Filed Pursuant to Rule 424(b)(3)
Registration No. 333-65218
THE INFORMATION IN THIS PRELIMINARY PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND
MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES OR ACCEPT OFFERS TO BUY THESE
SECURITIES BEFORE THIS PROSPECTUS SUPPLEMENT IS DELIVERED IN FINAL FORM. THIS
PRELIMINARY PROSPECTUS SUPPLEMENT AND THE ATTACHED PROSPECTUS ARE NOT AN OFFER
TO SELL THESE SECURITIES, AND WE ARE NOT SOLICITING OFFERS TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED APRIL 22, 2002
PRELIMINARY PROSPECTUS SUPPLEMENT
(To Prospectus dated July 23, 2001)
$1,125,861,000
(DELTA AIR LINES LOGO)
PASS THROUGH CERTIFICATES, SERIES 2002-1
Delta Air Lines, Inc. is issuing, through four separate pass through trusts,
Class G-1, Class G-2, Class C and Class D Pass Through Certificates, Series
2002-1. Only the Class G-1, Class G-2 and Class C Certificates are being offered
pursuant to this prospectus supplement. The Class D Certificates will be
privately placed concurrently with the issuance of the Class G-1, Class G-2 and
Class C Certificates. The Class D Certificates are not being offered pursuant to
this prospectus supplement.
Each Certificate will represent an interest in a pass through trust. The
proceeds from the sale of 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
Certificates of such trust. The Certificates do not represent interests in or
obligations of Delta or any of its affiliates. The Certificates will not be
listed on any national securities exchange.
The equipment notes to be held by the Class G-1, Class G-2 and Class C Trusts
will be issued for each of thirty-two Boeing aircraft delivered new to Delta
from May 1995 through April 2002 consisting of seventeen Boeing 737-832
aircraft, one Boeing 757-232 aircraft, eight Boeing 767-332ER aircraft and six
Boeing 767-432ER aircraft. The equipment notes to be held for the Class D Trust
will be issued for each of such aircraft except the seventeen Boeing 737-832
aircraft. The equipment notes issued for each aircraft will be secured by a
security interest in such aircraft. Interest on the equipment notes will be
payable semiannually on each January 2 and July 2, beginning January 2, 2003.
The principal of the equipment notes to be held by the Class G-1 and Class C
Trusts is scheduled for payment on January 2 and July 2 in certain years,
beginning on January 2, 2003 and ending on January 2, 2023 and January 2, 2012,
respectively. The entire principal amount of the equipment notes to be held by
the Class G-2 Trust is scheduled for payment on July 2, 2012. The entire
principal amount of the equipment notes to be held by the Class D Trust is
scheduled for payment on July 2, 2007. Delta will have the ability to enter into
sale/leaseback transactions involving any Boeing 737-832 aircraft which secures
the equipment notes. If such a transaction is entered into, the related aircraft
will be subject to a lease and a related amended and restated indenture and
Delta's obligations on the Equipment Notes will be assumed by the related owner
trustee on a non-recourse basis.
The Class G-1 and Class G-2 Certificates will rank equally in right to
distributions and rank senior in right to distributions to the other
Certificates. The Class C Certificates will rank junior in right to
distributions to the Class G-1 and Class G-2 Certificates and will rank senior
in right to distributions to the Class D Certificates. The Class D 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 of the Class G-1, Class G-2 and Class C
Certificates. Each liquidity facility will be in an amount sufficient to make
three semiannual interest distributions on the related class of Certificates.
There will be no liquidity facility for the Class D Certificates.
MBIA Insurance Corporation will issue financial guaranty insurance policies to
support the payment of interest on the Class G-1 and Class G-2 Certificates when
due and the payment of the outstanding balance on the Class G-1 and Class G-2
Certificates on the Final Legal Distribution Date for such certificates and
under certain other circumstances as described herein.
(MBIA LOGO)
INVESTING IN THE CERTIFICATES INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE S-16.
---------------------------------------------------------------------------------------------------------------
FACE INTEREST FINAL EXPECTED PRICE TO
CERTIFICATES AMOUNT RATE DISTRIBUTION DATE PUBLIC(1)
---------------------------------------------------------------------------------------------------------------
Class G-1 $587,495,000 % January 2, 2023 100%
Class G-2 $370,327,000 % July 2, 2012 100%
Class C $168,039,000 % January 2, 2012 100%
---------------------------------------------------------------------------------------------------------------
(1) Plus accrued interest, if any, from the date of issuance.
The underwriters will purchase all of the Class G-1, Class G-2 and Class C
Certificates if any are purchased. The aggregate proceeds from the sale of the
Class G-1, Class G-2 and Class C Certificates will be $1,125,861,000. Delta will
pay the underwriters a commission of $7,318,097. Delivery of the Class G-1,
Class G-2 and Class C Certificates in book-entry form only will be made on or
about April , 2002 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 supplement or the prospectus. Any
representation to the contrary is a criminal offense.
JOINT BOOKRUNNERS
JPMORGAN SALOMON SMITH BARNEY
April , 2002.
TABLE OF CONTENTS
PAGE
Presentation of information........... ii
Summary............................... S-1
Summary of terms of certificates.... 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
Selected financial and operating
data............................. S-14
Risk factors.......................... S-16
Terrorist attack.................... S-16
Risk factors relating to Delta...... S-17
Risk factors relating to the airline
industry......................... S-18
Risk factors relating to the
certificates and the offering.... S-19
The company........................... S-23
Recent developments................... S-23
Network developments................ S-23
Distribution costs.................. S-23
Delta reports March quarter 2002
loss............................. S-23
Description of the policy provider.... S-24
General............................. S-24
MBIA financial information.......... S-24
Financial strength ratings of
MBIA............................. S-25
Use of proceeds....................... S-26
Description of the certificates....... S-27
General............................. S-27
Distribution of payments on
equipment notes.................. S-28
Subordination....................... S-30
Pool factors........................ S-31
Reports to certificateholders....... S-33
Indenture events of default and
certain rights upon an indenture
event of default................. S-33
Purchase rights of
certificateholders............... S-36
PTC event of default................ S-36
Option to convert to leased
aircraft......................... S-37
Merger, consolidation and transfer
of assets........................ S-40
Modification of the pass through
trust agreements and certain
other agreements................. S-41
Termination of the trusts........... S-43
The trustees........................ S-44
Book-entry registration; delivery
and form......................... S-44
Description of the liquidity
facilities.......................... S-46
General............................. S-46
Drawings............................ S-46
Replacement of liquidity
facilities....................... S-47
Reimbursement of drawings........... S-50
Liquidity events of default......... S-51
Liquidity provider.................. S-51
Description of the policies and the
policy provider agreement........... S-52
The policies........................ S-52
PAGE
General............................. S-54
Definitions......................... S-55
The policy provider agreement....... S-56
Description of the intercreditor
agreement........................... S-57
Intercreditor rights................ S-57
Priority of distributions........... S-59
Voting of equipment notes........... S-65
The subordination agent............. S-65
Description of the aircraft and the
appraisals.......................... S-66
The aircraft........................ S-66
The appraisals...................... S-67
Description of the equipment notes.... S-68
General............................. S-68
Subordination....................... S-69
Principal and interest payments..... S-69
Redemption.......................... S-70
Security............................ S-72
Loan to value ratios of equipment
notes............................ S-72
Defeasance in connection with owned
aircraft......................... S-73
Limitation of liability............. S-73
Indenture events of default, notice
and waiver....................... S-74
Remedies............................ S-75
Modification of indentures and
leases........................... S-78
Indemnification..................... S-78
Certain provisions of the owned
aircraft indentures and the
leases........................... S-79
Certain U.S. federal income tax
consequences........................ S-87
Tax status of the trusts............ S-88
Taxation of certificate owners...... S-88
Certain U.S. federal income tax
consequences to non-U.S.
certificateholders............... S-90
Backup withholding.................. S-90
Certain Connecticut taxes............. S-91
Certain ERISA considerations.......... S-91
General............................. S-91
Plan assets issues.................. S-92
Prohibited transaction exemptions... S-92
Special considerations applicable to
insurance company general
accounts......................... S-93
Underwriting.......................... S-94
Legal opinions........................ S-95
Experts............................... S-96
Appendix I: Index of defined 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
i
PRESENTATION OF INFORMATION
These offering materials consist of two documents: (a) this prospectus
supplement, which describes the terms of the Certificates that we are currently
offering, and (b) the accompanying prospectus, which provides general
information about our Certificates, some of which may not apply to the
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 Defined 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 involve risks and
uncertainties that could cause actual results to differ materially from
historical experience or our expectations. Additional information concerning
these and other factors is contained in our SEC filings, including but not
limited to Delta's Forms 10-K, 10-Q and 8-K.
---------------------
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.
---------------------
ii
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 incorporated by reference 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 CERTIFICATES
------------------------------------------------------------------------------------------------------------
CLASS G-1 CLASS G-2 CLASS C CLASS D(1)
CERTIFICATES CERTIFICATES CERTIFICATES CERTIFICATES
------------------------------------------------------------------------------------------------------------
Aggregate face
amount.............. $587,495,000 $370,327,000 $168,039,000 $89,994,000
Ratings:
Moody's............... Aaa Aaa Baa2 Not Rated
Standard & Poor's..... AAA AAA A- Not Rated
Initial Loan to
Aircraft value ratio
(cumulative)(2)..... 51.9% 51.9% 61.1% 65.9%
Expected maximum Loan
to Aircraft value
ratio
(cumulative)........ 56.1% 56.1% 61.1% 66.1%
Expected principal
distribution window
(in years).......... 0.7-20.7 10.2 0.7-9.7 5.2
Initial average life
(in years).......... 10.4 10.2 5.4 5.2
Regular Distribution
Dates............... January 2 and January 2 and January 2 and January 2 and
July 2 July 2 July 2 July 2
Final expected Regular
Distribution Date... January 2, 2023 July 2, 2012 January 2, 2012 July 2, 2007
Final Legal
Distribution Date... July 2, 2024 January 2, 2014 July 2, 2013 July 2, 2007
Minimum
denomination........ $1,000 $1,000 $1,000 $100,000
Section 1110
protection.......... Yes Yes Yes Yes
Liquidity Facility
coverage............ 3 semiannual interest 3 semiannual interest 3 semiannual interest No
payments payments payments
Policy Coverage(3).... Yes Yes No No
------------------------------------------------------------------------------------------------------------
(1) The Class D Certificates will be privately placed concurrently with the
issuance of the other classes of Certificates. We are not offering the Class D
Certificates pursuant to this prospectus supplement.
(2) The initial aggregate appraised base value of the Aircraft is
$1,843,800,000. See "Loan to aircraft value ratios" in this prospectus
supplement summary for the method we used in calculating the Loan to Aircraft
value ratios.
(3) The Policies will support the payment of interest on the Class G-1 and Class
G-2 Certificates when due (after taking into account the prior use of any
available funds under the Liquidity Facility or the Cash Collateral Account for
the Class G-1 and Class G-2 Certificates) and the payment of the outstanding
balance of the Class G-1 and Class G-2 Certificates on the Final Legal
Distribution Date for such Certificates and in certain other circumstances as
described herein.
S-1
EQUIPMENT NOTES AND THE AIRCRAFT
The Trusts will hold secured Equipment Notes issued for each of thirty-two
Boeing aircraft, consisting of seventeen Boeing 737-832 aircraft, one Boeing
757-232 aircraft, eight Boeing 767-332ER aircraft and six Boeing 767-432ER
aircraft. All of the Aircraft have been delivered to and are being operated by
Delta, except for four Boeing 737-832 Aircraft delivered in 1998, which are
currently in storage and are expected to be returned to service by the end of
2002. 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.
--------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT OF
MANUFACTURER'S REGISTRATION DATE APPRAISED BASE SERIES G-1, G-2, C AND
AIRCRAFT TYPE SERIAL NUMBER NUMBER DELIVERED VALUE(1) D EQUIPMENT NOTES(2)
--------------------------------------------------------------------------------------------------------------
Boeing 737-832......... 29620 N372DA 10/26/98 $38,350,000 $25,649,844
Boeing 737-832......... 29621 N373DA 10/27/98 38,350,000 25,649,844
Boeing 737-832......... 29622 N374DA 11/4/98 38,400,000 25,648,092
Boeing 737-832......... 29623 N375DA 11/30/98 38,400,000 25,648,092
Boeing 737-832......... 30378 N396DA 8/18/00 41,000,000 27,738,000
Boeing 737-832......... 30537 N397DA 8/24/00 41,000,000 27,738,000
Boeing 737-832......... 30774 N398DA 8/24/00 41,000,000 27,738,000
Boeing 737-832......... 30379 N399DA 9/19/00 41,000,000 27,807,000
Boeing 737-832......... 30538 N3730B 9/22/00 41,000,000 27,807,000
Boeing 737-832......... 30818 N3764D 12/22/01 42,930,000 28,497,000
Boeing 737-832......... 30819 N3765 12/21/01 42,930,000 28,497,000
Boeing 737-832......... 30820 N3766 12/22/01 42,930,000 28,497,000
Boeing 737-832......... 30821 N3767 12/18/01 42,930,000 28,497,000
Boeing 737-832......... 29630 N3768 1/24/02 44,896,667 28,497,000
Boeing 737-832......... 30822 N3769L 1/31/02 44,896,667 28,497,000
Boeing 737-832......... 29631 N37700 2/25/02 45,026,667 28,566,000
Boeing 737-832......... 29632 N3771K 4/4/02 45,120,000 28,566,000
Boeing 757-232......... 30839 N67171 4/12/01 56,136,667 37,049,998
Boeing 767-332ER....... 27961 N185DN 5/3/95 63,600,000 41,872,498
Boeing 767-332ER....... 27962 N186DN 7/7/95 63,850,000 41,872,498
Boeing 767-332ER....... 27582 N187DN 6/19/96 66,900,000 43,679,998
Boeing 767-332ER....... 27583 N188DN 10/17/96 68,000,000 43,679,998
Boeing 767-332ER....... 25990 N189DN 2/13/97 69,100,000 45,487,499
Boeing 767-332ER....... 28447 N190DN 3/25/97 69,350,000 45,487,499
Boeing 767-332ER....... 28448 N191DN 4/9/97 69,650,000 45,487,499
Boeing 767-332ER....... 28449 N192DN 6/26/97 70,200,000 45,487,499
Boeing 767-432ER....... 29699 N828MH 8/11/00 89,426,667 59,167,499
Boeing 767-432ER....... 29700 N829MH 8/22/00 89,426,667 59,167,499
Boeing 767-432ER....... 29701 N830MH 9/13/00 89,500,000 59,407,498
Boeing 767-432ER....... 29702 N831MH 9/20/00 89,500,000 59,407,498
Boeing 767-432ER....... 29704 N832MH 9/26/00 89,500,000 59,407,498
Boeing 767-432ER....... 29706 N833MH 10/13/00 89,500,000 59,654,649
--------------------------------------------------------------------------------------------------------------
(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. In its
appraisal letter, one of the appraisers points out that, as a result of the
events of September 11, 2001, there has been a significant negative effect on
the current market values of all commercial aircraft and that the present used
aircraft market is considered to be a distressed market. See "Risk
factors--Appraisals and realizable value of aircraft."
