Date of such Equipment
Note and trading in the public securities markets either as determined by
interpolation between the most recent weekly average yield to maturity for two
series of United States Treasury securities trading in the public securities
markets, (A) one maturing as close as possible to, but earlier than, the Average
Life Date of such Equipment Note and (B) the other maturing as close as possible
to, but later than, the Average Life Date of such Equipment Note, in each case
as published in the most recent H.15(519) or, if a weekly average yield to
maturity for United States Treasury securities maturing on the Average Life Date
of such Equipment Note is reported in the most recent H.15(519), such weekly
average yield to maturity as published in such H.15(519). "H.15(519)" means the
weekly statistical release designated as such, or any successor publication,
published by the Board of Governors of the Federal Reserve System, and the "most
recent H.15(519)" means the H.15(519) published prior to the close of business
on the third Business Day prior to the applicable redemption date. The "date of
determination" of a Make-Whole Amount will be the third Business Day prior to
the applicable redemption date. (Indentures, Annex A)
"Average Life Date" for any Equipment Note means the date that follows the
redemption date by a period equal to the Remaining Weighted Average Life at the
redemption date of such Equipment Note. "Remaining Weighted Average Life" at the
redemption date of such Equipment Note means the number of days equal to the
quotient obtained by dividing (a) the sum of each of the products obtained by
multiplying (i) the amount of each then remaining installment of principal of
such Equipment Note, including the payment due on the maturity date of such
Equipment Note, by (ii) the number of days from and including the redemption
date to but excluding the scheduled payment date of such principal installment,
by (b) the then unpaid principal amount of such Equipment Note.
SECURITY
The Equipment Notes issued with respect to each Aircraft will be secured by
a security interest in the Aircraft, certain limited rights under the aircraft
purchase agreement between Delta and Boeing, certain requisition and insurance
proceeds with respect to such Aircraft, and all proceeds of the foregoing.
(Indentures, Granting Clause)
The Equipment Notes will not be cross-collateralized and, consequently, the
Equipment Notes issued in respect of any one Aircraft will not be secured by any
of the other Aircraft. See "-- Remedies".
LOAN TO VALUE RATIOS OF EQUIPMENT NOTES
The tables in Appendix IV set forth loan to Aircraft value ratios for the
Equipment Notes issued in respect of each Aircraft as of the issuance date of
the Certificates and each November 18 Regular Distribution Date. The LTVs were
obtained by dividing (i) the outstanding principal amount (assuming no payment
default or early redemption) of such Equipment Notes determined immediately
after giving effect to the payments scheduled to be made on each such Regular
Distribution Date by (ii) the assumed value (the "Assumed Aircraft Value") of
the Aircraft securing such Equipment Notes.
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<PAGE> 47
The tables in Appendix IV are based on the assumption that the appraised
base value of the Aircraft set forth opposite the initial Regular Distribution
Date included in each table depreciates by 3% annually from the date of delivery
by the manufacturer of such Aircraft. Other rates or methods of depreciation
would result in materially different LTVs, and no assurance can be given (i)
that the depreciation rate and method assumed for the purposes of the tables are
the ones most likely to occur or (ii) as to the actual future value of any
Aircraft. Thus the tables should not be considered a forecast or prediction of
expected or likely LTVs, but simply a mathematical calculation based on one set
of assumptions.
DEFEASANCE
Under certain circumstances, Delta may legally release itself from any
payment or other obligations on all, but not less than all, of the Equipment
Notes issued under one or more Indentures if Delta puts in place the following
arrangements for the benefit of the holders of such Equipment Notes (a "full
defeasance"):
- Delta must deposit in trust for the benefit of the holders of such
Equipment Notes a combination of money and direct obligations of the
United States (and certain depository receipts representing interests in
such direct obligations) ("U.S. Government Obligations") that will
generate enough money to pay when due the principal of and interest on
the Equipment Notes; and
- Delta must deliver to the relevant Loan Trustee a legal opinion stating
that there has been a change in the federal tax law from such law as in
effect on the date of this prospectus supplement or that there has been
an IRS ruling, in either case that lets Delta make the above deposit
without causing the holders of the Certificates to be taxed on their
Certificates any differently than if Delta did not make the deposit and
simply repaid the Equipment Notes itself.
If Delta were to accomplish full defeasance, as described above, holders of
the Equipment Notes so defeased would rely solely on the trust deposit for
repayment on such Equipment Notes. Holders of such Equipment Notes could not
look to Delta for repayment if a shortfall in the payment of principal of or
interest on such Equipment Notes occurred. In addition, the holders of such
Equipment Notes would have no beneficial interest in or other rights with
respect to the related Aircraft or other assets subject to the lien of the
related Indenture and such lien would terminate. (Indentures, Section 10.01)
LIMITATION OF LIABILITY
Except as otherwise provided in the Indentures, the Loan Trustee, in its
individual capacity, will not be answerable or accountable under the Indentures
or the Equipment Notes under any circumstances except, among other things, for
its own willful misconduct or negligence.
INDENTURE EVENTS OF DEFAULT, NOTICE AND WAIVER
"Indenture Events of Default" under each Indenture will include:
- the failure by Delta to pay any interest or principal or Make-Whole
Amount, if any, within 15 days after the same has become due on any
Equipment Note;
- the failure by Delta to pay any amount (other than interest, principal or
Make-Whole Amount, if any) when due under the Indenture, any Equipment
Note or any other operative documents for more than 30 days after Delta
receives written notice;
- the failure by Delta to carry and maintain insurance or indemnity on or
with respect to the Aircraft in accordance with the provisions of the
Indenture; provided that no such failure to carry and maintain insurance
will constitute an Indenture Event of Default until the earlier of (i)
the date such failure has continued unremedied for a period of 30 days
after the Loan Trustee receives notice of the cancellation or lapse of
such insurance or (ii) the date such insurance is not in effect as to the
Loan Trustee;
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<PAGE> 48
- the failure by Delta to perform or observe any other covenant or
condition to be performed or observed by it under any operative document
that continues for a period of 60 days after Delta receives written
notice; provided that, if such failure is capable of being remedied, no
such failure will constitute an Indenture Event of Default for a period
of one year after such notice is received by Delta so long as Delta is
diligently proceeding to remedy such failure;
- any representation or warranty made by Delta in the related operative
documents proves to have been incorrect in any material respect when
made, and such incorrectness continues to be material to the transactions
contemplated by the Indenture and remains unremedied for a period of 60
days after Delta receives written notice; provided that, if such
incorrectness is capable of being remedied, no such incorrectness will
constitute an Indenture Event of Default for a period of one year after
such notice is received by Delta so long as Delta is diligently
proceeding to remedy such incorrectness; and
- the occurrence of certain events of bankruptcy, reorganization or
insolvency of Delta. (Indentures, Section 4.01)
There will not be any cross-default provisions in the Indentures.
Consequently, events resulting in an Indenture Event of Default under any
particular Indenture may or may not result in an Indenture Event of Default
occurring under any other Indenture. If the Equipment Notes issued with respect
to one or more Aircraft are in default and the Equipment Notes issued with
respect to the remaining Aircraft are not in default, no remedies will be
exercisable under the Indentures with respect to such remaining Aircraft.
The holders of a majority in aggregate unpaid principal amount of the
Equipment Notes outstanding on a given date and issued with respect to any
Aircraft, by written instruction to the Loan Trustee, may on behalf of all the
Note Holders waive any existing default and its consequences under the Indenture
with respect to such Aircraft, except a default in the payment of the principal
of, Make-Whole Amount, if any, or interest due under any such Equipment Notes or
a default in respect of any covenant or provision of such Indenture that cannot
be modified or amended without the consent of each Note Holder. (Indentures,
Section 4.05)
REMEDIES
The exercise of remedies under the Indentures will be subject to the terms
of the Intercreditor Agreement, and the following description should be read in
conjunction with the description of the Intercreditor Agreement.
If an Indenture Event of Default occurs and is continuing under an
Indenture, the related Loan Trustee may, and upon receipt of written
instructions of the holders of a majority in principal amount of the Equipment
Notes then outstanding under such Indenture will, declare the principal of all
such Equipment Notes issued thereunder immediately due and payable, together
with all accrued but unpaid interest thereon (but without any Make-Whole
Amount). The holders of a majority in principal amount of Equipment Notes
outstanding under an Indenture may rescind any declaration of acceleration of
such Equipment Notes if (i) there has been paid to the related Loan Trustee an
amount sufficient to pay all overdue installments of principal and interest on
any such Equipment Notes, and all other amounts owing under the operative
documents, that have become due otherwise than by such declaration of
acceleration and (ii) all other Indenture Events of Default, other than
nonpayment of principal amount or interest on the Equipment Notes that have
become due solely because of such acceleration, have been cured or waived.
(Indentures, Section 4.02(d))
Each Indenture provides that if an Indenture Event of Default under such
Indenture has occurred and is continuing, the related Loan Trustee may exercise
certain rights or remedies available to it under such Indenture or under
applicable law. Such remedies include the right to take possession of the
Aircraft and to sell all or any part of the airframe or any engine comprising
the Aircraft subject to such Indenture. (Indentures, Section 4.02(a))
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<PAGE> 49
If the Equipment Notes issued in respect of one Aircraft are in default,
the Equipment Notes issued in respect of the other Aircraft may not be in
default, and, if not, no remedies will be exercisable under the applicable
Indentures with respect to such other Aircraft.
Section 1110 of the Bankruptcy Code ("Section 1110") provides that, subject
to the limitations specified therein, the right of a secured party with a
security interest in "equipment" (as defined in Section 1110) to take possession
of such equipment in compliance with the provisions of a security agreement and
to enforce any of its rights or remedies thereunder is not affected after 60
days after the date of the order for relief in a case under Chapter 11 of the
Bankruptcy Code by any provision of the Bankruptcy Code. Section 1110 provides
that the right to take possession of an aircraft and enforce other remedies may
not be exercised for 60 days following the date of the order for relief in
reorganization proceedings and may not be exercised at all after such 60-day
period (or such longer period consented to by the holder of a security interest
and approved by the court), if the trustee in reorganization agrees, subject to
the approval of the court, to perform the debtor's obligations under the
security agreement and cures all defaults (other than defaults resulting solely
from the financial condition, bankruptcy, insolvency or reorganization of the
debtor, the appointment of a trustee or custodian or the failure to satisfy any
penalty rate or provision relating to a default arising from any failure by the
debtor to perform nonmonetary obligations under the applicable agreement).
"Equipment" is defined in Section 1110, in part, as "an aircraft, aircraft
engine, propeller, appliance, or spare part (as defined in section 40102 of
title 49 of the United States Code) that is subject to a security interest
granted by, leased to, or conditionally sold to a debtor that, at the time such
transaction is entered into, holds an air carrier operating certificate issued
pursuant to chapter 447 of title 49 of the United States Code for aircraft
capable of carrying 10 or more individuals or 6,000 pounds or more of cargo."
It is a condition to the Trustee's obligation to purchase Equipment Notes
with respect to each Aircraft that Cadwalader, Wickersham & Taft, special
counsel to Delta, provide an opinion to the Trustees that, if Delta were to
become a debtor under Chapter 11 of the Bankruptcy Code, the Loan Trustee would
be entitled to the benefits of Section 1110 with respect to the airframe and
engines comprising the Aircraft originally subjected to the lien of the relevant
Indenture. This opinion is subject to certain qualifications and assumptions.
The opinion of Cadwalader, Wickersham & Taft will not address the possible
replacement of an Aircraft after an Event of Loss in the future, the
consummation of which is conditioned upon the contemporaneous delivery of an
opinion of counsel to the effect that the related Loan Trustee will be entitled
to Section 1110 benefits with respect to the replacement airframe unless there
is a change in law or court interpretation that results in Section 1110 not
being available. See "-- Certain Provisions of the Indentures -- Events of
Loss". The opinion of Cadwalader, Wickersham & Taft also will not address the
availability of Section 1110 with respect to the bankruptcy proceedings of any
possible lessee of an Aircraft if it is leased by Delta.
In certain circumstances following the bankruptcy or insolvency of Delta
where the obligations of Delta under any Indenture exceed the value of the
Aircraft collateral under such Indenture, post-petition interest will not accrue
on the related Equipment Notes. In addition, to the extent that distributions
are made to any Certificateholders, whether under the Intercreditor Agreement or
from drawings on the Liquidity Facilities, in respect of amounts that would have
been funded by post-petition interest payments on such Equipment Notes had such
payments been made, there would be a shortfall between the claim allowable
against Delta on such Equipment Notes after the disposition of the Aircraft
collateral securing such Equipment Notes and the remaining balance of the
Certificates. Such shortfall would first reduce some or all of the remaining
claim against Delta available to the Trustees for the most junior Classes.
If an Indenture Event of Default under any Indenture occurs and is
continuing, any sums held or received by the related Loan Trustee may be applied
to reimburse such Loan Trustee for any tax, expense or other loss incurred by it
and to pay any other amounts due to such Loan Trustee prior to any payments to
holders of the Equipment Notes issued under such Indenture. (Indentures, Section
3.03)
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<PAGE> 50
MODIFICATION OF INDENTURES
Without the consent of holders of a majority in principal amount of the
Equipment Notes outstanding under any Indenture, the provisions of such
Indenture may not be amended or modified, except to the extent indicated below.
Any Indenture may be amended without the consent of the Note Holders to,
among other things: (i) cure any defect or inconsistency in such Indenture or
the Equipment Notes issued thereunder; (ii) make any other provisions or
amendments with respect to matters or questions arising under such Indenture or
such Equipment Notes, or to amend, modify or supplement any provision thereof,
provided that such action does not adversely affect the interests of any such
holder; (iii) cure any ambiguity or correct any mistake; (iv) provide for
compliance with applicable law; or (v) provide for the issuance of Series D
Equipment Notes. (Indentures, Section 9.01)
Without the consent of the holder of each Equipment Note outstanding under
any Indenture affected thereby, no amendment or modification of such Indenture
may, among other things, (i) reduce the principal amount of, or Make-Whole
Amount, if any, or interest payable on, any Equipment Notes issued under such
Indenture or change the date on which any principal, Make-Whole Amount, if any,
or interest is due and payable, (ii) create any lien with respect to the
Collateral (as defined in such Indenture) prior to or pari passu with the lien
of such Indenture, except as provided in such Indenture, or deprive any holder
of an Equipment Note issued under such Indenture of the benefit of the lien of
such Indenture upon the Collateral or (iii) reduce the percentage in principal
amount of outstanding Equipment Notes issued under such Indenture required to
take or approve any action under such Indenture. (Indentures, Section 9.02(a))
INDEMNIFICATION
Delta will be required to indemnify each Loan Trustee, each Liquidity
Provider, the Subordination Agent, and each Trustee, but not the holders of
Certificates, for certain losses, claims and other matters. (Participation
Agreements, Section 4.02)
The Loan Trustee will not be required to take any action or refrain from
taking any action (other than notifying the Note Holders if it knows of an Event
of Default or of a default arising from Delta's failure to pay overdue
principal, interest or Make-Whole Amount, if any, under any Equipment Note),
unless it has received indemnification satisfactory to it against any risks
incurred in connection therewith. (Indentures, Section 5.03)
CERTAIN PROVISIONS OF THE INDENTURES
Maintenance and Operation
Under the terms of each Indenture, Delta will be obligated, among other
things and at its expense, to keep each Aircraft duly registered, and to
maintain, service, repair and overhaul the Aircraft so as to keep it in such
condition as necessary to maintain the airworthiness certificate for the
Aircraft in good standing at all times (other than during temporary periods of
storage, during permitted maintenance or modification or during periods of
grounding by applicable governmental authorities). (Indentures, Section 7.02(c)
and (e))
Delta will agree not to maintain, use or operate any Aircraft in violation
of any law, rule or regulation of any government having jurisdiction over such
Aircraft, or in violation of any airworthiness certificate, license or
registration relating to such Aircraft, except to the extent Delta (or any
lessee) is contesting in good faith the validity or application of any such law,
rule or regulation in any manner that does not involve any material risk of
sale, forfeiture or loss of the Aircraft. (Indentures, Section 7.02(b))
Delta must make all alterations, modifications and additions to each
Airframe and Engine necessary to meet the applicable requirements of the Federal
Aviation Administration (the "FAA") or any other applicable governmental
authority of another jurisdiction in which the Aircraft may then be registered;
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<PAGE> 51
provided, however, that Delta (or any lessee) may in good faith contest the
validity or application of any such requirement in any manner that does not
involve a material risk of sale, forfeiture or loss of the Aircraft. Delta (or
any lessee) may add further parts and make other alterations, modifications and
additions to any Airframe or any Engine as Delta (or any lessee) deems desirable
in the proper conduct of its business, including removal (without replacement)
of parts, so long as such alterations, modifications, additions or removals do
not materially diminish the value or utility of such Airframe or Engine below
its value or utility immediately prior to such alteration, modification,
addition or removal (assuming such Airframe or Engine was maintained in
accordance with the Indenture), except that the value (but not the utility) of
any Airframe or Engine may be reduced from time to time by the value of any such
parts which have been removed that Delta deems obsolete or no longer suitable or
appropriate for use on such Airframe or Engine. All parts (with certain
exceptions) incorporated or installed in or added to such Airframe or Engine as
a result of such alterations, modifications or additions will be subject to the
lien of the Indenture. Delta (or any lessee) is permitted to remove (without
replacement) parts that are in addition to, and not in replacement of or
substitution for, any part originally incorporated or installed in or attached
to an Airframe or Engine at the time of delivery thereof to Delta, as well as
any part that is not required to be incorporated or installed in or attached to
any Airframe or Engine pursuant to applicable requirements of the FAA or other
jurisdiction in which the Aircraft may then be registered, or any part that can
be removed without materially diminishing the requisite value or utility of the
Aircraft. (Indentures, Section 7.04(c))
Except as set forth above, Delta will be obligated to replace or cause to
be replaced all parts that are incorporated or installed in or attached to any
Airframe or any Engine and become worn out, lost, stolen, destroyed, seized,
confiscated, damaged beyond repair or permanently rendered unfit for use. Any
such replacement parts will become subject to the lien of the related Indenture
in lieu of the part replaced. (Indentures, Section 7.04(a))
Registration, Leasing and Possession
Although Delta has no current intention to do so, Delta will be permitted
to register an Aircraft in certain jurisdictions outside the United States,
subject to certain conditions specified in the related Indenture. These
conditions include a requirement that the laws of the new jurisdiction of
registration will give effect to the lien of and the security interest created
by the related Indenture in the applicable Aircraft. (Indentures, Section
7.02(e)) Delta also will be permitted, subject to certain limitations, to lease
any Aircraft to any United States certificated air carrier or to certain foreign
air carriers. In addition, subject to certain limitations, Delta will be
permitted to transfer possession of any Airframe or any Engine other than by
lease, including transfers of possession by Delta or any lessee in connection
with certain interchange and pooling arrangements, transfers to the government
of Canada, France, Germany, Japan, The Netherlands, Sweden, Switzerland, the
United Kingdom or the United States or any instrumentality or agency thereof,
and transfers in connection with maintenance or modifications. (Indentures,
Section 7.02(a)) There will be no general geographical restrictions on Delta's
(or any lessee's) ability to operate the Aircraft. The extent to which the
relevant Loan Trustee's lien would be recognized in an Aircraft if such Aircraft
were located in certain countries is uncertain. In addition, any exercise of the
right to repossess an Aircraft may be difficult, expensive and time-consuming,
particularly when such Aircraft is located outside the United States or has been
registered in a foreign jurisdiction or leased to a foreign operator, and may be
subject to the limitations and requirements of applicable law, including the
need to obtain consents or approvals for deregistration or re-export of the
Aircraft, which may be subject to delays and political risk. When a defaulting
lessee or other permitted transferee is the subject of a bankruptcy, insolvency
or similar event such as protective administration, additional limitations may
apply. See "Risk Factors -- Repossession".
In addition, at the time of foreclosing on the lien on the Aircraft under
the related Indenture, an Airframe subject to such Indenture might not be
equipped with Engines subject to the same Indenture. If Delta fails to transfer
title to engines not owned by Delta that are attached to repossessed Aircraft,
it could
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be difficult, expensive and time-consuming to assemble an Aircraft consisting of
an Airframe and Engines subject to the Indenture.
Liens
Delta is required to maintain each Aircraft free of any liens, other than
the rights of Delta, the lien of the Indenture, and any other rights existing
pursuant to the other operative documents and pass through documents related
thereto, the rights of others in possession of the Aircraft in accordance with
the terms of the Indenture and liens attributable to other parties to the
operative documents and pass through documents related thereto and other than
certain other specified liens, including but not limited to (i) liens for taxes
either not yet due or being contested in good faith by appropriate proceedings
so long as such proceedings do not involve any material risk of the sale,
forfeiture or loss of the Airframe or any Engine or the Loan Trustee's interest
therein; (ii) materialmen's, mechanics' and other similar liens arising in the
ordinary course of business and securing obligations that either are not yet
overdue for more than 60 days or are being contested in good faith by
appropriate proceedings so long as such proceedings do not involve any material
risk of the sale, forfeiture or loss of the Airframe or any Engine or the Loan
Trustee's interest therein; (iii) judgment liens so long as such judgment is
discharged or vacated within 60 days or the execution of such judgment is stayed
pending appeal or such judgment is discharged, vacated or reversed within 60
days after expiration of such stay; (iv) salvage or similar rights of insurers
under insurance policies maintained by Delta; and (v) any other lien as to which
Delta has provided a bond or other security adequate in the reasonable opinion
of the Loan Trustee. (Indentures, Section 7.01)
Insurance
Subject to certain exceptions, Delta is required to maintain or cause to be
maintained, at its expense (or at the expense of a lessee), all-risk aircraft
hull insurance covering each Aircraft, at all times in an amount not less than
110% of the aggregate outstanding principal amount of the Equipment Notes
relating to such Aircraft. However, after giving effect to self-insurance
permitted as described below, the amount payable under such insurance may be
less than such amounts payable with respect to the Equipment Notes. If an
Aircraft suffers an Event of Loss, insurance proceeds up to an amount equal to
the outstanding principal amount of the Equipment Notes, together with accrued
but unpaid interest thereon, plus an amount equal to the interest that will
accrue on the outstanding principal amount of the Equipment Notes during the
period commencing on the date following the date of payment of such insurance
proceeds to the Loan Trustee and ending on the loss payment date (the sum of
those amounts being the "Loan Amount"), will be paid to the applicable Loan
Trustee. If an Aircraft or Engine suffers loss or damage not constituting an
Event of Loss but involving insurance proceeds in excess of $8,000,000 (in the
case of a Boeing 737-832), $12,000,000 (in the case of a Boeing 757-232) or
$15,000,000 (in the case of a Boeing 767-332ER), proceeds in excess of such
specified amounts up to the Loan Amount will be payable to the applicable
Loan Trustee, and the proceeds up to such specified amounts and proceeds in
excess of the Loan Amount will be payable directly to Delta so long as an
Indenture Event of Default does not exist. So long as the loss does not
constitute an Event of Loss, insurance proceeds will be applied to repair or
replace the equipment. (Indentures, Section 7.06)
In addition, Delta is obligated to maintain or cause to be maintained
aircraft liability insurance at its expense (or at the expense of a lessee),
including, without limitation, bodily injury, personal injury and property
damage liability insurance (exclusive of manufacturer's product liability
insurance) and contractual liability insurance with respect to each Aircraft.
Such liability insurance must be underwritten by insurers of recognized
responsibility. The amount of such liability insurance coverage may not be less
than the amount of aircraft liability insurance from time to time applicable to
similar aircraft in Delta's fleet on which Delta carries insurance. (Indentures,
Section 7.06)
Delta also is required to maintain or cause to be maintained war-risk
insurance with respect to each Aircraft if and to the extent such insurance is
maintained by Delta (or any lessee) with respect to other
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similar aircraft operated by Delta (or such lessee) on the same routes on which
the Aircraft is operated. (Indentures, Section 7.06)
Delta may self-insure under a program applicable to all aircraft in its
fleet, but the amount of such self-insurance in the aggregate may not exceed for
any 12-month policy year 1% of the average aggregate insurable value (during the
preceding policy year) of all aircraft on which Delta carries insurance, unless
an insurance broker of national standing certifies that the standard among other
major U.S. airlines is a higher level of self-insurance, in which case Delta may
self-insure the Aircraft to such higher level. In addition, Delta may
self-insure to the extent of (i) any applicable deductible per Aircraft that is
not in excess of the amount customarily allowed as a deductible in the industry
or is required to facilitate claims handling, or (ii) any applicable mandatory
minimum per aircraft (or, if applicable, per annum or other period) liability
insurance or hull insurance deductibles imposed by the aircraft liability or
hull insurers. (Indentures, Section 7.06)
In respect of each Aircraft, Delta is required to name the relevant Loan
Trustee, the Subordination Agent, each Trustee and the Liquidity Provider as
additional insured parties under the liability insurance policy required with
respect to such Aircraft. In addition, the hull and liability insurance policies
will be required to provide that, in respect of the interests of such additional
insured party, the insurance shall not be invalidated or impaired by any act or
omission of Delta. (Indentures, Section 7.06)
Events of Loss
If an Event of Loss occurs with respect to the Airframe or the Airframe and
one or more Engines of an Aircraft, Delta must elect within 90 days after such
occurrence either to make payment with respect to such Event of Loss or to
replace such Airframe and any such Engines. Depending upon Delta's election, not
later than the first Business Day after the 120th day following the date of
occurrence of such Event of Loss, Delta will either (i) redeem the Equipment
Notes under the applicable Indenture by paying to the Loan Trustee the
outstanding unpaid principal amount of such Equipment Notes, together with
accrued interest thereon, but without any Make-Whole Amount or (ii) substitute
an airframe (or airframe and one or more engines, as the case may be) for the
Airframe, or Airframe and Engine(s), that suffered such Event of Loss.
(Indentures, Sections 2.10 and 7.05(a)) See "-- Redemption".
If Delta elects to replace an Airframe (or Airframe and one or more
Engines, as the case may be) that suffered such Event of Loss, it will do so
with an airframe or airframe and engines of the same model as the Airframe or
Airframe and Engines to be replaced or a comparable or improved model, with a
value and utility (without regard to hours or cycles) at least equal to the
Airframe or Airframe and Engines to be replaced, assuming that such Airframe and
such Engines were in the condition and repair required by the related Indenture.
Delta is also required to provide to the relevant Loan Trustee opinions of
counsel (i) to the effect that such Loan Trustee will be entitled to the
benefits of Section 1110 with respect to the replacement airframe (unless, as a
result of a change in law or governmental or judicial interpretation, such
benefits were not available to the Loan Trustee with respect to the Aircraft
immediately prior to such replacement), and (ii) as to the due registration of
the replacement aircraft and the due recordation of a supplement to the
Indenture relating to such replacement aircraft and the validity and perfection
of the security interest granted to the Loan Trustee in the replacement
aircraft. (Indentures, Section 7.05(a))
If Delta elects not to replace such Airframe, or Airframe and Engine(s),
then upon payment of the outstanding principal amount of the Equipment Notes
issued with respect to such Aircraft, together with accrued but unpaid interest
thereon, the lien of the Indenture relating to such Aircraft will terminate with
respect to such Aircraft, and the obligation of Delta thereafter to make the
scheduled interest and principal payments with respect thereto will cease. The
payments made under the Indenture by Delta will be deposited with the applicable
Loan Trustee. Amounts in excess of the amounts due and owing under the Equipment
Notes issued with respect to such Aircraft will be distributed by such Loan
Trustee to Delta. (Indentures, Sections 2.10, 3.02, 7.05(a) and 7.05(c))
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If an Event of Loss occurs with respect to an Engine alone, Delta will be
required to replace such Engine within 120 days after the occurrence of such
Event of Loss with another engine, free and clear of all liens (other than
certain permitted liens). Such replacement engine will be the same model as the
Engine to be replaced, or a comparable or improved model of the same or another
manufacturer, suitable for installation and use on the Airframe, and will have a
value and utility (without regard to hours or cycles) at least equal to the
Engine to be replaced, assuming that such Engine was in the condition and repair
required by the terms of the relevant Indenture. (Indentures, Section 7.05(b))
An "Event of Loss" with respect to an Aircraft, Airframe or any Engine
means any of the following events with respect to such property:
- the destruction of such property, damage to such property beyond repair
or rendition of such property permanently unfit for normal use;
- any damage to such property that results in an insurance settlement with
respect to such property on the basis of a total loss or a compromised or
constructive total loss;
- any theft or disappearance of such property for a period exceeding 180
days;
- the requisition for use of such property by any government (other than a
requisition for use by the government of Canada, France, Germany, Japan,
The Netherlands, Sweden, Switzerland, the United Kingdom or the United
States or the government of the country of registry of the Aircraft) that
results in the loss of possession of such property by Delta (or any
lessee) for a period exceeding 12 consecutive months;
- the operation or location of the Aircraft, while under requisition for
use by any government, in an area excluded from coverage by any insurance
policy required by the terms of the Indenture, unless Delta has obtained
indemnity or insurance in lieu thereof from such government;
- any requisition of title, capture, seizure, deprivation, confiscation or
detention (excluding requisition for use or hire not involving a
requisition of title) of the Aircraft by any government that results in
the loss of title or use of the Aircraft by Delta (or a lessee) for a
period in excess of 180 days;
- as a result of any law, rule, regulation, order or other action by the
FAA or other government of the country of registry, the use of the
Aircraft in the normal business of air transportation is prohibited by
virtue of a condition affecting all aircraft of the same type for a
period of 18 consecutive months, unless Delta is diligently carrying
forward all steps that are necessary or desirable to permit the normal
use of the Aircraft or, in any event, if such use is prohibited for a
period of three consecutive years; and
- with respect to any Engine, any divestiture of title to such Engine or,
in certain circumstances, the installation of such Engine on an airframe
that is subject to a conditional sale or other security agreement.
An Event of Loss with respect to an Aircraft is deemed to have occurred if
an Event of Loss occurs with respect to the Airframe that is a part of such
Aircraft. (Indentures, Annex A)
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of the principal federal income tax
consequences of the purchase, ownership and disposition of Certificates to a
Certificate Owner that purchases Certificates in the initial offering thereof at
the offering price set forth herein and holds such Certificates as capital
assets. The discussion is based on laws, regulations, rulings and decisions in
effect as of the date hereof, all of which are subject to change, possibly with
retroactive effect, or different interpretation. The discussion does not address
all of the federal income tax consequences that may be relevant to all
Certificate Owners in light of their particular circumstances (including, for
example, any special rules applicable to tax-exempt organizations, banks,
broker-dealers and insurance companies). Except for the discussion below under
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"-- Certain Federal Income Tax Consequences to Foreign Certificateholders", this
discussion is addressed to beneficial owners of Certificates that are (i)
individual citizens or residents of the United States, (ii) corporations created
or organized in or under the laws of the United States, any state thereof or the
District of Columbia or (iii) partnerships, trusts or estates treated, for
federal income tax purposes, as domestic partnerships, trusts or estates ("U.S.
Persons"). The statements of law and legal conclusions set forth herein are
based upon the opinion of Cadwalader, Wickersham & Taft, special counsel to
Delta. This discussion is based upon the tax laws of the United States as in
effect on the date of this prospectus supplement, as well as judicial and
administrative interpretations thereof (in final or proposed form) available on
or before such date. All of the foregoing are subject to change or differing
interpretations, which could apply retroactively. Prospective investors should
note that no rulings have been or will be sought from the IRS with respect to
any of the United States federal income tax consequences discussed below, and no
assurance can be given that the IRS will not take contrary positions. This
discussion supplements the discussion in the Prospectus under the heading
"Certain United States Federal Income Tax Consequences" and supersedes it to the
extent it is inconsistent. Persons considering an investment in the Certificates
should consult their own tax advisors regarding the federal, state, local and
any other tax consequences to them of the purchase, ownership and disposition of
Certificates in light of their own particular circumstances. The Trusts, the
Subordination Agent and the Loan Trustee are not indemnified for any federal
income taxes or with certain exceptions other taxes that may be imposed upon
them, and the imposition of any such taxes could result in a reduction in the
amounts available for distribution to the Certificate Owners.
GENERAL
The Trusts will not be classified as associations (or publicly traded
partnerships) taxable as corporations and, accordingly, will not themselves be
subject to federal income taxation. Based upon an interpretation of analogous
authorities under existing law, each Trust should be classified as a grantor
trust for federal income tax purposes. The discussion below assumes that the
Trusts will be classified as grantor trusts.
Each Certificate Owner will be treated as the owner of a pro rata undivided
interest in each Equipment Note and any other property held in the related Trust
and will be required to report on its federal income tax return its pro rata
share of the entire income from each of the Equipment Notes and any other
property held in the related Trust, in accordance with such Certificate Owner's
method of accounting. A Certificate Owner using the cash method of accounting
must take into account its pro rata share of income as and when received by the
Trustee. A Certificate Owner using an accrual method of accounting must take
into account its pro rata share of income as it accrues or is received by the
Trustee, whichever is earlier. A Certificate Owner's share of interest or
original issue discount, if any, paid on the related Equipment Note will be
taxable as ordinary income, and a Certificate Owner's share of any Make-Whole
Amount paid on the related Equipment Note will be treated as capital gain. Any
amounts received by a Trust from Interest Drawings under the relevant Liquidity
Facility will be treated for United States federal income tax purposes as having
the same characteristics as the payments they replace.
Each Certificate Owner will be entitled to deduct, consistent with its
method of accounting, its pro rata share of fees and expenses paid or incurred
by the corresponding Trust as provided in Section 162 or 212 of the Code.
Certain fees and expenses, including fees paid to the Trustee and the Liquidity
Provider, will be borne by parties other than the Certificate Owners. It is
possible that such fees and expenses will be treated as constructively received
by the Trust, in which event a Certificate Owner will be required to include in
income and will be entitled to deduct its pro rata share of such fees and
expenses. If a Certificate Owner is an individual, estate or trust, the
deduction for such holder's share of such fees and expenses will be allowed only
to the extent that all of such holder's miscellaneous itemized deductions,
including such holder's share of such fees and expenses, exceed 2% of such
holder's adjusted gross income. In addition, in the case of Certificate Owners
who are individuals, certain otherwise allowable
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itemized deductions will be subject generally to additional limitations on
itemized deductions under the applicable provisions of the Code.
SALES OF CERTIFICATES
A Certificate Owner that sells a Certificate will recognize capital gain or
loss (in the aggregate) equal to the difference between the amount realized on
the sale (except to the extent attributable to accrued interest, which will be
taxable as interest income if not previously included in income) and such
Certificate Owner's adjusted tax basis in the Certificate. Any such gain or loss
generally will be long-term capital gain or loss if the Certificate was held for
more than one year (except to the extent attributable to any property held by
the related Trust for one year or less). Any long-term capital gains with
respect to the Certificates are taxable to corporate taxpayers at the rates
applicable to ordinary income and to individual taxpayers at a maximum rate of
20%. Any capital losses will be deductible by corporate taxpayers only to the
extent of capital gains and by an individual taxpayer only to the extent of
capital gains plus $3,000 of other income.
EFFECT OF SUBORDINATION ON SUBORDINATED CERTIFICATE OWNERS
If any Trust is subordinated with respect to other Trusts and incurs a
shortfall in its receipts of principal or interest paid with respect to the
Equipment Notes held by it because of the subordination of the Equipment Notes
held by such Trust under the Intercreditor Agreement, the Certificate Owners of
Certificates in the subordinated Trust would probably be treated for federal
income tax purposes as if they had (i) received as distributions their full
share of such principal and interest, (ii) paid over to the relevant senior
class of Certificate Owners an amount equal to their share of the amount of the
shortfall, and (iii) retained the right to reimbursement of such amount to the
extent of future amounts payable to such subordinated Certificate Owners with
respect to the shortfall.
Under this analysis, (i) subordinated Certificate Owners incurring a
shortfall would be required to include as current income any interest or other
income of the corresponding subordinated Trust that was a component of such
shortfall, even though such amount was in fact paid to the relevant senior class
of Certificate Owners, (ii) a loss would be allowed to such subordinated
Certificate Owners when their right to receive reimbursement of such shortfall
became worthless (i.e., when it became clear that funds would not be available
from any source to reimburse such shortfall), and (iii) reimbursement of such
shortfall would not be taxable income to subordinated Certificate Owners because
the amount of such shortfall was previously included in income. These results
should not significantly affect the inclusion of income for subordinated
Certificate Owners on the accrual method of accounting, but could accelerate
inclusion of income for subordinated Certificate Owners on the cash method of
accounting by, in effect, placing them on the accrual method.
BOND PREMIUM
A Certificate Owner generally will be considered to have acquired an
interest in an Equipment Note held in the related Trust at a bond premium to the
extent such Certificate Owner's tax basis allocable to such Equipment Note
exceeds the remaining principal amount of the Equipment Note allocable to such
Certificate Owner's Certificate. In that event, a Certificate Owner may, in
certain circumstances, be able to amortize that bond premium (generally on a
constant yield basis) as an offset to interest income with corresponding
reductions in such Certificate Owner's tax basis in such Equipment Note. Special
rules apply to an Equipment Note that may be called at a redemption premium
prior to maturity. It is unclear how these rules apply to an Equipment Note when
there is more than one possible call date and the amount of any redemption
premium is uncertain. Certificate Owners should consult their own tax advisors
regarding the advisability and consequences of an election to amortize any bond
premium with respect to the Equipment Notes.
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ORIGINAL ISSUE DISCOUNT
The Equipment Notes will not be issued with original issue discount unless
certain aggregation rules set forth in the Treasury regulations apply. Under
those rules, if one investor purchases Certificates issued by more than one
Trust, certain of that investor's interests in the Equipment Notes in those
Trusts must in certain circumstances be treated together as a single debt
instrument, which, for purposes of calculating and amortizing any original issue
discount, has a single issue price, maturity date, stated redemption price at
maturity and yield to maturity. If the aggregation rules apply to an investor,
such Equipment Notes could be treated with respect to such investor as having
been issued with original issue discount. Generally, a holder of a debt
instrument issued with original issue discount that is not de minimis must
include such original issue discount in income for federal income tax purposes
as it accrues, in advance of the receipt of the cash attributable to such
income, under a method that takes into account the compounding of interest.
Certificate Owners should consult their own tax advisors regarding the
aggregation rules.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES TO FOREIGN CERTIFICATEHOLDERS
Subject to the discussion of backup withholding below, payments of
principal and interest on the Equipment Notes to, or on behalf of, any
beneficial owner of a Certificate that is not a U.S. Person (a "Non-U.S.
Certificateholder") will not be subject to U.S. federal withholding tax,
provided, in the case of interest, that (i) such Non-U.S. Certificateholder does
not actually or constructively own 10% or more of the total combined voting
power of all classes of stock of Delta entitled to vote, (ii) such Non-U.S.
Certificateholder is not a controlled foreign corporation for U.S. tax purposes
that is related to Delta, (iii) such Non-U.S. Certificateholder is not a bank
receiving interest pursuant to a loan agreement entered into in the ordinary
course of its trade or business and (iv) either (A) the Non-U.S.
Certificateholder certifies, under penalties of perjury, that it is not a U.S.
Person and provides its name and address and certain other information or (B) a
securities clearing organization, bank or other financial institution that holds
customers' securities in the ordinary course of its trade or business (a
"financial institution") and that holds the Certificate on behalf of the
Non-U.S. Certificateholder certifies, under penalties of perjury, that such a
certification and the Non-U.S. Certificateholder's name and address have been
received from the Non-U.S. Certificateholder by it or by another financial
institution and furnishes to the withholding agent the name and address of the
Non-U.S. Certificateholder and a copy of the Non-U.S. Certificateholder's
certification, provided that the U.S. Treasury Department has not published a
determination that a certification from such financial institution may not be
relied upon.
Any capital gain realized by a Non-U.S. Certificateholder upon the sale or
retirement of a Certificate or upon receipt of any Make-Whole Amount paid on an
Equipment Note will not be subject to U.S. federal income or withholding taxes
if (i) such gain is not effectively connected with a U.S. trade or business of
the Non-U.S. Certificateholder and (ii) in the case of an individual, such
Non-U.S. Certificateholder is not present in the United States for 183 days or
more in the taxable year of the sale, retirement or receipt.
Any interest or gain described in the two preceding paragraphs will be
subject to regular United States federal income tax at graduated rates if it is
effectively connected with the conduct of a United States trade or business by a
Non-U.S. Certificateholder.
Prospective investors that are not U.S. Persons should consult their own
tax advisors regarding the income and other tax consequences to them of the
purchase, ownership and disposition of the Certificates under U.S. federal,
state and local, and any other relevant law, in light of their own particular
circumstances.
BACKUP WITHHOLDING
Payments made on Certificates, and proceeds from the sale of Certificates
to or through certain brokers, may be subject to a "backup" withholding tax of
31% unless the Certificate Owner complies with certain reporting procedures or
is exempt from such requirements. Any such withheld amounts will be allowed as a
credit against the Certificate Owner's federal income tax and may entitle such
Certificate
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Owner to a refund if the required information is furnished to the Internal
Revenue Service. Certain penalties may be imposed by the Internal Revenue
Service on a Certificate Owner who is required to supply information but who
does not do so in the proper manner. With respect to Non-U.S.
Certificateholders, payments made on a Certificate and proceeds from the sale of
a Certificate owned by a Non-U.S. Certificateholder will generally not be
subject to such backup withholding tax if such Non-U.S. Certificateholder
provides the applicable statement as to its non-U.S. status or otherwise
establishes an exemption.
The Treasury Department has issued final Treasury Regulations governing
withholding, backup withholding and information reporting requirements. These
regulations do not significantly alter the substantive withholding and
information reporting requirements discussed herein; they unify current
certification procedures and forms and clarify reliance standards. These
regulations will generally become effective for payments made after December 31,
2000.
CERTAIN CONNECTICUT TAXES
The Trustee is a national banking association with its corporate trust
office in Connecticut. Bingham Dana LLP, counsel to the Trustee, has advised
Delta that, in its opinion, under currently applicable law, assuming that each
Trust will not be taxable as a corporation for federal income tax purposes, but,
rather, will be classified for such purposes as a grantor trust or as a
partnership, (i) the Trusts will not be subject to any tax (including, without
limitation, net or gross income, tangible or intangible property, net worth,
capital, franchise or doing business tax), fee or other governmental charge
under the laws of the State of Connecticut or any political subdivision thereof
and (ii) Certificate Owners that are not residents of or otherwise subject to
tax in Connecticut will not be subject to any tax (including, without
limitation, net or gross income, tangible or intangible property, net worth,
capital, franchise or doing business tax), fee or other governmental charge
under the laws of the State of Connecticut or any political subdivision thereof
as a result of purchasing, owning (including receiving payments with respect to)
or selling a Certificate. Neither the Trusts nor the Certificate Owners will be
indemnified for any state or local taxes imposed on them, and the imposition of
any such taxes on a Trust could result in a reduction in the amounts available
for distribution to the Certificate Owners of such Trust. In general, should a
Certificate Owner or a Trust be subject to any state or local tax that would not
be imposed if the Trust were administered in a different jurisdiction in the
United States or if the Trustee were located in a different jurisdiction in the
United States, the Trustee will either relocate the administration of the Trust
to such other jurisdiction or resign and, in the event of such a resignation, a
new Trustee in such other jurisdiction will be appointed.
CERTAIN ERISA CONSIDERATIONS
The following discussion supplements the discussion in the Prospectus under
the heading "ERISA Considerations" and supersedes it to the extent it is
inconsistent.
GENERAL
A fiduciary of a retirement plan or other employee benefit plan or
arrangement, including for this purpose an individual retirement account,
annuity or Keogh plan, that is subject to Title I of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") or Section 4975 of the Code,
or such a plan or arrangement which is a foreign, church or governmental plan or
arrangement exempt from Title I of ERISA and Section 4975 of the Code but
subject to a foreign, federal, state, or local law which is substantially
similar to the provisions of Title I of ERISA or Section 4975 of the Code (each,
a "Similar Law") (in each case, a "Plan"), should consider whether an investment
in the Certificates is appropriate for the Plan, taking into account the
provisions of the Plan documents, the overall investment policy of the Plan and
the composition of the Plan's investment portfolio, as there are imposed on Plan
fiduciaries certain fiduciary requirements, including those of investment
prudence and diversification and the requirement that a Plan's investments be
made in accordance with the documents governing the Plan.
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Further, a fiduciary should consider the fact that in the future there may be no
market in which such fiduciary would be able to sell or otherwise dispose of the
Certificates.
Any Plan fiduciary which proposes to cause a Plan to purchase Certificates
should consult with its counsel regarding the applicability of the fiduciary
responsibility and prohibited transaction provisions of ERISA and the Code and
Similar Law to such an investment, and to confirm that such purchase and holding
will not constitute or result in a non-exempt prohibited transaction or any
other violation of an applicable requirement of ERISA.
PLAN ASSETS ISSUES
The Department of Labor has promulgated a regulation, 29 CFR Section
2510.3-101 (the "Plan Asset Regulation"), describing what constitutes the assets
of a Plan with respect to the Plan's investment in an entity for purposes of
ERISA and Section 4975 of the Code. Under the Plan Asset Regulation, if a Plan
invests (directly or indirectly) in a Certificate, the Plan's assets will
include both the Certificate and an undivided interest in each of the underlying
assets of the corresponding Trust, including the Equipment Notes held by such
Trust, unless it is established that equity participation in the Trust by
benefit plan investors (including but not limited to Plans and entities whose
underlying assets include Plan assets by reason of an employee benefit plan's
investment in the entity) is not significant within the meaning of the Plan
Asset Regulation. In this regard, the extent to which there is equity
participation in a particular Trust by, or on behalf of, benefit plan investors
will not be monitored. If the assets of a Trust are deemed to constitute the
assets of a Plan, transactions involving the assets of such Trust could be
subject to the prohibited transaction provisions of ERISA and Section 4975 of
the Code or materially similar provisions of similar law unless a statutory or
administrative exemption is applicable to the transaction.
PROHIBITED TRANSACTION EXEMPTIONS
In addition, whether or not the assets of a Trust are deemed to be Plan
assets under the Plan Asset Regulation, the fiduciary of a Plan that proposes to
purchase and hold any Certificates should consider, among other things, whether
such purchase and holding may involve (i) the direct or indirect extension of
credit to a party in interest or a disqualified person, (ii) the sale or
exchange of any property between a Plan and a party in interest or a
disqualified person, or (iii) the transfer to, or use by or for the benefit of,
a party in interest or a disqualified person, of any Plan assets. Such parties
in interest or disqualified persons could include, without limitation, Delta and
its affiliates, the Underwriters, the Trustees and the Liquidity Provider.
Moreover, if Certificates are purchased by a Plan and Certificates of a
subordinate Class are held by a party in interest or a disqualified person with
respect to such Plan, the exercise by the holder of the subordinate Class of
Certificates of its right to purchase the senior Classes of Certificates upon
the occurrence and during the continuation of a Triggering Event could be
considered to constitute a prohibited transaction unless a statutory or
administrative exemption were applicable. Depending on the satisfaction of
certain conditions which may include the identity of the Plan fiduciary making
the decision to acquire or hold Certificates on behalf of a Plan, Prohibited
Transaction Class Exemption ("PTCE") 91-38 (relating to investments by bank
collective investment funds), PTCE 84-14 (relating to transactions effected by a
"qualified professional asset manager"), PTCE 95-60 (relating to investments by
an insurance company general account), PTCE 96-23 (relating to transactions
directed by an in-house asset manager) or PTCE 90-1 (relating to investments by
insurance company pooled separate accounts) (collectively, the "Class
Exemptions") could provide an exemption from the prohibited transaction
provisions of ERISA and Section 4975 of the Code. However, there can be no
assurance that any of these Class Exemptions or any other exemption will be
available with respect to any particular transaction involving the Certificates.
EACH PERSON WHO ACQUIRES OR ACCEPTS A CERTIFICATE OR AN INTEREST THEREIN
WILL BE DEEMED BY SUCH ACQUISITION OR ACCEPTANCE TO HAVE REPRESENTED AND
WARRANTED THAT EITHER: (I) NO ASSETS OF A PLAN OR ANY TRUST ESTABLISHED WITH
RESPECT TO A PLAN HAVE BEEN USED TO ACQUIRE SUCH CERTIFICATE OR AN INTEREST
THEREIN OR (II) THE PURCHASE AND HOLDING OF SUCH CERTIFICATE OR AN INTEREST
THEREIN BY SUCH PERSON ARE EXEMPT
S-55
<PAGE> 60
FROM THE PROHIBITED TRANSACTION RESTRICTIONS OF ERISA AND THE CODE OR MATERIALLY
SIMILAR PROVISIONS OF SIMILAR LAW PURSUANT TO ONE OR MORE PROHIBITED TRANSACTION
STATUTORY OR ADMINISTRATIVE EXEMPTIONS.
SPECIAL CONSIDERATIONS APPLICABLE TO INSURANCE COMPANY GENERAL ACCOUNTS
Any insurance company proposing to purchase Certificates should consider
the implications of the United States Supreme Court's decision in John Hancock
Mutual Life Insurance Co. v. Harris Trust and Savings Bank, 510 U.S. 86, 114 S.
Ct. 517 (1993), which in certain circumstances treats such general account
assets as assets of a Plan that owns a policy or other contract with such
insurance company, as well as the effect of Section 401(c) of ERISA as
interpreted by regulations issued by the United States Department of Labor in
January, 2000 (the "General Account Regulations"). The General Account
Regulations should not, however, adversely affect the applicability of PTCE
95-60 to purchases of Certificates by insurance company general accounts. The
plan asset status of insurance company separate accounts is unaffected by
Section 401(c) of ERISA, and separate account assets continue to be treated as
the assets of any Plan invested in a separate account, except to the extent
provided in the Plan Asset Regulation.
EACH PLAN FIDUCIARY SHOULD CONSULT WITH ITS LEGAL ADVISOR CONCERNING THE
POTENTIAL CONSEQUENCES TO THE PLAN UNDER ERISA, THE CODE OR SIMILAR LAW OF AN
INVESTMENT IN ANY OF THE CERTIFICATES.
S-56
<PAGE> 61
UNDERWRITING
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated November 7, 2000 (the "Underwriting Agreement"), the
Underwriters named below (the "Underwriters") have severally but not jointly
agreed with Delta to purchase the principal amount of Certificates indicated in
the following table.
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT AMOUNT AMOUNT OF AMOUNT OF
OF CLASS A-1 OF CLASS A-2 CLASS B CLASS C
UNDERWRITERS CERTIFICATES CERTIFICATES CERTIFICATES CERTIFICATES
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Goldman, Sachs & Co......................... $ 34,111,000 $ 73,816,000 $ 18,253,000 $ 23,829,000
Morgan Stanley & Co. Incorporated........... 34,111,000 73,816,000 18,252,000 23,828,000
Chase Securities Inc........................ 34,109,000 73,813,000 18,249,000 23,827,000
Salomon Smith Barney Inc.................... 34,109,000 73,813,000 18,249,000 23,827,000
Banc of America Securities LLC.............. 34,109,000 73,813,000 18,249,000 23,827,000
Credit Lyonnais Securities (USA) Inc........ 34,109,000 73,813,000 18,249,000 23,827,000
Tokyo-Mitsubishi International plc.......... 34,109,000 73,813,000 18,249,000 23,827,000
The Williams Capital Group, L.P............. 34,109,000 73,813,000 18,249,000 23,827,000
BNY Capital Markets, Inc.................... 34,109,000 73,813,000 18,249,000 23,827,000
Guzman & Company............................ 34,109,000 73,813,000 18,249,000 23,827,000
------------ ------------ ------------ ------------
Total............................. $341,094,000 $738,136,000 $182,497,000 $238,273,000
============ ============ ============ ============
</TABLE>
Certificates sold by the Underwriters to the public will initially be
offered at the price set forth on the cover of this prospectus supplement. Any
certificates sold by the Underwriters to securities dealers may be sold at a
discount from the offering price of up to 0.35% of the face amount of the
Certificates. The securities dealers may resell any Certificates purchased from
the Underwriters to certain other brokers or dealers at a discount from the
offering price of up to 0.25% of the face amount of the Certificates. If all of
the Certificates are not sold at the offering price, the Underwriters may change
the offering price and the other selling terms.
The Certificates are a new issue of securities with no established trading
market. Delta has been advised by the Underwriters that the Underwriters intend
to make a market in the Certificates but they are not obligated to do so and
they may discontinue market making at any time without notice. No assurance can
be given as to the liquidity of the trading market for the Certificates.
From time to time, the Underwriters or their respective affiliates perform
investment banking and advisory services for, and provide general financing and
banking services to, Delta and its affiliates.
It is expected that delivery of the Certificates will be made against
payment for the Certificates on or about the date specified in the second to the
last paragraph of the cover page of this prospectus supplement, which will be
the seventh business day following the date of pricing of the Certificates (such
settlement cycle being referred to herein as "T+7"). Under Rule 15c6-1 of the
Commission under the Securities Exchange Act of 1934, as amended, trades in the
secondary market generally are required to settle in three business days, unless
the parties to any trade expressly agree otherwise. Accordingly purchasers who
wish to trade Certificates on the date of pricing or the next three succeeding
business days will be required, by virtue of the fact that the Certificates
initially will settle in T+7, to specify an alternate settlement cycle at the
time of any trade to prevent a failed settlement. Purchasers of Certificates who
wish to trade Certificates on the date of pricing or the next three succeeding
business days should consult their own advisor.
Each Underwriter has represented and agreed that (1) it has not offered or
sold and prior to the date six months after the date of issue of the
Certificates will not offer or sell any Certificates to persons in the United
Kingdom, except to persons whose ordinary activities involve them in acquiring,
holding, managing or disposing of investments (as principal or agent) for the
purposes of their businesses or otherwise in
S-57
<PAGE> 62
circumstances that have not resulted and will not result in an offer to the
public in the United Kingdom within the meaning of the Public Offers of
Securities Regulations 1995, (2) it has complied, and will comply with, all
applicable provisions of the Financial Services Act 1986 of Great Britain with
respect to anything done by it in relation to the Certificates in, from or
otherwise involving the United Kingdom; and (3) it has only issued or passed on
and will only issue or pass on in the United Kingdom any document received by it
in connection with the issuance of the Certificates to a person who is of a kind
described in Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1996 of Great Britain or is a person to whom
the document may lawfully be issued or passed on.
The Certificates may not be offered, sold, transferred or delivered in or
from The Netherlands, as part of their initial distribution or as part of any
re-offering, and neither this prospectus supplement nor any other document in
respect of the offering may be distributed or circulated in The Netherlands,
other than to individuals or legal entities which include, but are not limited
to, banks, brokers, dealers, institutional investors and undertakings with a
treasury department, who or which trade or invest in securities in the conduct
of a business or profession.
In connection with the offering, the Underwriters may purchase and sell
Certificates in the open market. These transactions may include short sales,
stabilizing transactions and purchases to cover positions created by short
sales. Short sales involve the sale by the Underwriters of a greater number of
Certificates than they are required to purchase in the offering. Stabilizing
transactions consist of certain bids or purchases made for the purpose of
preventing or retarding a decline in the market price of the Certificates while
the offering is in progress.
The Underwriters also may impose a penalty bid. This occurs when a
particular Underwriter repays to the Underwriters a portion of the underwriting
discount received by it because the co-managers have repurchased Certificates
sold by or for the account of the Underwriters in stabilizing or short covering
transactions.
These activities by the Underwriters may stabilize, maintain or otherwise
affect the market price of the Certificates. As a result, the price of the
Certificates may be higher than the price that otherwise might exist in the open
market. If these activities are commenced, they may be discontinued by the
Underwriters at any time. These transactions may be effected in the
over-the-counter market or otherwise.
Tokyo-Mitsubishi International plc is not registered as a broker-dealer
under United States law and will not conduct any selling activity within the
United States.
Delta has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act. The Underwriters
have agreed to reimburse certain fees and expenses of Delta in connection with
the offering of approximately $1,125,000. Delta estimates that its share of the
total expenses of the offering, excluding underwriting discounts and
commissions, will be approximately $1,085,000.
Affiliates of Banc of America Securities LLC, BNY Capital Markets, Inc.,
Chase Securities Inc., Credit Lyonnais Securities and Salomon Smith Barney are
lenders under that certain $500 million credit agreement entered into between
Delta and a group of banks which may be repaid with the proceeds from the sale
of the Certificates.
S-58
<PAGE> 63
LEGAL OPINIONS
The validity of the Certificates is being passed upon for Delta by
Cadwalader, Wickersham & Taft, New York, New York, special counsel to Delta, and
for the Underwriters by Shearman & Sterling, New York, New York. The respective
counsel for Delta and the Underwriters will rely upon Bingham Dana LLP,
Hartford, Connecticut, counsel to State Street Bank and Trust Company of
Connecticut, National Association, as to certain matters relating to the
authorization, execution and delivery of the Basic Agreement, each Trust
Supplement and the Certificates, and the valid and binding effect thereof, and
on the opinion of Gregory L. Riggs, Vice President -- Deputy General Counsel of
Delta, or Leslie P. Klemperer, Vice President -- Associate General Counsel of
Delta, as to certain matters relating to the authorization, execution and
delivery of the Basic Agreement and each Trust Supplement by Delta. Shearman &
Sterling has also acted on behalf of Westdeutsche Landesbank Girozentrale,
acting through its New York Branch, as Liquidity Provider.
EXPERTS
The audited consolidated financial statements and schedules incorporated by
reference in the Prospectus and elsewhere in the registration statement have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in accounting and auditing
in giving said reports. Reference is made to said report, which includes an
explanatory paragraph with respect to the change in the method of accounting for
the sale of mileage credits as discussed in Note 18 to the audited consolidated
financial statements.
The references to AISI, AVITAS and MBA, and to their respective appraisal
reports, are included herein in reliance upon the authority of each such firm as
an expert with respect to the matters contained in its appraisal report.
S-59
<PAGE> 64
APPENDIX I
INDEX OF TERMS
The following is an index showing the page in this prospectus supplement
where certain defined terms appear.
<TABLE>
<CAPTION>
DEFINED TERM PAGE
------------ ----
<S> <C>
Adjusted Expected Distributions............................. S-36
Aggregate LTV Collateral Amount............................. S-37
Aircraft.................................................... S-38
AISI........................................................ S-39
Appraised Current Market Value.............................. S-37
Appraisers.................................................. S-39
Assumed Aircraft Value...................................... S-42
AVITAS...................................................... S-39
Average Life Date........................................... S-42
Bankruptcy Code............................................. S-23
Base Rate................................................... S-31
Basic Agreement............................................. S-15
Business Day................................................ S-18
Cash Collateral Account..................................... S-29
Cede........................................................ S-19
Certificate Account......................................... S-17
Certificate Owner........................................... S-26
Certificateholders.......................................... S-15
Certificates................................................ S-15
citizen of the United States................................ S-23
Class A-1 Certificateholders................................ S-15
Class A-1 Certificates...................................... S-15
Class A-1 Trust............................................. S-15
Class A-1 Trustee........................................... S-15
Class A-2 Certificateholders................................ S-15
Class A-2 Certificates...................................... S-15
Class A-2 Trust............................................. S-15
Class A-2 Trustee........................................... S-15
Class B Certificateholders.................................. S-15
Class B Certificates........................................ S-15
Class B Trust............................................... S-15
Class B Trustee............................................. S-15
Class C Certificateholders.................................. S-15
Class C Certificates........................................ S-15
Class C Trust............................................... S-15
Class C Trustee............................................. S-15
Class D Certificates........................................ S-25
Class D Trust............................................... S-25
Class D Trustee............................................. S-25
Class Exemptions............................................ S-55
Commission.................................................. S-15
Controlling Party........................................... S-33
Current Distribution Date................................... S-34
date of determination....................................... S-42
</TABLE>
I-1
<PAGE> 65
<TABLE>
<CAPTION>
DEFINED TERM PAGE
------------ ----
<S> <C>
Distribution Date........................................... S-17
Downgrade Drawing........................................... S-28
Drawing..................................................... S-30
DTC......................................................... S-19
DTC Participants............................................ S-26
Equipment Notes............................................. S-40
ERISA....................................................... S-54
event of default............................................ S-21
Event of Loss............................................... S-50
Expected Distributions...................................... S-34
FAA......................................................... S-46
Final Distributions......................................... S-33
Final Drawing............................................... S-30
Final Legal Distribution Date............................... S-17
financial institution....................................... S-53
full defeasance............................................. S-43
General Account Regulations................................. S-56
H.15(519)................................................... S-42
Indenture................................................... S-40
Indenture Events of Default................................. S-43
Indirect Participants....................................... S-26
Intercreditor Agreement..................................... S-32
Interest Drawings........................................... S-27
LIBOR....................................................... S-31
Liquidity Expenses.......................................... S-34
Liquidity Event of Default.................................. S-31
Liquidity Facility.......................................... S-27
Liquidity Obligations....................................... S-34
Liquidity Provider.......................................... S-27
Loan Amount................................................. S-48
Loan Trustee................................................ S-40
LTV Appraisal............................................... S-37
LTV Collateral Amount....................................... S-37
LTV Ratio................................................... S-37
LTVs........................................................ S-3
Make-Whole Amount........................................... S-42
Maximum Available Commitment................................ S-28
MBA......................................................... S-39
Minimum Sale Price.......................................... S-34
Moody's..................................................... S-13
most recent H.15(519)....................................... S-42
Non-Extension Drawing....................................... S-30
Non-Performing Equipment Notes.............................. S-36
Non-U.S. Certificateholder.................................. S-53
Note Holder................................................. S-21
Participation Agreement..................................... S-40
Pass Through Trust Agreements............................... S-15
Performing Equipment Note................................... S-28
Permitted Investments....................................... S-21
Plan........................................................ S-54
</TABLE>
I-2
<PAGE> 66
<TABLE>
<CAPTION>
DEFINED TERM PAGE
------------ ----
<S> <C>
Plan Asset Regulation....................................... S-55
Pool Balance................................................ S-18
Pool Factor................................................. S-18
Prospectus.................................................. S-15
PTC Event of Default........................................ S-22
PTCE........................................................ S-55
Rating Agencies............................................. S-14
Regular Distribution Dates.................................. S-17
Remaining Weighted Average Life............................. S-42
Replacement Facility........................................ S-29
Required Amount............................................. S-27
Scheduled Payments.......................................... S-17
Section 1110................................................ S-45
Section 1110 Period......................................... S-28
Series A-1 Equipment Notes.................................. S-40
Series A-2 Equipment Notes.................................. S-40
Series B Equipment Notes.................................... S-40
Series C Equipment Notes.................................... S-40
Series D Equipment Notes.................................... S-40
Similar Law................................................. S-54
Special Distribution Date................................... S-17
Special Payment............................................. S-17
Special Payments Account.................................... S-18
Standard & Poor's........................................... S-13
Stated Interest Rates....................................... S-27
Subordination Agent......................................... S-32
Termination Notice.......................................... S-31
Threshold Rating............................................ S-29
Transportation Code......................................... S-23
Treasury Yield.............................................. S-42
Triggering Event............................................ S-34
Trust Indenture Act......................................... S-23
Trust Property.............................................. S-16
Trust Supplement............................................ S-15
Trustees.................................................... S-15
Trusts...................................................... S-15
U.S. Government Obligations................................. S-43
U.S. Persons................................................ S-51
Underwriters................................................ S-57
Underwriting Agreement...................................... S-57
</TABLE>
I-3
<PAGE> 67
APPENDIX II
APPRAISAL LETTERS
II-1
<PAGE> 68
[AIRCRAFT INFORMATION SERVICES, INC. LOGO]
MR. PAUL JACOBSON
MANAGER
DELTA AIR LINES
HARTSFIELD INTERNATIONAL AIRPORT
ATLANTA, GA 30320
ADJUSTED BASE VALUE OPINION
44 AIRCRAFT - DELTA EETC 2000-1 FLEET
AISI FILE NO.: A0S066BVO-A
10 OCTOBER 2000
<PAGE> 69
[AIRCRAFT INFORMATION SERVICES, INC. LOGO]
10 October 2000
Mr. Paul Jacobson
Manager
DELTA AIR LINES
Hartsfield International Airport
Atlanta, GA 30320
Subject: Adjusted Base Value Opinion - 44 Aircraft.
AISI File number: A0S066BVO-A
Ref: (a) Fax messages MSDW to AISI 05/06/10 October 2000
Dear Mr. Jacobson:
Aircraft Information Services, Inc. (AISI) is pleased to offer our opinion to
Delta Air Lines (Delta) of the adjusted base values of the Fleet of 44 various
Delta Aircraft as identified and defined in Table I and reference (a) data above
(the 'Aircraft').
1. METHODOLOGY AND DEFINITIONS
The standard terms of reference for commercial aircraft value are 'half-life
base market value' and `half-life current market value' of an 'average'
aircraft. Base value is a theoretical value that assumes a balanced market while
current market value is the value in the real market; both assume a hypothetical
average aircraft condition. AISI value definitions are consistent with the
current definitions of the International Society of Transport Aircraft Trading
(ISTAT), those of 01 January 1994. AISI is a member of that organization and
employs an ISTAT Certified and Senior Certified Aircraft Appraiser.
AISI defines a 'base value' as that of a transaction between equally willing and
informed buyer and seller, neither under compulsion to buy or sell, for a single
unit cash transaction with no hidden value or liability, and with supply and
demand of the sale item roughly in balance. Base values are typically given for
aircraft in 'new' condition, 'average half-life' condition, or in a specifically
described condition unique to a single aircraft at a specific time. An 'average'
aircraft is an operable airworthy aircraft in average physical condition and
with average accumulated flight hours and cycles, with clear title and standard
unrestricted certificate of airworthiness, and registered in an authority which
does not represent a penalty to aircraft value or liquidity, with no damage
history and with inventory configuration and level of modification which is
<PAGE> 70
[AIRCRAFT INFORMATION SERVICES, INC. LOGO]
10 October 2000
AISI File No. A0S066BVO-A
Page - 2 -
normal for its intended use and age. AISI assumes average condition unless
otherwise specified in this report. 'Half-life' condition assumes that every
component or maintenance service which has a prescribed interval that determines
its service life, overhaul interval or interval between maintenance services, is
at a condition which is one-half of the total interval. It should be noted that
AISI and ISTAT value definitions apply to a transaction involving a single
aircraft, and that transactions involving more than one aircraft are often
executed at considerable and highly variable discounts to a single aircraft
price, for a variety of reasons relating to an individual buyer or seller.
AISI defines a 'current market value', which is synonymous with the older term
`fair market value' as that value which reflects the real market conditions,
whether at, above or below the base value conditions. Assumption of a single
unit sale and definitions of aircraft condition, buyer/seller qualifications and
type of transaction remain unchanged from that of base value. Current market
value takes into consideration the status of the economy in which the aircraft
is used, the status of supply and demand for the particular aircraft type, the
value of recent transactions and the opinions of informed buyers and sellers.
Current market value assumes that there is no short term time constraint to buy
or sell.
AISI encourages the use of base values to consider historical trends, to
establish a consistent baseline for long term value comparisons and future value
considerations, or to consider how actual market values vary from theoretical
base values. Base values are less volatile than current market values and tend
to diminish regularly with time. Base values are normally inappropriate to
determine near term values. AISI encourages the use of current market values to
consider the probable near term value of an aircraft.
AISI determines an 'adjusted market value' by determining the value of known
deviations from half-life condition, which may be better or worse than half-life
condition, and to account for better or worse than average physical condition,
and the inclusion of additional equipment, or absence of standard equipment. Our
opinion of the adjusted base values of the Aircraft are derived from information
and specifications supplied by the client in the above referenced (a) data. No
physical inspection of the Aircraft or their essential records was made by AISI
for the purposes of this report.
2. VALUATION
Adjustments from half life have been applied based on the assumed current
maintenance status of the Aircraft as indicated by the hours and cycles usage as
listed in the data supplied to AISI by the client in reference (a) above and in
accordance with standard AISI methods. Adjustments are calculated only where
there is sufficient information to do so, or where reasonable assumptions can be
made.
<PAGE> 71
[AIRCRAFT INFORMATION SERVICES, INC. LOGO]
10 October 2000
AISI File No. A0S066BVO-A
Page - 3 -
With regard to airframe and gear maintenance, the total hours/cycles of the
airframe did not exceed the assumed TBO limits and therefore the total
hours/cycles of the airframe were assumed to be the TSO. This is typical of
newer aircraft.
With regard to the engines, the engines total cycles was assumed to be equal to
the total cycles of the airframe and therefore the engine's life limit CSOs and
overhaul CSOs are assumed to be the same as the total cycles of the airframe.
Again, this is typical of newer aircraft.
All hours and cycle information for airframe, C Check, D Check, engines and gear
have been projected to the date of this report based on a daily utilization
factor calculated for each aircraft.
It is our considered opinion that the October 2000 adjusted base values of the
Aircraft are as follows in Table I subject to the assumptions, definitions, and
disclaimers herein.
TABLE I
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Manufacturer's Delivery Aircraft Serial Aircraft Adjusted Base Value
Date Number Registration October 2000 US Dollar
Number
--------------------------------------------------------------------------------
B737-832, CFM56-7B24* ENGINES, 155,500LB MTOW
<S> <C> <C> <C>
Jan-99 29624 N376DA $43,650,000
--------------------------------------------------------------------------------
May-99 29625 N377DA $43,890,000
--------------------------------------------------------------------------------
Aug-99 30265 N378DA $43,780,000
--------------------------------------------------------------------------------
Aug-99 30349 N379DA $43,780,000
--------------------------------------------------------------------------------
Sep-99 30266 N380DA $43,900,000
--------------------------------------------------------------------------------
Sep-99 30350 N381DN $43,890,000
--------------------------------------------------------------------------------
Oct-99 30345 N382DA $43,930,000
--------------------------------------------------------------------------------
Oct-99 30346 N383DN $43,950,000
--------------------------------------------------------------------------------
Nov-99 30347 N384DA $43,980,000
--------------------------------------------------------------------------------
Nov-99 30348 N385DN $43,980,000
--------------------------------------------------------------------------------
Dec-99 30373 N386DA $44,040,000
--------------------------------------------------------------------------------
Jan-00 30374 N387DA $47,030,000
--------------------------------------------------------------------------------
Feb-00 30375 N388DA $47,060,000
--------------------------------------------------------------------------------
Apr-00 30376 N389DA $47,190,000
--------------------------------------------------------------------------------
Apr-00 30536 N390DA $47,220,000
--------------------------------------------------------------------------------
May-00 30560 N391DA $47,330,000
--------------------------------------------------------------------------------
May-00 30561 N392DA $47,280,000
--------------------------------------------------------------------------------
Jun-00 30377 N393DA $47,340,000
--------------------------------------------------------------------------------
Jun-00 30562 N394DA $47,330,000
--------------------------------------------------------------------------------
Jul-00 30773 N395DN $47,350,000
--------------------------------------------------------------------------------
</TABLE>
<PAGE> 72
[AIRCRAFT INFORMATION SERVICES, INC. LOGO]
10 October 2000
AISI File No. A0S066BVO-A
Page - 4 -
B757-232 NON ETOP, PW2037 ENGINES, 230,000LB MTOW
<TABLE>
<S> <C> <C> <C>
--------------------------------------------------------------------------------
Jan-99 29728 N696DL $53,530,000
--------------------------------------------------------------------------------
Aug-99 30318 N697DL $53,840,000
--------------------------------------------------------------------------------
Aug-99 29911 N698DL $54,070,000
--------------------------------------------------------------------------------
Sep-99 29970 N699DL $54,240,000
--------------------------------------------------------------------------------
Sep-99 30337 N6700 $54,110,000
--------------------------------------------------------------------------------
Oct-99 30187 N6701 $54,120,000
--------------------------------------------------------------------------------
Nov-99 30188 N6702 $54,220,000
--------------------------------------------------------------------------------
Jan-00 30234 N6703D $57,030,000
--------------------------------------------------------------------------------
Apr-00 30396 N6704Z $57,290,000
--------------------------------------------------------------------------------
Apr-00 30397 N6705Y $57,310,000
--------------------------------------------------------------------------------
May-00 30422 N6706Q $57,410,000
--------------------------------------------------------------------------------
May-00 30395 N6707A $57,480,000
--------------------------------------------------------------------------------
Jul-00 30480 N6708D $57,650,000
--------------------------------------------------------------------------------
Aug-00 30481 N6709 $57,720,000
--------------------------------------------------------------------------------
Aug-00 30482 N6710E $57,760,000
--------------------------------------------------------------------------------
Sep-00 30483 N6711M $57,920,000
--------------------------------------------------------------------------------
Oct-00 30484 N6712B $57,950,000
--------------------------------------------------------------------------------
Oct-00 30777 N6713Y $57,950,000
--------------------------------------------------------------------------------
</TABLE>
B767-332ER, CF6-80C2B6F ENGINES, 407,000LB MTOW
<TABLE>
<S> <C> <C> <C>
--------------------------------------------------------------------------------
Jan-99 29694 N1602 $87,510,000
--------------------------------------------------------------------------------
Feb-99 29695 N1603 $87,620,000
--------------------------------------------------------------------------------
Apr-99 30180 N1604R $87,450,000
--------------------------------------------------------------------------------
May-99 30198 N1605 $87,540,000
--------------------------------------------------------------------------------
Jun-99 30199 N16065 $87,530,000
--------------------------------------------------------------------------------
Apr-00 30388 N1607B $92,570,000
--------------------------------------------------------------------------------
</TABLE>
* Note - the B737-832 aircraft are listed with CFM56-7B24 engines. However,
AISI has been informed the engines installed are actually CFM56-7B26 engines
purchased with an operating limit to CFM56-7B24 status. With this limit, AISI
has valued the aircraft as though they are powered by the CFM56-7B24 engine.
<PAGE> 73
[AIRCRAFT INFORMATION SERVICES, INC. LOGO]
10 October 2000
AISI File No. A0S066BVO-A
Page - 5 -
Unless otherwise agreed by Aircraft Information Services, Inc. (AISI) in
writing, this report shall be for the sole use of the client/addressee. This
report is offered as a fair and unbiased assessment of the subject aircraft or
equipment. AISI has no past, present, or anticipated future interest in the
subject aircraft or equipment. The conclusions and opinions expressed in this
report are based on published information, information provided by others,
reasonable interpretations and calculations thereof and are given in good faith.
Such conclusions and opinions are judgments that reflect conditions and values
which are current at the time of this report. The values and conditions reported
upon are subject to any subsequent change. AISI shall not be liable to any party
for damages arising out of reliance or alleged reliance on this report, or for
any parties action or failure to act as a result of reliance or alleged reliance
on this report.
Sincerely,
AIRCRAFT INFORMATION SERVICES, INC.
/s/ John D. McNicol
John D. McNicol
Vice President
Appraisals & Forecasts
<PAGE> 74
DELTA AIR LINES NOVEMBER 8, 2000
INTRODUCTION
AVITAS, Inc. has been retained by Delta Air Lines (the "Client") to provide its
opinion as to the Base Values for 20 Boeing 737-832, 18 757-232 and 6 767-332ER
aircraft. The subject aircraft are identified and their values are set forth in
Figure 1 of this report.
The values presented in this report for new aircraft assume that the aircraft
will be in new, "flyaway" condition and fully certificated for commercial
operations. We have further assumed that the subject aircraft will be operated
under the air transport regulations of a major nation.
In determining the values for used aircraft, AVITAS has not had the opportunity
to recently inspect the subject aircraft nor review their related technical
documentation. Consequently, unless otherwise stated, we use the following
assumptions in our valuation for each aircraft:
- the aircraft is in good physical condition
- it is in half-life, half-time condition with regard to the airframe,
engines, landing gear and other critical components, unless new or
nearly new
- it is in passenger configuration
- it is operated under the air transport regulations of a major nation
- the historical maintenance documentation has been properly controlled
under internationally recognized standards
- it is in compliance with all mandatory airworthiness directives
- its specifications and modification status are comparable to other
aircraft of its type and age
- its utilization rate is similar to that of other aircraft of its type
and age
The values presented in this report do not take into consideration fleet sales,
attached leases, tax considerations or other factors that might be considered in
structuring the terms and conditions of a specific transaction. These factors do
not directly affect the value of the aircraft itself but can affect the
economics of the transaction. Therefore, the negotiated striking price in an
aircraft transaction may take into consideration factors such as the present
value of the future lease stream, the terms and conditions of the specific lease
agreement and the impact of tax considerations.