(2) The Series D Equipment Notes will be issued only in respect of the Boeing
757-232, Boeing 767-332ER and Boeing 767-432ER Aircraft.
S-2
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
January 2 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. The proceeds from the sale
of an Aircraft, to the extent paid to the Subordination Agent in respect of any
Series of Equipment Notes secured by that Aircraft, may be available for
distribution pursuant to the Intercreditor Agreement to one or more Senior
Classes of Certificateholders in a default situation. 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.
-------------------------------------------------------------------------------------------------------------------------------
AGGREGATE POOL BALANCE(2) LTV(3)
ASSUMED --------------------------------------------------------- ---------------------------
AIRCRAFT CLASS G-1 CLASS G-2 CLASS C CLASS D CLASS G-1 CLASS G-2
DATE VALUE(1) CERTIFICATES CERTIFICATES CERTIFICATES CERTIFICATES CERTIFICATES CERTIFICATES
-------------------------------------------------------------------------------------------------------------------------------
April , 2002....... $1,843,800,000 $587,495,000 $370,327,000 $168,039,000 $89,994,000 51.9% 51.9%
January 2, 2003...... 1,770,775,088 554,130,449 370,327,000 154,905,988 89,994,000 52.2 52.2
January 2, 2004...... 1,697,750,177 520,847,708 370,327,000 140,873,258 89,994,000 52.5 52.5
January 2, 2005...... 1,624,725,265 487,523,912 370,327,000 125,712,180 89,994,000 52.8 52.8
January 2, 2006...... 1,551,700,353 454,200,116 370,327,000 110,561,087 89,994,000 53.1 53.1
January 2, 2007...... 1,478,675,442 420,876,320 370,327,000 94,423,475 89,994,000 53.5 53.5
January 2, 2008...... 1,405,650,530 387,552,524 370,327,000 80,303,756 0 53.9 53.9
January 2, 2009...... 1,332,625,618 354,228,728 370,327,000 68,759,279 0 54.4 54.4
January 2, 2010...... 1,259,600,707 320,904,932 370,327,000 20,428,446 0 54.9 54.9
January 2, 2011...... 1,186,575,795 287,581,136 370,327,000 1,591,891 0 55.4 55.4
January 2, 2012...... 1,113,550,883 254,246,300 370,327,000 0 0 56.1 56.1
January 2, 2013...... 466,289,613 243,350,030 0 0 0 52.2 NA
January 2, 2014...... 444,119,577 232,453,760 0 0 0 52.3 NA
January 2, 2015...... 420,244,744 217,377,160 0 0 0 51.7 NA
January 2, 2016...... 396,369,911 206,686,480 0 0 0 52.1 NA
January 2, 2017...... 370,360,551 195,995,800 0 0 0 52.9 NA
January 2, 2018...... 340,800,504 185,305,120 0 0 0 54.4 NA
January 2, 2019...... 311,240,457 165,729,714 0 0 0 53.2 NA
January 2, 2020...... 279,975,612 146,975,349 0 0 0 52.5 NA
January 2, 2021...... 248,710,767 76,689,316 0 0 0 30.8 NA
January 2, 2022...... 182,852,044 6,134,244 0 0 0 3.4 NA
January 2, 2023...... 0 0 0 0 0 NA NA
--------------------- ---------------------------
LTV(3)
---------------------------
CLASS C CLASS D
DATE CERTIFICATES CERTIFICATES
--------------------- ---------------------------
April , 2002....... 61.1% 65.9%
January 2, 2003...... 61.0 66.0
January 2, 2004...... 60.8 66.1
January 2, 2005...... 60.5 66.1
January 2, 2006...... 60.3 66.1
January 2, 2007...... 59.9 66.0
January 2, 2008...... 59.6 NA
January 2, 2009...... 59.5 NA
January 2, 2010...... 56.5 NA
January 2, 2011...... 55.6 NA
January 2, 2012...... NA NA
January 2, 2013...... NA NA
January 2, 2014...... NA NA
January 2, 2015...... NA NA
January 2, 2016...... NA NA
January 2, 2017...... NA NA
January 2, 2018...... NA NA
January 2, 2019...... NA NA
January 2, 2020...... NA NA
January 2, 2021...... NA NA
January 2, 2022...... NA NA
January 2, 2023...... NA NA
(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 in accordance with the Depreciation Assumption
described under "Description of the equipment notes--Loan to value ratio of
equipment notes." 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,
after giving effect to any principal distributions on such 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 January 2
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
CASH FLOW STRUCTURE
This diagram illustrates the structure for the offering of the Certificates and
cash flows.
(DELTA Flow Chart)
--------------------------------------------------------------------------------
(1) Delta will issue Series G-1, Series G-2 and Series C Equipment Notes in
respect of each Aircraft. Delta will issue Series D Equipment Notes in respect
of each Boeing 757-232, 767-332ER and 767-432ER Aircraft. We are not offering
the Class D Certificates under this prospectus supplement. The Equipment Notes
with respect to each Aircraft will be subject to a separate Indenture. Delta
will have the ability to enter into sale/leaseback transactions involving the
Boeing 737-832 Aircraft. If any such transaction is entered into, the related
Aircraft will be subject to a lease and a related Indenture and Delta's
obligations on the Equipment Notes will be assumed by the relevant Owner Trustee
on a non-recourse basis. See "Description of the certificates--Option to convert
to leased aircraft." The Equipment Notes will not be cross-collateralized. There
will not be any cross-default provisions in the Indentures or the Leases.
(2) Separate Liquidity Facilities will be available with respect to the Class
G-1, Class G-2 and Class C Certificates for up to three consecutive semiannual
interest distributions on the Certificates of such Class. There will be no
liquidity facility in respect of the Class D Certificates.
(3) The Policies cover payment of interest on and the outstanding balance of the
Class G-1 and Class G-2 Certificates only in the circumstances described herein.
See "Description of the policies and the policy provider agreement." The
Policies do not cover any amounts payable in respect of the Class C or Class D
Certificates.
S-4
THE OFFERING
TRUSTS...................
The Class G-1 Trust, the Class G-2 Trust, the Class C
Trust and the Class D 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 G-1, Class G-2 and Class C Certificates.
Each Class of Certificates will represent fractional
undivided interests in the related Trust.
CLASS D CERTIFICATES.....
We are not offering the Class D Certificates under this
prospectus supplement, but will privately place the Class
D Certificates with our affiliate concurrently with the
issuance of the other Certificates. There will be no
liquidity facility for the Class D Certificates. Delta
will issue Series D Equipment Notes in respect of the
Boeing 757-232, Boeing 767-332ER and Boeing 767-432ER
Aircraft only.
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 either be
full recourse obligations of Delta or secured by a Lease
which is a full recourse obligation. Delta will use the
proceeds from the issuance of the Equipment Notes for
general corporate purposes including, among other
possible uses, the repayment of $625 million Delta
borrowed in April 2001 under its 1997 Bank Credit
Agreement.
SUBORDINATION AGENT,
TRUSTEE AND LOAN
TRUSTEE..................
State Street Bank and Trust Company of Connecticut,
National Association.
POLICY PROVIDER..........
MBIA Insurance Corporation.
LIQUIDITY PROVIDER.......
Initially, Westdeutsche Landesbank Girozentrale, New York
branch. There will be no liquidity facility available
with respect to the Class D Certificates.
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 (other than the Class D Trust);
- With respect to the Class G-1 and Class G-2 Trusts, all
monies received under the Policy for such Trust; and
- Funds from time to time deposited with the Trustee in
accounts relating to such Trust.
REGULAR DISTRIBUTION
DATES....................
January 2 and July 2 of each year, commencing on January
2, 2003.
S-5
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 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, the Subordination
Agent and the Policy Provider will enter into the
Intercreditor Agreement. The Intercreditor Agreement
states how payments made on the Equipment Notes, the
Liquidity Facilities and the Policies will be distributed
among the Trusts, the Liquidity Provider and the Policy
Provider. The Intercreditor Agreement also sets forth
agreements among the Trusts, the Liquidity Provider and
the Policy Provider relating to who will control the
exercise of remedies under the Equipment Notes and the
Indentures.
SUBORDINATION............
Under the Intercreditor Agreement, distributions on the
Certificates generally will be made in the following
order:
- First, to the holders of the Class G-1 and Class G-2
Certificates;
- Second, to the holders of the Class C Certificates; and
- Third, to the holders of the Class D Certificates.
Certain payments to the Liquidity Provider and to the
Policy Provider will be made prior to payments on the
Certificates as discussed under "Description of the
intercreditor agreement--Priority of distributions."
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..
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).
S-6
The Controlling Party will be:
- The Policy Provider or, if a Policy Provider Default
has occurred and is continuing:
(1) Prior to the payment of Final Distributions to
holders of the Class G-1 and Class G-2 Certificates,
the Class G-1 or Class G-2 Trustee, whichever
represents the Class with the larger Pool Balance of
Certificates outstanding at the time the Indenture
Event of Default occurs;
(2) Upon payment of Final Distributions to the
holders of such larger Class, the other of the Class
G-1 Trustee or the Class G-2 Trustee;
- Upon payment of Final Distributions to the holders of
Class G-1 and Class G-2 Certificates and, unless a Policy
Provider Default has occurred and is continuing, of any
obligations to the Policy Provider, the Class C Trustee;
- Upon payment of Final Distributions to the holders of
Class G-1, Class G-2 and Class C Certificates and, unless
a Policy Provider Default has occurred and is continuing,
of any obligations to the Policy Provider, the Class D
Trustee; and
- Under certain circumstances and notwithstanding any of
the foregoing, the Liquidity Provider with the greatest
amount owed to it, unless the Policy Provider pays to the
Liquidity Provider all outstanding drawings and interest
thereon owing to the Liquidity Provider under the
Liquidity Facilities, in which case, the Policy Provider
(so long as no Policy Provider Default has occurred and
is continuing).
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 consent
of each Trustee, sell such Equipment Notes or the
Aircraft subject to the lien of such Indenture for less
than certain specified minimums or, if applicable, modify
lease rental payments for such Aircraft below a specified
threshold.
RIGHT TO BUY OTHER
CLASSES OF
CERTIFICATES.............
If Delta is in bankruptcy or certain other specified
events have occurred, Certificateholders and the Policy
Provider may have the right to buy certain other Classes
of Certificates on the following basis:
- If either the Class G-1 or Class G-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 C Certificateholders will have the right to
purchase all, but not less than all, of the Class G-1 and
Class G-2 Certificates, unless the Policy Provider has
elected to purchase such Class G-1 and Class G-2
Certificates as described below.
S-7
- The Class D Certificateholders (other than Delta or any
of its affiliates) will have the right to purchase all,
but not less than all, of the Class G-1, Class G-2 and
Class C Certificates unless the Policy Provider has
elected to purchase such Class G-1 and Class G-2
Certificates as described below.
- Whether or not any Class of Certificateholders has
purchased or elected to purchase the Class G-1 and Class
G-2 Certificates, the Policy Provider will have the right
to purchase all, but not less than all, of the Class G-1
and Class G-2 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
without any premium.
LIQUIDITY FACILITIES.....
Under the Liquidity Facility for each Trust (other than
the Class D 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 (other than the Class D 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.
POLICY COVERAGE..........
Under the Policies, the Policy Provider will honor
drawings to cover:
- any shortfall (after the application of drawings under
the Class G-1 or Class G-2 Liquidity Facility, as
applicable, and withdrawals from the Class G-1 or Class
G-2 Cash Collateral Account, as applicable (collectively,
"Prior Funds")), on any Regular Distribution Date in
interest on the Class G-1 and Class G-2 Certificates; and
- any shortfall (after giving effect to the application
of Prior Funds) on the Final Legal Distribution Date in
the Final Distribution (other than any unpaid premium) on
the Class G-1 or Class G-2 Certificates.
Further, upon a default in the payment of principal on a
Series G-1 or Series G-2 Equipment Note or if a Series
G-1 or Series G-2 Equipment Note is accelerated (each, a
"Defaulted Series G Equipment Note") then,
- on the first Business Day which is 18 months after the
last Regular Distribution Date on which full payment was
made on that Defaulted Series G Equipment Note prior to
such default or acceleration, the Policy Provider will
pay the outstanding amount of principal and accrued and
unpaid interest on that Defaulted Series G Equipment
Note; or
S-8
- if a Defaulted Series G Equipment Note or any
underlying collateral is disposed of in connection with
the exercise of remedies (a "Disposition"), the Policy
Provider will pay, after giving effect to the application
of Disposition proceeds and (if such Disposition occurs
prior to the end of the 18-month period referred to
above) any Prior Funds, the amount, if any, required to
reduce the Pool Balance of the Class G-1 or Class G-2
Certificates by an amount equal to the outstanding
principal amount of such Defaulted Series G Equipment
Note (less the amount of any Policy Drawings previously
paid by the Policy Provider in respect of principal on
such Defaulted Series G Equipment Note) plus accrued and
unpaid interest on the amount of such reduction.
Assuming there is no Disposition, instead of paying the
full amount of principal and accrued and unpaid interest
on a Defaulted Series G Equipment Note at the end of the
18-month period referred to above, the Policy Provider
may elect, after giving five days' prior written notice
to the Subordination Agent, instead to pay:
- an amount equal to the scheduled principal and interest
payable but not paid on the Defaulted Series G Equipment
Note (without regard to the acceleration thereof) during
the 18-month period (after giving effect to the
application of funds received from the related Liquidity
Facility and the related Cash Collateral Account
attributable to such interest); and
- thereafter, on each Regular Distribution Date, an
amount equal to the scheduled principal and interest
otherwise payable on the Defaulted Series G Equipment
Note (without regard to any acceleration thereof and
without regard to any funds available under any Liquidity
Facility or any Cash Collateral Account) until paid in
full.