[PHOTO]
WORLD HEADQUARTERS: 14520 Avion Pkwy, Chantilly, VA 20151 USA - Telephone: (703)
476-2300 Fax: (703) 860-5855 Email: [email protected]
AVITAS EUROPE: Palace House, 3 Cathedral St. London SE1 9DE - Telephone:
0171-716-6621 Fax: 0717-357-6873 Email: [email protected]
AVITAS ENGINEERING: 5040 N.W. 7th Street, #900 Miami, FL 33126 - Telephone:
(305) 476-9650 Fax: (305) 476-9915 Email: [email protected]
A DET NORSKE VERITAS COMPANY
<PAGE> 75
DELTA AIR LINES NOVEMBER 8, 2000
DEFINITIONS
AVITAS's value definitions, set forth in full in the appendix at the end of this
report, conform to those of the International Society of Transport Aircraft
Trading ("ISTAT") adopted in January 1994, and are summarized as follows:
- BASE VALUE is the appraiser's opinion of the underlying economic value
of an aircraft in an open, unrestricted, stable market environment with
a reasonable balance of supply and demand, and assumes full
consideration of its "highest and best use." An aircraft's Base Value
is founded in the historical trend of values and in the projection of
value trends and presumes an arm's-length, cash transaction between
willing and knowledgeable parties, acting prudently, with an absence of
duress and with a reasonable period of time for marketing. Base Value
typically assumes that an aircraft's physical condition is average for
an aircraft of its type and age, and its maintenance time status is at
mid-life, mid-time (or benefiting from an above-average maintenance
status if it is new or nearly new).
AIRCRAFT VALUE
AVITAS's opinion as to the values of the subject aircraft are presented below in
millions of U.S. dollars.
With regard to new aircraft, AVITAS considers the Base Value and the Current
Market Value to be the same. The Base Value of a new aircraft is the typical
price paid by an average operator in a single unit or small lot sale. Actual
transaction prices may be either above or below that level due to a number of
factors. For example, a launch order or a large fleet order may result in
discounts, whereas a single unit sale to a small operator who needs a
substantial amount of support may be approaching the list price.
Furthermore, implicit in these values is AVITAS's assumption that the new
aircraft will remain with the original operator for at least two years. If a
newly delivered aircraft comes onto the market, the seller is at an immediate
disadvantage as he is likely to be in competition with the manufacturer who can
offer training and support.
2
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DELTA AIR LINES NOVEMBER 8, 2000
FIGURE 1
DELTA AIR LINES
AIRCRAFT DESCRIPTION & SUMMARY OF AIRCRAFT VALUES
US$ IN MILLIONS
<TABLE>
<CAPTION>
SERIAL REG. DATE OF ENGINE MTOW BASE
NO. TYPE MFR. NUMBER NUMBER DELIVERY TYPE (LBS) VALUE
==========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 737-832 Boeing 29624 N376DA 1st Qtr. 1999 CFM56-7B24 155,500 $ 38.5
2 737-832 Boeing 29625 N377DA 2nd Qtr. 1999 CFM56-7B24 155,500 39.0
3 737-832 Boeing 30265 N378DA 3rd Qtr. 1999 CFM56-7B24 155,500 39.6
4 737-832 Boeing 30349 N379DA 3rd Qtr. 1999 CFM56-7B24 155,500 39.6
5 737-832 Boeing 30266 N380DA 3rd Qtr. 1999 CFM56-7B24 155,500 39.6
6 737-832 Boeing 30350 N381DN 3rd Qtr. 1999 CFM56-7B24 155,500 39.6
7 737-832 Boeing 30345 N382DA 4th Qtr. 1999 CFM56-7B24 155,500 40.1
8 737-832 Boeing 30346 N383DN 4th Qtr. 1999 CFM56-7B24 155,500 40.1
9 737-832 Boeing 30347 N384DA 4th Qtr. 1999 CFM56-7B24 155,500 40.1
10 737-832 Boeing 30348 N385DN 4th Qtr. 1999 CFM56-7B24 155,500 40.1
11 737-832 Boeing 30373 N386DA 4th Qtr. 1999 CFM56-7B24 155,500 40.1
12 737-832 Boeing 30374 N387DA 1st Qtr. 2000 CFM56-7B24 155,500 40.9
13 737-832 Boeing 30375 N388DA 1st Qtr. 2000 CFM56-7B24 155,500 40.9
14 737-832 Boeing 30376 N389DA 2nd Qtr. 2000 CFM56-7B24 155,500 41.7
15 737-832 Boeing 30536 N390DA 2nd Qtr. 2000 CFM56-7B24 155,500 41.7
16 737-832 Boeing 30560 N391DA 2nd Qtr. 2000 CFM56-7B24 155,500 41.7
17 737-832 Boeing 30561 N392DA 2nd Qtr. 2000 CFM56-7B24 155,500 41.7
18 737-832 Boeing 30377 N393DA 2nd Qtr. 2000 CFM56-7B24 155,500 41.7
19 737-832 Boeing 30562 N394DA 2nd Qtr. 2000 CFM56-7B24 155,500 41.7
20 737-832 Boeing 30773 N395DN 3rd Qtr. 2000 CFM56-7B24 155,500 42.6
21 757-232 Boeing 29728 N696DL 1st Qtr. 1999 PW2037 230,000 47.7
22 757-232 Boeing 30318 N697DL 3rd Qtr. 1999 PW2037 230,000 48.6
23 757-232 Boeing 29911 N698DL 3rd Qtr. 1999 PW2037 230,000 48.6
24 757-232 Boeing 29970 N699DL 3rd Qtr. 1999 PW2037 230,000 48.6
25 757-232 Boeing 30337 N6700 3rd Qtr. 1999 PW2037 230,000 48.6
26 757-232 Boeing 30187 N6701 4th Qtr. 1999 PW2037 230,000 49.1
27 757-232 Boeing 30188 N6702 4th Qtr. 1999 PW2037 230,000 49.1
28 757-232 Boeing 30234 N6703D 1st Qtr. 2000 PW2037 230,000 50.1
29 757-232 Boeing 30396 N6704Z 2nd Qtr. 2000 PW2037 230,000 51.1
30 757-232 Boeing 30397 N6705Y 2nd Qtr. 2000 PW2037 230,000 51.1
31 757-232 Boeing 30422 N6706Q 2nd Qtr. 2000 PW2037 230,000 51.1
32 757-232 Boeing 30395 N6707A 2nd Qtr. 2000 PW2037 230,000 51.1
33 757-232 Boeing 30480 N6708D 3rd Qtr. 2000 PW2037 230,000 52.2
34 757-232 Boeing 30481 N6709 3rd Qtr. 2000 PW2037 230,000 52.2
35 757-232 Boeing 30482 N6710E 3rd Qtr. 2000 PW2037 230,000 52.2
36 757-232 Boeing 30483 N6711M 3rd Qtr. 2000 PW2037 230,000 52.2
37 757-232 Boeing 30484 N6712B 4th Qtr. 2000 PW2037 230,000 53.3
38 757-232 Boeing 30777 N6713Y 4th Qtr. 2000 PW2037 230,000 53.3
39 767-332ER Boeing 29694 N1602 1st Qtr. 1999 CF6-80C2B6F 407,000 73.9
40 767-332ER Boeing 29695 N1603 1st Qtr. 1999 CF6-80C2B6F 407,000 73.9
41 767-332ER Boeing 30180 N1604R 2nd Qtr. 1999 CF6-80C2B6F 407,000 74.7
42 767-332ER Boeing 30198 N1605 2nd Qtr. 1999 CF6-80C2B6F 407,000 74.7
43 767-332ER Boeing 30199 N16065 2nd Qtr. 1999 CF6-80C2B6F 407,000 74.7
44 767-332ER Boeing 30388 N1607B 2nd Qtr. 2000 CF6-80C2B6F 407,000 79.8
==========================================================================================================================
TOTAL $2,172.7
==========================================================================================================================
</TABLE>
3
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DELTA AIR LINES NOVEMBER 8, 2000
BACKGROUND - BOEING 737
Design of the Boeing short range 737 was announced in early 1965 with Lufthansa
as the launch customer. As evidenced by the fleet statistics shown below, the
737 is an extremely popular aircraft family.
Figure 2
BOEING 737 FAMILY STATISTICS
AS OF JULY 2000
<TABLE>
<CAPTION>
MODEL AIRCRAFT IN SERVICE OPERATORS FIRM ORDERS
==============================================================================
<S> <C> <C> <C>
737-100 1 1
737-200 31 19
737-200A 781 131
737-300 1088 109
737-400 477 68
737-500 384 39
737-600 38 4 35
737-700 242 36 474
737-800 306 39 373
737-900 1 45
==============================================================================
GRAND TOTAL 3,349 293 927
==============================================================================
</TABLE>
Source: BACK Information Services
The first version in this series was the 737-100, which accommodates as many as
100 passengers. Only 30 were produced. The 737-200 is a stretched version, which
accommodates up to 130 passengers and is equipped with standard JT8D-9
powerplants. A 6-foot-4-inch plug was installed to increase capacity. The
737-200 Advanced model replaced the standard 737-200 in 1971. This aircraft
incorporated many aerodynamic improvements and a high lift system, which greatly
improved short field performance. Perhaps most significant of the upgrades was
the availability of the higher thrust JT8D-15 engines which allowed the maximum
takeoff weight to be increased to 115,000 pounds when the engine was introduced
and ultimately to 128,100 pounds.
The Boeing 737-300, first delivered in late 1984, features a fuselage lengthened
by about ten feet, fuel efficient CFM International CFM56-3 high bypass engines
and various structural, aerodynamic and systems modifications. The CFM engines
also make the -300 and subsequent models Stage 3/Chapter 3 noise compliant.
Though the maximum seating capacity is 149 passengers in a single-class
arrangement, the 737-300 typically seats 128 in a two-class configuration.
The 737-400 offers the same technology found in the -300 with the fuselage
lengthened by an additional ten feet and strengthened outer wings and landing
gear to allow for higher landing weights. The first
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production model was rolled out of the factory in January 1988 and the first
delivery was made to Piedmont Airlines that September.
The Boeing 737-500 is the successor to the 737-200 in terms of its size and
passenger loads but utilizes the later technology CFM56 engines and
EFIS-equipped cockpit. The 737-500 was first flown in June 1989. Typical seating
is 108 passengers in a two-class configuration, though the aircraft can seat up
to 132 passengers. The rather wide acceptance of the A320 in the early 1990s
prompted Boeing to launch a new range of aircraft to replace the 737 family and
compete with the A320's seat-mile economics. In response to customers' needs,
the 737-600, 737-700 and 737-800 programs were launched. The goal was to improve
economic performance and capability and to retain commonality with the existing
737 family. A new wing, new powerplant and other design enhancements were
incorporated to boost the range to 2,925 nautical miles (U.S. transcontinental),
and still retain as many parts as possible so that existing 737 operators would
be able to economize on maintenance costs. To improve what was already highly
regarded dispatch reliability, many of the modifications were designed to
simplify maintenance tasks. Overall, the new aircraft have 8% lower fuel burn
and estimated 15% lower maintenance charges than their predecessors.
The new supercritical wing has an increased chord and span providing a 15%
improvement in lift to drag ratio over the old design. A high hull weight was
needed to increase fuel capacity by 35%. To reduce the number of parts and
man-hours needed for overhaul, newly designed slats and flaps were fitted to the
wing.
The CFM56-7 powerplant is an improved version of the -5A series, and provides
thrust rated between 18,000 pounds and 26,400 pounds which allows for a typical
cruise speed of 0.82 Mach. In addition to an improved core, the -7 has a 61-inch
diameter fan with wider chord fan blades which allow it to operate at lower
turbine temperatures, thus slowing turbine deterioration. There is a fuel burn
performance improvement over the -5A which powers the A320 and A319. The
reliability of the CFM56-7 will certainly contribute to the reduction of
maintenance costs.
The Next Generation 737 maintains flight-deck commonality with the current 737
family. This allows pilots with a current 737 type rating to gain a rating for
the Next Generation 737s very quickly (possibly in as little as one day of
training), and reduces costly simulator training. The Next Generation 737's
instrumentation can be modified to display either 777 or 737-300/-400/-500
instrumentation. This reduces the amount of time it will take for pilots to get
new ratings. These systems were introduced as a lower cost means of competing
with the cross-crew qualification utilized by Airbus. Boeing elected not to
introduce a fly-by-wire system, but instead designed the flight controls to
minimize cross-training requirements.
On March 14, 1995, SAS became the launch customer for the 737-600, successor to
the -500, with a firm order for 35 aircraft and options for 35 more. Deliveries
commenced in the second half of 1998. Nine inches longer than the -500 and with
the same passenger capacity, the aircraft has CFM56-7 engines and a new wing.
The 737-600 has an increased takeoff weight of 124,000 pounds to 143,500 pounds
compared
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DELTA AIR LINES NOVEMBER 8, 2000
to the 115,500 pounds to 133,500 pounds of the -500. Standard fuel capacity has
been increased from 5,311 U.S. gallons to 7,150 U.S. gallons. As a result, the
-600 has a range with 108 passengers of 3,200 nautical miles, 800 miles more
than the -500.
In December 1993, Southwest Airlines gave Boeing the launch order for the Boeing
737-700 with 63 firm orders plus options. Deliveries of the 737-700 began in
1997. It shares many of the same qualities as its very successful predecessor,
the 737-300. The 737-700 has the same seating capacity as the 737-300 (128 in a
two-class configuration), but has an increase in range. The range increase is
due to the greater fuel capacity and higher takeoff weight, which is 133,000
pounds to 153,000 pounds.
The Boeing 737-800 is a stretched version of the 737-400 capable of transporting
up to 162 passengers in two-class configuration or 189 in a single class. The
extra seating gives the -800 a reduction in seat-mile charges over the -400 for
the same trip cost. The differences between the 737-800 and the A320 are far
less pronounced than the other variants, thus tightening the competition. The
seating of the 737-800 is greater than that of the A320 (189 vs 179 in a single
class); however, it has a little less range. The aircraft, delivered to launch
customer Hapag-Lloyd in April 1998, has a design range of approximately 2,900
nautical miles, making it most desirable in the European markets. The -800 has
takeoff weight offerings from 155,500 pounds to 174,200 pounds. Boeing is
offering winglets as an option and will make them available as a retrofit for
present operators. South African Airways is the first customer who has ordered a
737-800 with winglets. First delivery is scheduled for 2001. A 737-800 equipped
with the new winglets will be able to fly farther, burn 3% to 5% less fuel, or
carry up to 6,000 pounds more payload according to the manufacturer.
In late 1997, Alaska Airlines launched the Boeing 737-900, which is a 737-800
stretched by nearly nine feet, with ten firm orders. The aircraft will have 18%
more cargo volume and 9% more passenger cabin area than the 737-800. Deliveries
are scheduled to begin in April 2001.
The Figure below summarizes the performance capabilities of the 737 series
(excluding the -100, -200 and -200A).
FIGURE 3
<TABLE>
<CAPTION>
SEATING CAPACITY MTOW (LBS) RANGE (NM)
AIRCRAFT ---------------- --------------------- -------------------
MODEL BASIC MAX BASIC MAX BASIC MAX
------- ----- --- ------- ------- ----- -----
<S> <C> <C> <C> <C> <C> <C>
737-300 128 149 124,500 138,500 1,625 2,270
737-400 146 172 138,500 150,000 1,960 2,090
737-500 108 132 115,500 133,500 1,520 2,420
737-600 108 132 124,000 143,500 1,530 3,230
737-700 128 149 133,000 153,000 1,620 3,245
737-800 162 189 155,500 174,200 1,905 2,925
737-900 177 189 166,000 174,200 1,925 2,728
</TABLE>
6
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DELTA AIR LINES NOVEMBER 8, 2000
All CFM-powered 737s meet the noise abatement requirements outlined in U.S. FAR
Part 36, Stage 3, and ICAO Annex 16, Chapter 3. Earlier models of the Boeing 737
series do not meet these noise standards without modification.
CURRENT MARKET - BOEING 737-800
CURRENT MARKET
AVITAS is of the opinion that the current market for the Boeing 737-800 aircraft
is firm. There are presently 306 aircraft in service worldwide among 39 airline
operators and a backlog of 373 firm orders and 127 options. The transcontinental
range and additional 16 seats over the 737-400 and 12 seats over an A320, makes
the 737-800 popular with existing Boeing 737 operators and a tough competitor to
the A320.
RECENT FLEET DEVELOPMENTS
In September 2000, Continental placed an order for five 737-800s for delivery in
the second half of 2002. The carrier currently operates 16 777s and 52 737-800s.
Also in September, Ryanair, who had placed an ordered for three 737-800s to be
delivered mid-2002, has now ordered 28 (10 delivered) more. It intends to
operate 44 737-200s/800s by the end of 2002.
In August 2000, American Airlines placed a firm order for three 737-800
airplanes. The order is part of an exercised option from a 1996 contract. Also
in August, American Trans Air announced that it plans to purchase ten new
757-300s and 35 new 737-800s.
In June 2000, ILFC announced its order of 50 additional 737NG aircraft. The
model types are not known at this time.
In May 2000, American Trans Air ordered 37 B737-800 Enhanced Performance
aircraft (winglets and CFM56-7B27 engines).
In March 2000, Ryanair announced plans to acquire ten 737-800s after it raises
GBP 77 million through a new share placing to support its expansion plans.
In February 2000, South African Airways said it will acquire 21 737-800 aircraft
to support its regional and domestic route networks. The aircraft will come
equipped with the optional winglets that provide 5% better fuel efficiency and
increased performance.
In September 1999, Delta Air Lines announced orders for 18 additional 737-800
aircraft, as part of a plan to accelerate retirement of its 727 fleet.
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DELTA AIR LINES NOVEMBER 8, 2000
AVAILABILITY
As of August 2000, AVITAS is aware of three Boeing 737-800 aircraft being
advertised as available for lease by Sterling European Airlines, China Airlines,
Sunrock Aircraft Corporation.
RECENT TRANSACTIONS AND OPERATING LEASE RATES
The transactions and lease rates stated below have been publicly reported;
however, AVITAS is aware of additional proprietary transactions and lease rates,
which we use in formulating our value opinion but cannot disclose in this
report.
In August 1999, it was reported that Transavia's average monthly lease rate for
its 737-800s is $300,000. Lease terms are between five and seven years. AVITAS
believes that monthly operating lease rates range from the upper $200s to low
$300s depending on lease term, airline credit and size of order.
CURRENT OPERATOR BASE AND BACKLOG
As shown in the Figure below, as of July 2000, there were 306 737-800 aircraft
in service among 39 operators and another 373 on firm order and 127 options for
the type.
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DELTA AIR LINES NOVEMBER 8, 2000
FIGURE 4
BOEING 737-800 CURRENT FLEET & BACKLOG
AS OF JULY 2000
<TABLE>
<CAPTION>
OPERATOR IN SERVICE FIRM ORDERS OPTIONS TOTAL
====================================================================================
<S> <C> <C> <C> <C>
DELTA AIR LINES 24 107 131
AMERICAN AIRLINES 36 68 104
CONTINENTAL AIRLINES 44 11 34 89
TURK HAVA YOLLARI 22 4 23 49
RYANAIR 10 15 20 45
GE CAPITAL AVIATION SERVICES INC. 19 24 43
INTL LEASE FINANCE CORPORATION 37 37
HAPAG-LLOYD 19 7 26
TRANSAVIA AIRLINES 10 2 12 24
AIR BERLIN 13 7 20
ISTANBUL AIRLINES 12 6 18
JET AIRWAYS 8 10 18
CHINA AIRLINES 10 1 4 15
KLM ROYAL DUTCH AIRLINES 6 6 12
KOREAN AIR 4 6 2 12
SCANDINAVIAN AIRLINES SYSTEM 5 7 12
AIR EUROPA 10 10
BOEING 10 10
GATX CAPITAL CORPORATION 10 10
VARIG 10 10
SOUTH AFRICAN AIRWAYS 3 5 8
AIR ALGERIE 1 6 7
AIR CHINA 7 7
GATX FLIGHTLEASE AIRCRAFT CO. 7 7
ROYAL AIR MAROC. 5 2 7
FUTURA INTERNATIONAL AIRWAYS 6 6
HAINAN AIRLINES 5 1 6
BRITANNIA AIRWAYS 2 2 4
EURALAIR INTERNATIONAL 4 4
SABRE AIRWAYS 4 4
STERLING EUROPEAN AIRLINES 4 4
SUNEXPRESS 4 4
TAROM 4 4
BOULLIOUN AVIATION SERVICES INC. 3 3
BRITANNIA AB 3 3
BWIA INTERNATIONAL 3 3
CHINA SOUTHWEST AIRLINES 3 3
EL AL 3 3
NOVAIR AIRLINES 3 3
PEGASUS AIRLINES 3 3
SUNROCK AIRCRAFT CORPORATION 3 3
AIR PACIFIC 2 2
CYPRUS TURKISH AIRLINES 2 2
LAUDA AIR 2 2
LOT POLISH AIRLINES 2 2
NORTH AMERICAN AIRLINES 2 2
SAHARA AIRLINES 2 2
BLUE PANORAMA AIRLINES 1 1
GATX 737-800 PARTNERS B.V. 1 1
TRAVEL SERVICE AIRLINES 1 1
====================================================================================
GRAND TOTAL 306 373 127 806
====================================================================================
</TABLE>
Source: BACK Information Services
9
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DELTA AIR LINES NOVEMBER 8, 2000
The Figure below shows the geographic distribution of the 737-800. North
America has the greatest concentration of any region, accounting for about 55%
of the aircraft in service and on firm order. Europe follows with approximately
31% of the 737-800 aircraft in service and on firm order. However, in terms of
number of operators, Europe has the majority with 26, Asia and North America
both have nine each.
FIGURE 5
737-800 GEOGRAPHIC DISTRIBUTION
AS OF JULY 2000
<TABLE>
<CAPTION>
AFRICA/M.E. ASIA/PACIFIC EUROPE L.AM./CARIB. N. AMERICA
<S> <C> <C> <C> <C> <C>
In Service 12 41 134 3 116
Firm Orders 13 21 74 10 255
Options - 6 63 - 58
</TABLE>
Source: BACK Information Services
OUTLOOK AND FUTURE ASSET RISK ANALYSIS
With regard to the 737-800's competition, the A320-200, which has been in
service since 1988, has 832 aircraft in service and 517 firm orders. The A320
offers a maximum takeoff weight of 162,000 to 169,000 pounds versus the
737-800's 155,500 to 174,200 pounds and similar range capability; but the
737-800 can have as many as 12 more seats than the A320, depending on interior
configuration. Although Airbus has had a great degree of recent success with
the A320-200 and the aircraft remains a tough competitor to the 737-800, to
meet specific operating needs, the 737-800 can be ordered with higher
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DELTA AIR LINES NOVEMBER 8, 2000
specifications than the A320. AVITAS believes the values for the 737-800 should
remain firm despite intense competition in the foreseeable future.
BACKGROUND - BOEING 757
The Boeing 757 was initially developed as the short to medium-range version of
Boeing's new family of advanced technology aircraft: the 757/767/777. Based on
the Boeing 727 fuselage, the 757 offers improved performance as a result of new
generation high bypass turbofan engines and a redesigned, high technology wing.
The fuselage cross-section of the 757 is identical to that of the 707, 727 and
737. Boeing chose to remain with the identical fuselage design for several
reasons, one of which was the known passenger appeal of earlier Boeing aircraft
and another was to reduce developmental design costs.
As part of the family of Boeing's advanced technology aircraft, the 757 shares
many features with its larger, widebody sibling, the 767. The flight deck and
aircraft systems of the 757 and 767 are essentially identical and pilot
qualifications are based on one common type rating. Many airlines that operate
both the 757 and 767, such as United, have their pilots dual qualified on both
aircraft. This has a significant effect on reducing training costs and offers
scheduling flexibility.
The 757, over medium to long-range stage lengths, has excellent fuel efficiency
and low maintenance and handling costs. The aircraft utilizes high technology
honeycomb, graphite composites and laminates in all flight control surfaces as
well as in many non-structural areas. A large portion of the 757's components
and spares are interchangeable with the 767. This gives operators the advantage
of reducing spares inventory and investment costs.
First flight for the 757-200 took place on February 19, 1982. Deliveries to the
launch customers, Eastern Air Lines and British Airways, began in December 1982
and January 1983, respectively. Maximum gross takeoff weights range from
220,000 pounds to 255,000 pounds. The high gross weight version powered by the
PW engines has a range of 3,900 nautical miles. Boeing currently offers two
engine types each with two thrust options, the Rolls-Royce RB211-535E4 and
-535E4B, and the Pratt & Whitney PW2037 and PW2040. All 757s are Stage
3/Chapter 3 noise compliant.
The 757 is available with ETOPS capability. This version has increased fire
extinguishing capability, extra electrical/electronic cooling, backup hydraulic
generating capacity and overwater equipment. Two other variants of the 757 are
the 757-200PF, a dedicated freighter, and the 757-200 Combi, a mixed
cargo/passenger version. The market for the freighter version is dominated by
UPS with 75 of the 80 aircraft in service.
The Boeing 757-300 was launched in early 1996 with an order for 12 aircraft
from the German charter airline Condor Flugdienst. The 757-300 is a stretched
version of the -200 with 160 inches added in front of the wing and 120 inches
added behind the wing. The 757-300 also has a new interior and the landing
gear, high lift system and fuselage have been strengthened to accommodate the
larger size and heavier weight. The 757-300 received type certification from
the FAA and was also recommended for type validation by the JAA in January
1999. The first aircraft was delivered in March 1999 and seats 240
11
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DELTA AIR LINES NOVEMBER 8, 2000
passengers in a mixed-class layout with a range of 3,500 nautical miles. The
-300 has ETOPS capability and offers a 10% lower seat-mile cost than the -200.
CURRENT MARKET - BOEING 757-200
CURRENT MARKET
AVITAS believes that the market for the Boeing 757-200 series is currently
stable with some recent large orders from major carriers. The aircraft has low
availability, a broad operator base of 62 operators and a backlog of 82 firm
orders. However, the type is facing increased competition from the A321, which
presently has 166 aircraft in service among 40 operators and a firm backlog of
170 aircraft.
HISTORIC MARKET DEVELOPMENT
During its early production years, sales of the 757-200 were slow and heavily
dependent on Pratt & Whitney-powered aircraft sold in large fleets to Northwest
Airlines and Delta Air Lines. It appears that the 757-200 was perceived as
being too large in the mid-1980s when the focus of aircraft acquisitions,
particularly in the United States, was on smaller aircraft such as the 737-300
and the MD-80. The airline industry has grown into the 757-200 and it has
become part of the core of many airline fleets. In addition, the 757-200 has
proven to be an effective longer haul aircraft, with the ETOPS version being
particularly suited to transatlantic operations. The 757 series is profitably
deployed in both scheduled service and in high-density charter service.
RECENT FLEET DEVELOPMENTS
In July 2000, Northwest Airlines announced that it had reached agreements with
Boeing to accelerate deliveries of five Boeing 757-200 aircraft from 2004 to
2001. The five 757 aircraft, powered by Pratt & Whitney PW2037 engines, will be
delivered between June and October 2001.
In June 2000, start-up carrier National Airlines announced it would lease four
757-200 aircraft from GE Capital in 2001 and an additional four in 2002 adding
to its current fleet of 15 aircraft.
In May 2000, Iberia ordered eight more 757-200s with RB211-535E4 engines for
delivery in 2000. Also in May, American Trans Air ordered ten 757-300s with
RB211-535E4C engines for delivery from 2001 to 2003. American Airlines ordered
twenty 757-200 aircraft for delivery from 2001 through 2002. As part of the
deal Boeing is taking back five MD-90s and five MD-87s eliminating these types
from American's fleet.
In March 2000, China Xinjiang ordered three 757-200s to be delivered starting
in May 2001. In December 1999, GATX ordered two additional 757-200 aircraft,
bringing its total orders for 757-200 aircraft to ten. Delta Air Lines also
ordered two more 757-200 aircraft from the manufacturer in December 1999. Also
in December 1999, Turkmenistan Airlines ordered one 757-200 aircraft.
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In October 1999, it was announced that DHL International and Boeing will launch
the freighter conversion program for the Boeing 757-200. The airline will
acquire 44 RB211-535C powered 757-200 aircraft after Boeing converts them to
freighters. Of the aircraft to be converted, 34 will be acquired from British
Airways, who recently placed an order for 24 A318s. The first converted 757
aircraft will be delivered to DHL in the first quarter of 2001.
AVAILABILITY
As of August 2000, eight Boeing 757s were advertised as available for sale or
lease from the following entities: Ansett Worldwide Aviation, Air 2000, Babcock
& Brown Aircraft Management, CIT Aerospace, JMC, Condor, Lufthansa and IAMG.
The number of available aircraft has ranged between 4 and 15 during the last
year.
RECENT TRANSACTIONS & LEASE RATES
The transactions and lease rates stated below have been publicly reported,
however AVITAS is aware of additional proprietary transactions and lease rates
that are used to formulate a value opinion, which we cannot disclose in this
report.
American Airlines, United Airlines and Mexicana have all taken delivery of new
757-200s during the last 12 months with a lessor's cost of $54 million per
aircraft.
In late 1999, one 1987-built 757-200 sold for slightly more than $20 million.
In early 1999, Arkia Israeli Airlines paid $33 million for one 1990-built
757-200ER equipped with RB211-535E4 engines from ILFC.
- AVITAS is aware of a 1989 vintage 757-200 with RB211-535E4 engines
that leased in early 2000 for just over $400,000 per month.
- In August 1999, Aerovias de Mexico leased a 1992 vintage 757-200
aircraft for three years for $414,500 per month, plus maintenance
reserves.
- TWA is reportedly paying $491,666 per month for 12 years for each of
its ten new 757-200s.
- AVITAS is aware of a Sunrock Aircraft Corporation lease of a 1991
vintage 757-200 to Sunways Airlines for 31 months at $359,000 per
month.
- Star Air Tours is subleasing a 1983 vintage aircraft with RB211-535C
engines at $225,000 per month for five years.
- In late 1998, Mexicana leased two new 757-200s in a
delivery-sale-leaseback transaction for a monthly rate of $450,000 per
aircraft. Lease term is eight years. The carrier is also leasing a
1991 vintage 757-200 for $399,000 per month for three years.
ENGINE CHOICES
The greater number of Rolls operators should offer greater ease in remarketing
Rolls-powered 757s than Pratt & Whitney-powered aircraft. AVITAS has not noted
any discernible engine-related value differences with the exception of the
aircraft that are powered by the older model RB211-535C engines.
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DELTA AIR LINES NOVEMBER 8, 2000
Forty aircraft are presently in service with only three owner/operators: LTE,
Iberia, and British Airways. AVITAS believes that with such a small user base,
and considering the expense to upgrade these engines to the more economical
-535E4s, the current and future values of these aircraft are severely affected.
FIGURE 6
BOEING 757-200 CURRENT FLEET
BY ENGINE MANUFACTURER
AS OF JULY 2000
<TABLE>
<CAPTION>
ENGINE MANUFACTURER AIRCRAFT IN SERVICE OPERATORS
=============================================================
<S> <C> <C>
PRATT & WHITNEY 383 18
ROLLS-ROYCE 515 44
=============================================================
TOTAL 898 62
=============================================================
</TABLE>
Source: BACK Information Services
CURRENT OPERATOR BASE AND BACKLOG
As of July 2000, there were 898 aircraft in service among 62 operators with
Delta Air Lines, American Airlines and United Airlines being the largest
operators of the type. Regarding future deliveries, as of July 2000, there were
82 Boeing 757-200s on order and options for 33 more. The largest operators and
orderholders are displayed below.
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DELTA AIR LINES NOVEMBER 8, 2000
FIGURE 7
LARGEST BOEING 757-200 OPERATORS & ORDERHOLDERS
AS OF JULY 2000
<TABLE>
<CAPTION>
OPERATOR IN SERVICE ORDERS TOTAL
===============================================================================================
<S> <C> <C> <C>
AMERICAN AIRLINES 102 20 122
DELTA AIR LINES 111 9 120
UNITED AIR LINES 98 1 99
UNITED PARCEL SERVICE 75 75
NORTHWEST AIRLINES 48 25 73
BRITISH AIRWAYS 53 53
CONTINENTAL AIRLINES 41 41
US AIRWAYS 34 34
TRANS WORLD AIRLINES 27 27
IBERIA 20 6 26
BRITANNIA AIRWAYS 19 19
CHINA SOUTHERN AIRLINES 18 18
CONDOR 17 17
JMC AIRLINES 16 16
AMERICAN TRANS AIR 13 2 15
NATIONAL AIRLINES 15 15
AIR 2000 13 13
AMERICA WEST AIRLINES 13 13
CHINA SOUTHWEST AIRLINES 12 12
LTU INTERNATIONAL AIRWAYS 11 11
ALL OTHERS 142 19 161
===============================================================================================
GRAND TOTAL 898 82 980
===============================================================================================
</TABLE>
Source: BACK Information Services
OUTLOOK AND FUTURE ASSET RISK ANALYSIS
In terms of competition, the 757 enjoyed market dominance until the
introduction of the A321 in 1994. With similar capacity (approximately 9-19
fewer seats than the 757), but less range, the A321 has begun to challenge the
757. However, the 757-200 enjoyed an 11-year head start in market development
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FIGURE 8
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
BOEING 757-200 COMPETITIVE PROFILE
AS OF JULY 2000
----------------------------------------------------------------------------------------------------------------
AIRCRAFT TYPE IN SERVICE OPERATORS RANGE (NM) SEAT CAPACITY
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
B757-200 non-ETOPS 898* 62* 2,700 w/194 pax 194-239
----------------------------------------------------------------------------------------------------------------
B757-200 ETOPS 898* 62* 3,900 w/194 pax 194-239
----------------------------------------------------------------------------------------------------------------
B757-300 15 2 3,450 w/243 pax 243-289
----------------------------------------------------------------------------------------------------------------
A321-100 88 12 2,350 w/185 pax 185-220
----------------------------------------------------------------------------------------------------------------
A321-200 78 21 3,000 w/185 pax 185-220
----------------------------------------------------------------------------------------------------------------
</TABLE>
* Data include both non-ETOPS and ETOPS aircraft
In terms of freighter operations, operators utilize aircraft types for a much
longer life because of the lower level of utilization and therefore, many
earlier generation jet transport aircraft are still in operation with these
companies. This has affected the market for aircraft types such as the DC-8-70
series aircraft. The cost of acquiring replacement aircraft proves to be much
less cost effective than retaining the older aircraft. This is because the
best-fit replacement aircraft are generally new generation aircraft such as the
757-200PF. However, there have been a significant number of freight airlines
that are beginning to add these new generation aircraft to their fleets.
Airborne Express is converting 23 B767-200Fs acquired from ANA. UPS, which
ordered 30 new A300-600 freighters in 1998, previously purchased the 757-200PF
AND 767-300F.
AVITAS is of the opinion that many 757-passenger aircraft will be converted to
freighters as the type ages. However, due to the 757's success as a passenger
aircraft, until recently market values have not been low enough to absorb the
conversion costs. The DHL transaction has provided the initial indication that
the RB211-535C-powered aircraft values are becoming low enough to justify
freighter conversion. AVITAS believes that over the next several years, the
oldest of the type will drop into a value range that will justify conversion
and the market base is expected to broaden considerably.
BACKGROUND - BOEING 767
In July 1978, Boeing announced its intention to launch the development of an
advanced technology, short to medium-range, twin-aisle airliner. The new
widebody was equipped with a two (optional three) crew cockpit and twin high
bypass engines and was soon after designated the 767. A 216-seat mixed class
passenger version with a range of 3,160 nautical miles, the 767-200 was
selected as the basic model. The 767-200, powered by two Pratt & Whitney
JT9D-7R4D engines, made its maiden flight in September 1981. The fifth
production aircraft, with General Electric CF6-80A engines, first flew in
February 1982.
Delivery of the first 767-200 with Pratt & Whitney engines was to United
Airlines in August 1982, and the first General Electric powered aircraft to
Delta Air Lines in December of the same year.
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DELTA AIR LINES NOVEMBER 8, 2000
An extended-range version, the Boeing 767-200ER, was first delivered in June
1984 to Ethiopian Airlines. The ER version features higher gross weights and
increased fuel capacity and consequently greater range and utility. This
version is capable of carrying 224 passengers in a standard two-class
configuration or 181 passengers in a standard three-class configuration. The
aircraft in a three-class configuration has a range of 6,655 nautical miles.
The -200EM variant applies to 767-200 non-ER aircraft, which have been upgraded
with a maximum takeoff weight increase. The -200EM aircraft have no center wing
fuel tanks. The extent to which any -200 can be modified depends on the
specific aircraft's build specification and date of manufacture. The
installation of the ETOPS equipment and some weight increases are possible with
all 767-200s without major structural changes. However, increasing an
aircraft's maximum takeoff weight may require replacement of the landing gear
and structural changes at a cost of almost $3.0 million.
The 767-300 aircraft features a fuselage stretch of about 21 feet, various
structural modifications and a maximum seating capacity of 325 passengers. In a
more typical two-class configuration, this aircraft can carry 261 passengers up
to 4,260 nautical miles.
The 767-300ER is an extended range variant of the basic 767-300 with higher
gross weights. Development of the aircraft began in early 1985. This version
embodies further structural modifications to allow maximum gross takeoff
weights up to 412,000 pounds and a fuel capacity of 24,140 U.S. gallons. It was
first delivered in February 1988. This variant is approved for ETOPS operations
and carries 269 passengers in a standard two-class configuration or 218
passengers in a standard three-class configuration. The aircraft in a
three-class configuration has a range of 6,150 nautical miles. The 767-300ER
has established the greatest operator base and market penetration of the 767
family.
The 767-300F was launched as a specialized package freighter in January 1993 by
United Parcel Service. UPS ordered 30 (plus 30 options) package freighters and
Asiana ordered two freighters in November 1993. One was delivered in August
1996, and the delivery of the second one was canceled.
The modifications to the aircraft as freighter aircraft include a reinforced
landing gear and internal wing structure. The main deck floor has been
strengthened to accommodate 24 containers. The aircraft has no passenger
windows and a (8 ft 9 in x 11 ft 1 3/4 in) forward freight door. Pilot type
rating and many components are common to those of the Boeing 757 freighter.
Although Rolls-Royce, Pratt & Whitney and General Electric offer engines for
the 767-300F freighter aircraft, customers to date have chosen the General
Electric CF6-80C2B7F engine to power their aircraft. The 767-300 is available
in two freighter configurations, the package freighter and the freighter; both
are based on the 767-300ER airframe. The main difference between the two
configurations is found in the cargo handling system. The freighter has an
environmental control system, which allows perishable goods and live animals to
be transported, and powered handling systems on both the main and lower decks.