Notwithstanding an election by the Policy Provider to pay
scheduled payments instead of accelerated payments as
discussed above, the Policy Provider may, on any Business
Day (which shall be a Special Distribution Date) elected
by the Policy Provider upon 20 days' notice, cause the
Subordination Agent to make a drawing under the related
Policy for an amount equal to the then outstanding
principal balance of and accrued and unpaid interest on
the Defaulted Series G Equipment Note from the
immediately preceding Regular Distribution Date, less any
policy drawings previously paid by the Policy Provider in
respect of principal on such Equipment Note. Further,
notwithstanding an election by the Policy Provider to pay
scheduled payments instead of accelerated payments as
discussed above, upon the occurrence of a Policy Provider
Default, the Subordination Agent shall, on any Business
Day elected by the Subordination Agent upon 20 days'
notice to the Policy Provider, make a drawing under the
related Policy for an amount equal to the then
outstanding principal balance of and accrued and unpaid
interest on such Defaulted Series G Equipment Note from
the immediately preceding Regular Distribution Date, less
any policy drawings previously paid by the Policy
Provider in respect of principal on such Equipment Note.
S-9
At the end of the 18-month period referred to above, the
Policy for the related Trust will, if not already
endorsed to so provide, be endorsed to provide for the
payment to the Liquidity Provider of interest accruing on
all outstanding drawings under the Class G-1 and Class
G-2 Liquidity Facilities from and after the end of such
18-month period as and when such interest becomes due in
accordance with the Liquidity Facilities and any drawings
by the Liquidity Provider in respect of such interest
will be honored by the Policy Provider. Any future
amendments or modifications of any Policy which would
adversely affect the rights of the Liquidity Provider
will need the consent of the Liquidity Provider.
Accrued and unpaid interest payable by the Policy
Provider on account of the Defaulted Series G Equipment
Notes will be calculated at the Stated Interest Rate for
the Class G-1 or Class G-2 Certificates, as applicable.
The Policies will cover only the Class G-1 and Class G-2
Certificates, respectively, and the proceeds of any
policy drawing will be applied only to the outstanding
balance of, and interest on, the Class G-1 and Class G-2
Certificates. The reimbursement of drawings under the
Policies ranks junior to further distributions on the
Class G-1 and Class G-2 Certificates but, except for
certain limited amounts, senior to distribution on the
Class C and Class D Certificates.
CONVERSION TO LEASED
AIRCRAFT.................
At the time of issuance of the Certificates, each
Aircraft will be an Owned Aircraft. At any time after
issuance, so long as no Indenture Event of Default or
event or condition that, with the passage of time or
notice or both, would constitute an Indenture Event of
Default has occurred and is continuing, Delta may elect
to convert any Boeing 737-832 Aircraft to a Leased
Aircraft by entering into a sale/leaseback transaction
and, at the time of such conversion (if such conversion
takes place prior to May 1, 2003), to reoptimize the
Leased Aircraft Notes to be issued by the applicable
Owner Trustee to each Trustee in replacement of the
previously issued Owned Aircraft Notes. If Delta converts
any Boeing 737-832 Aircraft from an Owned Aircraft to a
Leased Aircraft, the terms of the financing agreements
entered into may differ from the forms of such agreements
described in this prospectus supplement because a third
party--the Owner Participant--will provide a portion of
the financing of such Aircraft and may request changes.
However, under the related Participation Agreement, the
terms of such financing agreements must (a) contain the
mandatory document terms set forth in the related
Participation Agreement and (b) not vary the mandatory
economic terms set forth in the related Participation
Agreement. In addition, Delta must (a) certify to the
Trustees and the Policy Provider that the modifications
to such agreements, if any, do not materially and
adversely affect the Certificateholders or the Policy
Provider, as applicable, and (b) obtain written
confirmation from each Rating Agency that the proposed
sale/leaseback transaction will not result in a
withdrawal, suspension or downgrading of the rating on
any Class of Offered Certificates (without regard to the
related Policy in the
S-10
case of the Class G-1 and Class G-2 Certificates). See
"Description of the certificates--Option to convert to
leased aircraft."
EQUIPMENT NOTES
(a) Issuer.............
Owned Aircraft. Under each Indenture, Delta will issue
Series G-1, Series G-2, Series C and, except in the case
of any Indenture relating to a Boeing 737-832 Aircraft,
Series D Equipment Notes, which will be acquired,
respectively, by the Class G-1, Class G-2, Class C and
Class D Trusts.
Leased Aircraft. If Delta leases a Boeing 737-832
Aircraft, the Aircraft will be owned by an Owner Trust
created by the related Owner Participant and Series G-1,
Series G-2 and Series C Equipment Notes for such Aircraft
will be issued by the applicable Owner Trustee. The
Equipment Notes will represent obligations of the Owner
Trust. Payments made by Delta under the lease will be
sufficient to pay scheduled payments on the Equipment
Notes.
(b) Interest...........
The Equipment Notes held in each Trust will accrue
interest at the rate per annum for the Certificates
issued by such Trust. The rate per annum for the Class
G-1, Class G-2 and Class C Certificates is set forth on
the cover page of this prospectus supplement. The rate
per annum for the Class D Certificates is %.
Interest on the Equipment Notes will be payable on
January 2 and July 2 of each year, commencing on January
2, 2003. 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 G-1
and Series C Equipment Notes are scheduled to be received
in specified amounts on January 2 and July 2 in certain
years, commencing on January 2, 2003 and ending on
January 2, 2023 and January 2, 2012, respectively.
Bullet Maturity Notes. The entire principal amount of the
Series G-2 Equipment Notes is scheduled to be paid on
July 2, 2012. The entire principal amount of the Series D
Equipment Notes is scheduled to be paid on July 2, 2007.
(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 or lease.
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 prior to maturity all of the Equipment Notes issued
with respect to an Aircraft. 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."
Purchase by Owner Trustee or Owner Participant. If an
event of default under a lease relating to a Boeing
737-832 Aircraft is continuing, the
S-11
applicable Owner Trustee or Owner Participant may elect
to purchase all of the Equipment Notes with respect to
such Aircraft, subject to the terms of the applicable
Indenture. The purchase price in such case will be the
unpaid principal amount of such Equipment Notes, together
with accrued interest, but without any premium (provided
that a Make-Whole Amount will be payable under certain
circumstances specified in the applicable Indenture).
(e) Security...........
The Equipment Notes issued with respect to each Aircraft
will be secured by a security interest in such Aircraft
and, in the case of any Leased Aircraft, in the related
Owner Trustee's rights under the lease with respect to
such Aircraft (with certain limited exceptions).
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, all of 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 on a more senior Class of
Certificates.
There will be no cross-default provisions in the
Indentures or in the leases (if any). 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, the Controlling Party may not exercise remedies
for the remaining Aircraft.
(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
for 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, if any, and other
property held by the relevant Trust, in accordance with
such Certificate Owner's method of accounting. See
"Certain U.S. federal income tax consequences."
CERTAIN ERISA
CONSIDERATIONS...........
Each person who acquires a Certificate will be deemed to
have represented that either:
- no assets of a Plan or of any trust established with
respect to a Plan shall have been used to acquire such
Certificate or an interest therein; or
- the purchase and holding of such Certificate or an
interest therein by such person are exempt from the
prohibited transaction restrictions of
S-12
the Employee Retirement Income Security Act of 1974 and
the Internal Revenue Code of 1986 or materially similar
provisions of Similar Law (as defined herein) 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:
-----------------------------------------------------------------------
CERTIFICATES MOODY'S STANDARD & POOR'S
-----------------------------------------------------------------------
Class G-1................................. Aaa AAA
Class G-2................................. Aaa AAA
Class C................................... Baa2 A-
Delta has been advised by Standard & Poor's that, upon
issuance, the Class C Certificates will be placed by
Standard & Poor's on CreditWatch with negative
implications.
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."
The Class D Certificates will not be rated.
THRESHOLD RATING
REQUIREMENTS FOR THE
LIQUIDITY PROVIDER.......
-----------------------------------------------------------------------
CERTIFICATES MOODY'S STANDARD & POOR'S
-----------------------------------------------------------------------
Class G-1................................. P-1 A-1+
Class G-2................................. P-1 A-1+
Class C................................... P-1 A-1
LIQUIDITY PROVIDER
RATING...................
The Liquidity Provider currently meets the Threshold
Rating requirement for each Class of Certificates.
RATING OF THE POLICY
PROVIDER.................
-----------------------------------------------------------------------
MOODY'S STANDARD & POOR'S
-----------------------------------------------------------------------
Financial Strength........................ Aaa AAA
S-13
SELECTED FINANCIAL AND OPERATING DATA
The following table presents selected financial and operating data of Delta. We
derived the annual historical financial data from Delta's audited consolidated
financial statements and the notes thereto. The consolidated financial data
include the results of ASA Holdings, Inc. and Comair Holdings, Inc. since April
1, 1999 and November 22, 1999, respectively. The audited consolidated financial
statements for the years ended December 31, 2001, 2000 and 1999 are incorporated
by reference in the prospectus accompanying this prospectus supplement and the
annual historical financial data should be read in conjunction with those
financial statements. The consolidated financial data for the interim periods
ended March 31, 2002 and 2001 were derived from Delta's unaudited consolidated
financial statements and may not be indicative of results for the year as a
whole. See "Where you can find more information" in the accompanying prospectus.
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------------ -----------------------------
----------------------------------------------------------------------------------------------
2002(1) 2001(2) 2001(3) 2000(4) 1999(5)
----------------------------------------------------------------------------------------------
(UNAUDITED)
STATEMENT OF OPERATIONS DATA (IN
MILLIONS):
Operating revenues..................... $ 3,103 $3,842 $13,879 $16,741 $14,883
Operating expenses..................... 3,538 3,957 15,481 15,104 13,565
Operating income (loss)................ (435) (115) (1,602) 1,637 1,318
Interest expense, net(6)............... 141 86 410 257 126
Net income (loss) before cumulative
effect of change in accounting
principle........................... (397) (133) (1,216) 928 1,262
Net income (loss)...................... (397) (133) (1,216) 828 1,208
OTHER DATA:
Ratio of earnings to fixed
charges(7)........................... (0.92x) 0.18x (0.61x) 2.42x 3.56x
OPERATING STATISTICS:
Revenue passengers enplaned
(thousands).......................... 24,618 26,932 104,943 119,930 110,083
Available seat miles (millions)(8)..... 33,740 37,727 147,837 154,974 147,073
Revenue passenger miles
(millions)(9)........................ 23,230 25,285 101,717 112,998 106,165
Operating revenue per available seat
mile................................. 9.20c 10.18c 9.39c 10.80c 10.12c
Passenger mile yield(10)............... 12.39c 14.23c 12.74c 13.86c 13.14c
Operating cost per available seat
mile................................. 10.49c 10.49c 10.47c 9.75c 9.22c
Passenger load factor(11).............. 68.85% 67.02% 68.80% 72.91% 72.18%
Breakeven passenger load factor........ 79.26% 69.16% 77.31% 65.29% 65.37%
----------------------------------------------------------------------------------------------
[footnotes on next page]
S-14
--------------------------------------------------------------------------------------------------
AT MARCH 31, AT DECEMBER 31, AT DECEMBER 31,
2002 2001 2000
--------------------------------------------------------------------------------------------------
BALANCE SHEET DATA (IN MILLIONS):
Cash, cash equivalents and short-term
investments............................... $ 1,513 $ 2,215 $ 1,607
Total assets................................ 23,705 23,605 21,931
Current liabilities......................... 6,302 6,403 5,245
Long-term debt (less current maturities).... 8,522(12) 8,279(12) 5,797
Obligations under capital leases (less
current obligations)...................... 63 68 99
Shareowners' equity......................... 3,411 3,769 5,343
--------------------------------------------------------------------------------------------------
(1) Includes $68 million pretax expenses (including $40 million in temporary
carrying costs related to surplus pilots and grounded aircraft as well as
re-qualification training and relocation costs resulting from capacity
reductions implemented in November 2001, and $28 million for non-cash fair value
adjustments of financial instruments accounted for under SFAS 133).
(2) Includes a $17 million pretax non-cash expense related to fair value
adjustments of financial instruments accounted for under SFAS 133.
(3) Includes a $634 million pretax gain that reflects the compensation Delta
recognized from the U.S. government under the Air Transportation Safety and
System Stabilization Act; a $111 million pretax gain on the sale of Delta's
equity interest in SkyWest, Inc.; a $68 million non-cash pretax gain for fair
value adjustments of financial instruments accounted for under SFAS 133; an $11
million pretax gain from the sale of Delta's equity interest in Equant, N.V.;
and $1.1 billion, pretax, for asset writedowns and other nonrecurring items. The
$1.1 billion in charges is primarily related to charges for early retirement and
severance costs relating to Delta's staffing reductions, charges for the
impairment and early retirement of certain aircraft and charges for discontinued
contracts, facilities and information technology projects.
(4) Includes pretax gains of $301 million related to Delta's equity investments
in priceline.com (of which $228 million represented a non-cash gain); a one-time
$16 million non-cash pretax gain related to Delta's equity investment in
Worldspan, L.P.; a $164 million cumulative effect, non-cash, pretax charge
resulting from Delta's adoption of SFAS 133 on July 1, 2000; a $159 million
non-cash, pretax charge for fair market value adjustments of financial
instruments accounted for under SFAS 133; a $108 million pretax charge for
nonrecurring items ($86 million charge for an early retirement medical option
program for eligible employees and $22 million charge relating to Delta's
closing of its Pacific gateway in Portland, Oregon); and a $7 million pretax
charge for the early extinguishment of certain debt obligations.
(5) Includes a $927 million pretax gain from the sale of investments in
priceline.com, Singapore Airlines Limited, Equant, N.V. and SAirGroup; a $469
million pretax charge for asset writedowns and other nonrecurring items
(including a $320 million asset writedown resulting from Delta's decision to
retire certain aircraft earlier than planned and $149 million for asset
impairment losses); an $89 million non-cash, pretax charge from the cumulative
effect of a change in accounting principle resulting from Delta's adoption on
January 1, 1999 of SAB 101; and a $40 million pretax charge for the early
extinguishment of certain debt obligations.
(6) Includes interest income.
(7) The ratio of earnings to fixed charges represents the number of times that
fixed charges are covered by earnings. Earnings represent income (loss) before
income taxes, excluding the cumulative effect of a change in accounting
principle, plus fixed charges excluding capitalized interest. Fixed charges
include interest, whether expensed or capitalized, and one-half of rental
expense, which Delta believes is representative of the interest factor in those
periods. Fixed charges exceeded adjusted earnings by $1,896 million and $607
million for the year ended December 31, 2001 and the three months ended March
31, 2002, respectively.
(8) "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.
(9) "Revenue passenger mile" represents one revenue-paying passenger transported
one mile and is calculated by multiplying the number of revenue passengers by
the number of miles they are flown during the period.
(10) "Passenger mile yield" represents the amount of passenger revenue earned
per revenue passenger mile during a reporting period.
(11) "Passenger load factor" is a measure of available seating capacity that is
used which is calculated by dividing revenue passenger miles by available seat
miles for a reporting period.
(12) Long-term debt includes $498 million in Special Facilities Revenue Bonds
issued in August 2001 by the Massachusetts Port Authority for the redevelopment
and expansion of Delta's facilities in Terminal A at Boston's Logan
International Airport. Delta has guaranteed the payment of debt service on these
bonds. The related proceeds of the bonds may only be used for the redevelopment
and expansion of Delta's facilities at Logan International Airport, and,
accordingly, are reflected on Delta's consolidated balance sheet at December 31,
2001 as a restricted investment in "other assets," as required by generally
accepted accounting principles.
S-15
RISK FACTORS
You should carefully consider the following risk factors as well as other
information contained in this prospectus supplement and the accompanying
prospectus.
TERRORIST ATTACK
LAST YEAR'S TERRORIST ATTACK ADVERSELY AFFECTED, AND MAY CONTINUE TO ADVERSELY
AFFECT, DELTA'S FINANCIAL RESULTS
As described in greater detail in Delta's filings with the SEC, the terrorist
attack of September 11, 2001 involving commercial aircraft of other airlines
have materially affected Delta's financial results and the airline industry
generally. Those effects continue, although they have been mitigated somewhat by
a slowly recovering business environment, the Air Transportation Safety and
System Stabilization Act and Delta's cost-cutting measures. Moreover, additional
terrorist attacks, even if not made directly on the airline industry, or the
fear of such attacks, could further negatively impact Delta and the airline
industry.
The future impact of the events of September 11, 2001 on Delta will depend on a
number of factors, including, but not limited to, the following: (i) the adverse
impact of the terrorist attack on the demand for air travel; (ii) the change in
Delta's operations and higher costs resulting from, and customer reaction to,
new airline security directives, including those of the Aviation and
Transportation Security Board; (iii) the availability and cost of war risk and
other insurance for Delta; (iv) the extent to which Delta receives additional
financial assistance under the Air Transportation Safety and System
Stabilization Act; (v) the credit downgrades of Delta and other airlines by
Moody's and Standard & Poor's discussed below, and the possibility of additional
downgrades, to the extent it makes it more difficult and/or more costly for
Delta to obtain financing; (vi) potential declines in the values of the aircraft
in Delta's fleet or facilities and any related asset impairment charges; and
(vii) additional terrorist activity and/or war.
IMPACT OF RATINGS ACTIONS RELATING TO DELTA
After September 11, 2001, the credit ratings on Delta's senior unsecured
long-term debt were lowered from Baa3 to Ba3 by Moody's and Delta's corporate
credit rating was lowered from BBB- to BB+ by Standard & Poor's with concurrent
downgrades of senior unsecured and various other debt. Standard & Poor's later
lowered Delta's senior unsecured debt rating (but no other ratings) from BB+ to
BB. The credit ratings of certain other airlines were also lowered by Moody's
and Standard and Poor's. Moody's announced that its ratings outlook on Delta's
debt securities is negative. Standard & Poor's ratings on Delta's senior
unsecured long-term remain on CreditWatch for possible future downgrade. There
can be no assurance that Delta's long-term debt rating will not be lowered
further or withdrawn by a rating agency.
The lowering of Delta's credit ratings could negatively impact its ability to
issue debt, to renew outstanding letters of credit which back certain Delta
obligations and to obtain certain financial instruments that Delta uses in its
fuel hedging program. It could also increase the cost of these transactions.
Delta may be required to purchase certain outstanding receivables totaling $212
million at December 31, 2001, that we sold to a third party if Delta's senior
unsecured long-term debt is rated below Ba2 by Moody's and below BB by Standard
& Poor's.
Delta has obtained from third parties a $424 million letter of credit relating
to the Delta Family-Care Savings Plan's Series C Guaranteed Serial ESOP Notes
and letters of credit totaling $409 million relating to bonds issued by various
municipalities to finance certain airport facilities leased to Delta. Delta may
be required to accelerate the payment of these obligations if it does
S-16
not extend these letters of credit prior to their expiration dates, which occur
between May 19, 2003 and December 4, 2003.
Moody's and Standard & Poor's have also downgraded the ratings on certain
classes of Delta Air Lines Pass Through Certificates, Series 2000-1 and Delta
Air Lines Pass Through Certificates, Series 2001-1. In connection with the
downgrades, Moody's announced that it would continue to review the ratings on
all classes of Delta Air Lines Pass Through Certificates, Series 2001-1 for
possible further downgrades and Standard & Poor's announced that the ratings on
all classes of Delta Air Lines Pass Through Certificates, Series 2000-1 and
Series 2001-1 would remain on CreditWatch with negative implications.
RISK FACTORS RELATING TO DELTA
DELTA CONTINUES TO EXPERIENCE SIGNIFICANT OPERATING LOSSES
Delta expects that the events of September 11, 2001 will continue to materially
affect its revenues due to declines in traffic and yield. While the business
environment is slowly recovering, traffic and yield remain significantly below
last year's level. For the quarter ended March 31, 2002, Delta's operating
revenues decreased 19.3%, revenue passenger miles declined 8.1% on a 10.6%
reduction in capacity and passenger mile yield fell 12.9% compared to the
quarter ended March 31, 2001.
Delta expects significant cost pressures to continue in 2002. These include,
among other items, (1) increased security costs and premiums for war and
terrorism risk insurance; (2) increased interest expense resulting from higher
levels of outstanding debt; and (3) increased pension expense due to the
decrease in the fair value of Delta's pension plan assets resulting from the
stock market decline and a new Delta pilot contract.
During 2002, Delta expects to incur unusual operating costs of approximately
$130 million. These nonrecurring expenses are a direct cost of Delta's capacity
reductions and represent the temporary carrying cost of surplus pilots and
grounded aircraft, as well as requalification training and relocation costs.
To help offset the impact of revenue declines and cost pressures, Delta has
implemented a cost reduction program. The primary elements of this program are
(1) reduction of Delta's staffing levels by approximately 12,000 employees; (2)
capacity reductions, including the accelerated retirement of certain aircraft
types; and (3) a detailed line item review of all other elements of Delta's cost
structure. The pace of passenger revenue recovery will determine Delta's
mainline capacity plans for the remainder of the year. Due to the changing
business environment, Delta will continue to refine many of its cost estimates
for 2002.
The continuing impact of September 11, 2001 on Delta's future financial
condition and results of operations will depend on, among other things, the
duration and magnitude of the adverse impact of the terrorist attacks on the
demand for air travel and the business environment.
SIGNIFICANT CHANGES OR EXTENDED PERIODS OF HIGH FUEL COSTS WOULD MATERIALLY
AFFECT DELTA'S OPERATING RESULTS
Delta's results of operations can be significantly impacted by changes in the
price and availability of jet fuel. Changes in jet fuel prices and availability
have industry-wide impact. Accordingly, lower jet fuel prices may be offset by
increased price competition and lower revenues for all air carriers. Moreover,
there can be no assurance that Delta will be able to increase its fares in
response to any future increases in fuel prices.
Delta's jet fuel purchase contracts do not provide material protection against
price increases or for assured availability of supplies. Delta purchases most of
its jet fuel from petroleum refiners under
S-17
contracts which establish the price based on various market indices. Delta also
purchases aircraft fuel on the spot market, from off-shore sources and under
contracts which permit the refiners to set the price and give Delta the right to
terminate upon short notices if the price is unacceptable.
Although Delta is currently able to obtain adequate supplies of jet fuel, it is
impossible to predict the future availability or price of jet fuel. Political
disruptions in oil producing countries, changes in government policy concerning
aircraft fuel production, transportation or marketing, changes in aircraft fuel
production capacity, environmental concerns and other unpredictable events may
result in fuel supply shortages and fuel price increases in the future.
RISK FACTORS RELATING TO THE AIRLINE INDUSTRY
THE INDUSTRY IN WHICH DELTA COMPETES IS HIGHLY COMPETITIVE
Delta faces significant competition with respect to domestic and international
routes, services and fares. All domestic routes served by Delta are subject to
competition from both new and established carriers, and service over virtually
all of Delta's domestic routes is highly competitive. On most domestic and
international routes, Delta competes with at least one, and usually more than
one, scheduled passenger airline. Delta also competes with all-cargo carriers,
charter airlines and, particularly on its shorter routes, with surface
transportation.
International marketing alliances formed by domestic and foreign carriers, such
as the Star Alliance (among United Airlines, Lufthansa German Airlines and
others), the Oneworld Alliance (among American Airlines, British Airways and
others) and the Wings Alliance (between Northwest Airlines and KLM-Royal Dutch
Airlines), have significantly increased competition in international markets.
Through marketing and codesharing arrangements with United States carriers,
foreign carriers have obtained access to interior United States passenger
traffic. Similarly, United States carriers have increased their ability to sell
international transportation such as transatlantic services to and beyond
European cities.
The airline industry is characterized by substantial price competition. If price
reductions are not offset by increases in traffic or changes in the mix of
traffic that improve Delta's passenger mile yield, Delta's operating results
will be adversely affected.
DELTA'S BUSINESS IS SUBJECT TO EXTENSIVE GOVERNMENT REGULATION
Airlines are subject to extensive regulatory and legal compliance requirements
that result in significant costs. The FAA from time to time issues directives
and other regulations relating to the maintenance and operation of aircraft that
require significant expenditures. Some FAA requirements cover, among other
things, security measures, collision avoidance systems, airborne windshear
avoidance systems, noise abatement and other environmental concerns, commuter
aircraft safety and increased inspections and maintenance procedures to be
conducted on older aircraft. Delta expects to continue incurring expenses to
comply with the FAA's regulations.
Additional laws, regulations, taxes and airport rates and charges have been
proposed from time to time that could significantly increase the cost of airline
operations or reduce revenues. For example, the Aviation and Transportation
Security Act, which became law in November 2001, mandates the federalization of
certain airport security procedures and imposes additional security requirements
on airports and airlines, most of which is funded by a new per-ticket tax on
passengers and a new tax on airlines. The ability of U.S. carriers to operate
international routes is subject to change because the applicable arrangements
between the United States and foreign governments may be amended from time to
time, or because appropriate slots or facilities are not made available. Delta
cannot provide assurance that laws or regulations enacted in the future will not
adversely affect it.
S-18
SEASONALITY AND OTHER FACTORS THAT IMPACT DEMAND FOR AIR TRAVEL
In general, demand for air travel is higher in the June and September quarters,
particularly in international markets, because there is more vacation travel
during these periods than during the remainder of the year. Demand for air
travel is also affected by factors such as economic conditions, fare levels and
weather conditions. In addition, demand for air travel at particular airlines
may be impacted from time to time by, among other things, actual or threatened
disruptions to operations due to labor issues. Due to these and other factors,
operating results for an interim period are not necessarily indicative of
operating results for an entire year, and operating results for an historical
period are not necessarily indicative of operating results for a future period.
RISK FACTORS RELATING TO THE CERTIFICATES AND THE OFFERING
APPRAISALS AND REALIZABLE VALUE OF AIRCRAFT
Three independent appraisal and consulting firms have prepared appraisals of the
Aircraft. The appraisal letters provided by these firms are annexed to this
prospectus supplement as Appendix II. Such 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 such 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 is sold separately or as
part of a block.
In addition, the value of the Aircraft have been negatively affected, at least
initially, as a consequence of the events of September 11, 2001 referred to
under "--Terrorist attacks." In its appraisal letter, one of the appraisers
points out that, as a result of the events of September 11, 2001, there has been
a significant negative effect on current market values of all commercial
aircraft and that the present used aircraft market is considered to be a
distressed market. 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 Owned
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 if a lessee is the subject
of a bankruptcy, insolvency or similar event.
In addition, some jurisdictions may allow for other liens or other third party
rights to have priority over a Loan Trustee's security interest in an Aircraft.
As a result, the benefits of the related Loan
S-19
Trustee's security interest in an Aircraft may be less than they would be if the
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 and the Policy Provider will receive payments
of Policy Provider Obligations owed to it before the holders of the Class C and
Class D Certificates receive any funds. In addition, in specified 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. 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
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 specified 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 D
Equipment Notes held in the Class D Trust. For a more detailed discussion of the
subordination provisions of the Intercreditor Agreement, see "Description of the
certificates--Subordination."
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 Policy Provider or, if a Policy Provider Default has occurred and is
continuing:
(1) Prior to the payment of Final Distributions to holders of the Class G-1
and Class G-2 Certificates, the Class G-1 Trustee or the Class G-2 Trustee,
whichever represents the Class with the larger Pool Balance of Certificates
outstanding at the time the Indenture Event of Default occurs;
(2) Upon payment of Final Distributions to the holders of such larger
Class, the other of the Class G-1 or Class G-2 Trustee;
- Upon payment of Final Distributions to the holders of Class G-1 and Class
G-2 Certificates and, unless a Policy Provider Default is continuing, of any
obligations to the Policy Provider, the Class C Trustee;
S-20
- Upon payment of Final Distributions to the holders of Class C Certificates
and, unless a Policy Provider Default is continuing, of any obligations to
the Policy Provider, the Class D Trustee; and
- Under certain circumstances, the Liquidity Provider with the greatest
amount owed to it. If the Policy Provider pays to the Liquidity Provider all
outstanding drawings and interest thereon owing to the Liquidity Provider
under the Liquidity Facilities, then, so long as no Policy Provider Default
has occurred and is continuing, the Policy Provider will have the right to
become (or remain) the Controlling Party.