The main deck features a ball-mat maneuvering area near the cargo door and
rollers through the entire length of the cabin.
The 767-400ER, a stretched version of the 767-300ER, was launched in April 1997
for Delta Air Lines as a replacement for their L-1011s on domestic services. In
addition to the 21 foot stretch, 11 feet forward
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DELTA AIR LINES NOVEMBER 8, 2000
of the wing and 10 feet aft of the wing, are numerous changes and enhancements
to the aircraft. The wing includes an all new 7 foot raked wing tip and a
strengthened wing box. The aircraft features an upgraded flight deck, new
modernized 777-style interior and longer main landing gear with 777-type
wheels, tires and brakes. Unlike the 767-300ER only PW and GE engines are
offered as powerplants for this model. The upgrades and changes have reduced
the commonality of this aircraft with its other family members. The aircraft
can carry 304 passengers in a standard two-class configuration or 245
passengers in a standard three-class configuration. In a three-class
configuration the aircraft has a range of 5,635 nautical miles. The first of
these new derivatives rolled out of the factory in August 1999.
All versions of the Boeing 767 meet the noise abatement requirements outlined
in U.S. FAR Part 36, Stage 3, and ICAO Annex 16, Chapter 3.
CURRENT MARKET - BOEING 767-300ER
CURRENT MARKET
AVITAS is of the opinion that the current market for the Boeing 767-300ER is
stable. The aircraft provides excellent operating economics through the use of
twin high-bypass engines, two-pilot cockpit and the capability to operate
efficiently over both medium and long-range sectors where capacity is not
sufficient to operate very large aircraft such as the 747. With a large
operator base, used 767-300ER aircraft in good condition are in demand and will
likely stay on the market a reasonably short period of time despite a generally
soft widebody market.
AVAILABILITY
As of August 2000, AVITAS is aware of eleven 767-300ER passenger aircraft
advertised as available for sale or lease by Ansett Worldwide Aviation,
AerFi/Indigo, CityBird, Babcock & Brown Aircraft Management, Air 2000, Sunrock
Aircraft Corp., and Itochu AirLease Group. The availability for the type has
ranged from nine to fourteen aircraft during the last twelve months.
RECENT TRANSACTIONS & LEASE RATES
The transactions and lease rates stated below have been publicly reported;
however, AVITAS is aware of additional proprietary transactions and lease
rates, which we cannot disclose in this report. There are some very recent
indications that the lease rates are beginning to soften for aircraft in this
size category.
- In July 1999, it was reported that Shanghai Airlines was financing a
new 767-300 to be delivered in December 1999 for $77 million.
- In early 1999, LanChile bought an ex-Asiana 1998-built 767-300ERF for
approximately $70 million. Due to the Asian economic situation, we
believe this transaction represents some distress from the seller.
- AVITAS is aware of a 1988 vintage 767-300ER aircraft with high MTOW
and CF6-80C2B7F engines that was purchased with a lease attached for
approximately $48 million in August 1998.
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DELTA AIR LINES NOVEMBER 8, 2000
- In May 1998, Ansett Worldwide Aviation and Wilmington Trust purchased
a new 767-300ER from Nissho Iwai Corporation for $80 million.
- In mid-1999, Air Madagascar entered a lease for a new 767-300ER for
$630,000 per month. The term is unknown. Varig is leasing two 1988
vintage 767-300ER for $635,000 per month per aircraft for five years.
CURRENT OPERATOR BASE AND BACKLOG
As of July 2000, there were 421 767-300ERs in service among 64 operators. There
were 41 firm orders for the type. With the large number of operators for the
767-300ER fleet, a fluid secondary market is expected to develop. The Figure
below depicts operators with five or more aircraft in service or on order.
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DELTA AIR LINES NOVEMBER 8, 2000
Figure 9
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
BOEING 767-300ER CURRENT FLEET & BACKLOG
AS OF JULY 2000
------------------------------------------------------------------------------------------------------------
OPERATOR IN SERVICE FIRM ORDERS OPTIONS TOTAL
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DELTA AIR LINES 58 58
------------------------------------------------------------------------------------------------------------
AMERICAN AIRLINES 49 49
------------------------------------------------------------------------------------------------------------
UNITED AIR LINES 34 3 37
------------------------------------------------------------------------------------------------------------
QANTAS 26 4 30
------------------------------------------------------------------------------------------------------------
BRITISH AIRWAYS 24 24
------------------------------------------------------------------------------------------------------------
CANADIAN AIRLINES INTERNATIONAL 19 19
------------------------------------------------------------------------------------------------------------
GE CAPITAL AVIATION SERVICES INC. 17 17
------------------------------------------------------------------------------------------------------------
AIR NEW ZEALAND 9 4 13
------------------------------------------------------------------------------------------------------------
SCANDINAVIAN AIRLINES SYSTEM 13 13
------------------------------------------------------------------------------------------------------------
KLM ROYAL DUTCH AIRLINES 12 12
------------------------------------------------------------------------------------------------------------
LAN CHILE 11 11
------------------------------------------------------------------------------------------------------------
ALITALIA 10 10
------------------------------------------------------------------------------------------------------------
VARIG 6 4 10
------------------------------------------------------------------------------------------------------------
CONDOR 9 9
------------------------------------------------------------------------------------------------------------
GULF AIR 9 9
------------------------------------------------------------------------------------------------------------
TRANS WORLD AIRLINES 9 9
--------------------- --------------------------------------------------------------------------------------
AIR CANADA 6 6
------------------------------------------------------------------------------------------------------------
ALL NIPPON AIRWAYS 6 6
------------------------------------------------------------------------------------------------------------
BRITANNIA AIRWAYS 6 6
------------------------------------------------------------------------------------------------------------
CHINA YUNNAN AIRLINES 3 3 6
------------------------------------------------------------------------------------------------------------
INTL LEASE FINANCE CORPORATION 6 6
------------------------------------------------------------------------------------------------------------
LOT POLISH AIRLINES 3 3 6
------------------------------------------------------------------------------------------------------------
LTU INTERNATIONAL AIRWAYS 6 6
------------------------------------------------------------------------------------------------------------
MARTINAIR HOLLAND 6 6
------------------------------------------------------------------------------------------------------------
AIR FRANCE 5 5
------------------------------------------------------------------------------------------------------------
ROYAL BRUNEI AIRLINES 5 5
------------------------------------------------------------------------------------------------------------
VIETNAM AIRLINES 5 5
------------------------------------------------------------------------------------------------------------
All others 72 6 4 82
------------------------------------------------------------------------------------------------------------
GRAND TOTAL 421 40 14 475
------------------------------------------------------------------------------------------------------------
</TABLE>
Source: BACK Information Services
20
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DELTA AIR LINES NOVEMBER 8, 2000
ENGINE DISTRIBUTION
There are only three operators, British Airways, Qantas and China Yunnan
Airlines, with 767-300ER aircraft equipped with Rolls-Royce engines. With such
a small operator base, we believe that it may be more difficult to re-market
those aircraft, and consequently, the values may be affected.
FIGURE 10
BOEING 767-300/-300ER BY ENGINE TYPE
AS OF JULY 2000
<TABLE>
<CAPTION>
ENGINE TYPE IN SERVICE OPERATORS FIRM ORDERS ORDERHOLDERS
----------- ---------- --------- ----------- ------------
<S> <C> <C> <C> <C>
CF6-80A2 24 1
CF6-80C2B 325 67 27 10
JT9D-7R4D 13 2
PW4000 163 37 6 4
RB211-524H 32 3 4 3
Unknown -- 1 4 --
--- --- -- --
GRAND TOTAL 557 111 41 17
</TABLE>
Source: BACK Information Services
RECENT FLEET DEVELOPMENTS
In September 2000, Balair took delivery of its second Boeing 767-300ER
aircraft. Both 767-300Es are being leased from Flightlease. The Swiss charter
airliner has put two 757-200s and two 767-300ER aircraft into service this
year.
In September 2000, it was reported that Continental will be taking delivery
this year of 28 aircraft including four 767-400ERs and three 767-300ERs.
In June 2000, Kenya Airways announced its order of three 767-300ERs to replace
its A310 fleet. Deliveries are expected to begin in June 2001.
In May 2000, LTU agreed to lease six new Airbus A330-200s from ILFC for ten
years each. Included in the deal are the purchases by ILFC from LTU and leases
back to the airline of an A330-300 and four Boeing 767-300ERs until the carrier
has received all six new A330-200s in 2002. The multi-aircraft sale/leaseback
deal strongly suggests that LTU has chosen the A330-200 to replace both the
Boeing 767-300ER and the A330-300 in its fleet. Additionally, Kenya Airways
announced it would acquire three 767-300ERs to replace its A310 fleet.
Deliveries are expected to begin in June 2001.
In April 2000, Air France ordered eight A330-200s to replace the Boeing
767-300ERs and A310s in its fleet. First deliveries are scheduled for December
2001. Also in April, All Nippon Airways announced its intention to lease three
Boeing 767-300ERs to start its new regional carrier.
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DELTA AIR LINES NOVEMBER 8, 2000
In December 1999, GE Capital Aviation Services ordered 17 767-300ER aircraft
(which can be substituted for 767-400ER) for delivery starting in the fourth
quarter of 2000.
In December 1999, SAS ordered four A330-300 aircraft and six A340-300 aircraft
to replace the airline's fleet of 767-300ERs on intercontinental routes. The
new aircraft will be delivered between 2001 and 2004.
In June 1999, Delta Air Lines placed orders for six 767-300ER aircraft powered
by CF6-80C2 engines as part of a larger order for Boeing aircraft. Deliveries
of the 767-300ER aircraft will take place from December 1999 through April
2000.
In May 1999, SAirGroup announced it purchased four 767-300ER aircraft and took
options for four more, as a step toward standardizing the fleets of charter
airline affiliates around the type. Balair CTA, Sobelair, LTU and Air Europe
are the airlines that will operate the new aircraft, the first of which is
scheduled for delivery in March 2000. In April 1999, TWA announced it would
lease three 767-300ER aircraft from GECAS.
OUTLOOK AND FUTURE ASSET RISK ANALYSIS
The 767-300ER offers exceptional economics on long-range routes such as
interior U.S. to interior Europe. With congestion at the major gateways,
traffic patterns have dispersed over the past decade with secondary markets
receiving non-stop service rather than funneling through the major gateways.
This dispersion has been facilitated in large part by the 767-300ER, offering
airlines a smaller aircraft with the range capability needed to serve these
markets effectively.
The market dominance of the 767-300ER is being challenged. Airbus has launched
the A330-200, a shortened fuselage variant of the A330-300 with a 6,400
nautical mile range and seating capacity for 253 passengers. The A330-200
currently holds 67 firm orders and 30 options.
COVENANTS
Unless otherwise noted, the values presented in this report assume an
arm's-length, free market transaction for cash between informed, willing and
able parties free of any duress to complete the transaction. If a distress sale
becomes necessary, a substantial discount may be required to quickly dispose of
the equipment.
AVITAS does not have, and does not intend to have, any financial or other
interest in the subject aircraft. Further, this report is prepared for the
exclusive use of the Client and shall not be provided to other parties without
the express consent of the Client.
This report represents the opinion of AVITAS and is intended to be advisory
only in nature. Therefore, AVITAS assumes no responsibility or legal liability
for any action taken, or not taken, by the Client or
22
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DELTA AIR LINES NOVEMBER 8, 2000
any other party, with regard to this equipment. By accepting this report, all
parties agree that AVITAS shall bear no such responsibility or legal liability
including liability for special or consequential damage.
STATEMENT OF INDEPENDENCE
AVITAS hereby states that this valuation report has been
independently prepared and fairly represents AVITAS's opinion of the subject
aircraft's value.
/s/ Douglas B. Kelly
----------------------------------
Douglas B. Kelly
Vice President - Asset Valuation
ISTAT Certified Appraiser
23
<PAGE> 97
APPENDIX A - AVITAS VALUE DEFINITIONS
- BASE VALUE is the appraiser's opinion of the underlying economic value of an
aircraft in an open, unrestricted, stable market environment with a
reasonable balance of supply and demand and assumes full consideration of its
"highest and best use." An aircraft's Base Value is founded in the historical
trend of values and in the projection of value trends and presumes an
arm's-length, cash transaction between willing and knowledgeable parties,
acting prudently, with an absence of duress and with a reasonable period of
time for marketing. Base Value typically assumes that an aircraft's physical
condition is average for an aircraft of its type and age, and its maintenance
time status is at mid-life, mid-time (or benefiting from an above-average
maintenance status if it is new or nearly new).
- MARKET VALUE (or CURRENT MARKET VALUE if the value pertains to the time of
the analysis) is the appraiser's opinion of the most likely trading price
that may be generated for an aircraft under the market conditions that are
perceived to exist at the time in question. Market Value assumes that the
aircraft is valued for its highest, best use, that the parties to the
hypothetical transaction are willing, able, prudent and knowledgeable, and
under no unusual pressure for a prompt sale, and that the transaction would
be negotiated in an open and unrestricted market on an arm's-length basis,
for cash or equivalent consideration, and given an adequate amount of time
for effective exposure to prospective buyers. Market Value assumes that an
aircraft's physical condition is average for an aircraft of its type and age,
and its maintenance time status is at mid-life, mid-time (or benefiting from
an above-average maintenance status if it is new or nearly new). Market Value
is synonymous with Fair Market Value in that both reflect the state of supply
and demand in the market that exists at the time.
- ADJUSTED (CURRENT) MARKET VALUE indicates the Market Value of the aircraft
adjusted for the actual technical status and maintenance condition of the
aircraft, but still assuming the same market conditions and transaction
circumstances as described above.
- DISTRESS VALUE is the appraiser's opinion of the price at which an aircraft
could be sold under abnormal conditions, such as an artificially limited
marketing time period, the perception of the seller being under duress to
sell, an auction, a liquidation, commercial restrictions, legal complications
or other such factors that significantly reduce the bargaining leverage of
the seller and give the buyer a significant advantage that can translate into
heavily discounted actual trading prices. Apart from the fact that the seller
is uncommonly motivated, the parties to the transaction are otherwise assumed
to be willing, able, prudent and knowledgeable, negotiating under the market
conditions that are perceived to exist at the time, not in an idealized
balanced market. While Distress Value normally implies that the seller is
under some duress, there are occasions when buyers, not sellers, are
distressed and, therefore, willing to pay a premium price.
- FUTURE BASE VALUE is the appraiser's forecast of future aircraft value(s)
setting forth Base Value(s) as defined above.
24
<PAGE> 98
APPENDIX A - AVITAS VALUE DEFINITIONS
- SECURITIZED VALUE or LEASE - ENCUMBERED VALUE is the appraiser's opinion of
the value of an aircraft under lease, given a specified lease payment stream
(rents and term), an estimated future residual value at lease termination and
an appropriate discount rate. The Securitized Value or Lease - Encumbered
Value may be more or less than the appraiser's opinion of Market Value. The
appraiser may not be fully aware of the credit risks associated with the
parties involved, nor the time-value of money to those parties, nor with
possible tax consequences pertaining to the parties involved, nor with all of
the provisions of the lease that may pertain to items such as security
deposits, purchase options at various dates, term extensions, sub-lease
rights, repossession rights, reserve payments and return conditions.
25
<PAGE> 99
APPENDIX B - AVITAS APPRAISAL METHODOLOGY
At AVITAS, we undertake formal periodic value reviews of the approximately ten
dozen aircraft types that we regularly track as well as value updates as market
events and movements require. The primary value opinions we develop are Market
Value, Base Value and Future Base Value. An aircraft's Market Value is the price
at which you could sell the aircraft under the market conditions prevailing at
the time in question and its Base Value is the theoretical value of the aircraft
assuming a balanced market in terms of supply and demand. In reaching our value
opinions, we use data on actual market transactions, various analytical
techniques, a proprietary forecasting model and our own extensive industry
experience. While Market Value and Base Value embody different value concepts,
we are continually cross checking their relationships to determine if our value
opinions are reasonable given existing market conditions.
Our broad aviation industry backgrounds are critically important; they add a
diversity of viewpoints and a high degree of realism to our value opinions. Our
backgrounds include: aircraft design, performance analysis, traffic and yield
forecasting, fleet forecasting, aircraft finance, the negotiation of aircraft
loans, finance leases and operating leases, problem deal workouts,
repossessions, aircraft sales, jetliner manufacturing, maintenance and overhaul
activities, econometric modeling and forecasting, market research, and database
development.
- MARKET VALUE In determining Current Market Values, we use a blend of
techniques and tools. First, through various services and our extensive
personal contacts, we collect as much actual transaction data as possible on
aircraft sales, leases, financings and scrappings. Our published values
assume airframes, engines and landing gear to be halfway through their
various overhaul and/or life cycles. Because sales of half-life aircraft
rarely occur, and because sales can include spare engines, parts, attached
lease streams, tax considerations and other factors, judgment and experience
are important in adjusting actual transaction data to represent clean,
half-life Market Values. In addition, because over the last several years
there have been a large number of aircraft leases, our experience and
knowledge of the market is used to make value inferences from lease rentals
and terms.
As a supplement to transaction data, and in some cases in the absence of actual
market activity, we also use other methods to assist in framing Market Value
opinions. We use several analytical tools because we do not believe that there
is any one technique which always results in the "right" number. Replacement
cost analysis can simply be the cost of a new airplane of the same model or it
can be used where it is possible to reproduce an aircraft. It is often helpful
in framing the upper limit of an aircraft's value, particularly for modified or
upgraded aircraft. Examples would be a passenger aircraft such as the 747-100
which can be converted into freighter configuration or a Stage 2 airplane which
can be hushkitted to Stage 3 compliance. Value in use or income analysis is
another technique in which an aircraft's earning capacity over time is
determined and the present value of those earnings is calculated. Because
different operators have different costs, yields and hurdle rates of return,
this technique can yield a range of values. Therefore, the appraiser must use
his judgment to determine what value in that range represents a Market Value
representative of the overall marketplace. Another powerful tool which we use is
should-cost analysis, which is a blend of replacement cost and value in use
analysis. This technique is used when there is little or no market data on a
particular airplane type but there is on similar or competing types. By
analyzing the economic and operational profiles of competing aircraft, the
appraiser is able to impute what the aircraft in question should cost to
position it competitively.
26
<PAGE> 100
APPENDIX B - AVITAS APPRAISAL METHODOLOGY
Once we have formulated our own internal Market Value opinions, we present them
to a small, select group of outside aviation experts - individuals in the fields
of aircraft manufacturing, sales, remarketing, financing and forecasting who we
know well and regard very highly - for their review and frank comments. We
consider this "reality check," which often results in further value refinements,
to be a critical part of our value process in that it helps us combat "ivory
tower syndrome."
- BASE VALUE The determination of Base Value, an aircraft's balanced market,
long term value, is a highly subjective matter, one in which even the most
skilled appraisers may have widely divergent views. We use three main tools
in developing Base Values. First, we use our own research, judgment and
perceptions of each aircraft type's long term competitive strengths and
weaknesses vis-a-vis both competing aircraft types and the marketplace as a
whole. Second, we utilize a transaction-based computer forecasting model
developed by AVITAS and refined over the years. Based on thousands of actual
market transactions, the model sets forth a series of value curves which
describe the value behaviors of aircraft under different circumstances.
Third, we do a final reality check by comparing our opinion of an aircraft's
Base Value to our opinion of its Current Market Value and current marketplace
conditions.
We analyze each aircraft model to determine its historic, current and projected
competitive position with respect to similar aircraft types in terms of mission
capability (i.e., what are the aircraft's capabilities and to what extent does
the market require those capabilities), economic profile and market penetration.
As a result of weighing those factors, we assign a numerical "strength" to each
aircraft for each year of its economic life, where Strength 10 represents the
strongest value performance and Strength 1 the weakest. The model then takes
those strength factors and translates them into the aircraft's Base and Future
Base Values based on its actual replacement cost (or theoretical replacement
cost if it is no longer in production). After Base Values have been calculated,
we compare them to our Current Market Value opinions as a calibration check of
the computer model. In the infrequent case where the marketplace for that
aircraft is in balance, Base Value and Current Market Value should be the same.
In most cases, though, we must subjectively compare Base Value with Current
Market Value to see if we believe the relationship is reasonable. This may
highlight where Base Value inputs require further refinements. Because of the
dynamics of the aircraft marketplace and our continuing recalibration, Base
Value opinions are not static.
27
<PAGE> 101
MORTEN BEYER & AGNEW
--------------------------------------------------------------------------------
AVIATION CONSULTING FIRM
APPRAISAL OF 44 AIRCRAFT
(2000-1 EETC)
PREPARED FOR:
Delta Air Lines
OCTOBER 31, 2000
Washington, D.C. London Pacific Rim
2107 Wilson Blvd. Lahinch 62, Lashmere 3-16-16 Higashiooi
Suite 750 Copthorne Shinagawa-ku
Arlington, Virginia 22201 West Sussex Tokyo 140-0011
United States United Kingdom Japan
Phone +703 276 3200 Phone +44 1342 716248 Phone +81 3 3763 6845
Fax +703 276 3201 Fax +44 1342 718967
<PAGE> 102
I. INTRODUCTION AND EXECUTIVE SUMMARY
MORTEN BEYER & AGNEW, INC. (MBA), has been retained by Delta Air Lines ("Delta")
to determine the Current Base Value of (20) Boeing 737-800, (18) 757-200 and (6)
767-300ER aircraft in their present configuration as passenger aircraft. The
aircraft are further identified in Section IV of this report.
In performing this valuation, MBA did not inspect the aircraft or the historical
maintenance documentation, and we relied solely on information provided to us by
Delta, and was not independently confirmed by MBA. Based on the information set
forth further in this report, it is our opinion that the Current Base Value of
this portfolio of aircraft is $2,339,060,000 as noted in Section IV.
MBA uses the definition of certain terms, such as Current Market Value and Base
Value, as promulgated by the Appraisal Program of International Society of
Transport Aircraft Trading (ISTAT), a non-profit association of management
personnel from banks, leasing companies, airlines, manufacturers, brokers, and
others who have a vested interest in the commercial aviation industry and who
have established a technical and ethical certification program for expert
appraisers.
ISTAT defines Current Market Value (CMV) as the appraiser's opinion of the most
likely trading price that may be generated for an aircraft under market
conditions that are perceived to exist at the time in question. Current Market
Value assumes that the aircraft is valued for its highest, best use; that the
parties to the hypothetical sale transaction are willing, able, prudent and
knowledgeable and under no unusual pressure for a prompt sale; and that the
transaction would be negotiated in an open and unrestricted market on an
arm's-length basis, for cash or equivalent consideration, and given an adequate
amount of time for effective exposure to prospective buyers.
The ISTAT definition of Base Value (BV) has, essentially, the same elements of
Market Value except that the market circumstances are assumed to be in a
reasonable state of equilibrium. Thus, Base Value pertains to an idealized
aircraft and market combination, but will not necessarily reflect the actual
Current Market Value of the aircraft in question. BV is founded in the
historical trend of values and is generally used to analyze historical values or
to project future values.
<PAGE> 103
III. CURRENT MARKET CONDITIONS
[PHOTO]
N376DA
Boeing 737-800
Boeing began replacing the trio of B-737-300/-400/-500s with upgraded new
generation versions beginning with the B-737-700 in 1997. Southwest Airlines'
order for 63 of the series officially launched the program in late 1993, and
with their most recent order of 94 with options for another 196 have secured the
future of the program.
The fuselage of the new aircraft mirror that of the old (which were out-growths
of the original - 100s and -200s). Upgraded avionics, a new wing design, and
other improvements combine to increase range, efficiency, and performance in
general. The CFM56-7 is the exclusive engine for the 3rd generation. However,
Boeing is losing market share to the more comfortable, wider A320 family, but
has is, of recent, making strides to hold their position.
Prospects for the 3rd generation B-737 jets were thought to be considerably
enhanced by the discontinuation of the MD-80/-90 series. The MD-95 has been
adopted by Boeing as its 100-seat competitor under the aegis of B-717, competing
with its own B-737-600. Airbus is becoming more aggressive with its
A318/319/320/321 high-tech series and winning an increasing share of orders.
During 1998 Airbus had 437 narrowbody orders, Boeing had 516, including 28
MD-80/-90s. In 1999, Airbus overwhelmed Boeing with 408 narrowbody orders to
Boeing's 106. Currently, the order book for the 737-800 stands at 394, with 316
in service with 41 operators.
The new generation aircraft are actually starting to compete with their older
and larger sibling the Boeing 757. Airlines such as Aloha and Southwest are
finding the flexibility and the range offered by the 737-700 to fit very well
with their respective trans-pacific and trans-continental routes. Delta has
replaced their 757's with 737-800 aircraft on their routes to Central America.
While these aircraft are allowing for greater economics, the success will only
be told by passenger preferences and tolerances for smaller cabins over longer
journeys.
As the industry passes the peak of the current cycle, the prospects for a
downturn increase, together with deferrals and cancellations of orders for both
manufacturers.
2
<PAGE> 104
[PHOTO]
N697DL
Boeing 757-200
The B-757 was conceived in 1978 as the successor to the B-727. First deliveries
took place in late 1982 as B-727 production was terminated. The aircraft was
somewhat slow in penetrating the market, as it came on-line in the depression of
the early 1980s, but has seen accelerating popularity in the late 1980s and 90s.
The aircraft is offered in two engine configurations, Rolls Royce and Pratt &
Whitney. The aircraft's popularity has increased as airlines have grown to
appreciate its fuel economy and operating efficiency. As of September 1, 2000,
the Rolls version had the greater market share, with 527 deliveries and 38 on
order, compared with 390 deliveries and 36 orders/options for the P&W version.
Both versions have achieved decent operator bases, with 42 airlines ordering the
RR version and 16 the P&W. A cargo version known as the PF (package freighter)
is also in production with 80 already produced and none on order. United Parcel
Service was the major purchaser, ordering 35 P&W powered models, and then 40
more Rolls Royce powered configurations along with 41 options. All B-757-200PFs
currently on order have already been delivered. There has also been one combi
aircraft.
The B-757's capabilities have grown in the 18 years it has been produced, and it
is currently available at much higher gross weights and in an ER (extended
range) version used by several European carriers in transatlantic operations. In
late 1995 and 1996 a total of three B-757s were lost in accidents, with crew
reactions to emergency situations was considered to be the probable cause. In
the prior 15 years only one had been lost in a hijacking situation in China.
The major competitor to the B-757 is not the smaller American twins, but rather
the Airbus A319/320/321 series (particularly the A321, which is marginally
smaller than the B-757). The Airbus narrowbody series has piled up an impressive
order backlog, and is increasingly penetrating the U.S. market, as seen by
USAir's recent order for up to 400--at the expense of the then-existing Boeing
options. Current operating costs suggests that the A320 is up to 25 percent more
efficient than the B-737s or MD-80s, and even equal to, or superior to, the
B-757, but now Boeing's own B-737-800/-900s also challenge the B-757 from below.
In the final analysis, the B-757 is assured of a firm share of the aircraft
market for many years to come in both passenger and cargo configuration. It has
excellent environmental characteristics has not experienced technical
difficulties, and also should meet Stage 4 noise levels.
ECONOMICS
The MBA Model shows the 757 to be one of the most efficient aircraft of any
type, size, or age. Its combination of capacity, low fuel consumption and
reasonable price all contribute to its outstanding economics. We expect that the
B-757 will prove to be one of the strongest players in the residual value market
for the next two decades.
3
<PAGE> 105
[PHOTO]
N1602
Boeing 767-300ER
The twin-aisle semi-widebody B-767 was launched in 1978 and entered service in
1982. The aircraft has undergone significant development in terms of gross
weight and capacity, affecting payload and range. The initial model, the
B-767-200, offered a MTOGW of 280,000 pounds, while the current 767-300ER is
certified up to 412,000 pounds. Early development extended the range of the -200
as the ER model, enabling it to fly the Atlantic nonstop. Initial routings were
circuitous, since the aircraft had to stay within 90 minutes of a landing place.
But as experience was gained, the FAA and international authorities approved
ETOPS (extended range twin-engine over water operations), and more direct routes
became possible. The first production models of the larger 767-300 were
delivered in 1986 in domestic configuration, soon to be followed by successively
higher gross weight Extended Range (ER) models.
Orders for the -200 slowed to a trickle following the introduction of the -300,
and it is probable that production of this model will be discontinued in the
near future, despite Continental's recent order. Much of the success of the
B-767 program is attributable to ETOPS operations, where these aircraft (and the
A310) have replaced B-747s, DC-10s and L-1011s on many long flights. So far
there have been no untoward incidents under the ETOPS programs. The 767 has an
exemplary overall safety record, with only three flight accidents--one
attributed to inadvertent thrust reverser deployment on a Lauda Air 767-300 over
Bangkok, one Ethiopian -200 lost in a hijacking incident in the Comoro Islands
in 1996, and the third was last year's Egypt Air accident off the coast of
Nantucket, which is currently being blamed on pilot error.
Economics
The MBA Model indicates that it is hard to make money with the B-767.
Satisfactory margins are achieved only by classifying the B-767 as a narrowbody
in terms of seating capacity. By definition, MBA has assumed that only 67.5
percent of maximum certified seating is installed in a widebody, compared to 85
percent in a narrowbody. This is in accord with industry experience. By making
this narrowbody assumption, we increased the available seating of the B-767-300
from 218 to 247.
In the long term, the relatively high seat mile costs of the B-767s will make
them less desirable in the used market, and the demand for and price of these
aircraft will decline further than that of more desirable types. Their residual
values will also be impaired and they will move into the cargo market.
MBA has classified the aircraft as having seven-abreast seating. Interestingly,
British tour operators utilize the aircraft in an eight-abreast configuration,
thus increasing potential maximum seating from 290 seats in our model to 375
seats claimed by Boeing. With 375 seats, the B-767-300 becomes a potent
economic competitor. However, until the industry shows more signs of utilizing
this capability we will continue to use the conventional capacity.
4
<PAGE> 106
IV. VALUATION
In developing the Current Base Value of these aircraft, MBA did not inspect the
aircraft or their historical maintenance documentation, but relied on partial
information supplied by the Client. Therefore, we used certain assumptions that
are generally accepted industry practice to calculate the value of aircraft when
more detailed information is not available. The principal assumptions are as
follows, for each aircraft:
1. The aircraft is being delivered new or is in good overall
condition if already in service.
2. The overhaul status of the airframe, engines, landing gear and
other major components are the equivalent of mid-time/mid-life
unless otherwise specified, or new.
3. The historical maintenance documentation has been maintained
to acceptable international standards.
4. The specifications of the aircraft are those most common for
an aircraft of its type and vintage.
5. The aircraft is in a standard airline configuration.
6. The aircraft is current as to all Airworthiness Directives and
Service Bulletins.
7. Its modification status is comparable to that most common for
an aircraft of its type and vintage.
8. Its utilization is comparable to industry averages.
9. There is no history of accident or incident damage.
10. No accounting is made for lease obligations or terms of
ownership.
5
<PAGE> 107
DELTA AIR LINES 2000 - 1 EETC
<TABLE>
<CAPTION>
Values in ($000,000)
SERIAL REGISTRATION ORIGINAL ENGINE AVG. MONTHLY AVG. MONTHLY MTOW CURRENT
NUMBER NUMBER DELIVERY ENGINE TYPE SERIAL NUMBERS CYCLES FLIGHT HOURS (LBS.) BASE VALUE
------ ------------ -------- ----------- -------------- ------------ ------------ ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BOEING 737-832
1 29624 N376DA 14-Jan-99 CFM 56-7B24 875510, 874488 137 266 155,500 39.52
2 29625 N377DA 10-May-99 CFM 56-7B24 875678, 874691 127 269 155,500 40.18
3 30265 N378DA 13-Aug-99 CFM 56-7B24 874845, 874848 145 284 155,500 40.68
4 30349 N379DA 23-Aug-99 CFM 56-7B24 875867, 874871 146 252 155,500 40.68
5 30266 N380DA 20-Sep-99 CFM 56-7B24 875948, 874882 119 237 155,500 40.85
6 30350 N381DN 13-Sep-99 CFM 56-7B24 875893, 874900 122 271 155,500 40.85
7 30345 N382DA 12-Oct-99 CFM 56-7B24 874943, 874944 127 279 155,500 41.01
8 30346 N383DN 19-Oct-99 CFM 56-7B24 874953, 874954 122 254 155,500 41.01
9 30347 N384DA 22-Nov-99 CFM 56-7B24 874980, 876176 130 258 155,500 41.18
10 30348 N385DN 19-Nov-99 CFM 56-7B24 874981, 876122 129 269 155,500 41.18
11 30373 N386DA 20-Dec-99 CFM 56-7B24 876160, 876175 125 269 155,500 41.34
12 30374 N387DA 14-Jan-00 CFM 56-7B24 874868, 877188 130 280 155,500 41.51
13 30375 N388DA 1-Feb-00 CFM 56-7B24 876206, 876207 138 261 155,500 41.60
14 30376 N389DA 15-Apr-00 CFM 56-7B24 874896, 877366 126 206 155,500 41.77
15 30536 N390DA 28-Apr-00 CFM 56-7B24 876291, 876292 137 238 155,500 41.77
16 30560 N391DA 8-May-00 CFM 56-7B24 876332, 876330 133 253 155,500 41.86
17 30561 N392DA 30-May-00 CFM 56-7B24 876435, 876389 126 278 155,500 41.86
18 30377 N393DA 30-Jun-00 CFM 56-7B24 876426, 876429 127 258 155,500 41.94
19 30562 N394DA 29-Jun-00 CFM 56-7B24 876432, 877440 135 267 155,500 41.94
20 30773 N395DN 17-Jul-00 CFM 56-7B24 877473, 876469 149 109 155,500 42.03
BOEING 757-232
1 29728 N696DL 27-Jan-99 P&W PW2037 P728704B, P727288B 140 283 230,000 54.22
2 30318 N697DL 1-Aug-99 P&W PW2037 P728721B, P728722B 146 309 230,000 55.78
3 29911 N698DL 31-Aug-99 P&W PW2037 P728727B, P728728B 128 284 230,000 55.78
4 29970 N699DL 13-Sep-99 P&W PW2037 P728731B, P728732B 107 215 230,000 56.01
5 30337 N6700 24-Sep-99 P&W PW2037 P728733B, P728734B 131 280 230,000 56.01
6 30187 N6701 7-Oct-99 P&W PW2037 P728737B, P728738B 139 303 230,000 56.23
7 30188 N6702 20-Nov-99 P&W PW2037 P728742B, P728744B 146 300 230,000 56.45
8 30234 N6703D 21-Jan-00 P&W PW2037 P728751B, P728752B 137 293 230,000 56.90
9 30396 N6704Z 4-Apr-00 P&W PW2037 P728753B, P728754B 143 333 230,000 57.26
10 30397 N6705Y 7-Apr-00 P&W PW2037 P728759B, P728760B 139 303 230,000 57.26
11 30422 N6706Q 3-May-00 P&W PW2037 P728761B, P728762B 135 305 230,000 57.38
12 30395 N6707A 31-May-00 P&W PW2037 P728763B, P728764B 151 295 230,000 57.38
13 30480 N6708D 20-Jul-00 P&W PW2037 P728766B, P728767B 143 314 230,000 57.62
14 30481 N6709 10-Aug-00 P&W PW2037 P728768B, P728769B 134 285 230,000 57.73
15 30482 N6710E 28-Aug-00 P&W PW2037 P728770B, P728771B 103 232 230,000 57.73
16 30483 N6711M 28-Sep-00 P&W PW2037 P728772B, P728773B 14 13 230,000 57.85
17 30484 N6712B 02-Oct-00 P&W PW2037 n/a n/a n/a 230,000 57.97
18 30777 N6713Y 31-Oct-00 P&W PW2037 n/a n/a n/a 230,000 57.97
BOEING 767-332ER
1 29694 N1602 22-Jan-99 GE CF6-80C2B6F 704805, 704806 70 417 407,000 80.28
2 29695 N1603 5-Feb-99 GE CF6-80C2B6F 704808, 704809 65 459 407,000 80.62
3 30180 N1604R 28-Apr-99 GE CF6-80C2B6F 704865, 704866 69 439 407,000 81.30
4 30198 N1605 27-May-99 GE CF6-80C2B6F 704883, 704884 67 394 407,000 81.64
5 30199 N16065 10-Jun-99 GE CF6-80C2B6F 704887, 704888 75 433 407,000 81.98
6 30388 N1607B 21-Apr-00 GE CF6-80C2B6F 704999, 706101 69 405 407,000 84.95
TOTAL $ 2,339.06
</TABLE>
6
<PAGE> 108
V. COVENANTS
This report has been prepared for the exclusive use of Delta and shall not be
provided to other parties by MBA without the express consent of Delta.
MBA certifies that this report has been independently prepared and that it fully
and accurately reflects MBA's opinion as to the Current Base Value. MBA further
certifies that it does not have, and does not expect to have, any financial or
other interest in the subject or similar aircraft.
This report represents the opinion of MBA as to the Current Base Value of the
subject aircraft and is intended to be advisory only in nature. Therefore, MBA
assumes no responsibility or legal liability for any actions taken or not taken
by Delta or any other party with regard to the subject aircraft. By accepting
this report, all parties agree that MBA shall bear no such responsibility or
legal liability.
PREPARED BY:
/s/ Bryson P. Monteleone
-------------------------------------
Bryson P. Monteleone
Director of Operations
REVIEWED BY:
/s/ Morten S. Beyer
-------------------------------------
Morten S. Beyer, Appraiser Fellow
Chairman and CEO
ISTAT Certified Senior Appraiser
October 31, 2000
#00314
7
<PAGE> 109
APPENDIX III
EQUIPMENT NOTE PRINCIPAL PAYMENTS
III-1
<PAGE> 110
APPENDIX III
EQUIPMENT NOTE PRINCIPAL PAYMENTS
SERIES A-1 EQUIPMENT NOTES
<TABLE>
<CAPTION>
REGULAR
DISTRIBUTION DATE N376DA N377DA N378DA N379DA N380DA N381DN N382DA
----------------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
May 18, 2001................... $ 0.00 $593,544.26 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
November 18, 2001.............. 589,767.51 0.00 596,090.41 595,574.63 596,669.54 597,030.32 597,871.10
May 18, 2002................... 0.00 593,544.26 0.00 0.00 0.00 0.00 0.00
November 18, 2002.............. 589,767.51 0.00 596,090.41 595,574.63 596,669.54 597,030.32 597,871.10
May 18, 2003................... 0.00 593,544.26 0.00 0.00 0.00 0.00 0.00
November 18, 2003.............. 589,767.51 0.00 596,090.41 595,574.63 596,669.54 597,030.32 597,871.10
May 18, 2004................... 0.00 593,544.26 0.00 0.00 0.00 0.00 0.00
November 18, 2004.............. 589,767.51 0.00 596,090.41 595,574.63 596,669.54 597,030.32 597,871.10
May 18, 2005................... 0.00 593,544.26 0.00 0.00 0.00 0.00 0.00
November 18, 2005.............. 592,786.06 0.00 611,658.52 611,727.66 614,470.89 614,422.53 617,029.83
May 18, 2006................... 0.00 593,544.26 0.00 0.00 0.00 0.00 0.00
November 18, 2006.............. 708,975.83 0.00 716,576.77 715,956.74 717,272.96 717,706.66 718,717.39
May 18, 2007................... 0.00 702,002.90 0.00 0.00 0.00 0.00 0.00
November 18, 2007.............. 708,975.83 0.00 716,576.77 715,956.74 717,272.96 717,706.66 718,717.39
May 18, 2008................... 0.00 713,515.98 0.00 0.00 0.00 0.00 0.00
November 18, 2008.............. 708,975.83 0.00 716,576.77 715,956.74 717,272.96 717,706.66 718,717.39
May 18, 2009................... 0.00 713,515.98 0.00 0.00 0.00 0.00 0.00
November 18, 2009.............. 708,975.83 0.00 716,576.77 715,956.74 717,272.96 717,706.66 718,717.39
May 18, 2010................... 0.00 713,515.98 0.00 0.00 0.00 0.00 0.00
<CAPTION>
REGULAR
DISTRIBUTION DATE N383DN N384DA N385DN N386DA
----------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
May 18, 2001................... $ 0.00 $ 0.00 $ 0.00 $ 0.00
November 18, 2001.............. 597,510.72 598,287.48 598,441.64 599,171.49
May 18, 2002................... 0.00 0.00 0.00 0.00
November 18, 2002.............. 597,510.72 598,287.48 598,441.64 599,171.49
May 18, 2003................... 0.00 0.00 0.00 0.00
November 18, 2003.............. 597,510.72 598,287.48 598,441.64 599,171.49
May 18, 2004................... 0.00 0.00 0.00 0.00
November 18, 2004.............. 597,510.72 598,287.48 598,441.64 599,171.49
May 18, 2005................... 0.00 0.00 0.00 0.00
November 18, 2005.............. 617,078.14 619,864.02 619,843.35 622,465.52
May 18, 2006................... 0.00 0.00 0.00 0.00
November 18, 2006.............. 718,284.16 719,217.93 719,403.25 720,280.62
May 18, 2007................... 0.00 0.00 0.00 0.00
November 18, 2007.............. 718,284.16 719,217.93 719,403.25 720,280.62
May 18, 2008................... 0.00 0.00 0.00 0.00
November 18, 2008.............. 718,284.16 719,217.93 719,403.25 720,280.62
May 18, 2009................... 0.00 0.00 0.00 0.00
November 18, 2009.............. 718,284.16 719,217.93 719,403.25 720,280.62
May 18, 2010................... 0.00 0.00 0.00 0.00
</TABLE>
<TABLE>
<CAPTION>
REGULAR
DISTRIBUTION DATE N387DA N388DA N389DA N390DA N391DA N392DA N393DA
----------------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
May 18, 2001................... $ 0.00 $ 0.00 $599,498.18 $598,837.82 $599,620.05 $598,505.32 $598,132.84
November 18, 2001.............. 600,401.09 600,829.71 0.00 0.00 0.00 0.00 0.00
May 18, 2002................... 0.00 0.00 599,498.18 598,837.82 599,620.05 598,505.32 598,132.84
November 18, 2002.............. 600,401.09 600,829.71 0.00 0.00 0.00 0.00 0.00
May 18, 2003................... 0.00 0.00 599,498.18 598,837.82 599,620.05 598,505.32 598,132.84
November 18, 2003.............. 600,401.09 600,829.71 0.00 0.00 0.00 0.00 0.00
May 18, 2004................... 0.00 0.00 599,498.18 598,837.82 599,620.05 598,505.32 598,132.84
November 18, 2004.............. 600,401.09 600,829.71 0.00 0.00 0.00 0.00 0.00
May 18, 2005................... 0.00 0.00 599,498.18 598,837.82 599,620.05 598,505.32 598,132.84
November 18, 2005.............. 625,190.70 626,663.25 0.00 0.00 0.00 0.00 0.00
May 18, 2006................... 0.00 0.00 608,047.76 608,160.16 609,557.01 609,746.75 611,170.16
November 18, 2006.............. 721,758.76 722,274.01 0.00 0.00 0.00 0.00 0.00
May 18, 2007................... 0.00 0.00 720,673.34 719,879.51 720,819.84 719,479.80 719,032.03
November 18, 2007.............. 721,758.76 722,274.01 0.00 0.00 0.00 0.00 0.00
May 18, 2008................... 0.00 0.00 720,673.34 719,879.51 720,819.84 719,479.80 719,032.03
November 18, 2008.............. 721,758.76 722,274.01 0.00 0.00 0.00 0.00 0.00
May 18, 2009................... 0.00 0.00 720,673.34 719,879.51 720,819.84 719,479.80 719,032.03
November 18, 2009.............. 721,758.76 722,274.01 0.00 0.00 0.00 0.00 0.00
May 18, 2010................... 0.00 0.00 720,673.34 719,879.51 720,819.84 719,479.80 719,032.03
<CAPTION>
REGULAR
DISTRIBUTION DATE N394DA N395DN N696DL N697DL
----------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
May 18, 2001................... $598,183.26 $598,558.71 $ 0.00 $ 0.00
November 18, 2001.............. 0.00 0.00 772,388.34 773,611.44
May 18, 2002................... 598,183.26 598,558.71 0.00 0.00
November 18, 2002.............. 0.00 0.00 772,388.34 773,611.44
May 18, 2003................... 598,183.26 598,558.71 0.00 0.00
November 18, 2003.............. 0.00 0.00 772,388.34 773,611.44
May 18, 2004................... 598,183.26 598,558.71 0.00 0.00
November 18, 2004.............. 0.00 0.00 772,388.34 773,611.44
May 18, 2005................... 598,183.26 598,558.71 0.00 0.00
November 18, 2005.............. 0.00 0.00 777,350.43 792,883.15
May 18, 2006................... 611,161.57 612,627.67 0.00 0.00
November 18, 2006.............. 0.00 0.00 928,509.38 929,979.71
May 18, 2007................... 719,092.64 719,543.98 0.00 0.00
November 18, 2007.............. 0.00 0.00 928,509.38 929,979.71
May 18, 2008................... 719,092.64 719,543.98 0.00 0.00
November 18, 2008.............. 0.00 0.00 928,509.38 929,979.71
May 18, 2009................... 719,092.64 719,543.98 0.00 0.00
November 18, 2009.............. 0.00 0.00 928,509.38 929,979.71
May 18, 2010................... 719,092.64 719,543.98 0.00 0.00
</TABLE>
III-2
<PAGE> 111
EQUIPMENT NOTE PRINCIPAL PAYMENTS
SERIES A-1 EQUIPMENT NOTES
<TABLE>
<CAPTION>
REGULAR
DISTRIBUTION DATE N698DL N699DL N6700 N6701 N6702 N6703D N6704Z
----------------- ----------- ----------- ----------- ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 18, 2001............... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 793,229.75
November 18, 2001.......... 772,793.15 773,874.06 772,506.73 775,190.07 773,877.36 790,370.95 0.00
May 18, 2002............... 0.00 0.00 0.00 0.00 0.00 0.00 793,229.75
November 18, 2002.......... 772,793.15 773,874.06 772,506.73 775,190.07 773,877.36 790,370.95 0.00
May 18, 2003............... 0.00 0.00 0.00 0.00 0.00 0.00 793,229.75
November 18, 2003.......... 772,793.15 773,874.06 772,506.73 775,190.07 773,877.36 790,370.95 0.00
May 18, 2004............... 0.00 0.00 0.00 0.00 0.00 0.00 793,229.75
November 18, 2004.......... 772,793.15 773,874.06 772,506.73 775,190.07 773,877.36 790,370.95 0.00
May 18, 2005............... 0.00 0.00 0.00 0.00 0.00 0.00 793,229.75
November 18, 2005.......... 794,296.17 796,417.95 795,864.56 799,641.54 801,630.84 823,559.99 0.00
May 18, 2006............... 0.00 0.00 0.00 0.00 0.00 0.00 803,665.50
November 18, 2006.......... 928,996.02 930,295.41 928,651.71 931,877.42 930,299.38 950,126.78 0.00
May 18, 2007............... 0.00 0.00 0.00 0.00 0.00 0.00 953,563.42
November 18, 2007.......... 928,996.02 930,295.41 928,651.71 931,877.42 930,299.38 950,126.78 0.00
May 18, 2008............... 0.00 0.00 0.00 0.00 0.00 0.00 953,563.42
November 18, 2008.......... 928,996.02 930,295.41 928,651.71 931,877.42 930,299.38 950,126.78 0.00
May 18, 2009............... 0.00 0.00 0.00 0.00 0.00 0.00 953,563.42
November 18, 2009.......... 928,996.02 930,295.41 928,651.71 931,877.42 930,299.38 950,126.78 0.00
May 18, 2010............... 0.00 0.00 0.00 0.00 0.00 0.00 953,563.42
<CAPTION>
REGULAR
DISTRIBUTION DATE N6705Y N6706Q N6707A N6708D
----------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
May 18, 2001............... $ 793,123.50 $ 792,427.88 $ 790,953.52 $ 794,791.99
November 18, 2001.......... 0.00 0.00 0.00 0.00
May 18, 2002............... 793,123.50 792,427.88 790,953.52 794,791.99
November 18, 2002.......... 0.00 0.00 0.00 0.00
May 18, 2003............... 793,123.50 792,427.88 790,953.52 794,791.99
November 18, 2003.......... 0.00 0.00 0.00 0.00
May 18, 2004............... 793,123.50 792,427.88 790,953.52 794,791.99
November 18, 2004.......... 0.00 0.00 0.00 0.00
May 18, 2005............... 793,123.50 792,427.88 790,953.52 794,791.99
November 18, 2005.......... 0.00 0.00 0.00 0.00
May 18, 2006............... 803,796.92 805,161.99 805,809.61 813,712.92
November 18, 2006.......... 0.00 0.00 0.00 0.00
May 18, 2007............... 953,435.70 952,599.47 950,827.11 955,441.43
November 18, 2007.......... 0.00 0.00 0.00 0.00
May 18, 2008............... 953,435.70 952,599.47 950,827.11 955,441.43
November 18, 2008.......... 0.00 0.00 0.00 0.00
May 18, 2009............... 953,435.70 952,599.47 950,827.11 955,441.43
November 18, 2009.......... 0.00 0.00 0.00 0.00
May 18, 2010............... 953,435.70 952,599.47 950,827.11 955,441.43
</TABLE>
<TABLE>
<CAPTION>
REGULAR
DISTRIBUTION DATE N6709 N6710E N6711M N6712B N6713Y N1602 N1603
----------------- ----------- ----------- ----------- ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 18, 2001............... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
November 18, 2001.......... 794,910.47 795,100.13 793,492.59 797,393.93 796,395.86 1,197,195.13 1,200,889.51
May 18, 2002............... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2002.......... 794,910.47 795,100.13 793,492.59 797,393.93 796,395.86 1,197,195.13 1,200,889.51
May 18, 2003............... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2003.......... 794,910.47 795,100.13 793,492.59 797,393.93 796,395.86 1,197,195.13 1,200,889.51
May 18, 2004............... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2004.......... 794,910.47 795,100.13 793,492.59 797,393.93 796,395.86 1,197,195.13 1,200,889.51
May 18, 2005............... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2005.......... 843,464.84 843,666.08 845,468.23 852,028.61 852,162.40 1,204,284.91 1,209,569.70
May 18, 2006............... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2006.......... 955,583.86 955,811.85 953,879.39 958,569.30 957,369.49 1,439,181.39 1,443,622.50
May 18, 2007............... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2007.......... 955,583.86 955,811.85 953,879.39 958,569.30 957,369.49 1,439,181.39 1,443,622.50
May 18, 2008............... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2008.......... 955,583.86 955,811.85 953,879.39 958,569.30 957,369.49 1,439,181.39 1,443,622.50
May 18, 2009............... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2009.......... 955,583.86 955,811.85 953,879.39 958,569.30 957,369.49 1,439,181.39 1,443,622.50
May 18, 2010............... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
<CAPTION>
REGULAR
DISTRIBUTION DATE N1604R N1605 N16065 N1607B
----------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
May 18, 2001............... $1,200,015.73 $1,199,096.16 $1,199,359.46 $1,218,612.97
November 18, 2001.......... 0.00 0.00 0.00 0.00
May 18, 2002............... 1,200,015.73 1,199,096.16 1,199,359.46 1,218,612.97
November 18, 2002.......... 0.00 0.00 0.00 0.00
May 18, 2003............... 1,200,015.73 1,199,096.16 1,199,359.46 1,218,612.97
November 18, 2003.......... 0.00 0.00 0.00 0.00
May 18, 2004............... 1,200,015.73 1,199,096.16 1,199,359.46 1,218,612.97
November 18, 2004.......... 0.00 0.00 0.00 0.00
May 18, 2005............... 1,200,015.73 1,199,096.16 1,199,359.46 1,218,612.97
November 18, 2005.......... 0.00 0.00 0.00 0.00
May 18, 2006............... 1,200,015.73 1,199,096.16 1,199,359.46 1,236,726.52
November 18, 2006.......... 0.00 0.00 0.00 0.00
May 18, 2007............... 1,417,848.37 1,420,255.69 1,422,134.10 1,464,928.36
November 18, 2007.......... 0.00 0.00 0.00 0.00
May 18, 2008............... 1,442,572.10 1,441,466.66 1,441,783.18 1,464,928.36
November 18, 2008.......... 0.00 0.00 0.00 0.00
May 18, 2009............... 1,442,572.10 1,441,466.66 1,441,783.18 1,464,928.36
November 18, 2009.......... 0.00 0.00 0.00 0.00
May 18, 2010............... 1,442,572.10 1,441,466.66 1,441,783.18 1,464,843.88
</TABLE>
III-3
<PAGE> 112
EQUIPMENT NOTE PRINCIPAL PAYMENTS
SERIES A-2 EQUIPMENT NOTES
<TABLE>
<CAPTION>
REGULAR
DISTRIBUTION DATE N376DA N377DA N378DA N379DA N380DA N381DN
----------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
May 18, 2001..................... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
November 18, 2001................ 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2002..................... 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2002................ 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2003..................... 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2003................ 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2004..................... 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2004................ 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2005..................... 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2005................ 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2006..................... 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2006................ 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2007..................... 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2007................ 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2008..................... 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2008................ 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2009..................... 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2009................ 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2010..................... 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2010................ 12,786,640.58 12,480,783.58 13,257,272.74 13,261,746.88 13,329,259.08 13,326,129.55
<CAPTION>
REGULAR
DISTRIBUTION DATE N382DA N383DN N384DA N385DN N386DA
----------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
May 18, 2001..................... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
November 18, 2001................ 0.00 0.00 0.00 0.00 0.00
May 18, 2002..................... 0.00 0.00 0.00 0.00 0.00
November 18, 2002................ 0.00 0.00 0.00 0.00 0.00
May 18, 2003..................... 0.00 0.00 0.00 0.00 0.00
November 18, 2003................ 0.00 0.00 0.00 0.00 0.00
May 18, 2004..................... 0.00 0.00 0.00 0.00 0.00
November 18, 2004................ 0.00 0.00 0.00 0.00 0.00
May 18, 2005..................... 0.00 0.00 0.00 0.00 0.00
November 18, 2005................ 0.00 0.00 0.00 0.00 0.00
May 18, 2006..................... 0.00 0.00 0.00 0.00 0.00
November 18, 2006................ 0.00 0.00 0.00 0.00 0.00
May 18, 2007..................... 0.00 0.00 0.00 0.00 0.00
November 18, 2007................ 0.00 0.00 0.00 0.00 0.00
May 18, 2008..................... 0.00 0.00 0.00 0.00 0.00
November 18, 2008................ 0.00 0.00 0.00 0.00 0.00
May 18, 2009..................... 0.00 0.00 0.00 0.00 0.00
November 18, 2009................ 0.00 0.00 0.00 0.00 0.00
May 18, 2010..................... 0.00 0.00 0.00 0.00 0.00
November 18, 2010................ 13,391,316.21 13,394,442.32 13,464,714.34 13,463,377.10 13,529,526.01
</TABLE>
<TABLE>
<CAPTION>
REGULAR
DISTRIBUTION DATE N387DA N388DA N389DA N390DA N391DA N392DA
----------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
May 18, 2001..................... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
November 18, 2001................ 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2002..................... 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2002................ 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2003..................... 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2003................ 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2004..................... 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2004................ 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2005..................... 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2005................ 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2006..................... 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2006................ 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2007..................... 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2007................ 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2008..................... 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2008................ 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2009..................... 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2009................ 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2010..................... 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2010................ 13,595,869.87 13,632,921.90 13,143,668.00 13,150,032.67 13,183,263.37 13,194,007.41
<CAPTION>
REGULAR
DISTRIBUTION DATE N393DA N394DA N395DN N696DL N697DL
----------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
May 18, 2001..................... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
November 18, 2001................ 0.00 0.00 0.00 0.00 0.00
May 18, 2002..................... 0.00 0.00 0.00 0.00 0.00
November 18, 2002................ 0.00 0.00 0.00 0.00 0.00
May 18, 2003..................... 0.00 0.00 0.00 0.00 0.00
November 18, 2003................ 0.00 0.00 0.00 0.00 0.00
May 18, 2004..................... 0.00 0.00 0.00 0.00 0.00
November 18, 2004................ 0.00 0.00 0.00 0.00 0.00
May 18, 2005..................... 0.00 0.00 0.00 0.00 0.00
November 18, 2005................ 0.00 0.00 0.00 0.00 0.00
May 18, 2006..................... 0.00 0.00 0.00 0.00 0.00
November 18, 2006................ 0.00 0.00 0.00 0.00 0.00
May 18, 2007..................... 0.00 0.00 0.00 0.00 0.00
November 18, 2007................ 0.00 0.00 0.00 0.00 0.00
May 18, 2008..................... 0.00 0.00 0.00 0.00 0.00
November 18, 2008................ 0.00 0.00 0.00 0.00 0.00
May 18, 2009..................... 0.00 0.00 0.00 0.00 0.00
November 18, 2009................ 0.00 0.00 0.00 0.00 0.00
May 18, 2010..................... 0.00 0.00 0.00 0.00 0.00
November 18, 2010................ 13,233,837.53 13,233,351.57 13,270,502.89 16,772,892.03 17,180,552.22
</TABLE>
III-4
<PAGE> 113
EQUIPMENT NOTE PRINCIPAL PAYMENTS
SERIES A-2 EQUIPMENT NOTES
<TABLE>
<CAPTION>
REGULAR
DISTRIBUTION DATE N698DL N699DL N6700 N6701 N6702 N6703D
----------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
May 18, 2001..................... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
November 18, 2001................ 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2002..................... 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2002................ 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2003..................... 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2003................ 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2004..................... 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2004................ 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2005..................... 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2005................ 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2006..................... 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2006................ 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2007..................... 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2007................ 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2008..................... 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2008................ 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2009..................... 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2009................ 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2010..................... 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2010................ 17,222,380.47 17,273,404.16 17,265,635.02 17,352,588.48 17,412,295.52 17,912,482.40
<CAPTION>
REGULAR
DISTRIBUTION DATE N6704Z N6705Y N6706Q N6707A N6708D
----------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
May 18, 2001..................... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
November 18, 2001................ 0.00 0.00 0.00 0.00 0.00
May 18, 2002..................... 0.00 0.00 0.00 0.00 0.00
November 18, 2002................ 0.00 0.00 0.00 0.00 0.00
May 18, 2003..................... 0.00 0.00 0.00 0.00 0.00
November 18, 2003................ 0.00 0.00 0.00 0.00 0.00
May 18, 2004..................... 0.00 0.00 0.00 0.00 0.00
November 18, 2004................ 0.00 0.00 0.00 0.00 0.00
May 18, 2005..................... 0.00 0.00 0.00 0.00 0.00
November 18, 2005................ 0.00 0.00 0.00 0.00 0.00
May 18, 2006..................... 0.00 0.00 0.00 0.00 0.00
November 18, 2006................ 0.00 0.00 0.00 0.00 0.00
May 18, 2007..................... 0.00 0.00 0.00 0.00 0.00
November 18, 2007................ 0.00 0.00 0.00 0.00 0.00
May 18, 2008..................... 0.00 0.00 0.00 0.00 0.00
November 18, 2008................ 0.00 0.00 0.00 0.00 0.00
May 18, 2009..................... 0.00 0.00 0.00 0.00 0.00
November 18, 2009................ 0.00 0.00 0.00 0.00 0.00
May 18, 2010..................... 0.00 0.00 0.00 0.00 0.00
November 18, 2010................ 17,367,765.38 17,371,809.42 17,411,734.03 17,436,514.33 17,627,528.06
</TABLE>
<TABLE>
<CAPTION>
REGULAR
DISTRIBUTION DATE N6709 N6710E N6711M N6712B N6713Y N1602
----------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
May 18, 2001..................... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
November 18, 2001................ 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2002..................... 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2002................ 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2003..................... 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2003................ 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2004..................... 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2004................ 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2005..................... 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2005................ 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2006..................... 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2006................ 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2007..................... 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2007................ 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2008..................... 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2008................ 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2009..................... 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2009................ 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2010..................... 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2010................ 18,419,724.53 18,424,119.33 18,480,343.88 18,635,251.77 18,643,909.52 25,981,809.01
<CAPTION>
REGULAR
DISTRIBUTION DATE N1603 N1604R N1605 N16065 N1607B
----------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
May 18, 2001..................... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
November 18, 2001................ 0.00 0.00 0.00 0.00 0.00
May 18, 2002..................... 0.00 0.00 0.00 0.00 0.00
November 18, 2002................ 0.00 0.00 0.00 0.00 0.00
May 18, 2003..................... 0.00 0.00 0.00 0.00 0.00
November 18, 2003................ 0.00 0.00 0.00 0.00 0.00
May 18, 2004..................... 0.00 0.00 0.00 0.00 0.00
November 18, 2004................ 0.00 0.00 0.00 0.00 0.00
May 18, 2005..................... 0.00 0.00 0.00 0.00 0.00
November 18, 2005................ 0.00 0.00 0.00 0.00 0.00
May 18, 2006..................... 0.00 0.00 0.00 0.00 0.00
November 18, 2006................ 0.00 0.00 0.00 0.00 0.00
May 18, 2007..................... 0.00 0.00 0.00 0.00 0.00
November 18, 2007................ 0.00 0.00 0.00 0.00 0.00
May 18, 2008..................... 0.00 0.00 0.00 0.00 0.00
November 18, 2008................ 0.00 0.00 0.00 0.00 0.00
May 18, 2009..................... 0.00 0.00 0.00 0.00 0.00
November 18, 2009................ 0.00 0.00 0.00 0.00 0.00
May 18, 2010..................... 0.00 0.00 0.00 0.00 0.00
November 18, 2010................ 26,103,782.23 25,194,840.93 25,268,634.08 25,315,926.30 26,737,413.30
</TABLE>
III-5
<PAGE> 114
EQUIPMENT NOTE PRINCIPAL PAYMENTS
SERIES B EQUIPMENT NOTES
<TABLE>
<CAPTION>
REGULAR
DISTRIBUTION DATE N376DA N377DA N378DA N379DA N380DA N381DN
----------------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
May 18, 2001................ $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
November 18, 2001........... 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2002................ 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2002........... 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2003................ 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2003........... 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2004................ 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2004........... 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2005................ 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2005........... 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2006................ 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2006........... 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2007................ 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2007........... 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2008................ 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2008........... 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2009................ 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2009........... 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2010................ 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2010........... 3,161,376.92 3,085,756.65 3,277,736.31 3,278,842.50 3,295,534.25 3,294,760.51
<CAPTION>
REGULAR
DISTRIBUTION DATE N382DA N383DN N384DA N385DN N386DA
----------------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
May 18, 2001................ $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
November 18, 2001........... 0.00 0.00 0.00 0.00 0.00
May 18, 2002................ 0.00 0.00 0.00 0.00 0.00
November 18, 2002........... 0.00 0.00 0.00 0.00 0.00
May 18, 2003................ 0.00 0.00 0.00 0.00 0.00
November 18, 2003........... 0.00 0.00 0.00 0.00 0.00
May 18, 2004................ 0.00 0.00 0.00 0.00 0.00
November 18, 2004........... 0.00 0.00 0.00 0.00 0.00
May 18, 2005................ 0.00 0.00 0.00 0.00 0.00
November 18, 2005........... 0.00 0.00 0.00 0.00 0.00
May 18, 2006................ 0.00 0.00 0.00 0.00 0.00
November 18, 2006........... 0.00 0.00 0.00 0.00 0.00
May 18, 2007................ 0.00 0.00 0.00 0.00 0.00
November 18, 2007........... 0.00 0.00 0.00 0.00 0.00
May 18, 2008................ 0.00 0.00 0.00 0.00 0.00
November 18, 2008........... 0.00 0.00 0.00 0.00 0.00
May 18, 2009................ 0.00 0.00 0.00 0.00 0.00
November 18, 2009........... 0.00 0.00 0.00 0.00 0.00
May 18, 2010................ 0.00 0.00 0.00 0.00 0.00
November 18, 2010........... 3,310,877.30 3,311,650.20 3,329,024.30 3,328,693.68 3,345,048.37
</TABLE>
<TABLE>
<CAPTION>
REGULAR
DISTRIBUTION DATE N387DA N388DA N389DA N390DA N391DA N392DA
----------------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
May 18, 2001................ $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
November 18, 2001........... 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2002................ 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2002........... 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2003................ 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2003........... 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2004................ 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2004........... 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2005................ 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2005........... 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2006................ 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2006........... 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2007................ 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2007........... 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2008................ 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2008........... 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2009................ 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2009........... 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2010................ 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2010........... 3,361,451.27 3,370,612.04 3,249,648.60 3,251,222.21 3,259,438.18 3,262,094.55
<CAPTION>
REGULAR
DISTRIBUTION DATE N393DA N394DA N395DN N696DL N697DL
----------------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
May 18, 2001................ $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
November 18, 2001........... 0.00 0.00 0.00 0.00 0.00
May 18, 2002................ 0.00 0.00 0.00 0.00 0.00
November 18, 2002........... 0.00 0.00 0.00 0.00 0.00
May 18, 2003................ 0.00 0.00 0.00 0.00 0.00
November 18, 2003........... 0.00 0.00 0.00 0.00 0.00
May 18, 2004................ 0.00 0.00 0.00 0.00 0.00
November 18, 2004........... 0.00 0.00 0.00 0.00 0.00
May 18, 2005................ 0.00 0.00 0.00 0.00 0.00
November 18, 2005........... 0.00 0.00 0.00 0.00 0.00
May 18, 2006................ 0.00 0.00 0.00 0.00 0.00
November 18, 2006........... 0.00 0.00 0.00 0.00 0.00
May 18, 2007................ 0.00 0.00 0.00 0.00 0.00
November 18, 2007........... 0.00 0.00 0.00 0.00 0.00
May 18, 2008................ 0.00 0.00 0.00 0.00 0.00
November 18, 2008........... 0.00 0.00 0.00 0.00 0.00
May 18, 2009................ 0.00 0.00 0.00 0.00 0.00
November 18, 2009........... 0.00 0.00 0.00 0.00 0.00
May 18, 2010................ 0.00 0.00 0.00 0.00 0.00
November 18, 2010........... 3,271,942.17 3,271,822.02 3,281,007.34 4,146,940.19 4,247,730.35
</TABLE>
III-6
<PAGE> 115
EQUIPMENT NOTE PRINCIPAL PAYMENTS
SERIES B EQUIPMENT NOTES
<TABLE>
<CAPTION>
REGULAR
DISTRIBUTION DATE N698DL N699DL N6700 N6701 N6702 N6703D N6704Z
----------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 18, 2001............... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
November 18, 2001.......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2002............... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2002.......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2003............... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2003.......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2004............... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2004.......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2005............... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2005.......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2006............... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2006.......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2007............... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2007.......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2008............... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2008.......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2009............... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2009.......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2010............... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2010.......... 4,258,071.99 4,270,687.12 4,268,766.27 4,290,264.70 4,305,026.71 4,428,693.22 4,294,017.05
<CAPTION>
REGULAR
DISTRIBUTION DATE N6705Y N6706Q N6707A N6708D
----------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
May 18, 2001............... $ 0.00 $ 0.00 $ 0.00 $ 0.00
November 18, 2001.......... 0.00 0.00 0.00 0.00
May 18, 2002............... 0.00 0.00 0.00 0.00
November 18, 2002.......... 0.00 0.00 0.00 0.00
May 18, 2003............... 0.00 0.00 0.00 0.00
November 18, 2003.......... 0.00 0.00 0.00 0.00
May 18, 2004............... 0.00 0.00 0.00 0.00
November 18, 2004.......... 0.00 0.00 0.00 0.00
May 18, 2005............... 0.00 0.00 0.00 0.00
November 18, 2005.......... 0.00 0.00 0.00 0.00
May 18, 2006............... 0.00 0.00 0.00 0.00
November 18, 2006.......... 0.00 0.00 0.00 0.00
May 18, 2007............... 0.00 0.00 0.00 0.00
November 18, 2007.......... 0.00 0.00 0.00 0.00
May 18, 2008............... 0.00 0.00 0.00 0.00
November 18, 2008.......... 0.00 0.00 0.00 0.00
May 18, 2009............... 0.00 0.00 0.00 0.00
November 18, 2009.......... 0.00 0.00 0.00 0.00
May 18, 2010............... 0.00 0.00 0.00 0.00
November 18, 2010.......... 4,295,016.90 4,304,887.88 4,311,014.58 4,358,240.93
</TABLE>
<TABLE>
<CAPTION>
REGULAR
DISTRIBUTION DATE N6709 N6710E N6711M N6712B N6713Y N1602 N1603
----------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 18, 2001............... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
November 18, 2001.......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2002............... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2002.......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2003............... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2003.......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2004............... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2004.......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2005............... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2005.......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2006............... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2006.......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2007............... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2007.......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2008............... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2008.......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2009............... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2009.......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2010............... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2010.......... 4,554,104.08 4,555,190.65 4,569,091.64 4,607,391.16 4,609,531.71 6,423,758.52 6,453,915.25
<CAPTION>
REGULAR
DISTRIBUTION DATE N1604R N1605 N16065 N1607B
----------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
May 18, 2001............... $ 0.00 $ 0.00 $ 0.00 $ 0.00
November 18, 2001.......... 0.00 0.00 0.00 0.00
May 18, 2002............... 0.00 0.00 0.00 0.00
November 18, 2002.......... 0.00 0.00 0.00 0.00
May 18, 2003............... 0.00 0.00 0.00 0.00
November 18, 2003.......... 0.00 0.00 0.00 0.00
May 18, 2004............... 0.00 0.00 0.00 0.00
November 18, 2004.......... 0.00 0.00 0.00 0.00
May 18, 2005............... 0.00 0.00 0.00 0.00
November 18, 2005.......... 0.00 0.00 0.00 0.00
May 18, 2006............... 0.00 0.00 0.00 0.00
November 18, 2006.......... 0.00 0.00 0.00 0.00
May 18, 2007............... 0.00 0.00 0.00 0.00
November 18, 2007.......... 0.00 0.00 0.00 0.00
May 18, 2008............... 0.00 0.00 0.00 0.00
November 18, 2008.......... 0.00 0.00 0.00 0.00
May 18, 2009............... 0.00 0.00 0.00 0.00
November 18, 2009.......... 0.00 0.00 0.00 0.00
May 18, 2010............... 0.00 0.00 0.00 0.00
November 18, 2010.......... 6,229,188.04 6,247,432.71 6,259,125.27 6,610,373.71
</TABLE>
III-7
<PAGE> 116
APPENDIX III
EQUIPMENT NOTE PRINCIPAL PAYMENTS
SERIES C EQUIPMENT NOTES
<TABLE>
<CAPTION>
REGULAR
DISTRIBUTION DATE N376DA N377DA N378DA N379DA N380DA N381DN
----------------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
May 18, 2001................ $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
November 18, 2001........... 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2002................ 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2002........... 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2003................ 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2003........... 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2004................ 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2004........... 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2005................ 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2005........... 4,156,170.27 4,097,107.41 4,274,431.71 4,274,256.56 4,291,645.12 4,291,767.64
<CAPTION>
REGULAR
DISTRIBUTION DATE N382DA N383DN N384DA N385DN N386DA
----------------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
May 18, 2001................ $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
November 18, 2001........... 0.00 0.00 0.00 0.00 0.00
May 18, 2002................ 0.00 0.00 0.00 0.00 0.00
November 18, 2002........... 0.00 0.00 0.00 0.00 0.00
May 18, 2003................ 0.00 0.00 0.00 0.00 0.00
November 18, 2003........... 0.00 0.00 0.00 0.00 0.00
May 18, 2004................ 0.00 0.00 0.00 0.00 0.00
November 18, 2004........... 0.00 0.00 0.00 0.00 0.00