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 any Aircraft or Equipment Notes, as
the case may be, 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 or sells any Aircraft for less than the
outstanding principal amount of the related Equipment Notes, certain holders of
Certificates will receive a smaller amount of principal distributions than
anticipated and, if the shortfall arises from the sale of the Equipment Notes,
will not have any claim for the shortfall against Delta, any Owner Trustee, any
Owner Participant, any Trustee or the Policy Provider (except, with respect to
the holders of the Class G-1 and Class G-2 Certificates, as described in
"Description of the policies and the policy provider agreement--The policies").
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 that Aircraft in excess of
the outstanding principal amount of the Equipment Notes related to the Aircraft
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."
REVISIONS TO AGREEMENTS RELATING TO LEASED AIRCRAFT
If Delta enters into a sale/leaseback transaction covering any Boeing 737-832
Aircraft, such transaction will involve negotiation with the Owner Participant.
In connection with the negotiation of definitive documents for a Leased Aircraft
the Owner Participant may request revisions to the Participation Agreement,
Lease, Trust Agreement and Indenture applicable to the Owner Trust related to
such Aircraft. As a result, the terms of such documents applicable to such
Aircraft may differ from the descriptions of them contained in this prospectus
supplement. However, these documents must still contain certain required
economic terms and document terms. See "Description of the certificates--Option
to convert to leased aircraft".
Each Owner Participant will have the right to sell, assign or otherwise transfer
its interest as Owner Participant in any Leased Aircraft transaction, subject to
the terms and conditions of the relevant Participation Agreement and related
documents.
RISK OF INSOLVENCY OF OWNER PARTICIPANT IN RESPECT OF LEASED AIRCRAFT
In the event of bankruptcy, insolvency, receivership or like proceedings
involving an Owner Participant, it is possible that, notwithstanding that the
applicable Aircraft is owned by the related Owner Trustee in trust, such
Aircraft and the related Lease and Equipment Notes might become part of such
proceeding. In such event, payments under such Lease or on such Equipment Notes
may be interrupted and the ability of the related Loan Trustee to exercise its
remedies under the
S-21
related Indenture might be restricted, though such Loan Trustee would retain its
status as a secured creditor in respect of the related Lease and the related
Aircraft.
RATINGS OF THE CERTIFICATES
It is a condition to the issuance of the Certificates that the Class G-1 and
Class G-2 Certificates be rated not lower than Aaa 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 Moody's,
the "Rating Agencies") and the Class C Certificates be rated not lower than Baa2
by Moody's and A- by Standard & Poor's. The Class D Certificates will not be
rated. A rating is not a recommendation to purchase, hold or sell Certificates
and the rating does not address market price of the Certificates or suitability
of investing in the Certificates 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, the Policy Provider (in the case of the Class G-1 and
Class G-2 Certificates) or the Liquidity Provider) so warrant. Delta has been
advised by Standard & Poor's that, upon issuance, the Class C Certificates will
be placed on CreditWatch with negative implications.
The rating of each Class of Certificates is based primarily on the Policies for
the benefit of the holders of Class G-1 and Class G-2 Certificates, the default
risk of the Equipment Notes that are held for such Class, the availability of
the Liquidity Facility, if any, 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 of the Class G-1, Class G-2 and Class C Certificates,
there has been no public market for such Certificates. Neither Delta nor any
Trust intends to apply for listing of such Certificates on any securities
exchange or otherwise. The Underwriters may assist in resales of such
Certificates, but they are not required to do so, and any market-making activity
may be discontinued at any time without notice at the sole discretion of each
Underwriter. A secondary market for such 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
Class G-1, Class G-2 and Class C Certificates may be adversely affected.
S-22
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 the most
currently available data, Delta is the second largest carrier in terms of
passengers carried and the third largest as measured by operating revenues and
revenue passenger miles flown. Delta is the leading U.S. transatlantic airline
offering the most daily flight departures, servicing the largest number of
nonstop routes and carrying more passengers than any other U.S. airline. We
operate hubs at Atlanta, Cincinnati, Dallas/Fort Worth and Salt Lake City. We
also operate international gateways in Atlanta and at New York's John F. Kennedy
International Airport.
Delta is a Delaware corporation headquartered in Atlanta, Georgia. Our address
is Hartsfield Atlanta International Airport, Atlanta, Georgia 30320, and the
telephone number is (404) 715-2600. Our website is www.delta.com.
RECENT DEVELOPMENTS
NETWORK DEVELOPMENTS
On January 18, 2002, Delta and its European SkyTeam partners, Air France,
Alitalia and CSA Czech Airlines, received final approval from the U.S.
Department of Transportation for antitrust immunity. The grant of antitrust
immunity enables Delta and its European partners to offer a more integrated
route network, and develop common sales, marketing and discount programs for
customers.
DISTRIBUTION COSTS
On March 14, 2002, Delta announced that "base" commissions will no longer be
paid to travel agents for tickets sold in the United States (including Puerto
Rico and the U.S. Virgin Islands) and Canada, effective immediately. While Delta
is eliminating published base commissions, individually negotiated incentive
commissions will continue to be paid to select agents. Delta expects this
decision to reduce passenger commission expenses by approximately $100-150
million in 2002.
DELTA REPORTS MARCH QUARTER 2002 LOSS
On April 16, 2002, Delta reported a net loss of $354 million and a loss per
share of $2.90 for the quarter ended March 31, 2002, versus a net loss of $122
million and loss per share of $1.02 in the quarter ended March 31, 2001,
excluding unusual items. Including unusual items, the March 2002 quarter net
loss and loss per share were $397 million and $3.25, respectively, versus a net
loss of $133 million and loss per share of $1.11 in the March 2001 quarter.
Excluding unusual items, operating expenses for the March 2002 quarter decreased
11.6% and unit costs decreased 1.2%.
S-23
DESCRIPTION OF THE POLICY PROVIDER
GENERAL
The information set forth in this section, including any financial statements
incorporated by reference herein, has been provided by MBIA Insurance
Corporation ("MBIA" or the "Policy Provider") for inclusion in this prospectus
supplement, and such information has not been independently verified by Delta,
the Underwriters, the Trusts or the Liquidity Provider. Accordingly,
notwithstanding anything to the contrary herein, none of Delta, the
Underwriters, the Trusts or the Liquidity Provider assumes any responsibility
for the accuracy, completeness or applicability of such information.
MBIA is the principal operating subsidiary of MBIA Inc., a New York Stock
Exchange listed company (the "Parent Company"). The Parent Company is not
obligated to pay the debts of or claims against MBIA. MBIA is domiciled in the
State of New York and licensed to do business in and subject to regulation under
the laws of all 50 states, the District of Columbia, the Commonwealth of Puerto
Rico, the Commonwealth of the Northern Mariana Islands, the Virgin Islands of
the United States and the Territory of Guam. MBIA has three branches, one in the
Republic of France, one in the Republic of Singapore and one in the Kingdom of
Spain. New York has laws prescribing minimum capital requirements, limiting
classes and concentrations of investments and requiring the approval of policy
rates and forms. State laws also regulate the amount of both the aggregate and
individual risks that may be insured, the payment of dividends by MBIA, changes
in control and transactions among affiliates. Additionally, MBIA is required to
maintain contingency reserves on its liabilities in certain amounts and for
certain periods of time.
MBIA does not accept any responsibility for the accuracy or completeness of this
prospectus supplement or any information or disclosure contained herein, or
omitted herefrom, other than with respect to the accuracy of the information
regarding the Policy Provider set forth under the heading "Description of the
policy provider," including the financial statements incorporated by reference
herein. Additionally, MBIA makes no representation regarding the Certificates or
the advisability of investing in the Certificates.
The Policies are not covered by the Property/Casualty Insurance Security Fund
specified in Article 76 of the New York Insurance Law.
MBIA FINANCIAL INFORMATION
The following document filed by the Parent Company with the SEC is incorporated
herein by reference:
- The Parent Company's Annual Report on Form 10-K for the year ended
December 31, 2001.
Any documents filed by the Parent Company pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act after the date of this prospectus supplement and
prior to the termination of the offering of the securities offered hereby shall
be deemed to be incorporated by reference in this prospectus supplement and to
be a part hereof. Any statement contained in a document incorporated or deemed
to be incorporated by reference herein, or contained in this prospectus
supplement, shall be deemed to be modified or superseded for purposes of this
prospectus supplement to the extent that a statement contained herein or in any
other subsequently filed document which also is or is deemed to be incorporated
by reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this prospectus supplement.
The consolidated financial statements of MBIA, a wholly owned subsidiary of the
Parent Company, and its subsidiaries as of December 31, 2001 and December 31,
2000 and for each of the three
S-24
years in the period ended December 31, 2001, prepared in accordance with
generally accepted accounting principles, included in the Annual Report on Form
10-K of the Parent Company for the year ended December 31, 2001 are hereby
incorporated by reference into this prospectus supplement and shall be deemed to
be a part hereof.
All financial statements of MBIA and its subsidiaries included in documents
filed by the Parent Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934, as amended, subsequent to the date of this
prospectus supplement and prior to the termination of the offering of the
Certificates shall be deemed to be incorporated by reference into this
prospectus supplement and to be a part hereof from the respective dates of
filing such documents.
The Parent Company files annual, quarterly and special reports, information
statements and other information with the SEC under File No. 1-9583. Copies of
the SEC filings including:
- the Parent Company's Annual Report on Form 10-K for the year ended
December 31, 2001,
- the Parent Company's Quarterly Report on Form 10-Q for the quarters ended
March 31, 2001, June 30, 2001, and September 30, 2001;
are available:
- over the internet at the SEC's web site at http://www.sec.gov;
- at the SEC's public reference rooms in Washington, D.C.; and
- at no cost, upon request to MBIA Insurance Corporation, 113 King Street,
Armonk, New York 10504. The telephone number of MBIA is (914) 273-4545.
The tables below present selected financial information of MBIA determined in
accordance with statutory accounting practices prescribed or permitted by
insurance regulatory authorities ("SAP") as well as generally accepted
accounting principles ("GAAP"):
-----------------------------------------------------------------------------------------
SAP
---------------------------
DECEMBER 31, DECEMBER 31,
2000 2001
-----------------------------------------------------------------------------------------
(AUDITED) (UNAUDITED)
(IN MILLIONS)
Admitted Assets............................................. $7,627 $8,545
Liabilities................................................. 5,245 5,688
Capital and Surplus......................................... 2,382 2,857
-----------------------------------------------------------------------------------------
GAAP
---------------------------
DECEMBER 31, DECEMBER 31,
2000 2001
-----------------------------------------------------------------------------------------
(AUDITED) (AUDITED)
(IN MILLIONS)
Assets...................................................... $8,450 $9,460
Liabilities................................................. 3,642 4,234
Shareholder's Equity........................................ 4,808 5,226
FINANCIAL STRENGTH RATINGS OF MBIA
Moody's rates the financial strength of MBIA as "Aaa."
Standard & Poor's rates the financial strength of MBIA "AAA."
Fitch Ratings rates the financial strength of MBIA "AAA."
S-25
Each rating of MBIA should be evaluated independently. The ratings reflect the
respective rating agency's current assessment of the creditworthiness of MBIA
and its ability to pay claims on its policies of insurance. Any further
explanation as to the significance of the above ratings may be obtained only
from the applicable rating agency.
The above ratings are not recommendations to buy, sell or hold the Certificates,
and such ratings may be subject to revision or withdrawal at any time by the
rating agencies. Any downward revision or withdrawal of any of the above ratings
may have an adverse effect on the market price of the Certificates. MBIA does
not guaranty the market price of the Certificates nor does it guaranty that the
ratings on the Certificates will not be revised or withdrawn.
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 to be
initially acquired by the Trusts 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 a $625
million loan under Delta's $625 million 1997 Bank Credit Agreement, which is an
unsecured revolving credit facility with a group of banks that is scheduled to
terminate on May 1, 2002. The loan was made on April 30, 2001 for general
corporate purposes; bears interest at LIBOR plus a margin of 0.75% (currently
2.64%); may be paid at any time without penalty; and matures on May 1, 2002.
S-26
DESCRIPTION OF THE CERTIFICATES
The following summary of particular terms of the Certificates, with respect to
the Class G-1, Class G-2 and Class C Certificates (the "Offered Certificates"),
supplements (and, to the extent inconsistent therewith, replaces) the
description of the general terms and provisions of the Offered 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, the Intercreditor
Agreement and the Policies, each of which, to the extent relating to an Offered
Certificate, 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 "SEC").
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 2002-1 Pass
Through Trusts: the "Class G-1 Trust," the "Class G-2 Trust," the "Class C
Trust" and the "Class D Trust," and, collectively, the "Trusts." The Trusts will
be formed pursuant to a pass through trust agreement between Delta and State
Street Bank and Trust Company of Connecticut, National Association, as trustee,
dated November 16, 2000 (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
G-1 Trust, the Class G-2 Trust, the Class C Trust and the Class D Trust is
referred to herein, respectively, as the "Class G-1 Trustee," the "Class G-2
Trustee," the "Class C Trustee" and the "Class D Trustee," and collectively as
the "Trustees." The Certificates to be issued by the Class G-1 Trust, the Class
G-2 Trust, the Class C Trust and the Class D Trust are referred to herein,
respectively, as the "Class G-1 Certificates," the "Class G-2 Certificates," the
"Class C Certificates" and the "Class D Certificates." The Class G-1 Trust will
purchase all of the Series G-1 Equipment Notes, the Class G-2 Trust will
purchase all of the Series G-2 Equipment Notes, the Class C Trust will purchase
all of the Series C Equipment Notes and the Class D Trust will purchase all of
the Series D Equipment Notes. The holders of the Class G-1 Certificates, the
Class G-2 Certificates, the Class C Certificates and the Class D Certificates
are referred to herein, respectively, as the "Class G-1 Certificateholders," the
"Class G-2 Certificateholders," the "Class C Certificateholders" and the "Class
D 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.
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);
S-27
- for the Class G-1, Class G-2 and Class C Trusts, all monies receivable
under the Liquidity Facility for such Trust;
- for the Class G-1 and Class G-2 Trusts, all monies receivable under the
Policy for the related 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 Owner Trustees
(if any) in their individual capacities, any Owner Participant (if any) 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 (other than the Class D 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 $100,000 in the case of the
Class D Certificates) 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, payable on January 2
and July 2 of each year, commencing on January 2, 2003. The rate per annum for
each of the Class G-1, Class G-2 and Class C Certificates is set forth on the
cover page of this prospectus supplement. The rate per annum for the Class D
Certificates is %. 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 (other than the Class D Trust) 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 related 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
S-28
particular Trust will be entitled to receive and retain the proceeds of drawings
under the Liquidity Facility, if any, for such Trust. See "Description of the
liquidity facilities."