May 18, 2005................ 0.00 0.00 0.00 0.00 0.00
November 18, 2005........... 4,308,068.92 4,307,946.54 4,325,227.06 4,325,279.41 4,341,543.02
</TABLE>
<TABLE>
<CAPTION>
REGULAR
DISTRIBUTION DATE N387DA N388DA N389DA N390DA N391DA N392DA
----------------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
May 18, 2001................ $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
November 18, 2001........... 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2002................ 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2002........... 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2003................ 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2003........... 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2004................ 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2004........... 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2005................ 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2005........... 4,358,977.32 4,368,131.74 4,257,017.87 4,256,934.26 4,266,042.16 4,265,901.02
<CAPTION>
REGULAR
DISTRIBUTION DATE N393DA N394DA N395DN N696DL N697DL
----------------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
May 18, 2001................ $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
November 18, 2001........... 0.00 0.00 0.00 0.00 0.00
May 18, 2002................ 0.00 0.00 0.00 0.00 0.00
November 18, 2002........... 0.00 0.00 0.00 0.00 0.00
May 18, 2003................ 0.00 0.00 0.00 0.00 0.00
November 18, 2003........... 0.00 0.00 0.00 0.00 0.00
May 18, 2004................ 0.00 0.00 0.00 0.00 0.00
November 18, 2004........... 0.00 0.00 0.00 0.00 0.00
May 18, 2005................ 0.00 0.00 0.00 0.00 0.00
November 18, 2005........... 4,273,861.74 4,273,868.13 4,282,924.53 5,449,063.87 5,541,903.51
</TABLE>
III-8
<PAGE> 117
APPENDIX III
EQUIPMENT NOTE PRINCIPAL PAYMENTS
SERIES C EQUIPMENT NOTES
<TABLE>
<CAPTION>
REGULAR
DISTRIBUTION DATE N698DL N699DL N6700 N6701 N6702 N6703D N6704Z
----------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 18, 2001............... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
November 18, 2001.......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2002............... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2002.......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2003............... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2003.......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2004............... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2004.......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2005............... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2005.......... 5,549,299.84 5,563,013.37 5,558,211.45 5,583,479.97 5,593,711.37 5,741,452.25 5,627,537.73
<CAPTION>
REGULAR
DISTRIBUTION DATE N6705Y N6706Q N6707A N6708D
----------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
May 18, 2001............... $ 0.00 $ 0.00 $ 0.00 $ 0.00
November 18, 2001.......... 0.00 0.00 0.00 0.00
May 18, 2002............... 0.00 0.00 0.00 0.00
November 18, 2002.......... 0.00 0.00 0.00 0.00
May 18, 2003............... 0.00 0.00 0.00 0.00
November 18, 2003.......... 0.00 0.00 0.00 0.00
May 18, 2004............... 0.00 0.00 0.00 0.00
November 18, 2004.......... 0.00 0.00 0.00 0.00
May 18, 2005............... 0.00 0.00 0.00 0.00
November 18, 2005.......... 5,628,191.60 5,635,444.08 5,637,593.04 5,688,461.95
</TABLE>
<TABLE>
<CAPTION>
REGULAR
DISTRIBUTION DATE N6709 N6710E N6711M N6712B N6713Y N1602 N1603
----------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 18, 2001............... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
November 18, 2001.......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2002............... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2002.......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2003............... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2003.......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2004............... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2004.......... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
May 18, 2005............... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
November 18, 2005.......... 5,863,779.34 5,865,178.39 5,873,975.02 5,917,007.58 5,916,668.64 8,442,459.84 8,477,747.89
<CAPTION>
REGULAR
DISTRIBUTION DATE N1604R N1605 N16065 N1607B
----------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
May 18, 2001............... $ 0.00 $ 0.00 $ 0.00 $ 0.00
November 18, 2001.......... 0.00 0.00 0.00 0.00
May 18, 2002............... 0.00 0.00 0.00 0.00
November 18, 2002.......... 0.00 0.00 0.00 0.00
May 18, 2003............... 0.00 0.00 0.00 0.00
November 18, 2003.......... 0.00 0.00 0.00 0.00
May 18, 2004............... 0.00 0.00 0.00 0.00
November 18, 2004.......... 0.00 0.00 0.00 0.00
May 18, 2005............... 0.00 0.00 0.00 0.00
November 18, 2005.......... 8,274,929.38 8,289,160.40 8,300,204.58 8,657,422.48
</TABLE>
III-9
<PAGE> 118
APPENDIX IV
LOAN TO VALUE RATIOS OF EQUIPMENT NOTES
IV-1
<PAGE> 119
APPENDIX IV
LOAN TO VALUE RATIOS OF EQUIPMENT NOTES
<TABLE>
<CAPTION>
N376DA N377DA
------------------------------------------------ ------------------------------------------------
EQUIPMENT NOTE ASSUMED EQUIPMENT NOTE ASSUMED
OUTSTANDING AIRCRAFT LOAN TO OUTSTANDING AIRCRAFT LOAN TO
BALANCE VALUE AIRCRAFT BALANCE VALUE AIRCRAFT
(IN MILLIONS) (IN MILLIONS) VALUE RATIO (IN MILLIONS) (IN MILLIONS) VALUE RATIO
------------------ ------------- ----------- ------------------ ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
November 16, 2000........ $25.89 $39.52 65.5% $26.07 $40.18 64.9%
November 18, 2001........ 25.30 38.27 66.1 25.47 38.92 65.5
November 18, 2002........ 24.71 37.01 66.8 24.88 37.65 66.1
November 18, 2003........ 24.12 35.76 67.5 24.29 36.39 66.7
November 18, 2004........ 23.53 34.50 68.2 23.69 35.13 67.4
November 18, 2005........ 18.78 33.25 56.5 19.00 33.87 56.1
November 18, 2006........ 18.07 31.99 56.5 18.41 32.60 56.5
November 18, 2007........ 17.37 30.74 56.5 17.71 31.34 56.5
November 18, 2008........ 16.66 29.48 56.5 16.99 30.08 56.5
November 18, 2009........ 15.95 28.23 56.5 16.28 28.81 56.5
November 18, 2010........ 0.00 0.00 NA 0.00 0.00 NA
</TABLE>
<TABLE>
<CAPTION>
N378DA N379DA
------------------------------------------------ ------------------------------------------------
EQUIPMENT NOTE ASSUMED EQUIPMENT NOTE ASSUMED
OUTSTANDING AIRCRAFT LOAN TO OUTSTANDING AIRCRAFT LOAN TO
BALANCE VALUE AIRCRAFT BALANCE VALUE AIRCRAFT
(IN MILLIONS) (IN MILLIONS) VALUE RATIO (IN MILLIONS) (IN MILLIONS) VALUE RATIO
------------------ ------------- ----------- ------------------ ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
November 16, 2000........ $26.67 $40.68 65.6% $26.67 $40.68 65.6%
November 18, 2001........ 26.08 39.41 66.2 26.08 39.41 66.2
November 18, 2002........ 25.48 38.14 66.8 25.48 38.15 66.8
November 18, 2003........ 24.88 36.88 67.5 24.89 36.88 67.5
November 18, 2004........ 24.29 35.61 68.2 24.29 35.61 68.2
November 18, 2005........ 19.40 34.34 56.5 19.40 34.34 56.5
November 18, 2006........ 18.68 33.07 56.5 18.69 33.08 56.5
November 18, 2007........ 17.97 31.80 56.5 17.97 31.81 56.5
November 18, 2008........ 17.25 30.53 56.5 17.26 30.54 56.5
November 18, 2009........ 16.54 29.27 56.5 16.54 29.28 56.5
November 18, 2010........ 0.00 0.00 NA 0.00 0.00 NA
</TABLE>
<TABLE>
<CAPTION>
N380DA N381DN
------------------------------------------------ ------------------------------------------------
EQUIPMENT NOTE ASSUMED EQUIPMENT NOTE ASSUMED
OUTSTANDING AIRCRAFT LOAN TO OUTSTANDING AIRCRAFT LOAN TO
BALANCE VALUE AIRCRAFT BALANCE VALUE AIRCRAFT
(IN MILLIONS) (IN MILLIONS) VALUE RATIO (IN MILLIONS) (IN MILLIONS) VALUE RATIO
------------------ ------------- ----------- ------------------ ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
November 16, 2000........ $26.79 $40.85 65.6% $26.79 $40.85 65.6%
November 18, 2001........ 26.19 39.58 66.2 26.19 39.58 66.2
November 18, 2002........ 25.59 38.31 66.8 25.59 38.31 66.8
November 18, 2003........ 25.00 37.04 67.5 24.99 37.04 67.5
November 18, 2004........ 24.40 35.77 68.2 24.40 35.77 68.2
November 18, 2005........ 19.49 34.50 56.5 19.49 34.50 56.5
November 18, 2006........ 18.78 33.23 56.5 18.77 33.23 56.5
November 18, 2007........ 18.06 31.96 56.5 18.06 31.96 56.5
November 18, 2008........ 17.34 30.69 56.5 17.34 30.69 56.5
November 18, 2009........ 16.62 29.42 56.5 16.62 29.42 56.5
November 18, 2010........ 0.00 0.00 NA 0.00 0.00 NA
</TABLE>
<TABLE>
<CAPTION>
N382DA N383DN
------------------------------------------------ ------------------------------------------------
EQUIPMENT NOTE ASSUMED EQUIPMENT NOTE ASSUMED
OUTSTANDING AIRCRAFT LOAN TO OUTSTANDING AIRCRAFT LOAN TO
BALANCE VALUE AIRCRAFT BALANCE VALUE AIRCRAFT
(IN MILLIONS) (IN MILLIONS) VALUE RATIO (IN MILLIONS) (IN MILLIONS) VALUE RATIO
------------------ ------------- ----------- ------------------ ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
November 16, 2000........ $26.89 $41.01 65.6% $26.89 $41.01 65.6%
November 18, 2001........ 26.30 39.74 66.2 26.30 39.74 66.2
November 18, 2002........ 25.70 38.47 66.8 25.70 38.47 66.8
November 18, 2003........ 25.10 37.19 67.5 25.10 37.20 67.5
November 18, 2004........ 24.50 35.92 68.2 24.50 35.92 68.2
November 18, 2005........ 19.58 34.65 56.5 19.58 34.65 56.5
November 18, 2006........ 18.86 33.38 56.5 18.86 33.38 56.5
November 18, 2007........ 18.14 32.11 56.5 18.14 32.11 56.5
November 18, 2008........ 17.42 30.83 56.5 17.42 30.84 56.5
November 18, 2009........ 16.70 29.56 56.5 16.71 29.57 56.5
November 18, 2010........ 0.00 0.00 NA 0.00 0.00 NA
</TABLE>
IV-2
<PAGE> 120
APPENDIX IV
LOAN TO VALUE RATIOS OF EQUIPMENT NOTES
<TABLE>
<CAPTION>
N384DA N385DN
-------------------------------------------- --------------------------------------------
EQUIPMENT NOTE ASSUMED EQUIPMENT NOTE ASSUMED
OUTSTANDING AIRCRAFT LOAN TO OUTSTANDING AIRCRAFT LOAN TO
BALANCE VALUE AIRCRAFT BALANCE VALUE AIRCRAFT
(IN MILLIONS) (IN MILLIONS) VALUE RATIO (IN MILLIONS) (IN MILLIONS) VALUE RATIO
-------------- ------------- ----------- -------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
November 16, 2000................. $27.01 $41.18 65.6% $27.01 $41.18 65.6%
November 18, 2001................. 26.41 39.91 66.2 26.41 39.91 66.2
November 18, 2002................. 25.81 38.63 66.8 25.81 38.63 66.8
November 18, 2003................. 25.21 37.36 67.5 25.21 37.36 67.5
November 18, 2004................. 24.62 36.09 68.2 24.61 36.09 68.2
November 18, 2005................. 19.67 34.82 56.5 19.67 34.81 56.5
November 18, 2006................. 18.95 33.54 56.5 18.95 33.54 56.5
November 18, 2007................. 18.23 32.27 56.5 18.23 32.27 56.5
November 18, 2008................. 17.51 31.00 56.5 17.51 30.99 56.5
November 18, 2009................. 16.79 29.72 56.5 16.79 29.72 56.5
November 18, 2010................. 0.00 0.00 NA 0.00 0.00 NA
</TABLE>
<TABLE>
<CAPTION>
N386DA N387DA
-------------------------------------------- --------------------------------------------
EQUIPMENT NOTE ASSUMED EQUIPMENT NOTE ASSUMED
OUTSTANDING AIRCRAFT LOAN TO OUTSTANDING AIRCRAFT LOAN TO
BALANCE VALUE AIRCRAFT BALANCE VALUE AIRCRAFT
(IN MILLIONS) (IN MILLIONS) VALUE RATIO (IN MILLIONS) (IN MILLIONS) VALUE RATIO
-------------- ------------- ----------- -------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
November 16, 2000................. $27.12 $41.34 65.6% $27.23 $41.51 65.6%
November 18, 2001................. 26.52 40.07 66.2 26.63 40.23 66.2
November 18, 2002................. 25.92 38.79 66.8 26.03 38.96 66.8
November 18, 2003................. 25.32 37.52 67.5 25.43 37.68 67.5
November 18, 2004................. 24.72 36.24 68.2 24.83 36.40 68.2
November 18, 2005................. 19.76 34.97 56.5 19.84 35.12 56.5
November 18, 2006................. 19.04 33.69 56.5 19.12 33.85 56.5
November 18, 2007................. 18.32 32.42 56.5 18.40 32.57 56.5
November 18, 2008................. 17.59 31.14 56.5 17.68 31.29 56.5
November 18, 2009................. 16.87 29.87 56.5 16.96 30.01 56.5
November 18, 2010................. 0.00 0.00 NA 0.00 0.00 NA
</TABLE>
<TABLE>
<CAPTION>
N388DA N389DA
-------------------------------------------- --------------------------------------------
EQUIPMENT NOTE ASSUMED EQUIPMENT NOTE ASSUMED
OUTSTANDING AIRCRAFT LOAN TO OUTSTANDING AIRCRAFT LOAN TO
BALANCE VALUE AIRCRAFT BALANCE VALUE AIRCRAFT
(IN MILLIONS) (IN MILLIONS) VALUE RATIO (IN MILLIONS) (IN MILLIONS) VALUE RATIO
-------------- ------------- ----------- -------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
November 16, 2000................. $27.29 $41.60 65.6% $27.14 $41.77 65.0%
November 18, 2001................. 26.69 40.32 66.2 26.54 40.49 65.5
November 18, 2002................. 26.09 39.04 66.8 25.94 39.22 66.1
November 18, 2003................. 25.49 37.76 67.5 25.34 37.94 66.8
November 18, 2004................. 24.89 36.49 68.2 24.74 36.67 67.5
November 18, 2005................. 19.89 35.21 56.5 19.88 35.39 56.2
November 18, 2006................. 19.17 33.93 56.5 19.28 34.12 56.5
November 18, 2007................. 18.45 32.65 56.5 18.56 32.84 56.5
November 18, 2008................. 17.73 31.37 56.5 17.83 31.57 56.5
November 18, 2009................. 17.00 30.09 56.5 17.11 30.29 56.5
November 18, 2010................. 0.00 0.00 NA 0.00 0.00 NA
</TABLE>
<TABLE>
<CAPTION>
N390DA N391DA
-------------------------------------------- --------------------------------------------
EQUIPMENT NOTE ASSUMED EQUIPMENT NOTE ASSUMED
OUTSTANDING AIRCRAFT LOAN TO OUTSTANDING AIRCRAFT LOAN TO
BALANCE VALUE AIRCRAFT BALANCE VALUE AIRCRAFT
(IN MILLIONS) (IN MILLIONS) VALUE RATIO (IN MILLIONS) (IN MILLIONS) VALUE RATIO
-------------- ------------- ----------- -------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
November 16, 2000................. $27.14 $41.77 65.0% $27.20 $41.86 65.0%
November 18, 2001................. 26.54 40.50 65.5 26.60 40.58 65.5
November 18, 2002................. 25.94 39.22 66.1 26.00 39.31 66.1
November 18, 2003................. 25.34 37.95 66.8 25.40 38.03 66.8
November 18, 2004................. 24.74 36.67 67.5 24.80 36.76 67.5
November 18, 2005................. 19.89 35.40 56.2 19.94 35.48 56.2
November 18, 2006................. 19.28 34.13 56.5 19.33 34.21 56.5
November 18, 2007................. 18.56 32.85 56.5 18.61 32.93 56.5
November 18, 2008................. 17.84 31.58 56.5 17.88 31.65 56.5
November 18, 2009................. 17.12 30.30 56.5 17.16 30.38 56.5
November 18, 2010................. 0.00 0.00 NA 0.00 0.00 NA
</TABLE>
IV-3
<PAGE> 121
APPENDIX IV
LOAN TO VALUE RATIOS OF EQUIPMENT NOTES
<TABLE>
<CAPTION>
N392DA N393DA
-------------------------------------------- --------------------------------------------
EQUIPMENT NOTE ASSUMED EQUIPMENT NOTE ASSUMED
OUTSTANDING AIRCRAFT LOAN TO OUTSTANDING AIRCRAFT LOAN TO
BALANCE VALUE AIRCRAFT BALANCE VALUE AIRCRAFT
(IN MILLIONS) (IN MILLIONS) VALUE RATIO (IN MILLIONS) (IN MILLIONS) VALUE RATIO
-------------- ------------- ----------- -------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
November 16, 2000................. $27.20 $41.86 65.0% $27.26 $41.94 65.0%
November 18, 2001................. 26.60 40.59 65.5 26.66 40.67 65.6
November 18, 2002................. 26.01 39.31 66.1 26.06 39.39 66.2
November 18, 2003................. 25.41 38.04 66.8 25.46 38.12 66.8
November 18, 2004................. 24.81 36.77 67.5 24.87 36.85 67.5
November 18, 2005................. 19.94 35.49 56.2 19.99 35.58 56.2
November 18, 2006................. 19.33 34.22 56.5 19.38 34.30 56.5
November 18, 2007................. 18.61 32.95 56.5 18.66 33.03 56.5
November 18, 2008................. 17.90 31.67 56.5 17.94 31.76 56.5
November 18, 2009................. 17.18 30.40 56.5 17.22 30.49 56.5
November 18, 2010................. 0.00 0.00 NA 0.00 0.00 NA
</TABLE>
<TABLE>
<CAPTION>
N394DA N395DN
-------------------------------------------- --------------------------------------------
EQUIPMENT NOTE ASSUMED EQUIPMENT NOTE ASSUMED
OUTSTANDING AIRCRAFT LOAN TO OUTSTANDING AIRCRAFT LOAN TO
BALANCE VALUE AIRCRAFT BALANCE VALUE AIRCRAFT
(IN MILLIONS) (IN MILLIONS) VALUE RATIO (IN MILLIONS) (IN MILLIONS) VALUE RATIO
-------------- ------------- ----------- -------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
November 16, 2000................. $27.26 $41.94 65.0% $27.32 $42.60 64.1%
November 18, 2001................. 26.66 40.67 65.6 26.72 41.31 64.7
November 18, 2002................. 26.06 39.39 66.2 26.12 40.02 65.3
November 18, 2003................. 25.46 38.12 66.8 25.52 38.73 65.9
November 18, 2004................. 24.86 36.85 67.5 24.92 37.44 66.6
November 18, 2005................. 19.99 35.58 56.2 20.04 36.15 55.4
November 18, 2006................. 19.38 34.30 56.5 19.43 34.86 55.7
November 18, 2007................. 18.66 33.03 56.5 18.71 33.56 55.7
November 18, 2008................. 17.94 31.76 56.5 17.99 32.27 55.7
November 18, 2009................. 17.22 30.49 56.5 17.27 30.98 55.7
November 18, 2010................. 0.00 0.00 NA 0.00 0.00 NA
</TABLE>
<TABLE>
<CAPTION>
N696DL N697DL
-------------------------------------------- --------------------------------------------
EQUIPMENT NOTE ASSUMED EQUIPMENT NOTE ASSUMED
OUTSTANDING AIRCRAFT LOAN TO OUTSTANDING AIRCRAFT LOAN TO
BALANCE VALUE AIRCRAFT BALANCE VALUE AIRCRAFT
(IN MILLIONS) (IN MILLIONS) VALUE RATIO (IN MILLIONS) (IN MILLIONS) VALUE RATIO
-------------- ------------- ----------- -------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
November 16, 2000................. $33.95 $51.82 65.5% $34.58 $52.74 65.6%
November 18, 2001................. 33.18 50.17 66.1 33.80 51.09 66.2
November 18, 2002................. 32.41 48.53 66.8 33.03 49.45 66.8
November 18, 2003................. 31.63 46.89 67.5 32.26 47.80 67.5
November 18, 2004................. 30.86 45.24 68.2 31.48 46.16 68.2
November 18, 2005................. 24.63 43.60 56.5 25.15 44.51 56.5
November 18, 2006................. 23.71 41.96 56.5 24.22 42.86 56.5
November 18, 2007................. 22.78 40.31 56.5 23.29 41.22 56.5
November 18, 2008................. 21.85 38.67 56.5 22.36 39.57 56.5
November 18, 2009................. 20.92 37.03 56.5 21.43 37.93 56.5
November 18, 2010................. 0.00 0.00 NA 0.00 0.00 NA
</TABLE>
<TABLE>
<CAPTION>
N698DL N699DL
-------------------------------------------- --------------------------------------------
EQUIPMENT NOTE ASSUMED EQUIPMENT NOTE ASSUMED
OUTSTANDING AIRCRAFT LOAN TO OUTSTANDING AIRCRAFT LOAN TO
BALANCE VALUE AIRCRAFT BALANCE VALUE AIRCRAFT
(IN MILLIONS) (IN MILLIONS) VALUE RATIO (IN MILLIONS) (IN MILLIONS) VALUE RATIO
-------------- ------------- ----------- -------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
November 16, 2000................. $34.63 $52.82 65.6% $34.72 $52.95 65.6%
November 18, 2001................. 33.86 51.17 66.2 33.95 51.30 66.2
November 18, 2002................. 33.09 49.53 66.8 33.17 49.66 66.8
November 18, 2003................. 32.31 47.88 67.5 32.40 48.01 67.5
November 18, 2004................. 31.54 46.24 68.2 31.62 46.36 68.2
November 18, 2005................. 25.20 44.60 56.5 25.27 44.72 56.5
November 18, 2006................. 24.27 42.95 56.5 24.33 43.07 56.5
November 18, 2007................. 23.34 41.31 56.5 23.40 41.42 56.5
November 18, 2008................. 22.41 39.66 56.5 22.47 39.78 56.5
November 18, 2009................. 21.48 38.02 56.5 21.54 38.13 56.5
November 18, 2010................. 0.00 0.00 NA 0.00 0.00 NA
</TABLE>
IV-4
<PAGE> 122
APPENDIX IV
LOAN TO VALUE RATIOS OF EQUIPMENT NOTES
<TABLE>
<CAPTION>
N6700 N6701
-------------------------------------------- --------------------------------------------
EQUIPMENT NOTE ASSUMED EQUIPMENT NOTE ASSUMED
OUTSTANDING AIRCRAFT LOAN TO OUTSTANDING AIRCRAFT LOAN TO
BALANCE VALUE AIRCRAFT BALANCE VALUE AIRCRAFT
(IN MILLIONS) (IN MILLIONS) VALUE RATIO (IN MILLIONS) (IN MILLIONS) VALUE RATIO
-------------- ------------- ----------- -------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
November 16, 2000................. $34.69 $52.91 65.6% $34.85 $53.15 65.6%
November 18, 2001................. 33.92 51.26 66.2 34.08 51.50 66.2
November 18, 2002................. 33.15 49.62 66.8 33.30 49.85 66.8
November 18, 2003................. 32.38 47.98 67.5 32.53 48.20 67.5
November 18, 2004................. 31.60 46.33 68.2 31.75 46.55 68.2
November 18, 2005................. 25.25 44.69 56.5 25.37 44.90 56.5
November 18, 2006................. 24.32 43.04 56.5 24.44 43.25 56.5
November 18, 2007................. 23.39 41.40 56.5 23.51 41.60 56.5
November 18, 2008................. 22.46 39.76 56.5 22.57 39.96 56.5
November 18, 2009................. 21.53 38.11 56.5 21.64 38.31 56.5
November 18, 2010................. 0.00 0.00 NA 0.00 0.00 NA
</TABLE>
<TABLE>
<CAPTION>
N6702 N6703D
-------------------------------------------- --------------------------------------------
EQUIPMENT NOTE ASSUMED EQUIPMENT NOTE ASSUMED
OUTSTANDING AIRCRAFT LOAN TO OUTSTANDING AIRCRAFT LOAN TO
BALANCE VALUE AIRCRAFT BALANCE VALUE AIRCRAFT
(IN MILLIONS) (IN MILLIONS) VALUE RATIO (IN MILLIONS) (IN MILLIONS) VALUE RATIO
-------------- ------------- ----------- -------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
November 16, 2000................. $34.93 $53.26 65.6% $35.87 $54.68 65.6%
November 18, 2001................. 34.16 51.61 66.2 35.08 53.00 66.2
November 18, 2002................. 33.38 49.96 66.8 34.29 51.31 66.8
November 18, 2003................. 32.61 48.32 67.5 33.50 49.63 67.5
November 18, 2004................. 31.83 46.67 68.2 32.71 47.95 68.2
November 18, 2005................. 25.44 45.02 56.5 26.14 46.27 56.5
November 18, 2006................. 24.51 43.38 56.5 25.19 44.59 56.5
November 18, 2007................. 23.58 41.73 56.5 24.24 42.91 56.5
November 18, 2008................. 22.65 40.08 56.5 23.29 41.22 56.5
November 18, 2009................. 21.72 38.44 56.5 22.34 39.54 56.5
November 18, 2010................. 0.00 0.00 NA 0.00 0.00 NA
</TABLE>
<TABLE>
<CAPTION>
N6704Z N6705Y
-------------------------------------------- --------------------------------------------
EQUIPMENT NOTE ASSUMED EQUIPMENT NOTE ASSUMED
OUTSTANDING AIRCRAFT LOAN TO OUTSTANDING AIRCRAFT LOAN TO
BALANCE VALUE AIRCRAFT BALANCE VALUE AIRCRAFT
(IN MILLIONS) (IN MILLIONS) VALUE RATIO (IN MILLIONS) (IN MILLIONS) VALUE RATIO
-------------- ------------- ----------- -------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
November 16, 2000................. $35.87 $55.22 65.0% $35.88 $55.22 65.0%
November 18, 2001................. 35.08 53.53 65.5 35.09 53.54 65.5
November 18, 2002................. 34.29 51.84 66.1 34.29 51.85 66.1
November 18, 2003................. 33.49 50.15 66.8 33.50 50.16 66.8
November 18, 2004................. 32.70 48.47 67.5 32.71 48.47 67.5
November 18, 2005................. 26.28 46.78 56.2 26.28 46.79 56.2
November 18, 2006................. 25.48 45.09 56.5 25.48 45.10 56.5
November 18, 2007................. 24.52 43.40 56.5 24.53 43.41 56.5
November 18, 2008................. 23.57 41.71 56.5 23.57 41.72 56.5
November 18, 2009................. 22.62 40.03 56.5 22.62 40.04 56.5
November 18, 2010................. 0.00 0.00 NA 0.00 0.00 NA
</TABLE>
<TABLE>
<CAPTION>
N6706Q N6707A
-------------------------------------------- --------------------------------------------
EQUIPMENT NOTE ASSUMED EQUIPMENT NOTE ASSUMED
OUTSTANDING AIRCRAFT LOAN TO OUTSTANDING AIRCRAFT LOAN TO
BALANCE VALUE AIRCRAFT BALANCE VALUE AIRCRAFT
(IN MILLIONS) (IN MILLIONS) VALUE RATIO (IN MILLIONS) (IN MILLIONS) VALUE RATIO
-------------- ------------- ----------- -------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
November 16, 2000................. $35.93 $55.30 65.0% $35.95 $55.32 65.0%
November 18, 2001................. 35.14 53.61 65.5 35.16 53.64 65.5
November 18, 2002................. 34.34 51.92 66.1 34.37 51.95 66.1
November 18, 2003................. 33.55 50.24 66.8 33.58 50.27 66.8
November 18, 2004................. 32.76 48.55 67.5 32.79 48.59 67.5
November 18, 2005................. 26.33 46.87 56.2 26.36 46.91 56.2
November 18, 2006................. 25.53 45.18 56.5 25.55 45.22 56.5
November 18, 2007................. 24.57 43.49 56.5 24.60 43.54 56.5
November 18, 2008................. 23.62 41.81 56.5 23.65 41.86 56.5
November 18, 2009................. 22.67 40.12 56.5 22.70 40.17 56.5
November 18, 2010................. 0.00 0.00 NA 0.00 0.00 NA
</TABLE>
IV-5
<PAGE> 123
APPENDIX IV
LOAN TO VALUE RATIOS OF EQUIPMENT NOTES
<TABLE>
<CAPTION>
N6708D N6709
-------------------------------------------- --------------------------------------------
EQUIPMENT NOTE ASSUMED EQUIPMENT NOTE ASSUMED
OUTSTANDING AIRCRAFT LOAN TO OUTSTANDING AIRCRAFT LOAN TO
BALANCE VALUE AIRCRAFT BALANCE VALUE AIRCRAFT
(IN MILLIONS) (IN MILLIONS) VALUE RATIO (IN MILLIONS) (IN MILLIONS) VALUE RATIO
-------------- ------------- ----------- -------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
November 16, 2000................. $36.28 $55.82 65.0% $36.68 $55.88 65.6%
November 18, 2001................. 35.49 54.13 65.6 35.89 54.19 66.2
November 18, 2002................. 34.69 52.44 66.2 35.09 52.50 66.8
November 18, 2003................. 33.90 50.75 66.8 34.30 50.81 67.5
November 18, 2004................. 33.10 49.06 67.5 33.50 49.12 68.2
November 18, 2005................. 26.62 47.37 56.2 26.80 47.43 56.5
November 18, 2006................. 25.81 45.68 56.5 25.84 45.74 56.5
November 18, 2007................. 24.85 43.99 56.5 24.88 44.05 56.5
November 18, 2008................. 23.90 42.29 56.5 23.93 42.36 56.5
November 18, 2009................. 22.94 40.60 56.5 22.97 40.67 56.5
November 18, 2010................. 0.00 0.00 NA 0.00 0.00 NA
</TABLE>
<TABLE>
<CAPTION>
N6710E N6711M
-------------------------------------------- --------------------------------------------
EQUIPMENT NOTE ASSUMED EQUIPMENT NOTE ASSUMED
OUTSTANDING AIRCRAFT LOAN TO OUTSTANDING AIRCRAFT LOAN TO
BALANCE VALUE AIRCRAFT BALANCE VALUE AIRCRAFT
(IN MILLIONS) (IN MILLIONS) VALUE RATIO (IN MILLIONS) (IN MILLIONS) VALUE RATIO
-------------- ------------- ----------- -------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
November 16, 2000................. $36.69 $55.90 65.6% $36.76 $55.99 65.7%
November 18, 2001................. 35.90 54.21 66.2 35.96 54.30 66.2
November 18, 2002................. 35.10 52.52 66.8 35.17 52.62 66.8
November 18, 2003................. 34.31 50.83 67.5 34.38 50.93 67.5
November 18, 2004................. 33.51 49.15 68.2 33.58 49.24 68.2
November 18, 2005................. 26.80 47.46 56.5 26.86 47.56 56.5
November 18, 2006................. 25.85 45.77 56.5 25.91 45.87 56.5
November 18, 2007................. 24.89 44.08 56.5 24.96 44.18 56.5
November 18, 2008................. 23.94 42.39 56.5 24.00 42.50 56.5
November 18, 2009................. 22.98 40.71 56.5 23.05 40.81 56.5
November 18, 2010................. 0.00 0.00 NA 0.00 0.00 NA
</TABLE>
<TABLE>
<CAPTION>
N6712B N6713Y
-------------------------------------------- --------------------------------------------
EQUIPMENT NOTE ASSUMED EQUIPMENT NOTE ASSUMED
OUTSTANDING AIRCRAFT LOAN TO OUTSTANDING AIRCRAFT LOAN TO
BALANCE VALUE AIRCRAFT BALANCE VALUE AIRCRAFT
(IN MILLIONS) (IN MILLIONS) VALUE RATIO (IN MILLIONS) (IN MILLIONS) VALUE RATIO
-------------- ------------- ----------- -------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
November 16, 2000................. $37.04 $56.41 65.7% $37.04 $56.41 65.7%
November 18, 2001................. 36.24 54.71 66.2 36.24 54.71 66.2
November 18, 2002................. 35.44 53.01 66.9 35.44 53.02 66.9
November 18, 2003................. 34.64 51.31 67.5 34.65 51.32 67.5
November 18, 2004................. 33.85 49.61 68.2 33.85 49.63 68.2
November 18, 2005................. 27.08 47.91 56.5 27.08 47.93 56.5
November 18, 2006................. 26.12 46.22 56.5 26.13 46.24 56.5
November 18, 2007................. 25.16 44.52 56.5 25.17 44.55 56.5
November 18, 2008................. 24.20 42.82 56.5 24.21 42.85 56.5
November 18, 2009................. 23.24 41.12 56.5 23.25 41.16 56.5
November 18, 2010................. 0.00 0.00 NA 0.00 0.00 NA
</TABLE>
<TABLE>
<CAPTION>
N1602 N1603
-------------------------------------------- --------------------------------------------
EQUIPMENT NOTE ASSUMED EQUIPMENT NOTE ASSUMED
OUTSTANDING AIRCRAFT LOAN TO OUTSTANDING AIRCRAFT LOAN TO
BALANCE VALUE AIRCRAFT BALANCE VALUE AIRCRAFT
(IN MILLIONS) (IN MILLIONS) VALUE RATIO (IN MILLIONS) (IN MILLIONS) VALUE RATIO
-------------- ------------- ----------- -------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
November 16, 2000................. $52.60 $80.28 65.5% $52.82 $80.62 65.5%
November 18, 2001................. 51.40 77.73 66.1 51.62 78.06 66.1
November 18, 2002................. 50.20 75.19 66.8 50.42 75.51 66.8
November 18, 2003................. 49.01 72.64 67.5 49.22 72.95 67.5
November 18, 2004................. 47.81 70.09 68.2 48.02 70.40 68.2
November 18, 2005................. 38.16 67.54 56.5 38.33 67.84 56.5
November 18, 2006................. 36.72 65.00 56.5 36.89 65.29 56.5
November 18, 2007................. 35.28 62.45 56.5 35.44 62.73 56.5
November 18, 2008................. 33.84 59.90 56.5 34.00 60.18 56.5
November 18, 2009................. 32.41 57.35 56.5 32.56 57.62 56.5
November 18, 2010................. 0.00 0.00 NA 0.00 0.00 NA
</TABLE>
IV-6
<PAGE> 124
APPENDIX IV
LOAN TO VALUE RATIOS OF EQUIPMENT NOTES
<TABLE>
<CAPTION>
N1604R N1605
-------------------------------------------- --------------------------------------------
EQUIPMENT NOTE ASSUMED EQUIPMENT NOTE ASSUMED
OUTSTANDING AIRCRAFT LOAN TO OUTSTANDING AIRCRAFT LOAN TO
BALANCE VALUE AIRCRAFT BALANCE VALUE AIRCRAFT
(IN MILLIONS) (IN MILLIONS) VALUE RATIO (IN MILLIONS) (IN MILLIONS) VALUE RATIO
-------------- ------------- ----------- -------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
November 16, 2000................ $52.64 $81.15 64.9% $52.74 $81.29 64.9%
November 18, 2001................ 51.44 78.60 65.5 51.55 78.74 65.5
November 18, 2002................ 50.24 76.04 66.1 50.35 76.19 66.1
November 18, 2003................ 49.04 73.49 66.7 49.15 73.64 66.7
November 18, 2004................ 47.84 70.94 67.4 47.95 71.09 67.4
November 18, 2005................ 38.37 68.38 56.1 38.46 68.54 56.1
November 18, 2006................ 37.17 65.83 56.5 37.26 65.99 56.5
November 18, 2007................ 35.75 63.28 56.5 35.84 63.43 56.5
November 18, 2008................ 34.31 60.72 56.5 34.40 60.88 56.5
November 18, 2009................ 32.87 58.17 56.5 32.96 58.33 56.5
November 18, 2010................ 0.00 0.00 NA 0.00 0.00 NA
</TABLE>
<TABLE>
<CAPTION>
N16065 N1607B
-------------------------------------------- --------------------------------------------
EQUIPMENT NOTE ASSUMED EQUIPMENT NOTE ASSUMED
OUTSTANDING AIRCRAFT LOAN TO OUTSTANDING AIRCRAFT LOAN TO
BALANCE VALUE AIRCRAFT BALANCE VALUE AIRCRAFT
(IN MILLIONS) IN MILLIONS) VALUE RATIO (IN MILLIONS) (IN MILLIONS) VALUE RATIO
-------------- ------------- ----------- -------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
November 16, 2000................ $52.82 $81.40 64.9% $55.19 $84.95 65.0%
November 18, 2001................ 51.62 78.85 65.5 53.98 82.36 65.5
November 18, 2002................ 50.42 76.30 66.1 52.76 79.76 66.1
November 18, 2003................ 49.22 73.75 66.7 51.54 77.17 66.8
November 18, 2004................ 48.02 71.20 67.4 50.32 74.58 67.5
November 18, 2005................ 38.52 68.64 56.1 40.44 71.99 56.2
November 18, 2006................ 37.32 66.09 56.5 39.21 69.39 56.5
November 18, 2007................ 35.90 63.54 56.5 37.74 66.80 56.5
November 18, 2008................ 34.46 60.99 56.5 36.28 64.21 56.5
November 18, 2009................ 33.02 58.44 56.5 34.81 61.61 56.5
November 18, 2010................ 0.00 0.00 NA 0.00 0.00 NA
</TABLE>
IV-7
<PAGE> 125
PROSPECTUS
DELTA AIR LINES, INC.
PASS THROUGH CERTIFICATES
-------------------------
This prospectus relates to the issuance of Pass Through Certificates by one
or more Pass Through Trusts to be formed by Delta Air Lines, Inc.
THE CERTIFICATES:
- Will be issued in one or more series with distribution rates and distribution
dates specified in the prospectus supplement;
- Will represent interests in the relevant Pass Through Trust only and will be
repaid only from the assets of that Trust, and will not represent obligations
of, or be guaranteed by, Delta;
- May have one or more forms of liquidity enhancement; and
- Will be issued in registered form and may be issued in accordance with a
book-entry system.
The aggregate public offering price of the Certificates will not exceed
$1,746,381,000.
EACH PASS THROUGH TRUST:
- Will issue one or more series of Certificates;
- Will use the proceeds of each series of Certificates to purchase Equipment
Notes of one or more series, each with an interest rate equal to the rate on
that series of Certificates and with a maturity date on or prior to the final
distribution date for that series of Certificates; and
- Will pass through principal and interest paid on the Equipment Notes that it
owns, subject to any applicable subordination provisions.
THE EQUIPMENT NOTES:
- Will be issued in series;
- Will be issued either in connection with sale/leaseback transactions relating
to aircraft leased to us ("Leased Aircraft"), or to finance or refinance all
or a portion of the cost of aircraft owned by us ("Owned Aircraft") or to
raise funds for general corporate purposes;
- If issued in connection with Leased Aircraft, will not be our obligations and
will not be guaranteed by us, but amounts due from us under the relevant lease
will be sufficient to make all payments required under those Equipment Notes;
and
- Will be secured by the aircraft specified in the prospectus supplement and, in
the case of any Leased Aircraft, by the interest of the lessor in that lease.
This prospectus is accompanied by a prospectus supplement which includes
additional information as to the particular series of Certificates being sold
and the underlying Equipment Notes. Sales of Certificates may not be consummated
without both this prospectus and a prospectus supplement.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED THAT
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY SECURITIES IN ANY
STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
The date of this prospectus is February 23, 2000
<PAGE> 126
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS
About This Prospectus....................................... 1
Delta Air Lines, Inc........................................ 1
General Outline............................................. 1
Use of Proceeds............................................. 2
Consolidated Ratios of Earnings to Fixed Charges............ 3
Description of the Certificates............................. 3
Description of the Equipment Notes.......................... 17
Certain United States Federal Income Tax Consequences....... 24
ERISA Considerations........................................ 27
Plan of Distribution........................................ 27
Validity of the Certificates................................ 28
Experts..................................................... 28
Where You Can Find More Information......................... 29
</TABLE>
-------------------------
You should rely only on the information contained in this prospectus or any
prospectus supplement or information contained in documents which you are
referred to in this prospectus or any prospectus supplement. Delta has not
authorized anyone to provide you with information different from that contained
in this prospectus or any prospectus supplement. Delta is offering to sell the
pass through certificates only in jurisdictions where offers and sales are
permitted. The information contained in this prospectus or any prospectus
supplement is accurate only as of the date on the front of those documents,
regardless of the time of delivery of the documents or any sale of the pass
through certificates.
<PAGE> 127
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that Delta filed with
the Securities and Exchange Commission utilizing a shelf registration process.
Under this shelf process, the Certificates described in this prospectus may be
sold in one or more offerings up to a total dollar amount of $1,746,381,000.
This prospectus provides you with a general description of the Certificates that
may be offered.
Each time Certificates are sold, Delta will provide a prospectus supplement
that will contain specific information about the terms of that offering. The
prospectus supplement may also add, update or change information contained in
this prospectus. You should read both this prospectus and any prospectus
supplement together with additional information described in the section
entitled "Where You Can Find More Information" on page 29.
For more detail, you should read our registration statement and the
exhibits filed with our registration statement.
DELTA AIR LINES, INC.
Delta is a major airline engaged in domestic and foreign air
transportation. We provide scheduled air transportation over a network of routes
throughout the United States and between the United States and various foreign
countries.
We operate hubs in Atlanta, Cincinnati, Dallas/Fort Worth and Salt Lake
City. We also operate an international gateway at New York's Kennedy Airport and
a Pacific gateway in Portland, Oregon. Our principal executive offices are
located at Hartsfield Atlanta International Airport, Atlanta, Georgia 30320, and
our telephone number is (404) 715-2600. Delta is incorporated under the laws of
the State of Delaware.
GENERAL OUTLINE
The Certificates are securities that evidence an ownership interest in a
pass through trust (a "Trust"). The holders of the Certificates issued by a
Trust will be the beneficiaries of that Trust. The beneficial interest in a
Trust represented by a Certificate will be a percentage interest in the property
of that Trust. The beneficial interest will be equal to the original face amount
of that Certificate divided by the original face amount of all the Certificates
issued by that Trust. Each Certificate will represent a beneficial interest only
in the property of the Trust that issued that Certificate. Multiple series of
Certificates may be issued. If more than one series of Certificates is issued,
each series of Certificates will be issued by a separate Trust.
The property that will be held by each Trust will include equipment notes
("Equipment Notes") secured by either Leased Aircraft or Owned Aircraft.
Payments on principal and interest on the Equipment Notes owned by a Trust will
be passed through to holders of the Certificates issued by that Trust in
accordance with the terms of the Basic Agreement (as defined below) for that
Trust.
We will enter into a Pass Through Trust Agreement (the "Basic Agreement")
in anticipation of offerings of Certificates. In connection with issuance of a
particular series of Certificates, we will enter into a separate Trust
Supplement (a "Trust Supplement"). The Trust Supplement with respect to a
particular series of Certificates will form a separate Trust for that series,
and will name the trustee for that Trust (the "Trustee"). Action taken by the
Trustee with respect to any series of Certificates will be taken on behalf of
the Trust it represents.
1
<PAGE> 128
The Trustee will enter into one or more purchase or refunding agreements
(each, a "Note Purchase Agreement") in connection with each series of
Certificates. Under a Note Purchase Agreement, the Trustee will agree to
purchase one or more Equipment Notes to be issued under a trust indenture (an
"Indenture"). Each Equipment Note will relate to one or more Aircraft, as
described in the applicable prospectus supplement.
The Equipment Notes in each Trust will have identical interest rates, which
in each case will be equal to the rate applicable to the Certificates issued by
that Trust. Also, the Equipment Notes in each Trust will have identical priority
of payment (in each case, relative to any other Equipment Notes issued under the
same Indenture). The maturity dates of the Equipment Notes in each Trust will
occur on or before the final distribution date applicable to the Certificates
that will be issued by that Trust.
The Trustee will distribute the amount of payments of principal, premium,
if any, and interest received by it as holder of the Equipment Notes to the
registered holders of Certificates of the Trust (the "Certificateholders") in
which the Equipment Notes are held. These distributions may be subject to the
effect of any cross-subordination provisions described in the prospectus
supplement for a series of Certificates (which could, if applicable, limit or
delay your receipt of distributions).
LEASED AIRCRAFT
Each series of Equipment Notes issued in connection with a Leased Aircraft
(the "Leased Aircraft Notes") will be issued by a trustee (an "Owner Trustee")
under an Indenture (a "Leased Aircraft Indenture") between an Owner Trustee and
a loan trustee (a "Loan Trustee"). The Owner Trustee and the Loan Trustee with
respect to each series of Leased Aircraft Notes will be specified in the related
prospectus supplement.
The Owner Trustee will not be acting in its individual capacity, but solely
as owner trustee of a separate trust for the benefit of one or more
institutional investors (each, an "Owner Participant"). With respect to each
Leased Aircraft, the related Owner Participant(s) will have provided or will
provide, from sources other than the Leased Aircraft Notes, a portion of the
equipment cost of the related Leased Aircraft. No Owner Participant will be
personally liable for any amount payable under the related Leased Aircraft
Indenture or the related Leased Aircraft Notes.
Each Leased Aircraft will be leased by the related Owner Trustee to us
pursuant to a separate lease agreement (a "Lease").
OWNED AIRCRAFT
Equipment Notes that are not Leased Aircraft Notes are "Owned Aircraft
Notes". Each series of Owned Aircraft Notes will be issued under an Indenture
(an "Owned Aircraft Indenture") between a Loan Trustee and us.
USE OF PROCEEDS
The Trustee will use the proceeds of the Certificates for the purchase of
one or more Equipment Notes. The Equipment Notes will be issued:
- To finance or refinance the debt portion and, in certain cases, to
refinance some of the equity portion of one or more separate leveraged
lease transactions entered into by us, as lessee of Leased Aircraft;
- To finance the purchase of Owned Aircraft by us, or to refinance any debt
previously issued by us in connection with our purchase of Owned
Aircraft; and
- To provide us with proceeds available for general corporate purposes.
2
<PAGE> 129
General corporate purposes of Delta may include, among other possible uses, the
repayment of short-term or long-term indebtedness, capital expenditures,
repurchases of common stock and acquisitions.
To the extent that the proceeds of any offering of Certificates are not
used to purchase Equipment Notes on the date of issuance of those Certificates,
the relevant proceeds will be held for the benefit of those Certificateholders.
If those proceeds are not used to purchase Equipment Notes by the date specified
in the applicable prospectus supplement, they will be returned to the applicable
Certificateholders. See "Description of Certificates -- Delayed Purchase of
Equipment Notes" on pages 15-16 for a description of the procedure for delayed
purchase of Equipment Notes.
The prospectus supplement with respect to any series of Certificates will
provide additional details with respect to the use of proceeds of those
Certificates, and with respect to the use of proceeds of any Equipment Notes to
be purchased by the Trust.
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the historical ratios of earnings to fixed
charges of Delta and its consolidated subsidiaries for the periods indicated:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEARS ENDED JUNE 30, DECEMBER 31,
-------------------------------- ------------
1995 1996 1997 1998 1999 1998 1999
---- ---- ---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C>
1.69 1.43 3.05 3.41 3.45 3.04 3.67
</TABLE>
Earnings represent:
- Income before income taxes, excluding the cumulative effect of accounting
changes; plus
- Fixed charges, excluding capitalized interest and interest offset on the
Guaranteed Serial ESOP Notes of the Delta Family-Care Savings Plan, which
are guaranteed by Delta.
Fixed charges include:
- Interest, whether expensed or capitalized, including gross interest on
the Guaranteed Serial ESOP Notes;
- Amortization of debt issuance costs; and
- One-half of rental expense, except for the years ended June 30, 1995,
1996 and 1997, where one-third of the rentals were included in fixed
charges. Management of Delta believes this is representative of the
interest factor in those periods.
DESCRIPTION OF THE CERTIFICATES
In connection with each offering under this prospectus and accompanying
prospectus supplement, one or more separate Trusts will be formed and one or
more series of Certificates will be issued. Each series of Certificates will be
issued pursuant to the Basic Agreement and a Trust Supplement between the
Trustee and us. The statements made under this caption are summaries of detailed
provisions of the Basic Agreement.
We have filed a copy of the Basic Agreement with the Securities and
Exchange Commission ("SEC") as an exhibit to the registration statement. In
addition, we will file with the SEC forms of each of the agreements listed below
and discussed in this prospectus or the accompanying prospectus supplement:
- Trust Supplement
- Note Purchase Agreement
- Indenture
- Lease
- Trust Agreement
3
<PAGE> 130
- Participation Agreement, and
- Liquidity Facility Assignment
You should refer to those agreements for more information regarding the terms
discussed in this prospectus and accompanying prospectus supplement. See "Where
You Can Find More Information" on page 29 for information on documents we file
with the SEC. The summaries contained in this prospectus and the accompanying
prospectus supplement are qualified in their entirety by reference to those
filed agreements.
The Certificates offered pursuant to this prospectus will be limited to
$1,746,381,000 aggregate public offering price.
The prospectus supplement accompanying this prospectus contains a glossary.
You should refer to the glossary for definitions of the material terms used with
respect to the series of Certificates being offered. To the extent that any
provision in the accompanying prospectus supplement is inconsistent with this
summary, the prospectus supplement will control.
GENERAL
WHAT THE CERTIFICATES REPRESENT
Each Certificate will represent a fractional undivided interest in the
Trust created by the Basic Agreement and the related Trust Supplement. All
payments and distributions will be made only from the property of the related
Trust (the "Trust Property"). The Trust Property will include:
- The Equipment Notes held in that Trust;
- All monies at any time paid, due and to become due on those Equipment
Notes (subject to the effect of any cross-subordination provisions
described in the prospectus supplement for a series of Certificates);
- Funds from time to time deposited with the Trustee in accounts of the
Trust; and
- If specified in the prospectus supplement related to a series of
Certificates, rights under intercreditor agreements relating to
cross-subordination arrangements and monies receivable under a liquidity
facility.
The Certificates will be issued in minimum denominations of $1,000 or an
integral multiple of that amount. One Certificate of each series, however, may
be issued in a different denomination.
WHAT THE CERTIFICATES DO NOT REPRESENT
The Certificates do not represent an interest in or an obligation of us,
the Trustee, any of the Loan Trustees or Owner Trustees in their individual
capacities, any Owner Participant or any of their affiliates. By accepting a
Certificate, you agree to look solely to the income and proceeds from the Trust
Property as provided in the Basic Agreement and the applicable Trust Supplement.
ISSUANCE OF EQUIPMENT NOTES
The Equipment Notes issued under a single Indenture may be held in more
than one Trust. One Trust may hold Equipment Notes issued under more than one
Indenture. Unless otherwise provided in a prospectus supplement, only Equipment
Notes having the same priority of payment (which will constitute a "Class" of
Equipment Notes) may be held in the same Trust.
PASS THROUGH OF INTEREST PAID ON EQUIPMENT NOTES
Interest paid on the Equipment Notes will be passed through to
Certificateholders of each Trust. The rate of payment to Certificateholders will
be the same rate per annum payable on the Equipment Notes held by that Trust.
This rate will be set forth for each Trust on the cover page of the applicable
prospectus supplement, and may be affected by any cross-subordination provisions
described in the prospectus supplement for a series of Certificates.
4
<PAGE> 131
DESCRIPTION OF INFORMATION CONTAINED IN PROSPECTUS SUPPLEMENTS
You should consult the related prospectus supplement for a description of
the specific series of Certificates. The information in the related prospectus
supplement will include the following:
- Specific designation and title of the Certificates;
- Aggregate principal amount of each series of Certificates;
- Regular Distribution Dates and Special Distribution Dates applicable to
those Certificates;
- Distribution rates on those Certificates;
- Ranking of the Certificates in terms of priority of payment;
- Subordination provisions among the holders of Certificates, including any
cross-subordination provisions among the holders of Certificates in
separate Trusts;
- Currency or currencies (including currency units) in which the
Certificates may be denominated;
- Specific form of the Certificates, including whether or not the
Certificates are to be issued in accordance with a book-entry system;
- Any related lease or financing arrangements;
- Any listing on a national securities exchange;
- Description of the Equipment Notes to be purchased by the Trust,
including:
-- the period or periods within which, the price or prices at which, and
the terms and conditions upon which the Equipment Notes may or must be
redeemed or defeased in whole or in part, by us or, with respect to
Leased Aircraft Notes, the Owner Trustee,
-- the interest rate and payment dates of the Equipment Notes,
-- the payment priority of the Equipment Notes in relation to any other
Equipment Notes issued in relation to the same Aircraft,
-- any additional related security or liquidity enhancements, and
-- any intercreditor or other rights or limitations between the holders
of Equipment Notes which have different priorities but relate to the
same Aircraft;
- Description of the related Aircraft;
- Description of the related Note Purchase Agreement and related
Indentures, including:
-- a description of the events of default under the related Indentures,
-- the remedies exercisable upon the occurrence of events of default, and
-- any limitations on the exercise of those remedies with respect to the
related Equipment Notes;
- If the Certificates relate to Leased Aircraft, a description of the
related Leases, Trust Agreements and Participation Agreements, including:
-- the names of the related Owner Trustees,
-- a description of the events of default under the Leases, the remedies
exercisable upon the occurrence of the described events of default and
any limitations on the exercise of those remedies with respect to the
Leased Aircraft Notes,
-- a description of the events of loss with respect to the related Leased
Aircraft and any right we may have to replace Leased Aircraft, and
5
<PAGE> 132
-- any rights of the Owner Trustee or Owner Participant to cure our
failures to pay rent under the related Lease;
- Description of the terms of any underwriting arrangement, including:
-- the names of any underwriters or agents,
-- the amounts to be purchased by underwriters or agents, and
-- the compensation of underwriters or agents;
- The extent, if any, to which the provisions of the operative documents
applicable to the Equipment Notes may be amended by the parties to those
Equipment Notes and whether the consent of the holders or the consent of
the holders of a specified percentage of aggregate principal amount of
the Equipment Notes is necessary for amendment; and
- Any other special terms pertaining to the relevant Certificates.
BOOK-ENTRY REGISTRATION
GENERAL
The applicable prospectus supplement for each series of Certificates will
state whether those Certificates will be subject to the following provisions and
the provisions under the caption "Definitive Certificates" on page 8.
Upon issuance, each series of Certificates will be represented by one or
more fully registered global certificates. Unless otherwise provided in a
prospectus supplement, each global certificate will be deposited with, or on
behalf of, The Depository Trust Company ("DTC") and registered in the name of
DTC's nominee, CEDE & Co. ("Cede"). No person acquiring an interest in
Certificates (a "Certificate Owner") will be entitled to receive a certificate
representing their interest in those Certificates until, if ever, a Definitive
Certificate, as described under "Definitive Certificates" on page 8 is issued.
Unless and until Definitive Certificates are issued, all references to
actions by Certificateholders will refer to actions taken by DTC upon
instructions from DTC Participants. All references to distributions, notices,
reports and statements to Certificateholders will refer, as the case may be, to
distributions, notices, reports and statements to DTC or Cede, as the registered
holder of those Certificates, or to DTC Participants for distribution to
Certificate Owners in accordance with DTC procedures.
DTC AND DTC PARTICIPANTS
DTC is:
- A limited purpose trust company organized under the laws of the State of
New York;
- A member of the Federal Reserve System;
- A "clearing corporation" within the meaning of the New York Uniform
Commercial Code; and
- A "clearing agency" registered pursuant to section 17A of the Exchange
Act.
DTC was created to hold securities for its participants ("DTC
Participants") and to facilitate the clearance and settlement of securities
transactions between DTC Participants through electronic book-entries, thereby
eliminating the need for physical transfer of certificates. DTC Participants
include:
- Securities brokers and dealers
- Banks
- Trust companies
- Clearing corporations
Indirect access to the DTC system also is available to Indirect
Participants that clear through or maintain a custodial relationship with a DTC
Participant either directly or indirectly. Indirect Participants may include:
- Banks
- Brokers
6
<PAGE> 133
- Dealers
- Trust companies
PROCEDURE FOR TRANSFERS AND PAYMENTS
Certificate Owners that are not DTC Participants or Indirect Participants
but desire to purchase, sell or otherwise transfer ownership of, or other
interests in, the Certificates may do so only through DTC Participants and
Indirect Participants. In addition, Certificate Owners will receive all
distributions of principal and interest from the Trustee through DTC, DTC
Participants or Indirect Participants, as the case may be.
Under a book-entry format, Certificate Owners may experience some delay in
their receipt of payments, because the payments will be forwarded by the Trustee
to Cede, as nominee for DTC. DTC will forward those payments in same-day funds
to DTC Participants who are credited with ownership of the Certificates. The
amounts forwarded to DTC Participants will be proportionate to the principal
amount of each DTC Participant's respective holdings of beneficial interests in
the Certificates. Subsequently, DTC Participants will forward payments to
Indirect Participants or Certificate Owners, as the case may be, in accordance
with customary industry practices. The forwarding of these distributions to the
Certificate Owners will be the responsibility of the appropriate DTC
Participants.
Unless and until, if ever, the Definitive Certificates are issued, the only
"Certificateholder" will be Cede. Certificate Owners will not be recognized by
the Trustee as Certificateholders, as the term is used in the Basic Agreement,
and Certificate Owners will be permitted to exercise the rights of
Certificateholders only indirectly through DTC and DTC Participants.
Under the rules, regulations and procedures creating and affecting DTC and
its operations (the "Rules"), DTC is required to make book-entry transfers of
the Certificates among the DTC Participants for whom it is acting with respect
to the Certificates. DTC also is required to receive and transmit distributions
of principal, premium, if any, and interest with respect to the Certificates.
Similarly, the DTC Participants and Indirect Participants, with which
Certificate Owners have accounts for their Certificates, are required to make
book-entry transfers and receive and transmit applicable payments on behalf of
their respective customers. Accordingly, although Certificate Owners will not
possess the Certificates, the Rules provide a mechanism by which Certificate
Owners will receive payments and will be able to transfer their interests.
Because DTC can only act on behalf of DTC Participants, who in turn act on
behalf of Indirect Participants, the ability of a Certificate Owner to pledge
its Certificates to persons or entities that do not participate in the DTC
system, or to otherwise act with respect to its Certificates, may be limited due
to the lack of a physical certificate for those Certificates.
DTC has advised Delta that it will take any action permitted to be taken by
a Certificateholder under the Basic Agreement only at the direction of one or
more of the DTC Participants to whose accounts the Certificates are credited.
Additionally, in the event any action requires approval by Certificateholders of
a particular percentage of beneficial interest in each Trust, DTC will take such
action only at the direction of and on behalf of DTC Participants whose holdings
include undivided interests that satisfy that percentage. DTC may take
conflicting actions with respect to the undivided interests of DTC Participants
who hold those undivided interests.
Neither Delta nor the Trustee will have any liability for:
- Any aspect of the records relating to or payments made on account of
beneficial ownership interests in the Certificates held by Cede, as
nominee for DTC; or
- For maintaining, supervising or reviewing any records relating to those
beneficial ownership interests.
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DEFINITIVE CERTIFICATES
Certificates will be issued in certificated form ("Definitive
Certificates") to Certificate Owners or their nominees, rather than to DTC or
its nominee, only if:
- Delta advises the Trustee in writing that DTC is no longer willing or
able to discharge properly its responsibilities as depository with
respect to the Certificates and Delta is unable to locate a qualified
successor;
- Delta, at its option, elects to terminate the book-entry system through
DTC; or
- After the occurrence of particular events specified in the related
Prospectus Supplement, Certificate Owners with fractional undivided
interests aggregating at least a majority in interest in the applicable
Trust advise the Trustee, Delta and DTC through DTC Participants in
writing that the continuation of a book-entry system through DTC, or its
successor, is no longer in the Certificate Owners' best interest.
Upon the occurrence of any of these events, the Trustee will be required to
notify all Certificate Owners through DTC Participants of the availability of
Definitive Certificates. Upon surrender by DTC of the global certificates
representing the Certificates and receipt of instructions for re-registration,
the Trustee will reissue the Certificates as Definitive Certificates to
Certificate Owners.
If and when Definitive Certificates are issued to owners, distributions of
principal, premium, if any, and interest with respect to Certificates will be
made in accordance with the procedures set forth in the Basic Agreement and the
applicable Trust Supplements. The Trustee will make these distributions directly
to holders in whose names the Definitive Certificates were registered at the
close of business on the applicable record date. The distributions will be made
by check mailed to the address of each applicable holder as it appears on the
register maintained by the Trustee. The final payment on any Certificate,
however, will be made only upon presentation and surrender of the Certificate at
the office or agency specified in the notice of final distribution to
Certificateholders.
Definitive Certificates will be freely transferable and exchangeable at the
office of the Trustee upon compliance with the requirements set forth in the
Basic Agreement and the applicable Trust Supplements. No service charge will be
imposed for any registration of transfer or exchange, but payment of a sum
sufficient to cover any tax or other governmental charge will be required.
PAYMENTS AND DISTRIBUTIONS
GENERAL
Payments of principal, premium, if any, and interest on the Equipment Notes
held in each Trust will be distributed by the Trustee, upon receipt, to the
Certificateholders of the applicable Trust on the dates specified in the
applicable prospectus supplement, except in certain cases. Any
cross-subordination provisions set forth in the prospectus supplement for a
series of Certificates may affect these payments. Also, payments may be affected
when some or all of the relevant Equipment Notes are in default as described in
the applicable prospectus supplement.
SCHEDULED PAYMENTS
Scheduled payments of principal of, and interest on, the unpaid principal
amount of the Equipment Notes held in each Trust will be scheduled to be
received by the Trustee on the Regular Distribution Dates specified in the
applicable prospectus supplement ("Scheduled Payments"). Each Certificateholder
of each Trust will be entitled to receive a proportional share of any
distribution of Scheduled Payments of principal and interest made on the
Equipment Notes held in that Trust, subject to any cross-subordination
provisions set forth in the prospectus supplement for that series of
Certificates.
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SPECIAL PAYMENTS
Special payments ("Special Payments") include all payments, other than
Scheduled Payments received on a Regular Distribution Date or within five days
thereafter. Special Payments would include payments of principal, premium, if
any, and interest received by the Trustee on account of the early redemption or
purchase, if any, of the Equipment Notes relating to one or more Aircraft held
in a Trust.
Special Payments received by the Trustee relating to one or more Aircraft
will be distributed on the "Special Distribution Date" determined by the method
described in the applicable prospectus supplement. The applicable prospectus
supplement may, however, specify that payments received by the Trustee following
default in relation to the Equipment Notes on a Regular Distribution Date as a
result of a drawing under any Liquidity Facility provided for the benefit of the
specified Certificateholders will be distributed on the Regular Distribution
Date to those Certificateholders. The Trustee will mail notice of any
anticipated Special Distribution Date to the Certificateholders of record of the
applicable Trust.
POOL FACTORS
Certificateholders will receive periodic statements of the Pool Balance and
Pool Factor with respect to the relevant Trust. Those statements will provide
information with respect to the remaining principal portion of the Certificates
issued by that Trust. The "Pool Balance" indicates, as of any given date, the
original aggregate face amount of the Certificates of a Trust less the aggregate
amount of all payments made in relation to those Certificates. The aggregate
amount of all payments will not include, however, payments of interest or
premium or reimbursements of any costs and expenses connected to payments of
interest or premium.
The "Pool Factor" for each Trust as of any date is the Pool Balance for
that Trust divided by the aggregate original face amount of Certificates of that
Trust (rounded to the seventh decimal place).
The Pool Factor for a Trust will initially be 1.0000000 and will decline as
a result of reductions in the Pool Balance of that Trust. The amount of a
Certificateholder's proportional share of the Pool Balance of a Trust will be
the original denomination of the holder's Certificate of that Trust multiplied
by the Pool Factor for that Trust.
The Pool Factor and the Pool Balance for each Trust will be computed and
mailed to the Certificateholders on a Regular Distribution Date or Special
Distribution Date. Each computation will give effect to (1) the payment of
principal, if any, on the Equipment Notes or other Trust Property held in the
Trust and (2) the distribution of principal to be made on that date.
In the event of an early redemption, a purchase of an issue of Equipment
Notes by the related Owner Trustee after an Indenture Default (as defined below)
or a default in the payment of principal in respect of one or more issues of the
Equipment Notes held in a Trust (if the applicable payment is not made within
five days of the Regular Distribution Date), the Pool Factor and the Pool
Balance of each Trust affected will be recomputed, after giving appropriate
effect to that event. Notice of the recomputation will be mailed to the
Certificateholders of that Trust.
REPORTS TO CERTIFICATEHOLDERS
Together with each distribution of a Scheduled Payment or a Special
Payment, the Trustee will send to the Certificateholders a statement giving
effect to that distribution and setting forth the following information:
- The amount of distribution allocable to principal and the amount
allocable to premium per $1,000 aggregate principal amount of Certificate
for that Trust, if any;
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- The amount of distribution allocable to interest, per $1,000 aggregate
principal amount of Certificate for that Trust; and
- The Pool Balance and the Pool Factor for that Trust.
If the Certificates are registered in the name of DTC or its nominee, on
the record date prior to each Regular Distribution Date and Special Distribution
Date, the Trustee will request from DTC a securities position listing setting
forth the names of all DTC Participants reflected on DTC's books as holding
interests in the Certificates on that date. On each Regular Distribution Date
and Special Distribution Date, the applicable Trustee will mail to each of these
DTC Participants the described statement and will make available additional
copies as requested by them for forwarding to Certificate Owners.
In addition, after the end of each calendar year, the Trustee will prepare
a report for each Certificateholder of each Trust at any time during the
preceding calendar year. Each report will contain the sum of the distributions
allocable to principal, premium, if any, and interest with respect to the Trust
for that calendar year. In the event a person was a Certificateholder during
only a portion of that calendar year, the report will contain the sum for the
applicable portion of that calendar year. The report will also contain other
items readily available to the Trustee and which a Certificateholder reasonably
requests as necessary for the purpose of that Certificateholder's preparation of
its federal income tax return. The report and other items will be prepared on
the basis of information supplied to the Trustee by the DTC Participants and
will be delivered by the Trustee to those DTC Participants. The report will then
be available for forwarding by DTC Participants to Certificate Owners.
At the time, if any, Certificates are issued in the form of Definitive
Certificates, the Trustee will prepare and deliver the information described
above to each Certificateholder of record of each Trust as the name and period
of ownership of that Certificateholder appears on the records of the registrar
of the Certificates.
VOTING OF EQUIPMENT NOTES
The Trustee, as holder of the Equipment Notes held in each Trust, has the
right to vote, give consents or waivers or otherwise exercise rights as the
holder of those Equipment Notes. The Basic Agreement and Trust Supplement
relating to each Trust will set forth:
- The circumstances under which the Trustee may direct any action or cast
any vote as the holder of the Equipment Notes held in the applicable
Trust at its own discretion;
- The circumstances in which the Trustee will seek instructions from the
Certificateholders of the Trust before taking action as the holder of
Equipment Notes; and
- If applicable, the percentage of Certificateholders required to direct
the Trustee to take any action.
The Trustee's rights will be subject to the effect of any
cross-subordination provisions set forth in the related prospectus supplement.
If specified in the related prospectus supplement, the right of a Trustee to
vote and give consents and waivers with respect to the Equipment Notes held in
the related Trust may, in the circumstances set forth in an intercreditor
agreement to be executed by that Trustee and specified in that prospectus
supplement, be exercisable by another person specified in that prospectus
supplement.
EVENTS OF DEFAULT AND CERTAIN RIGHTS UPON AN EVENT OF DEFAULT
You will have special rights if an event of default occurs and is not
cured, as described later in this subsection. The prospectus supplement will
specify the events of default under the Basic Agreement ("Events of Default")
and under the related Indentures ("Indenture Defaults"). The Indenture Defaults
in the case of Leased Aircraft Indentures will include events of default under
the related Leases (a "Lease Event of Default"). With respect to any Equipment
Notes that are supported by a
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Liquidity Facility, the Indenture Defaults or Events of Default also may include
events of default under that Liquidity Facility.
Unless otherwise provided in a prospectus supplement, all of the Equipment
Notes issued under the same Indenture will relate to a specific Aircraft and
there will be no cross-collateralization or cross-default provisions in the
Indentures. Accordingly, events resulting in an Indenture Default under any
particular Indenture would not necessarily result in an Indenture Default
occurring under any other Indenture.
As described below under "Cross-Subordination Issues" on page 15, a
prospectus supplement may provide the terms of any cross-subordination
provisions among Certificateholders of separate Trusts. If cross-subordination
provisions are provided, payments made pursuant to an Indenture under which an
Indenture Default has not occurred may be distributed first to the holders of
the Certificates issued under the Trust holding the most senior Equipment Notes
issued under other Indentures.
The ability of the applicable Owner Trustee or Owner Participant under a
Leased Aircraft Indenture to cure Indenture Defaults, including an Indenture
Default that results from the occurrence of a Lease Event of Default under the
related Lease, will be described in the prospectus supplement. Some Certificates
or Equipment Notes may be entitled to the benefits of a Liquidity Facility. A
drawing under a Liquidity Facility for the purpose of making a payment of
interest because Delta failed to make a corresponding payment will not cure an
Indenture Default or any Lease Default related to that failure by Delta.
The prospectus supplement related to a series of Certificates will describe
the circumstances under which the Trustee of a Trust may vote some or all of the
Equipment Notes held in that Trust. The prospectus supplement also will set
forth the percentage of Certificateholders of the Trust entitled to direct the
Trustee to take any action with respect to the Equipment Notes of that Trust. If
the Equipment Notes outstanding under an Indenture are held by more than one
Trust, then the ability of the Certificateholders of any one Trust to cause the
Loan Trustee with respect to any Equipment Notes held in that Trust to
accelerate those Equipment Notes or to direct the exercise of remedies by the
Loan Trustee under the applicable Indenture will depend upon the proportion of
the aggregate principal amount of the Equipment Notes outstanding under the
applicable Indenture and Trust to the aggregate principal amount of all
Equipment Notes outstanding under that Indenture. In addition, if
cross-subordination provisions are applicable to any series of Certificates,
those provisions may affect the ability of the Certificateholders of any one
Trust to accelerate the Equipment Notes or to direct the exercise of remedies by
the Loan Trustee depending, in part, upon the Class of Equipment Notes held in
that Trust.
If the Equipment Notes outstanding under an Indenture are held by more than
one Trust, then each Trust will hold Equipment Notes with different terms from
the Equipment Notes held in the other Trusts. The Certificateholders of each
Trust may, therefore, have divergent or conflicting interests from those of the
Certificateholders of the other Trusts holding Equipment Notes issued under the
same Indenture. In addition, so long as the same institution acts as Trustee of
each Trust, in the absence of instructions from the Certificateholders of any
Trust, the Trustee for that Trust might, for the same reason, be faced with a
potential conflict of interest upon an Indenture Default. In the event this sort
of conflict of interest occurs, the Trustee has indicated that it would resign
as Trustee of one or all of the related Trusts, and a successor trustee would be
appointed in accordance with the terms of the Basic Agreement.
The prospectus supplement for a series of Certificates will specify whether
and under what circumstances the Trustee may sell all or part of the Equipment
Notes held in the related Trust. A "Special Payments Account" will be
established by the Trustee for the benefit of the Certificateholders of the
applicable Trust, and any proceeds received by the Trustee upon any
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such sale will be deposited into that Special Payments Account and distributed
to the Certificateholders of the applicable Trust on a Special Distribution
Date.
The market for Equipment Notes in default may be very limited, and the
Trustee may not be able to sell such Equipment Notes for a reasonable price.
Furthermore, if the same institution acts as Trustee of multiple Trusts, it may
be faced with a conflict in deciding from which Trust to sell Equipment Notes to
available buyers. If the Trustee sells any Equipment Notes in default for less
than their outstanding principal amount, the Certificateholders of that Trust
will receive a smaller amount of principal distributions than anticipated and
will not have any claim for the shortfall against Delta, any Owner Trustee, any
Owner Participant or the Trustee. Furthermore, unless otherwise specified in the
applicable prospectus supplement, neither the Trustee nor the Certificateholders
of that Trust could take any action with respect to any remaining Equipment
Notes held in that Trust, so long as no related Indenture Defaults exist.
The Trustee will deposit in the Special Payments Account for a Trust, and
will distribute to the Certificateholders of that Trust on a Special
Distribution Date, any amount, other than Scheduled Payments received on a
Regular Distribution Date or within five days of a Regular Distribution Date,
distributed to the Trustee of that Trust under any Indenture on account of the
Equipment Notes held in that Trust. In addition, a prospectus supplement may
provide that the applicable Owner Trustee may, under specified circumstances,
redeem or purchase the outstanding Equipment Notes issued under the applicable
Indenture. If any Equipment Notes are so redeemed or purchased, the price paid
by the Owner Trustee to the Trustee of any Trust for those Equipment Notes will
be deposited in the Special Payments Account for that Trust and will be
distributed to the Certificateholders of that Trust on a Special Distribution
Date.
The Trustee will invest and reinvest, to the extent practicable, any funds
held by the Trustee in the Special Payments Account for the related Trust,
pending the distribution of those funds on a Special Distribution Date. Those
investments would be made in "Permitted Investments" specified in the related
prospectus supplement.
The Basic Agreement provides that the Trustee of each Trust will, within 90
days after the occurrence of a default (as defined below in this paragraph) in
respect of that Trust, give to the Certificateholders of that Trust notice,
transmitted by mail, of all uncured or unwaived defaults with respect to that
Trust known to it. The Trustee may withhold that notice, however, except in the
case of default in the payment of principal, premium, if any, or interest on any
of the Equipment Notes held in that Trust, if the Trustee in good faith
determines that the withholding of notice is in the interests of those
Certificateholders. The term "default" as used in this paragraph only means the
occurrence of an Indenture Default with respect to Equipment Notes held in a
Trust, except that in determining whether any Indenture Default has occurred,
any related grace period or notice will be disregarded.
The Basic Agreement contains a provision entitling the Trustee of each
Trust, subject to the duty of the Trustee during a default to act with the
required standard of care, to demand reasonable security or indemnity by the
Certificateholders of that Trust before proceeding to exercise any right or
power under the Basic Agreement at the request of those Certificateholders.
The prospectus supplement for a series of Certificates will specify the
percentage of Certificateholders entitled to waive, or to instruct the Trustee
to waive, any past Event of Default related to that Trust and its consequences.
The prospectus supplement for a series of Certificates also will specify the
percentage of Certificateholders, and whether that percentage includes
Certificateholders of any other Trust holding Equipment Notes issued under
related Indentures, entitled to waive, or to instruct the Trustee or the Loan
Trustee to waive, any past Indenture Default. A waiver by the relevant
Certificateholders of, or instruction
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by the relevant Certificateholders to the Trustee to waive, any past Indenture
Default will annul any direction previously given.
MERGERS AND SIMILAR EVENTS
We are generally permitted to consolidate or merge with another person. We
are also permitted to sell or lease substantially all of our assets to another
person or to buy or lease substantially all of the assets of another person.
However, we may not take any of these actions unless all of the following
conditions are met:
- The surviving, successor or transferee person will:
-- be organized and validly existing under the laws of the United States
or any of its states or the District of Columbia,
-- be a "citizen of the United States", as defined in Title 49 of the
United States Code relating to aviation (the "Transportation Code")
(see "Equipment Notes -- Security -- Special Rights of Lessors,
Conditional Vendors and Holders of Security Interests Under the
Bankruptcy Code" on pages 19-20 for the definition of "citizen of the
United States") holding an air carrier operating certificate issued by
the Secretary of Transportation pursuant to Chapter 447 of Title 49,
United States Code, if, and so long as, such status is a condition of
entitlement to the benefits of Section 1110 of the Bankruptcy Code,
and
-- expressly assume all of our obligations contained in the Basic
Agreement and any Trust Supplement, the Note Purchase Agreements, any
Owned Aircraft Indentures and, in relation to the Leased Aircraft, the
applicable Participation Agreements and Leases, and any other
operative documents; and
- Delta will have delivered a certificate and an opinion or opinions of
counsel indicating that the relevant transaction, in effect, complies
with these conditions.
MODIFICATIONS OF THE BASIC AGREEMENT
SUPPLEMENTAL AGREEMENTS ENTERED WITHOUT CONSENT
The Basic Agreement contains provisions permitting us, together with the
Trustee of each Trust, to enter into a supplemental trust agreement without the
consent of the Certificateholders of that Trust to, among other things:
- Provide for the formation of that Trust and the issuance of a series of
Certificates;
- Evidence the succession of another corporation to Delta and the
assumption by that corporation of our obligations under the Basic
Agreement and the applicable Trust Supplement;
- Add to our covenants for the benefit of the Certificate, or to surrender
any of our rights or powers under the Basic Agreement;
- Cure any ambiguity or correct or supplement any defective or inconsistent
provision of the Basic Agreement or the applicable Trust Supplement or to
make any other provisions necessary to address related matters or
questions that arise, provided that doing so does not materially
adversely affect the interests of the Certificateholders;
- Cure any ambiguity or correct any mistake or to give effect or provide
for replacement liquidity facilities, if applicable to the relevant
Certificates;
- Comply with any requirement of the SEC, applicable law, rules or
regulations of any exchange or quotation system on which any Certificates
may be listed or of any regulatory body;
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- Modify, eliminate or add to the provisions of the Basic Agreement to the
extent necessary to continue the qualification of the Basic Agreement,
including any supplemental agreement under the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act") and to add to the Basic
Agreement any other provisions expressly permitted by the Trust Indenture
Act, with some certain exceptions;
- Provide for a successor Trustee or to add to or change any provision of
the Basic Agreement as necessary to facilitate the administration of the
related Trusts by more than one Trustee; and
- Make any other amendments or modifications to the Basic Agreement,
provided the amendments or modifications will only apply to Certificates
issued after the relevant amendment.
No supplemental trust agreement entered into under any of these provisions,
however, will be permitted if it adversely affects the status of any Trust as a
grantor trust for U.S. federal income tax purposes.
SUPPLEMENTAL AGREEMENTS ENTERED WITH CONSENT
The Basic Agreement also contains provisions permitting us, together with
the Trustee of each Trust, and with the consent of the Certificateholders of
that Trust evidencing fractional undivided interests aggregating not less than a
majority in interest of that Trust, to execute a supplemental trust agreement
that adds any provisions to or changes or eliminates any of the provisions of
the Basic Agreement (to the extent relating to that Trust) or the applicable
Trust Supplement, or modifies the rights of the Certificateholders. No such
supplemental trust agreement may, however, without the consent of each
Certificateholder to be affected:
- Reduce in any manner the amount of, or delay the timing of, any receipt
by the Trustee of payments on the Equipment Notes held in the applicable
Trust or distributions related to any Certificate, or change the date or
place of any payment related to any Certificate, or make distributions
payable in coin or currency other than that provided for in the
Certificates, or impair the right of any Certificateholder of the Trust
to institute suit for the enforcement of any applicable payment when due;
- Permit the disposition of any Equipment Note held in the Trust, except as
provided in the Basic Agreement or the applicable Trust Supplement, or
otherwise deprive any Certificateholder of the benefit of the ownership
of the applicable Equipment Notes;
- Reduce the percentage of the aggregate fractional undivided interests of
the Trust provided for in the Basic Agreement or the applicable Trust
Supplement, as the consent of the Certificateholders of that Trust is
required for any related supplemental trust agreement or for any waiver
provided for in the Basic Agreement or applicable Trust Supplement;
- Modify any of the provisions relating to the rights of the relevant
Certificateholders with regards to the waiver of events of default or
supplemental agreements, with some limited exceptions;
- Alter the priority of distributions specified in any applicable
intercreditor agreement in a manner materially adverse to the interests
of the Certificateholders of that Trust; or
- Adversely affect the status of any Trust as a grantor trust for U.S.
federal income tax purposes.
MODIFICATION OF INDENTURE AND RELATED AGREEMENTS
The prospectus supplement will specify the Trustee's obligations in the
event that the Trustee, as the holder of any Equipment Notes
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held in a Trust, receives a request for its consent to any amendment,
modification or waiver under the Indenture or other documents relating to those
Equipment Notes, including any Lease related to Leased Aircraft Notes, or any
Liquidity Facility.
CROSS-SUBORDINATION ISSUES
The Equipment Notes issued under a single Indenture may be held in more
than one Trust, and one Trust may hold Equipment Notes issued under several
Indentures. Unless otherwise provided in a prospectus supplement, only Equipment
Notes of the same Class may be held in a Trust. If Equipment Notes of different
Classes are held in the same Trust, payments made on account of a subordinate
class of Certificates issued under a prospectus supplement may, under
circumstances described in that prospectus supplement, be subordinated to the
prior payment of all amounts owing to Certificateholders of a Trust holding
senior Equipment Notes issued under a Related Indenture. The prospectus
supplement relating to an issuance of Certificates will describe any applicable
"cross-subordination" provisions and any related terms, including the percentage
of Certificateholders under any Trust which are permitted to:
- Grant waivers of defaults under any related Indenture;
- Consent to the amendment or modification of any related Indenture; or
- Direct the exercise of remedial actions under any related Indenture.