After use of any available funds under the Liquidity Facility or the Cash
Collateral Account for the Class G-1 and Class G-2 Certificates, the payment of
interest on the Class G-1 and Class G-2 Certificates will be supported by the
related Policy provided by the Policy Provider. See "Description of the policies
and the policy provider agreement--The policies."
Payments of principal of the Series G-1 and Series C Equipment Notes are
scheduled to be received by the Trustee in installments on January 2 and July 2
in certain years, commencing on January 2, 2003 and ending on January 2, 2023
and January 2, 2012, respectively. The entire principal amount of the Series G-2
Equipment Notes is scheduled for payment on July 2, 2012 and the entire
principal amount of the Series D Equipment Notes is scheduled for payment on
July 2, 2007.
Scheduled payments of interest or principal on the Equipment Notes are referred
to herein as "Scheduled Payments," and January 2 and July 2 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 G-1 Certificates is July 2, 2024, for the Class
G-2 Certificates is January 2, 2014, for the Class C Certificates is July 2,
2013 and for the Class D Certificates is July 2, 2007.
Payment of principal of the Class G-1 and Class G-2 Certificates on the Final
Legal Distribution Date and, in certain limited circumstances earlier, will be
supported by the related Policy provided by the Policy Provider. See
"Description of the policies and the policy provider agreement--The policies."
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, the Trust
Indenture Estate under (and as defined in) any Leased Aircraft Indenture, or the
Collateral 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
S-29
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."
In the case of the distribution of proceeds from any "No proceeds drawing" or
"Avoidance drawing" as described in "Description of the policies and the policy
provider agreement--The policies," the Class G-1 Trustee or Class G-2 Trustee,
as applicable, will mail a notice to the Certificateholders of the related Trust
stating the scheduled Special Distribution Date, the related Record Date, the
amount of such distribution and the reason for such distribution. Such notice
will be mailed not less than 15 days prior to the date such proceeds are
scheduled to be distributed. Each such distribution will be made by the Class
G-1 Trustee or Class G-2 Trustee, as applicable, to the Certificateholders of
record of the related Trust on the Record Date applicable to such distribution.
(Section 4.02(c))
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 "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 or, solely with respect to draws under a Policy, Armonk, New York or
the location of the Policy Provider's fiscal agent (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."
S-30
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 and, with respect to the Class
G-1 and Class G-2 Trust, payments under the Policy for such Trust made for the
benefit of the Class G-1 or Class G-2 Certificateholders (other than in respect
of the Liquidity Facilities and interest on the Class G-1 and Class G-2
Certificates). (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)
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 if Delta enters into a sale/leaseback transaction
prior to May 1, 2003 with respect to any Boeing 737-832 Aircraft since the
amortization schedule of the Equipment Notes issued with respect to a Leased
Aircraft may vary from such amortization schedule as a result of a
reoptimization negotiated with an Owner Participant so long as it complies with
the Mandatory Economic Terms. In addition, 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
S-31
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.
---------------------------------------------------------------------------------------------------------------------------------
CLASS G-1 CLASS G-2 CLASS C CLASS D
-------------------------- --------------------------- -------------------------- --------------
SCHEDULED EXPECTED SCHEDULED EXPECTED SCHEDULED EXPECTED SCHEDULED
PAYMENTS OF POOL PAYMENTS OF POOL PAYMENTS OF POOL PAYMENTS OF
DATE PRINCIPAL FACTOR PRINCIPAL FACTOR PRINCIPAL FACTOR PRINCIPAL
---------------------------------------------------------------------------------------------------------------------------------
April , 2002........... 1.0000000 1.0000000 1.0000000
January 2, 2003.......... $33,364,551.48 0.9432088 $ 0.00 1.0000000 $13,133,011.88 0.9218455 $ 0.00
July 2, 2003............. 0.00 0.9432088 0.00 1.0000000 0.00 0.9218455 0.00
January 2, 2004.......... 33,282,740.48 0.8865568 0.00 1.0000000 14,032,730.36 0.8383367 0.00
July 2, 2004............. 0.00 0.8865568 0.00 1.0000000 0.00 0.8383367 0.00
January 2, 2005.......... 33,323,796.00 0.8298350 0.00 1.0000000 15,161,078.16 0.7481131 0.00
July 2, 2005............. 0.00 0.8298350 0.00 1.0000000 0.00 0.7481131 0.00
January 2, 2006.......... 33,323,796.00 0.7731132 0.00 1.0000000 15,151,092.48 0.6579490 0.00
July 2, 2006............. 0.00 0.7731132 0.00 1.0000000 0.00 0.6579490 0.00
January 2, 2007.......... 33,323,796.00 0.7163913 0.00 1.0000000 16,137,612.13 0.5619140 0.00
July 2, 2007............. 0.00 0.7163913 0.00 1.0000000 0.00 0.5619140 89,994,000.00
January 2, 2008.......... 33,323,796.00 0.6596695 0.00 1.0000000 14,119,719.15 0.4778876 0.00
July 2, 2008............. 0.00 0.6596695 0.00 1.0000000 0.00 0.4778876 0.00
January 2, 2009.......... 33,323,796.00 0.6029476 0.00 1.0000000 11,544,476.77 0.4091864 0.00
July 2, 2009............. 0.00 0.6029476 0.00 1.0000000 23,508,502.63 0.2692873 0.00
January 2, 2010.......... 33,323,796.00 0.5462258 0.00 1.0000000 24,822,330.06 0.1215697 0.00
July 2, 2010............. 0.00 0.5462258 0.00 1.0000000 0.00 0.1215697 0.00
January 2, 2011.......... 33,323,796.00 0.4895040 0.00 1.0000000 18,836,555.13 0.0094733 0.00
July 2, 2011............. 0.00 0.4895040 0.00 1.0000000 0.00 0.0094733 0.00
January 2, 2012.......... 33,334,836.00 0.4327633 0.00 1.0000000 1,591,891.25 0.0000000 0.00
July 2, 2012............. 0.00 0.4327633 370,327,000.00 0.0000000 0.00 0.0000000 0.00
January 2, 2013.......... 10,896,270.00 0.4142163 0.00 0.0000000 0.00 0.0000000 0.00
July 2, 2013............. 0.00 0.4142163 0.00 0.0000000 0.00 0.0000000 0.00
January 2, 2014.......... 10,896,270.00 0.3956693 0.00 0.0000000 0.00 0.0000000 0.00
July 2, 2014............. 4,385,920.00 0.3882039 0.00 0.0000000 0.00 0.0000000 0.00
January 2, 2015.......... 10,690,680.00 0.3700068 0.00 0.0000000 0.00 0.0000000 0.00
July 2, 2015............. 0.00 0.3700068 0.00 0.0000000 0.00 0.0000000 0.00
January 2, 2016.......... 10,690,680.00 0.3518098 0.00 0.0000000 0.00 0.0000000 0.00
July 2, 2016............. 0.00 0.3518098 0.00 0.0000000 0.00 0.0000000 0.00
January 2, 2017.......... 10,690,680.00 0.3336127 0.00 0.0000000 0.00 0.0000000 0.00
July 2, 2017............. 0.00 0.3336127 0.00 0.0000000 0.00 0.0000000 0.00
January 2, 2018.......... 10,690,680.00 0.3154157 0.00 0.0000000 0.00 0.0000000 0.00
July 2, 2018............. 0.00 0.3154157 0.00 0.0000000 0.00 0.0000000 0.00
January 2, 2019.......... 19,575,406.40 0.2820955 0.00 0.0000000 0.00 0.0000000 0.00
July 2, 2019............. 1,650,666.02 0.2792859 0.00 0.0000000 0.00 0.0000000 0.00
January 2, 2020.......... 17,103,699.02 0.2501729 0.00 0.0000000 0.00 0.0000000 0.00
July 2, 2020............. 0.00 0.2501729 0.00 0.0000000 0.00 0.0000000 0.00
January 2, 2021.......... 70,286,032.43 0.1305361 0.00 0.0000000 0.00 0.0000000 0.00
July 2, 2021............. 25,963,530.08 0.0863425 0.00 0.0000000 0.00 0.0000000 0.00
January 2, 2022.......... 44,591,542.10 0.0104414 0.00 0.0000000 0.00 0.0000000 0.00
July 2, 2022............. 0.00 0.0104414 0.00 0.0000000 0.00 0.0000000 0.00
January 2, 2023.......... 6,134,243.99 0.0000000 0.00 0.0000000 0.00 0.0000000 0.00
------------------------- ---------
CLASS D
---------
EXPECTED
POOL
DATE FACTOR
------------------------- ---------
April , 2002........... 1.0000000
January 2, 2003.......... 1.0000000
July 2, 2003............. 1.0000000
January 2, 2004.......... 1.0000000
July 2, 2004............. 1.0000000
January 2, 2005.......... 1.0000000
July 2, 2005............. 1.0000000
January 2, 2006.......... 1.0000000
July 2, 2006............. 1.0000000
January 2, 2007.......... 1.0000000
July 2, 2007............. 0.0000000
January 2, 2008.......... 0.0000000
July 2, 2008............. 0.0000000
January 2, 2009.......... 0.0000000
July 2, 2009............. 0.0000000
January 2, 2010.......... 0.0000000
July 2, 2010............. 0.0000000
January 2, 2011.......... 0.0000000
July 2, 2011............. 0.0000000
January 2, 2012.......... 0.0000000
July 2, 2012............. 0.0000000
January 2, 2013.......... 0.0000000
July 2, 2013............. 0.0000000
January 2, 2014.......... 0.0000000
July 2, 2014............. 0.0000000
January 2, 2015.......... 0.0000000
July 2, 2015............. 0.0000000
January 2, 2016.......... 0.0000000
July 2, 2016............. 0.0000000
January 2, 2017.......... 0.0000000
July 2, 2017............. 0.0000000
January 2, 2018.......... 0.0000000
July 2, 2018............. 0.0000000
January 2, 2019.......... 0.0000000
July 2, 2019............. 0.0000000
January 2, 2020.......... 0.0000000
July 2, 2020............. 0.0000000
January 2, 2021.......... 0.0000000
July 2, 2021............. 0.0000000
January 2, 2022.......... 0.0000000
July 2, 2022............. 0.0000000
January 2, 2023.......... 0.0000000
The Pool Factor and Pool Balance of each Trust will be recomputed if there has
been a reoptimization of the Equipment Notes in connection with a sale/leaseback
transaction, an early
S-32
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," or any drawing under the
Policies (other than in respect of interest on the Certificates). 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 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
S-33
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."
An Indenture Event of Default with respect to a Leased Aircraft Indenture will
include Lease Events of Default under the related Lease. With respect to each
Leased Aircraft, the applicable Owner Trustee and Owner Participant will, under
the related Indenture, have the right under certain circumstances to cure
Indenture Events of Default that result from the occurrence of a Lease Event of
Default under the related Lease. If the Owner Trustee or the Owner Participant
exercises any such cure right, the Indenture Event of Default will be deemed to
have been cured. There are no cross-default or cross-acceleration provisions in
the Leases. Consequently, events resulting in a Lease Event of Default under any
particular Lease may or may not result in a Lease Event of Default under any
other Lease or an Indenture Event of Default under the related Leased Aircraft
Indenture.
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 distributions than anticipated and will not have any claim
for the shortfall against Delta, any Liquidity Provider, any Owner Trustee, any
Owner Participant, the Policy Provider (except in the case of the Class G-1 and
Class G-2 Certificates) 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) In addition, if, following an
Indenture Event of Default under any Leased Aircraft Indenture, the applicable
Owner Participant or Owner Trustee exercises its option to redeem or purchase
the outstanding Equipment Notes issued under such Leased Aircraft Indenture,
S-34
the price paid by such Owner Trustee for the Equipment Notes issued under such
Indenture and distributed to such Trust by the Subordination Agent 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. (Section
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, notify the Certificateholders of such Trust by mail of such default,
unless such default has 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 or a Triggering Event under the Intercreditor Agreement. 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 default or Indenture Event of Default
thereunder. Notwithstanding the foregoing provisions of this
S-35
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 G-1 or Class G-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 (unless
the Policy Provider has elected to purchase such Class that is so
represented as provided below);
- the Class C Certificateholders will have the right to purchase all, but
not less than all, of the Class G-1 and Class G-2 Certificates (unless the
Policy Provider has elected to purchase such Class G-1 and Class G-2
Certificates as provided below);
- the Class D Certificateholders (other than Delta or any of its affiliates)
will have the right to purchase all, but not less than all, of the Class G-1
and Class G-2 Certificates (unless the Policy Provider has elected to
purchase such Class G-1 and Class G-2 Certificates as provided below) and to
purchase all, but not less than all, of the Class C Certificates; and
- whether or not the Class G-1 Certificateholders, the Class G-2
Certificateholders, Class C Certificateholders or the Class D
Certificateholders have purchased or elected to purchase the Class G-1 and
Class G-2 Certificates, the Policy Provider shall have the right to purchase
all, but not less than all, of the Class G-1 and Class G-2 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 (unless, in the case of the Class G-1
or Class G-2 Certificates, the Subordination Agent has made a drawing under
the related Policy in an aggregate amount sufficient to pay such outstanding
Pool Balance and has distributed such amount to the related Trustee); 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, or (in the case of the Class G-1 or Class G-2 Certificates) a
drawing under the related Policy, 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.
S-36
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."
OPTION TO CONVERT TO LEASED AIRCRAFT
At any time after the date of initial issuance of the Certificates (the
"Issuance Date"), Delta, so long as no Indenture Event of Default or event or
condition that, with the passage of time or notice, or both would constitute and
Indenture Event of Default has occurred and is continuing, will have the option
of entering into a leveraged lease financing with respect to any Boeing 737-832
Aircraft by converting an Owned Aircraft to a Leased Aircraft and at the time of
such conversion (if such conversion takes place prior to May 1, 2003) to
reoptimize the Leased Aircraft Notes to be issued by the applicable Owner
Trustee to each Trustee (subject to the Mandatory Economic Terms) in replacement
for the Owned Aircraft Notes previously issued to each Trustee.
- On the Issuance Date, Delta will enter into a secured debt financing with
respect to each Aircraft (such Aircraft, an "Owned Aircraft") and the
relevant parties will enter into a participation agreement (each, an "Owned
Aircraft Participation Agreement") and an indenture (each, an "Owned
Aircraft Indenture,") relating to the financing of such Owned Aircraft.
- If Delta subsequently chooses to enter into a leveraged lease financing
with respect to any Boeing 737-832 Aircraft (such Aircraft, a "Leased
Aircraft"), the Owned Aircraft Participation Agreement will provide for the
relevant parties to enter into an amended and restated participation
agreement (each, a "Leased Aircraft Participation Agreement" and, together
with any other Leased Aircraft Participation Agreements and the Owned
Aircraft Participation Agreements, the "Participation Agreements"), a lease
(each, a "Lease") and an amended and restated indenture (each, a "Leased
Aircraft Indenture" and, together with any other Leased Aircraft Indentures
and the Owned Aircraft Indentures, the "Indentures") relating to the
financing of such Leased Aircraft.
In the case of a Leased Aircraft, the terms of the agreements actually entered
into may differ from the forms of such agreements and, consequently, may differ
from the description of such agreements contained in this prospectus supplement.
See "Description of the equipment notes." However, under the Owned Aircraft
Participation Agreement, the terms of such agreements are required to (a)
contain the Mandatory Document Terms (as such Mandatory Document Terms are
permitted to vary in accordance with the terms of the Owned Aircraft
Participation Agreement) and (b) not vary the Mandatory Economic Terms except as
expressly provided therein. In addition, Delta is obligated (a) to certify to
the Trustees and the Policy Provider that the modifications to such agreements,
if any, do not materially and adversely affect the Certificateholders or the
Policy Provider and (b) to obtain written confirmation from each Rating Agency
that the proposed sale/leaseback transaction will not result in a withdrawal,
suspension or downgrading of the rating on any Class of Offered Certificates
(without regard to the related Policy in the case of the Class G-1 and Class G-2
Certificates).
"Mandatory Economic Terms," as defined in the Owned Aircraft Participation
Agreements, will require, among other things, that:
- The principal amount of the Series G-1, Series G-2 and Series C Leased
Aircraft Notes secured by any Boeing 737-832 Aircraft will be equal to the
outstanding balance of the related Series G-1, Series G-2 and Series C Owned
Aircraft Notes for such Aircraft at the time of conversion.
S-37
- The loan to Aircraft value ratio with respect to each Boeing 737-832
Aircraft (computed on the basis of an assumed value of such Aircraft no
greater than the value for such Aircraft set forth under "Summary--Equipment
notes and the aircraft" under the column "Appraised base value" (the
"Assumed Aircraft Value") and the Depreciation Assumption) at the time of
the issuance of the Leased Aircraft Notes and on any Regular Distribution
Date thereafter, calculated as set forth in "Description of the equipment
notes -- Loan to value ratios of equipment notes," will not exceed the
amounts set forth in the following table:
--------------------------------------------------------------------------------------------------
LOAN TO AIRCRAFT VALUE RATIO
-----------------------------------------------------
REGISTRATION SERIES G-1 SERIES G-2 SERIES C
AIRCRAFT TYPE NUMBER EQUIPMENT NOTES EQUIPMENT NOTES EQUIPMENT NOTES
--------------------------------------------------------------------------------------------------
737-832.................. N372DA 65.0% 59.8% 72.4%
737-832.................. N373DA 65.0 59.8 72.4
737-832.................. N374DA 65.0 59.8 72.4
737-832.................. N375DA 65.0 59.8 72.4
737-832.................. N396DA 61.9 56.9 68.9
737-832.................. N397DA 61.9 56.9 68.9
737-832.................. N398DA 61.9 56.9 68.9
737-832.................. N399DA 62.0 57.0 69.0
737-832.................. N3730B 62.0 57.0 69.0
737-832.................. N3764D 56.0 55.1 66.7
737-832.................. N3765 56.0 55.1 66.7
737-832.................. N3766 56.0 55.1 66.7
737-832.................. N3767 56.0 55.1 66.7
737-832.................. N3768 53.6 52.7 63.7
737-832.................. N3769L 53.6 52.7 63.7
737-832.................. N37700 53.5 52.6 63.7
737-832.................. N3771K 53.4 52.5 63.6
--------------------------------------------------------------------------------------------------
- As of May 1, 2003, the average life of each Class of Certificates
(computed without regard to the acceleration of any Equipment Notes) shall
be not less than the minimum nor more than the maximum years from the
Issuance Date set forth in the following table:
-------------------------------------------------------------------------------------------------------
CLASS G-1 CLASS G-2 CLASS C
CERTIFICATES CERTIFICATES CERTIFICATES
-------------------------------------------------------------------------------------------------------
Minimum................................................ 10.2 years 10.2 years 5.3 years
Maximum................................................ 10.5 years 10.2 years 5.5 years
-------------------------------------------------------------------------------------------------------
- As of May 1, 2003, the average life of the Series G-1, Series G-2 and
Series C Equipment Notes (computed without regard to the acceleration of any
Equipment Notes) shall be not less than the minimum nor more than the
maximum years from the Issuance Date set forth in the following table;
provided, however, that if any Leased Aircraft Notes are issued after April
30, 2003, the average life of such series of Leased Aircraft Notes must
correspond to the average life of the same series of Owned Aircraft Notes
being assumed.
------------------------------------------------------------------------------------------------
SERIES G-1 SERIES G-2 SERIES C
EQUIPMENT NOTES EQUIPMENT NOTES EQUIPMENT NOTES
------------------------------------------------------------------------------------------------
Minimum................................ 8.5 years 10.2 years 4.0 years
Maximum................................ 13.5 years 10.2 years 7.0 years
------------------------------------------------------------------------------------------------
S-38
- The final maturity date of the Series G-1 Equipment Notes and the Series C
Equipment Notes will not extend beyond January 2, 2023 and January 2, 2012,
respectively.
- The final maturity date of the Series G-2 Equipment Notes shall be July 2,
2012 and there shall be no scheduled amortization of such Equipment Notes.
- The interest rate applicable to each Series of Leased Aircraft Notes must
be equal to the rate applicable to the Certificates issued by the
corresponding Trust.
- The payment dates for the Leased Aircraft Notes and basic rent under the
Leases must be January 2 and July 2, provided that, at Delta's election,
basic rent may also be paid at the commencement of a Lease.
- Basic rent (and supplemental rent), Stipulated Loss Values and termination
values under the Leases must be sufficient to pay amounts due with respect
to the related Leased Aircraft Notes.
- The amounts payable under the all-risk aircraft hull insurance maintained
with respect to each Leased Aircraft must be sufficient to pay the
applicable Stipulated Loss Value.
- (a) The past due rate in the Leased Aircraft Indentures and the Leases,
(b) the Make-Whole Amount payable under the Leased Aircraft Indentures, (c)
the provisions relating to the redemption and purchase of Equipment Notes in
the Leased Aircraft Indentures and (d) the indemnification of the Loan
Trustees, the Subordination Agent, the Liquidity Provider, the Policy
Provider, the Trustees and registered holders of the Equipment Notes with
respect to certain taxes and expenses, in each case must be no less
favorable to the Loan Trustees, the Subordination Agent, the Liquidity
Provider, the Policy Provider, the Trustees and the registered holders of
the Equipment Notes than as set forth in the form of Leased Aircraft
Participation Agreement, Lease and Leased Aircraft Indenture (collectively,
the "Leased Aircraft Operative Agreements").
The "Mandatory Document Terms" prohibit modifications in any material adverse
respect to certain specified provisions of the forms of Leased Aircraft
Operative Agreements annexed to the Owned Aircraft Participation Agreement, as
follows:
- In the case of the Leased Aircraft Indentures, the following modifications
are prohibited:
(i) modifications to the granting clause of the Leased Aircraft Indentures
so as to deprive the Note Holders of a first priority security interest in
the Leased Aircraft and the Lease or to eliminate the obligations intended
to be secured thereby;
(ii) modifications to certain provisions relating to the issuance,
redemption, purchase, payments, and ranking of the Equipment Notes
(including the obligation to pay the Make-Whole Amount in certain
circumstances);
(iii) modifications to certain provisions regarding Indenture Events of
Default, remedies relating thereto and rights of the Owner Trustee and the
Owner Participant in such circumstances;
(iv) modifications to certain provisions relating to any replacement of an
airframe or engines; and
(v) modifications to the provision that New York law will govern the Leased
Aircraft Indentures.
- In the case of the Leases, the following modifications are prohibited:
(i) modifications to certain provisions regarding the unconditional
obligation of Delta to pay basic rent, Stipulated Loss Value and
termination value to the Loan Trustee;
S-39
(ii) modification of the obligations of Delta to record the Leased Aircraft
Indenture with the Federal Aviation Administration and to maintain such
Indenture as a first-priority perfected mortgage on the related Aircraft;
(iii) modification of the obligations of Delta to furnish certain opinions
with respect to a replacement airframe; and
(iv) modification of the obligations of Delta to consent to the assignment
of the Lease by the Owner Trustee as collateral under the Leased Aircraft
Indenture, as well as modifications which would either alter the provision
that New York law will govern the Lease or would deprive the Loan Trustee
of rights expressly granted to it under the Lease.
- In the case of the Leased Aircraft Participation Agreements, the following
modifications are prohibited:
(i) modifications to certain conditions relating to delivering the Aircraft
with a certificate of airworthiness, delivering an opinion of outside
counsel with respect to the entitlement to the benefits of Section 1110
with respect to an Aircraft and the filing of certain documents with the
Federal Aviation Administration;
(ii) modifications to the provisions restricting the Note Holder's ability
to transfer the Equipment Notes;
(iii) modifications to certain provisions requiring the delivery of legal
opinions; and
(iv) modifications to the provision that New York law will govern the
Leased Aircraft Participation Agreements.
- In the case of all of the Leased Aircraft Operative Agreements,
modifications in the definition of "Make-Whole Amount" which are adverse in
any material respect to the interests of the Note Holders, the Subordination
Agent, the Liquidity Provider, the Policy Provider or the Loan Trustees are
prohibited.
Notwithstanding the foregoing, any such Mandatory Document Term may be modified
to correct or supplement any such provisions which may be defective or to cure
any ambiguity or correct any mistake; provided that any such modification does
not materially adversely affect the interests of the Note Holders, the
Subordination Agent, the Liquidity Provider, the Policy Provider, the Loan
Trustees or the Certificateholders.
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 is, if and to the extent required under
Section 1110 of the United States Bankruptcy Code (the "Bankruptcy Code") in
order that the Loan Trustee continues to be entitled to any benefits of
Section 1110 with respect to an Aircraft, 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, the Participation Agreements and the Leases (if
any); and
S-40
- 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 or, if applicable, a Lease 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 or, with
respect to the Pass Through Trust Agreement for the Class G-1 and Class G-2
Trusts, the Policies and the Policy Provider Agreement, without the consent of
the holders of any of the Certificates of such Trust (but, in the case of
certain of the following relating to the Class G-1 or Class G-2 Trusts, subject
to the prior written consent of the Policy Provider) 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, any Liquidity
Facility or the Policy Provider Agreement;
- 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, any Liquidity
Facility, either Policy or the Policy Provider Agreement;
- to cure any ambiguity or correct any mistake or inconsistency in such Pass
Through Trust Agreement, the Intercreditor Agreement, any Liquidity
Facility, either Policy or the Policy Provider;
- make or modify any other provision with respect to matters or questions
arising under such Pass Through Trust Agreement, the Intercreditor
Agreement, any Liquidity Facility, either Policy or the Policy Provider
Agreement 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 SEC, 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, any Liquidity Facility, either
Policy or the Policy Provider Agreement to the extent necessary to continue
the qualification of such Pass Through Trust Agreement (including any
supplemental agreement), the Intercreditor Agreement, any Liquidity
Facility, either Policy or the Policy Provider Agreement under the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"), and add to
such Pass Through Trust Agreement, the Intercreditor Agreement, any
Liquidity Facility, the Policy or the Policy Provider Agreement 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, any Liquidity Facility, either
Policy or the Policy Provider Agreement 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;
S-41
- 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, and, with respect to the Pass Through Trust
Agreement for the Class G-1 and Class G-2 Trusts, the Policy Provider, 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, any Liquidity Facility or, with respect to the Pass Through Trust
Agreement for the Class G-1 and Class G-2 Trusts, the Policies or the Policy
Provider Agreement to the extent applicable to such Certificateholders or
modifying the rights of the Certificateholders under such Pass Through Trust
Agreement, the Intercreditor Agreement, any Liquidity Facility, either Policy or
the Policy Provider Agreement, except that no such supplemental agreement may,
without the consent of the Policy Provider (with respect to the Pass Through
Trust Agreement for the Class G-1 and Class G-2 Trusts) and 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;
- cause such Trust to become an association taxable as a corporation for
U.S. federal income tax purposes; or
- to terminate or modify either Policy, other than amendments already
contemplated or required by Section 3.06 of the Policy Provider Agreement
and/or Section 3.07(c) of the Intercreditor Agreement.
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
S-42
Agent) a request for a consent to any amendment, modification, waiver or
supplement under any Indenture, any Participation Agreement, any Lease, 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 and the Policy Provider. The Policy Provider will
be entitled to direct the Class G-1 and Class G-2 Trustee with respect to the
matters referred to above as long as the Final Distribution on the related
Certificates has not been made or any Policy Provider Obligation remains
outstanding and no Policy Provider Default has occurred and is continuing. The
Trustee will request from the Certificateholders or the Policy Provider, as the
case may be, 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;
- 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))
If Certificateholders are entitled to direct the Trustee and 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, Lease (if
any), 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)
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
S-43
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 (other than the Class D 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
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 (other than the Class D 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 (other than Class D Certificateholders) are to
actions taken by DTC upon instructions from DTC Participants, and all references
to distributions, notices, reports and statements to Certificateholders (other
than Class D Certificateholders) will refer, as the case may be, to
distributions, notices, reports and statements to DTC or Cede, as the registered
holder of
S-44
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.
S-45
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. There is no liquidity facility for the Class D Certificates.