Payments made on account of Certificates may also be subordinated to the
rights of the provider of any related Liquidity Facility, as described under
"Liquidity Facility" on page 16.
TERMINATION OF THE TRUSTS
Our obligations and the obligations of the Trustee with respect to a Trust
will terminate upon the distribution to Certificateholders of that Trust of:
- All amounts required to be distributed to them pursuant to the Basic
Agreement and the applicable Trust Supplement; and
- The disposition of all property held in that Trust.
Before termination, the Trustee will send notice of the termination of that
Trust to each Certificateholder of record. That notice will specify the amount
of the proposed final payment and the proposed date for the distribution of the
final payment for that Trust.
The final distribution to any Certificateholder of a terminating Trust will
be made only upon surrender of that Certificateholder's Certificates at the
office or agency of the Trustee specified in the applicable notice of
termination.
DELAYED PURCHASE OF EQUIPMENT NOTES
In the event that, on the issuance date of any Certificates, all of the
proceeds from the sale of those Certificates are not used to purchase the
Equipment Notes contemplated to be held in the related Trust, the Equipment
Notes may be purchased by the Trustee at any time on or prior to the date
specified in the applicable prospectus supplement. If such a delay occurs, any
proceeds from the sale of Certificates which are not used to purchase Equipment
Notes will be held under an arrangement described in the applicable prospectus
supplement pending the purchase of those Equipment Notes. The arrangements with
respect to the payment of interest on funds being held will be described in the
applicable prospectus supplement. If the proceeds are not used to purchase the
Equipment Notes by the relevant date specified in the applicable prospectus
supplement, they will be returned to the holders of the applicable Certificates.
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LIQUIDITY FACILITY
The related prospectus supplement may provide that distributions made by
the Trustee with respect to the related Certificates will be supported by a
Liquidity Facility issued by an institution identified in the related prospectus
supplement.
A Liquidity Facility is a revolving credit agreement, letter of credit,
bank guarantee, insurance policy or other instrument or agreement that will
increase the likelihood that the Certificateholders will receive timely payments
of interest on the Certificates. While a Liquidity Facility is designed to
increase the likelihood of timely payments of interest, it is not a guarantee of
the timely or ultimate payment of principal. Unless otherwise provided in the
related prospectus supplement, the provider of the relevant Liquidity Facility
will have a senior claim upon the assets of the related Trust. See "Description
of the Equipment Notes -- Liquidity Facility" on page 23 for a description of
how the Equipment Notes may be similarly supported by a Liquidity Facility.
THE TRUSTEE
REPRESENTATIONS, LIABILITIES, OBLIGATIONS AND POWERS
Unless otherwise provided in the prospectus supplement for any series of
Certificates, the Trustee for each series of Certificates will be The Bank of
New York. The Trustee makes no representations as to the validity or sufficiency
of the Basic Agreement, any Trust Supplement, any Equipment Notes or any other
operative document.
The Trustee will not be liable with respect to any series of Certificates
for any action taken or omitted to be taken by it in good faith under the
direction of the holders of a majority in principal amount of outstanding
Certificates of that series. If provided by the prospectus supplement, the
Trustee will not have any obligation to exercise any of its rights or powers
under the Basic Agreement at the request of any Certificateholders, unless they
have offered to the Trustee indemnity satisfactory to it.
The Basic Agreement provides that the Trustee (in its individual or
fiduciary capacity) may acquire and hold Certificates and, subject to some
conditions, may otherwise deal with us and with any Owner Trustee with the same
rights it would have if it were not the Trustee.
RESIGNATION AND REMOVAL
The Trustee may resign from its position as Trustee of any or all of the
Trusts at any time. If the Trustee resigns, we will appoint a successor trustee.
If the Trustee ceases to be eligible to continue as Trustee for any Trust or
becomes incapable of acting as Trustee or becomes insolvent, we may remove that
Trustee. Also, any Certificateholder holding Certificates of that Trust for at
least six months may, on behalf of himself and all others similarly situated,
petition any court of competent jurisdiction for the removal of an ineligible,
incapable, or insolvent Trustee and the appointment of a successor trustee. Any
resignation or removal of the Trustee and appointment of a successor does not
become effective until acceptance of the appointment by the successor trustee.
Pursuant to the resignation and successor trustee provisions, it is possible
that different trustees could be appointed to act as successor trustees for each
Trust. All references in this prospectus to the Trustee should be read to take
into account the possibility that the Trusts could have different successor
trustees in the event of a resignation or removal.
FEE, EXPENSES AND INDEMNIFICATION
The Basic Agreement provides that we will pay the Trustee's fees and
expenses and indemnify the Trustee against certain liabilities.
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DESCRIPTION OF THE EQUIPMENT NOTES
The statements made under this caption are summaries of detailed provisions
of the Indentures and Equipment Notes. For more complete and detailed
information, you should consult the entire prospectus and the applicable
prospectus supplement. Statements that do not distinguish between the Leased
Aircraft Notes and the Owned Aircraft Notes or between their respective
Indentures refer to any Equipment Notes and any Indenture. Additionally, we will
file with the SEC forms of the Indenture and Equipment Notes. You should refer
to those agreements for more information regarding the terms discussed in this
prospectus and accompanying prospectus supplement. See "Where You Can Find More
Information" on page 29 for more information on documents we file with the SEC.
The summaries contained in this prospectus and the accompanying prospectus
supplement are qualified in their entirety by reference to those filed
agreements.
To the extent that any provision in the accompanying prospectus supplement
is inconsistent with any provision in this summary, the prospectus supplement
will control.
GENERAL
Equipment Notes will be issued under a Leased Aircraft Indenture or an
Owned Aircraft Indenture.
- A Leased Aircraft Indenture will be between an Owner Trustee and a Loan
Trustee, and will be entered into in connection with a leveraged lease
arrangement relating to Leased Aircraft. The Owner Trust administered by
the Owner Trustee will be the owner of the Leased Aircraft. An Owner
Participant will be the beneficiary of the Owner Trust. Leased Aircraft
Notes issued under a Leased Aircraft will be nonrecourse obligations of
the Owner Trust. Leased Aircraft Notes will not be our obligations or the
obligations of the applicable Owner Participant, and will not be
enforceable against us or such Owner Participant. Leased Aircraft Notes
will be secured by the Leased Aircraft described in the applicable
prospectus supplement and by certain rights of the applicable Owner Trust
under the related Lease.
- An Owned Aircraft Indenture will be between us and a Loan Trustee. Owned
Aircraft Notes issued under an Owned Aircraft Indenture will be our
direct obligations. Owned Aircraft Notes will be secured by Aircraft
owned by us and described in the applicable prospectus supplement.
PRINCIPAL AND INTEREST PAYMENTS
Interest received by the Trustee on the Equipment Notes held in each Trust
will be passed through to the Certificateholders of that Trust on the dates and
at the rate per annum set forth in the applicable prospectus supplement until
the final distribution for that Trust. Likewise, principal payments received by
the Trustee on the Equipment Notes held in each Trust will be passed through to
the Certificateholders of that Trust in scheduled amounts on the dates set forth
in the applicable prospectus supplement until the final distribution date for
that Trust.
REDEMPTION
The applicable prospectus supplement will describe the circumstances,
whether voluntary or involuntary, under which the Equipment Notes may be
redeemed or purchased prior to their stated maturity date, in whole or in part.
If the Equipment Notes can be redeemed or purchased prior to their stated
maturity, the prospectus supplement will describe the premium, if any,
applicable upon redemption or purchase, and any other terms applying to the
redemption or purchase of the Equipment Notes.
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SECURITY
LEASED AIRCRAFT NOTES
The Leased Aircraft Notes will be secured by:
- An assignment by the related Owner Trustee to the related Loan Trustee of
that Owner Trustee's rights under the Lease or Leases relating to the
Leased Aircraft, including the right to receive payments of rent under
the related Lease; and
- A mortgage granted to the Loan Trustee in the applicable Leased Aircraft,
subject to our rights under the applicable Lease.
Under the terms of each Lease, our obligations with respect to the Leased
Aircraft will be those of a lessee under a "net lease". Accordingly, we will be
obligated, among other things (and at our own expense), to cause the Leased
Aircraft to be duly registered, to pay all costs of operating that Aircraft and
to maintain, service, repair and overhaul (or cause to be maintained, serviced,
repaired and overhauled) that Aircraft.
With respect to the Leased Aircraft, the assignment by the related Owner
Trustee to the related Loan Trustee of its rights under the related Lease will
exclude, among other things:
- Rights of that Owner Trustee and the related Owner Participant relating
to indemnification from us for certain matters;
- Insurance proceeds payable to that Owner Trustee in its individual
capacity and to the related Owner Participant under liability insurance
maintained by us as directed by that Lease or by that Owner Trustee or
related Owner Participant;
- Insurance proceeds payable to that Owner Trustee in its individual
capacity or to the related Owner Participant under certain casualty
insurance maintained by that Owner Trustee or related Owner Participant
pursuant to that Lease; and
- Any rights of the related Owner Participant or that Owner Trustee to
enforce payment of these amounts and their respective rights to the
related proceeds of the foregoing.
OWNED AIRCRAFT NOTES
The Owned Aircraft Notes will be secured by a mortgage granted to the
related Loan Trustee of all of our right, title and interest in and to the Owned
Aircraft specified in the related Owned Aircraft Indenture. Under the terms of
each Owned Aircraft Indenture, we will be obligated, among other things (and at
our own expense), to cause the Owned Aircraft to be duly registered, to pay all
costs of operating that Aircraft and to maintain, service, repair and overhaul
(or cause to be maintained, serviced, repaired and overhauled) that Aircraft.
INSURANCE COVERAGE
The prospectus supplement will describe the insurance coverage required for
the relevant Aircraft.
RECOGNITION OF THE LOAN TRUSTEE'S SECURITY INTEREST
We will be required, except under certain circumstances, to keep each
Aircraft registered under the Transportation Code, and to record the Indenture
and the Lease, if applicable, among other documents, relating to each Aircraft
under the Transportation Code. The recording of the Indenture, the Lease, if
applicable, and other documents with respect to each Aircraft will give the
related Loan Trustee a perfected security interest in the related Aircraft
whenever it is located in the United States or any of its territories and
possessions. The Convention on the International Recognition of Rights in
Aircraft (the "Convention") provides that the security interest will also be
recognized, with some exceptions, in those jurisdictions that have ratified or
adhere to the Convention. We will have the right, with some conditions and at
our own expense, to register each Aircraft in countries other than the United
States. Each Aircraft may also be operated by us or under
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lease, sublease or interchange arrangements in countries that are not parties to
the Convention.
The extent to which the related Loan Trustee's security interest would be
recognized in an Aircraft located in a country that is not a party to the
Convention, and the extent to which that security interest would be recognized
in a jurisdiction adhering to the Convention if the Aircraft is registered in a
jurisdiction not a party to the Convention, is uncertain. Moreover, in the case
of an Indenture Default, the ability of the related Loan Trustee to realize upon
its security interest in an Aircraft could be adversely affected as a legal or
practical matter if that Aircraft were registered or located outside the United
States.
Unless otherwise specified in the applicable prospectus supplement, the
Equipment Notes will not be cross-collateralized. Consequently, the Equipment
Notes issued in relation to any one Aircraft will not be secured by any other
Aircraft or, in the case of Leased Aircraft Notes, any other Lease. Unless and
until an Indenture Default relating to a Leased Aircraft occurs and is
continuing, the related Loan Trustee may exercise only limited rights of the
related Owner Trustee under the related Lease.
INVESTMENT AND REINVESTMENT OF RELATED FUNDS
The Loan Trustee will invest and reinvest funds, if any, relating to any
Aircraft and held by that Loan Trustee, pending distribution of those funds.
Investments will be described in the applicable Indenture. We will direct the
investment and reinvestment of those funds. We will not, however, direct
investment and reinvestment:
- In the case of a Leased Aircraft Indenture, if a Lease Event of Default
exists under the applicable Lease; or
- In the case of an Owned Aircraft Indenture, if an Indenture Default
exists or a payment default or bankruptcy default exists under that
Indenture.
The net amount of any loss resulting from any of the investments made at
our direction will be paid by us.
SPECIAL RIGHTS OF LESSORS, CONDITIONAL VENDORS AND HOLDERS OF SECURITY
INTERESTS UNDER THE BANKRUPTCY CODE
Section 1110 of the U.S. Bankruptcy Code provides in relevant part that the
right of lessors, conditional vendors and holders of security interests in
"equipment" (as defined in Section 1110 of the U.S. Bankruptcy Code) to take
possession of that equipment in compliance with the provisions of a lease,
conditional sale contract or security agreement, as the case may be, is not
affected by:
- The automatic stay provision of the U.S. Bankruptcy Code, which enjoins
repossessions by creditors for the duration of the reorganization period;
- The provision of the U.S. Bankruptcy Code allowing the trustee in
reorganization to use property of the debtor during the reorganization
period;
- Section 1129 of the U.S. Bankruptcy Code, which governs the confirmation
of plans of reorganization in Chapter 11 cases; or
- Any power of the bankruptcy court to enjoin a repossession.
Section 1110 relief would not be available, however, if the following two
conditions are satisfied: (1) within 60 days after the date of the order for
relief under the U.S. Bankruptcy Code, or such longer period consented to by the
lessor, conditional vendor or holder of a security interest, the trustee in
reorganization agrees to perform the debtor's obligations that become due on or
after that date; and (2) all defaults, other than defaults resulting solely from
the financial condition, bankruptcy, insolvency or reorganization of the debtor,
or from any failure of the debtor to pay penalty rates based on a failure to
perform non-monetary obligations are cured before the later of the expiration of
that
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60-day period and the date that is 30 days after the date of default.
Accordingly, the right of a lessor, conditional vendor or holder of a
security interest to take possession of an aircraft in the event of default
would not be exercisable for 60 days following the date of the order for relief
(unless specifically permitted by the bankruptcy court). Furthermore, if the
conditions specified above are satisfied within the applicable period, it is
unclear whether Section 1110 affords any relief at all with respect to the
exercise of any right to take possession based on an event of default occurring
after that period.
"Equipment" is defined in Section 1110 of the U.S. Bankruptcy Code, in
part, as an aircraft, aircraft engine, propeller, appliance, or spare part that
is subject to a security interest granted by, leased to, or conditionally sold
to a debtor that is a citizen of the United States holding an "air carrier
operating certificate" issued by the Secretary of Transportation pursuant to
chapter 447 of Title 49 of the U.S. Code for aircraft capable of carrying 10 or
more individuals or 6,000 pounds of more of cargo.
A "spare part" is defined in Section 40102 of Title 49 of the U.S. Code as
an accessory, appurtenance, or part of an aircraft (except an aircraft engine or
propeller), aircraft engine (except a propeller), propeller, or appliance, that
is to be installed at a later time in an aircraft, aircraft engine, propeller,
or appliance.
A "citizen of the United States" is defined in Section 40102 of Title 49 of
the U.S. Code as:
- An individual who is a citizen of the United States;
- A partnership each of whose partners is an individual who is a citizen of
the United States; or
- A corporation or association organized under the laws of the United
States or a State, the District of Columbia, or a territory or possession
of the United States, of which the president and at least two-thirds of
the board of directors and other managing officers are citizens of the
United States, and in which at least 75 percent of the voting interest is
owned or controlled by persons that are citizens of the United States.
In connection with any issuance of Certificates under this prospectus and
the applicable prospectus supplement, unless otherwise described in the
applicable prospectus supplement, it is a condition to the Trustee's obligation
to purchase Equipment Notes with respect to each Aircraft that outside counsel
designated by us provide its opinion to that Trustee that:
- If that Aircraft is a Leased Aircraft, the Owner Trustee, as lessor under
the Lease for that Aircraft, and the Loan Trustee, as assignee of that
Owner Trustee's rights under the applicable Lease pursuant to the
applicable Indenture, will be entitled to the benefits of Section 1110 of
the U.S. Bankruptcy Code with respect to the airframe and engines
comprising that Aircraft; or
- If that Aircraft is an Owned Aircraft, the Loan Trustee will be entitled
to the benefits of Section 1110 with respect to the airframe and engines
comprising that Owned Aircraft, in each case so long as we continue to be
a "citizen of the United States" holding an "air carrier operating
certificate" for aircraft capable of carrying 10 or more individuals or
6,000 pounds or more of cargo.
The opinion of outside counsel will not address the possible replacement of an
Aircraft after an event of loss in the future. Events of loss and any right we
have to replace Aircraft will be described in the applicable prospectus
supplement.
OTHER RANKING OF EQUIPMENT NOTES
Some of the Equipment Notes for one or more Aircraft, as described in the
applicable prospectus supplement, may be subordinated and junior in right of
payment to other Equipment Notes for the same Aircraft. The terms of
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any subordination will be described in that prospectus supplement.
PAYMENTS AND LIMITATION OF LIABILITY
PAYMENTS
The Owner Trustee will lease each Leased Aircraft to us for a term
commencing on the date that Aircraft is delivered to the Owner Trustee. The term
will expire on a date after the latest maturity date of the related Leased
Aircraft Notes, unless previously terminated as permitted by the terms of the
related Lease. Some payments, such as basic rent, under each related Lease will
be payable by us. Also, the related Owner Trustee under the applicable Indenture
will assign our payments to the related Loan Trustee to provide the funds
necessary to pay principal of, premium, if any, and interest due from the Owner
Trustee on the Leased Aircraft Notes issued under the related Indenture.
In certain cases, the basic rent payments under a Lease may be adjusted,
but each Lease will provide that under no circumstances will our rent payments
be less than the scheduled payments on the related Leased Aircraft Notes. The
balance of any basic rent payment under each Lease, after payment of amounts due
on the Leased Aircraft Notes issued under the Indenture corresponding to the
applicable Lease, will be paid over to the applicable Owner Trustee. Our
obligation to pay rent and to cause other payments to be made under each Lease
will be our general obligations.
LIMITATION OF LIABILITY
The Leased Aircraft Notes will not be our obligations and will not be
guaranteed by us, except in some specified circumstances involving our purchase
of a Leased Aircraft and our assumption of some specified obligations, including
the obligation to make payments on the related Leased Aircraft Notes. None of
the Owner Trustees, the Owner Participants or the Loan Trustees will be
personally liable to any holder of the Leased Aircraft Notes for amounts payable
under those Leased Aircraft Notes, or, except as provided in the related
Indentures in the case of the Owner Trustees and the Loan Trustees, for any
liability under those Indentures.
Except in the circumstances mentioned, all amounts payable under any Leased
Aircraft Notes, other than payments made in connection with an optional
redemption or purchase by the related Owner Trustee or the related Owner
Participant, will be made only from:
- The assets subject to the lien of the applicable Indenture with respect
to the related Aircraft or the income and proceeds received by the
related Loan Trustee from the applicable Indenture, including rent
payable by us under the related Lease; and
- If provided in the related prospectus supplement, the applicable
Liquidity Facility.
Except as otherwise provided in the applicable Indenture, no Owner Trustee
will be personally liable for any amount payable or for any statements,
representations, warranties, agreements or obligations under any Indenture or
Leased Aircraft Notes except for its own willful misconduct or gross negligence.
None of the Owner Participants will have any duty or responsibility under the
Leased Aircraft Indentures or under the related Leased Aircraft Notes to the
related Loan Trustee or to any holder of those Leased Aircraft Notes.
Our obligations under each Owned Aircraft Indenture and under the Owned
Aircraft Notes will be our general obligations.
DEFEASANCE OF THE INDENTURES AND THE EQUIPMENT NOTES IN CERTAIN CIRCUMSTANCES
Unless otherwise specified in the applicable prospectus supplement, each
Indenture provides that the obligations under the applicable Indenture of the
related Loan Trustee and the related Owner Trustee, in relation to any Leased
Aircraft Notes, or our obligations, with respect to any Owned Aircraft Notes,
will be deemed to have been discharged and paid in full on the
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91st day after the date of irrevocable deposit with the related Loan Trustee.
The deposit must consist of:
- Money; or
- Obligations of the United States or any agency or instrumentality of the
United States the payment of which is backed by the full faith and credit
of the United States which, through the payment of principal and interest
on those obligations and complying with their terms, will provide money
in an aggregate amount sufficient to pay when due, including as a
consequence of redemption in respect of which notice is given on or prior
to the date of irrevocable deposit, the:
-- principal of,
-- premium, if any, and
-- interest on all Equipment Notes issued under and in compliance with
the terms of the applicable Indenture.
Discharge may occur only if, among other things:
- No event of default or event which with the giving of notice or lapse of
time, or both, would become an event of default under the Indenture has
occurred and is continuing on the date of irrevocable deposit; and
- We have delivered an opinion of counsel to the effect that holders of the
Equipment Notes will not recognize income, gain or loss for federal
income tax purposes as a result of the deposit, defeasance and discharge
and will be subject to federal income tax on the same amount and in the
same manner and at the same time as would have been the case if the
deposit, defeasance and discharge had not occurred.
Deposit as described will not be deemed to discharge certain obligations,
including the obligations:
- To register the transfer or exchange of Equipment Notes;
- To replace stolen, lost, destroyed or mutilated Equipment Notes; and
- To maintain paying agencies and hold money for payment in Trust.
Upon defeasance, or upon payment in full of the principal of, premium, if
any, and interest on all Equipment Notes issued under any Indenture on its
maturity date or deposit with the applicable Loan Trustee of money sufficient to
satisfy those amounts no earlier than one year prior to the related Indenture's
maturity, the holders of the related Equipment Notes will have no beneficial
interest in or other rights related to the Aircraft or other assets subject to
the lien of the Indenture. Consequently, the lien will terminate.
OUR ASSUMPTION OF OBLIGATIONS
In relation to Leased Aircraft and unless otherwise specified in the
applicable prospectus supplement, upon our exercise of any purchase options we
may have under the related Lease prior to the end of the term of that Lease, we
may assume on a full recourse basis all of the obligations of the Owner Trustee,
other than its obligations in its individual capacity under the Indenture with
respect to that Aircraft, including the obligations to make payments on the
related Leased Aircraft Notes.
If we assume the obligations of the Owner Trustee relevant provisions of
the related Lease, including provisions relating to maintenance, possession and
use of the related Aircraft, liens, insurance and events of default, will be
incorporated into the Indenture. Also, the Leased Aircraft Notes issued under
that Indenture will not be redeemed and will continue to be secured by the
Aircraft. It is a condition to our assumption that, if the related Aircraft is
registered under the laws of the United States, an opinion of counsel be
delivered at the time
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of assumption. The opinion should substantially state that the related Loan
Trustee under the Indenture would, immediately following assumption, be entitled
to the benefits of Section 1110 of the Bankruptcy Code with respect to the
related Aircraft and its engines. The opinion need not be delivered if the
benefits of Section 1110 are not available to the Loan Trustee with respect to
that Aircraft or any engine immediately prior to assumption.
LIQUIDITY FACILITY
The related prospectus supplement may provide that one or more payments of
interest on the related Equipment Notes of one or more series will be supported
by a Liquidity Facility issued by an institution identified in the related
prospectus supplement. Unless otherwise provided in the related prospectus
supplement, the provider of the Liquidity Facility will have a senior claim upon
the assets securing the Equipment Notes.
OUR RELATIONSHIP TO THE TRUSTEE
The Bank of New York and certain of its affiliates are the trustees under a
number of other indentures to which Delta is a party; some of these indentures
relate to indebtedness which is secured by some of Delta's assets. If an event
of default occurred under an indenture relating to the Equipment Notes or one of
these other indentures, The Bank of New York may be deemed to have a conflicting
interest with respect to the debt securities for purposes of the Trust Indenture
Act of 1939 and, accordingly, may be required to resign as trustee.
INTERCREDITOR ISSUES
Equipment Notes may be issued in different Classes, which means that the
Equipment Notes may have different payment priorities even though they are
issued by the same borrower and relate to the same Aircraft. If different
Classes of Equipment Notes are issued, the related prospectus supplement will
describe:
- The priority of distributions among those Equipment Notes, and any
Liquidity Facilities for those Equipment Notes;
- The ability of any Class to exercise and/or enforce any or all remedies
with respect to the related Aircraft, and if the Equipment Notes are
Leased Aircraft Notes, the related Lease; and
- Other intercreditor terms and provisions.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
GENERAL
Unless otherwise indicated in the applicable prospectus supplement, this
summary describes the principal United States federal income tax consequences of
owning the Certificates. This summary is the opinion of Sullivan & Cromwell,
special tax counsel to Delta. It applies to you only if you acquire Certificates
in the initial offering at the initial offering price and you own your
Certificates as capital assets for tax purposes. This summary does not apply to
you if you are a member of a class of holders subject to special rules, such as:
- A dealer in securities or currencies;
- A trader in securities that elects to use a mark-to-market method of
accounting;
- A bank;
- A life insurance company;
- A tax-exempt organization;
- A person that owns Certificates that are a hedge or that are hedged
against interest rate risks;
- A person that owns Certificates as part of a straddle or conversion
transaction for tax purposes; or
- A person whose functional currency for tax purposes is not the U.S.
dollar.
This summary is based on the Internal Revenue Code of 1986, as amended (the
"Code"), its legislative history, existing and proposed regulations under the
Internal Revenue Code, published rulings and court decisions, all as currently
in effect. These laws are subject to change, possibly on a retroactive basis.
PLEASE CONSULT YOUR OWN TAX ADVISOR CONCERNING THE CONSEQUENCES OF OWNING THESE
CERTIFICATES IN YOUR PARTICULAR CIRCUMSTANCES UNDER THE CODE AND LAWS OF ANY
OTHER TAXING JURISDICTION
U.S. CERTIFICATE HOLDERS
This section describes the tax consequences to a U.S. Certificateholder.
You are a U.S. Certificateholder if you are a beneficial owner of a Certificate
and you are:
- A citizen or resident of the United States;
- A domestic corporation;
- An estate whose income is subject to United States federal income tax
regardless of its source; or
- A trust if a United States court can exercise primary supervision over
the trust's administration and one or more U.S. persons are authorized to
control all substantial decisions of the trust.
If you are not a U.S. Certificateholder, this section does not apply to you and
you should refer to "U.S. Alien Certificateholders" on page 25.
TAX STATUS OF THE TRUSTS
Each Trust will be classified as a grantor trust for United States federal
income tax purposes.
TAXATION OF CERTIFICATEHOLDERS GENERALLY
If you are a U.S. Certificateholder, you will be treated as owning your
proportional undivided interest in each of the Equipment Notes and any other
property held by the related Trust. Accordingly, your share of interest paid on
the Equipment Notes will be taxable as ordinary income, as it is paid or
accrued, in accordance with your method of accounting for United States federal
income tax purposes. In the event that a Trust is supported by a Liquidity
Facility, any amounts received by the Trust under the Liquidity Facility
attributable to unpaid interest will be treated for United States federal income
tax purposes as having
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the same characteristics as the payments they replace. If we were to assume an
Owner Trust's obligations under Leased Aircraft Notes, that assumption would be
treated for United States federal income tax purposes as a taxable exchange of
those Leased Aircraft Notes, resulting in recognition of gain or loss by you.
You will be entitled to deduct, consistent with your method of accounting,
your proportional share of fees and expenses paid or incurred by the
corresponding Trust as provided in Section 162 or 212 of the Code. Some fees and
expenses, including fees paid to the Trustee and the provider of the Liquidity
Facility, if applicable, will be borne by parties other than the
Certificateholders. Certain of these fees and expenses will be treated as
constructively received by the Trust, in which case a U.S. Certificateholder
will be required to include in income and will be entitled to deduct its
proportional share of those fees and expenses. If a U.S. Certificateholder is an
individual, estate or trust, the deduction for the relevant holder's share of
fees or expenses will be allowed only to the extent that all of that holder's
miscellaneous itemized deductions, including that holder's share of such fees
and expenses, exceed 2% of that holder's adjusted gross income. In addition, in
the case of U.S. Certificateholders who are individuals, certain otherwise
allowable itemized deductions will be subject generally to additional
limitations on itemized deductions under applicable provisions in the Code.
ORIGINAL ISSUE DISCOUNT
The Equipment Notes may be issued with original issue discount ("OID"). The
applicable Prospectus Supplement will state whether any Equipment Notes to be
held by the related Trust will be issued with OID and, if applicable, will
describe the special United States federal income tax rules governing debt
instruments issued with OID. Generally, a holder of a debt instrument issued
with OID that is not de minimis must include that OID in income for United
States federal income tax purposes as it accrues, in advance of the receipt of
the cash attributable to that income, under a method that takes into account the
compounding of interest.
SALE OR OTHER DISPOSITION OF THE CERTIFICATES
Upon the sale, exchange or other disposition of a Certificate, you will
generally recognize capital gain or loss equal to the difference between the
amount realized on the disposition (other than any amount attributable to
accrued interest which will be taxable as ordinary income) and your adjusted tax
basis in the related Equipment Notes any other property held by the
corresponding Trust. Any gain or loss will be long-term capital gain or loss to
the extent that gain or loss is attributable to property held by the Trust for
more than one year. Long-term capital gain of a noncorporate U.S.
Certificateholder is generally taxed at a maximum rate of 20%.
U.S. ALIEN CERTIFICATEHOLDERS
This section describes the tax consequences to a "U.S. Alien
Certificateholder". You are a U.S. Alien Certificateholder if you are the
beneficial owner of a Certificate and are, for United States federal income tax
purposes:
- A nonresident alien individual;
- A foreign corporation;
- A foreign partnership; or
- An estate or trust that is not subject to United States federal income
tax on a net income basis on income or gain from a Certificate.
Under present United States federal income and estate tax law, and subject
to the discussion of backup withholding below, if you are a U.S. Alien
Certificateholder of a Certificate:
- Payments of interest on the Equipment Notes to, or on behalf of, a U.S.
Alien Certificateholder will not be subject to United States federal
withholding tax if,
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- - you do not actually or constructively own 10% or more of the total
combined voting power of all classes of stock of Delta or an Owner
Participant entitled to vote,
- - you are not a controlled foreign corporation that is related to Delta
or an Owner Participant through stock ownership, and
- - you certify, to the Trustee or a U.S. payor, under penalties of
perjury, that you are not a United States Certificateholder and
provide your name and address, or
- - a securities clearing organization, bank or other financial
institution that holds customers' securities in the ordinary course
of its trade or business and holds the Certificate certifies to the
Trustee or a U.S. payor under penalties of perjury that a similar
statement has been received from you by it or by a similar financial
institution between it and you and furnishes the payor with a copy
thereof; and
- No deduction for any United States federal withholding tax will be made
from any gain that you realize on the sale or exchange of your
Certificate.
Further, a Certificate held by an individual, who at death is not a citizen or
resident of the United States will not be includible in the individual's gross
estate for United States federal estate tax purposes if:
- The decedent did not actually or constructively own 10% or more of the
total combined voting power of all classes of stock of Delta or an Owner
Participant entitled to vote at the time of death; and
- The income on the Equipment Note would not have been effectively
connected with a United States trade or business of the decedent at the
same time.
If you receive a payment after December 31, 2000, recently finalized
Treasury regulations will apply. Under these regulations, after December 31,
2000 you may use an alternative method to satisfy the certification requirement
described above. Additionally, if you are a partner in a foreign partnership,
after December 31, 2000, you (in addition to the foreign partnership) must
provide the certification described above, and the partnership must provide
certain information. The Internal Revenue Service will apply a look-through rule
in the case of tiered partnerships.
BACKUP WITHHOLDING AND INFORMATION REPORTING
U.S. CERTIFICATEHOLDERS
In general, if you are a noncorporate U.S. Certificateholder, all payments
on an Equipment Note will be reported to the Internal Revenue Service. In
addition, the proceeds of the sale of your Certificate before maturity within
the United States will be reported to the Internal Revenue Service.
Additionally, backup withholding at a rate of 31% will apply to any payments if
you fail to provide an accurate taxpayer identification number, or you are
notified by the Internal Revenue Service that you have failed to report all
interest and dividends required to be shown on your federal income tax returns.
U.S. ALIEN CERTIFICATEHOLDERS
You are generally exempt from backup withholding and information reporting
with respect to any payments on an Equipment Note provided that you provide the
certification described under "U.S. Alien Certificateholders", and provided
further that payor does not have actual knowledge that you are a U.S. person.
See the discussion above with respect to the rules under the final withholding
regulations.
In general, payment of the proceeds from the sale of Certificates to or
through a United States office of a broker is subject to both United States
backup withholding and information reporting, unless you are a U.S. Alien
Certificateholder and you certify as to your non-
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United States status under penalties of perjury or otherwise establish an
exemption. Payments of the proceeds from the sale by a U.S. Alien
Certificateholder of a Certificate made to or through a foreign office of a
broker will not be subject to information reporting or backup withholding.
Information reporting, but not backup withholding, however, may apply to a
payment made outside of the United States of the proceeds of a sale of
Certificate through an office outside the United States if the broker is:
- A U.S. person;
- A controlled foreign corporation for United States tax purposes;
- A foreign person 50% or more of whose gross income is effectively
connected with a United States trade or business for a specified
three-year period; or
- With respect to payments made after December 31, 2000, a foreign
partnership, if at any time during the tax year: (1) one or more of its
partners are "U.S. persons" (as defined in the U.S. Treasury regulations)
who in the aggregate own more than 50% of the income or capital interest
in the partnership, or (2) such foreign partnership is engaged in a
United States trade or business unless the broker has documentary
evidence in its records that you are a non-U.S. person and does not have
actual knowledge that you are a U.S. person, or you otherwise establish
an exemption.
ERISA CONSIDERATIONS
Unless otherwise indicated in the applicable prospectus supplement, the
Certificates may not be purchased by:
- An employee benefit plan subject to Title I of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"); or
- An individual retirement account or an employee benefit plan subject to
section 4975 of the Code.
Certain governmental plans and non-electing church plans, however, are not
subject to Title I of ERISA or Section 4975 of the Code and, therefore, may
purchase the Certificates.
PLAN OF DISTRIBUTION
The Certificates may be sold to or through underwriters, directly to other
purchasers or through agents. The distribution of the Certificates may be
effected from time to time in one or more transactions at:
- A fixed price or prices, which may be changed;
- Market prices prevailing at the time of sale;
- Prices related to the prevailing market prices at the time of sale; or
- Negotiated prices.
In connection with the sale of Certificates, underwriters or agents may
receive compensation from us or from purchasers of Certificates for whom they
may act as agents in the form of discounts, concessions or commissions.
Underwriters may sell Certificates to or through dealers, and those dealers may
receive compensation in the form of discounts, concessions or commissions from
the underwriters or commissions from the purchasers for whom they may act as
agents. Underwriters, dealers and agents that participate in the distribution of
Certificates may be deemed to be underwriters, and any discounts or commissions
received by them
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from us, and any profit on the resale of Certificates by them, may be deemed to
be underwriting discounts and commissions under the Securities Act. Any outright
or deemed underwriter or agent will be identified, and any related compensation
received from us will be described, in the applicable prospectus supplement.
Under agreements which we may enter into, underwriters and agents who
participate in the distribution of Certificates may be entitled to
indemnification by us against some liabilities, including liabilities under the
Securities Act.
If indicated in the applicable Prospectus Supplement, we will authorize
underwriters or other persons acting as our agents to solicit offers by specific
institutions to purchase Certificates from us pursuant to contracts providing
for payment and delivery on a future date. Institutions with which these
contracts may be made include, among others:
- Commercial and savings banks
- Insurance companies
- Pension funds
- Investment companies
- Educational and charitable institutions
In all cases, we must approve the contracting institutions. The obligations
of any purchaser under any payment and delivery contract will be subject to the
condition that the purchase of the Certificates is not, at the time of delivery,
prohibited under the laws of the jurisdiction to which that purchaser is
subject. The underwriters relevant or other agents will not have any
responsibility in respect of the validity or performance of such contracts.
Unless otherwise indicated in the applicable prospectus supplement, we do
not intend to apply for the listing of any series of Certificates on a national
securities exchange. If the Certificates of any series are sold to or through
underwriters, the underwriters may make a market in those Certificates, as
permitted by applicable laws and regulations. No underwriter would be obligated,
however, to make a market in those Certificates, and any market-making that is
done could be discontinued at any time at the sole discretion of the
underwriters. Accordingly, no assurance can be given as to the liquidity of, or
trading markets for, the Certificates of any series.
Some of the underwriters or agents and their associates may be customers
of, engage in transactions with and perform services for us in the ordinary
course of business.
VALIDITY OF THE CERTIFICATES
Unless otherwise indicated in the applicable prospectus supplement, the
validity of the offered Certificates will be passed upon for us by Robert S.
Harkey, Senior Vice President --
General Counsel, and for any agents, dealers or underwriters by Sullivan &
Cromwell, New York, New York.
EXPERTS
The consolidated financial statements and schedule included or incorporated
by reference in our Annual Report on Form 10-K for the fiscal year ended June
30, 1999 and incorporated by reference in this prospectus have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are incorporated herein by reference in this
prospectus in reliance upon the authority of said firm as experts in accounting
and auditing in giving said reports.
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WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any documents we file at the
SEC's public reference room 450 Fifth Street, N.W., Washington, D.C. 20549.
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference room. Our SEC filings are also available to the public on the SEC's
web site at http://www.sec.gov and through the New York Stock Exchange, 20 Broad
Street, New York, New York 10005, on which our common stock is listed.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and later information that we file
with the SEC will automatically update and supersede this information as well as
the information included in this prospectus. We incorporate by reference the
documents listed below and any future filings made with the SEC under Sections
13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934 ("Exchange
Act") until we sell all the Certificates. This prospectus is part of a
registration statement we filed with the SEC.
- Annual Report on Form 10-K for the fiscal year ended June 30, 1999;
- Quarterly Report on Form 10-Q for the quarter ended September 30, 1999;
- Quarterly Report on Form 10-Q for the quarter ended December 31, 1999;
- Current Report on Form 8-K dated November 30, 1999; and
- Current Report on Form 8-K dated January 31, 2000.
Any party to whom this prospectus is delivered, including a holder in
street name, may request a copy of these filings (other than any exhibits unless
specifically incorporated by reference into this prospectus), at no cost, by
writing or telephoning us at the following address:
Delta Air Lines, Inc.
Investor Relations Department
(Dept. No. 829)
P.O. Box 20706
Atlanta, Georgia 30320
(404) 715-2600
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(Delta Air Lines Logo)