Therefore, the statements under this caption apply only to the Class G-1, Class
G-2 and Class C Trusts and any reference to a Liquidity Facility should be read
to exclude the Class D Trust. 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 SEC. 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 (other than the Class D 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"). The Pool Balance for purposes of the definition of Required Amount with
respect to the Class G-1 and Class G-2 Liquidity Facilities shall, in the event
of any Policy Provider Election, be deemed to be reduced by an amount (if
positive) by which (a) the outstanding principal balance of the Series G-1 or
Series G-2 Equipment Note in respect of which such Policy Provider Election has
been made exceeds (b) the amount of any policy drawings previously paid by the
Policy Provider in respect of principal of such Series G-1 or Series G-2
Equipment Note. 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 (including,
in the case of the Class G-1 or Class G-2 Trust, funds from the related Policy).
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:
------------------------------------------------------------------------
AVAILABLE
TRUST AMOUNT
------------------------------------------------------------------------
Class G-1................................................... $
Class G-2...................................................
Class C.....................................................
Except as otherwise provided below, the Liquidity Facility for each Trust will
enable the Subordination Agent to make Interest Drawings thereunder promptly on
or after 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 (including any required payments by
the Policy Provider following a Policy Provider Election), if any, available to
the Subordination Agent on such Regular Distribution Date is not sufficient to
pay such interest.
S-46
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 will 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 occurring before the date of the order for relief
for such proceedings shall not be taken into consideration 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"), (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 and (iii) any payment default occurring after the Section 1110
Period will not be taken into consideration if such payment default is cured
before the end of the grace period, if any, set forth in the related Owned
Aircraft Indenture (in the case of an Owned Aircraft) or Lease (in the case of a
Leased Aircraft). (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 Moody's or the short-term corporate credit rating of the
Liquidity Provider issued by Standard & Poor's (or if such Liquidity Provider
does not have a short-term unsecured debt rating or short-term
S-47
corporate credit rating, as applicable, issued by Moody's or Standard & Poor's,
the long-term unsecured debt rating or long-term corporate credit rating of such
Liquidity Provider issued by such Rating Agency) is lower than the Threshold
Rating applicable to such Trust, then, unless the Rating Agencies confirm in
writing that such lower rating will not result in the downgrading, withdrawal or
suspension of the ratings of the relevant Class of Certificates (without regard
to the related Policy in the case of the Class G-1 and Class G-2 Certificates)
the Liquidity Facility for such Class may be replaced by a Replacement Facility.
If such Liquidity Facility is not so replaced with a Replacement Facility within
10 days after the downgrading (or within 45 days of such downgrading solely in
the event of a downgrading of such Liquidity Provider's short-term corporate
credit 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 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 and
without regard to the related Policy in the case of the Class G-1 and Class G-2
Certificates), and in the case of the Class G-1 or Class G-2 Liquidity
Facilities only, to be consented to by the Policy Provider, which consent shall
not be unreasonably withheld or delayed, 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 G-1 Liquidity Provider
and the Class G-2 Liquidity Provider, a short-term unsecured debt rating of P-1
in the case of Moody's and a short-term corporate credit rating of 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 short-term
corporate credit rating of 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 or
short-term corporate credit rating, as applicable, from any such rating
agencies, then in lieu of such short-term rating, with respect to the Class G-1
Liquidity Provider and the Class G-2 Liquidity Provider, a long-term unsecured
debt rating of A1 in the case of Moody's and a long-term corporate credit rating
of 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 long-term corporate credit rating of A in the case of Standard &
Poor's.
- 364 days after the initial issuance date of the Certificates (counting
from, and including, such issuance date);
S-48
- 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 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 (with or without cause), 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 reasonably 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 will 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
S-49
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.
"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 plus the
S-50
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;
- 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
short-term corporate credit rating of A-1+ from Standard & Poor's.
S-51
DESCRIPTION OF THE POLICIES AND THE POLICY PROVIDER AGREEMENT
The following summary describes certain terms of the Policies and certain
provisions of the Policy Provider Agreement. The summary does not purport to be
complete and is qualified in its entirety by reference to all of the provisions
of the Policies which will be filed as an exhibit to a Current Report on Form
8-K to be filed by Delta with the SEC. The provisions of the Policies are
substantially identical except as otherwise indicated.
THE POLICIES
The Policy Provider will issue two financial guarantee insurance policies (each,
a "Policy") in favor of the Subordination Agent for the benefit of the holders
of the Class G-1 Certificates and the holders of the Class G-2 Certificates,
respectively. The Policies do not cover any amounts payable on the Class C or
Class D Certificates. The Intercreditor Agreement directs the Subordination
Agent to make a drawing under the Policies under the following five
circumstances:
INTEREST DRAWINGS
If on any Regular Distribution Date (other than the Final Legal Distribution
Date), after giving effect to
- the application of funds in accordance with the priorities set forth under
"Description of the intercreditor agreement--Priority of distributions,"
- any drawings under the Liquidity Facility for the Class G-1 or Class G-2
Certificates in respect of interest due on the respective Class of
Certificates, and
- any withdrawal of funds from the Cash Collateral Account for the Class G-1
or Class G-2 Certificates in respect of such interest,
the Subordination Agent does not then have sufficient funds available for the
payment of all amounts due and owing in respect of accrued and unpaid interest
on the Class G-1 or Class G-2 Certificates at the Stated Interest Rate for such
Class of Certificates, the Subordination Agent is to request a policy drawing
under the Policy for such Class in an amount sufficient to enable the
Subordination Agent to pay such interest.
PROCEEDS DEFICIENCY DRAWING
If the Subordination Agent receives a Special Payment consisting of proceeds of
the Disposition of any Defaulted Series G Equipment Note or the Indenture Estate
or Collateral under (and as defined in) the related Indenture, on any Policy
Business Day elected by the Subordination Agent upon 20 days' notice to the
Policy Provider, the Policy Provider will pay, after giving effect to the
application of any Disposition proceeds and (if such Disposition occurs prior to
a Policy Provider Election with respect to such Defaulted Series G Equipment
Note) Prior Funds, the amount, if any, required to reduce the Pool Balance of
such Class by an amount equal to the outstanding principal amount of such
Defaulted Series G Equipment Note (less the amount of any Policy Drawings
previously paid by the Policy Provider in respect of principal on such Defaulted
Series G Equipment Note) plus accrued and unpaid interest from the immediately
preceding Regular Distribution Date on the amount of such reduction.
NO PROCEEDS DRAWING
On the first Policy Business Day (which shall be a Special Distribution Date)
that is 18 months after the last date on which full payment was made on a Series
G-1 or Series G-2 Equipment Note as to which there has subsequently been a
failure to pay principal or that has been accelerated, if there has not
previously been a proceeds deficiency drawing as described in the preceding
paragraph with respect to such Equipment Note, then on that Special Distribution
Date the Subordination Agent will request a drawing under the Policy for such
Trust in an amount equal to the then
S-52
outstanding principal amount of such Defaulted Series G Equipment Note plus
accrued and unpaid interest thereon from the immediately preceding Regular
Distribution Date. The Subordination Agent is to give prompt notice to each
Trustee, Delta, the Liquidity Provider and the Policy Provider establishing the
Special Distribution Date, which notice is to be given not less than 25 days
prior to such Special Distribution Date. After the payment by the Policy
Provider in full of the requested drawing, the Subordination Agent will have no
right to make any further drawing under the Policy for such Trust in respect of
the Defaulted Series G Equipment Note except for an Avoidance Drawing as
described below.
Notwithstanding the foregoing, at the end of any such 18-month period the Policy
Provider may, so long as no Policy Provider Default has occurred and is
continuing, elect by giving notice to the Subordination Agent at least five days
prior to the end of such 18-month period (the "Policy Provider Election")
instead to pay
- on such Special Distribution Date an amount equal to the scheduled
principal and interest payable but not paid on the Defaulted Series G
Equipment Note (without regard to the acceleration thereof) during such
18-month period (after giving effect to the application of funds received
from the Liquidity Facility for the applicable Class and the Cash Collateral
Account for such Class attributable to such interest) and
- thereafter, on each Regular Distribution Date, an amount equal to the
scheduled principal and interest payable on the Defaulted Series G Equipment
Note on the related payment date (without regard to any acceleration thereof
or any funds available under any Liquidity Facility or any Cash Collateral
Account) until the establishment of an Election Distribution Date or a
Special Distribution Date.
Following a Policy Provider Election, on any Policy Business Day (which shall be
a Special Distribution Date) elected by the Policy Provider upon 20 days' notice
to the Subordination Agent, the Policy Provider may (notwithstanding the Policy
Provider Election) request the Subordination Agent to, and the Subordination
Agent shall, make a Policy Drawing for such Trust for an amount equal to the
then outstanding principal balance of the Defaulted Series G Equipment Note
(less any Policy Drawing previously paid by the Policy Provider in respect of
principal on such Defaulted Series G Equipment Note) and accrued and unpaid
interest thereon at the Stated Interest Rate for the Class G-1 Certificates or
Class G-2 Certificates, as applicable, from the immediately preceding Regular
Distribution Date to such Special Distribution Date.
Further, after a Policy Provider Election, following the occurrence and
continuation of a Policy Provider Default, the Subordination Agent will be
required on a Policy Business Day specified by the Subordination Agent upon 20
days' notice to the Policy Provider (such specified Policy Business Day, an
"Election Distribution Date," which shall be a Special Distribution Date) to
make a Policy Drawing for such Trust for an amount equal to the then outstanding
principal balance of the Defaulted Series G Equipment Note (less any Policy
Drawings previously paid by the Policy Provider in respect of principal on such
Equipment Note) and accrued and unpaid interest thereon at the Stated Interest
Rate for the Class G-1 Certificates or Class G-2 Certificates, as applicable,
from the immediately preceding Regular Distribution Date to such Election
Distribution Date.
Regardless of whether or not the Policy Provider makes a Policy Provider
Election, the Policy Provider shall, at the end of the 18-month period, endorse
the Policy for such Trust (if not already endorsed to so provide) to provide for
the payment to the Liquidity Provider of interest accruing on the outstanding
drawings of the related Liquidity Facilities from and after the end of such
18-month period as and when such interest becomes due in accordance with such
Liquidity Facilities. Any future amendment or modification of the Policy which
would adversely affect the rights of the Liquidity Provider shall require the
consent of the Liquidity Provider.
S-53
FINAL POLICY DRAWING
If on the Final Legal Distribution Date of the Class G-1 or Class G-2
Certificates after giving effect to the application of any Prior Funds, the
Subordination Agent does not then have sufficient funds available for the
payment in full of the Final Distribution (calculated as at such date but
excluding any accrued and unpaid premium) on such Certificates, the
Subordination Agent shall request a Policy Drawing for such Class in an amount
sufficient to enable the Subordination Agent to pay the Final Distribution
(calculated as at such date but excluding any accrued and unpaid premium) on
such Certificates.
AVOIDANCE DRAWING
If at any time the Subordination Agent has actual knowledge of the issuance of
any Order prior to the expiration of either Policy, the Subordination Agent is
to give prompt notice to each Trustee, Delta, each Liquidity Provider and the
Policy Provider of such Order and establishing as a Special Distribution Date
the date that is the earlier of the third Business Day that immediately precedes
the expiration of such Policy and the Business Day that immediately follows the
25th day after that notice. With respect to that Special Distribution Date, the
Subordination Agent is to request a Policy Drawing for the relevant Preference
Amount and to deliver to the Policy Provider a copy of the documentation
required by such Policy with respect to such Order.
GENERAL
All requests by the Subordination Agent for a policy drawing under any Policy
are to be made by it no later than 1:00 p.m. (New York City time) on (or, in the
case of any Preference Amount, at least three Business Days prior to) the
applicable Distribution Date and in the form required by such Policy and
delivered to the Policy Provider in accordance with such Policy. All proceeds of
any policy drawing are to be deposited by the Subordination Agent in the related
policy account established by the Subordination Agent under the Intercreditor
Agreement (a "Policy Account") and from there paid to the Trustee for such Trust
for distribution to the holders of the Certificates issued by such Trust without
regard to the subordination provisions of the Intercreditor Agreement. In the
case of any Preference Amounts, however, all or part of the policy drawing will
be paid directly to the receiver, conservator, debtor-in-possession or trustee
in bankruptcy to the extent such amounts have not been paid by the
Certificateholders. If any request for a policy drawing is rejected because it
does not satisfy the requirements of any Policy, the Subordination Agent will
resubmit the request so as to satisfy those requirements.
Each Policy provides that if such a request for a policy drawing is properly
submitted or resubmitted it will pay to the Subordination Agent for deposit in
the Policy Account the applicable payment under such Policy no later than 3:00
p.m. on the later of the relevant Distribution Date and the date the request is
received by the Policy Provider (if a request received by 1:00 p.m. on such
date) or on the next Policy Business Day (if the request is received after that
time).
Subject to the reimbursement rights of the Liquidity Providers, the Policy
Provider will be subrogated to all of the rights of the holders of the Class G-1
and Class G-2 Certificates to payment on the Class G-1 and Class G-2
Certificates to the extent of the payments made under the Policy for such Class.
Once any payment made under a Policy is received by the Subordination Agent, the
Policy Provider will have no further obligation in respect of those payments,
regardless of whether or not the funds are properly distributed by the
Subordination Agent, the Paying Agent or the Trustee for such Trust. The Policy
Provider shall not be required to make any payment except at the times and in
the amounts expressly set forth in the Policies.
The Policies for the Class G-1 and Class G-2 Trusts do not cover (i) shortfalls,
if any, attributable to the liability of the Class G-1 Trust, the Class G-1
Trustee, the Class G-2 Trust, the Class G-2 Trustee or the Subordination Agent
for withholding taxes, if any (including interest and penalties in respect
S-54
of that liability), (ii) any premium, prepayment penalty or other accelerated
payment, which at any time may become due on or with respect to any Class G-1 or
Class G-2 Certificate, nor (iii) any failure of the Subordination Agent or the
Trustee of such Trust to make any payment due to the holders of the Class G-1 or
Class G-2 Certificates, as applicable, from funds received.
The Policy Provider's obligation under the Policy for such Trust will be
discharged to the extent that funds are received by the Subordination Agent for
distribution to the Trustee for such Trust and the holders of the related
Certificates, whether or not the funds are properly distributed by the
Subordination Agent or the Trustee for such Trust.
Each Policy is noncancellable. The Policy for each Trust expires and terminates
without any action on the part of the Policy Provider or any other person on the
date that is one year and one day following the date on which the Certificates
issued by such Trust have been paid in full, unless an Insolvency Proceeding
exists, in which case on the later of (i) the date of the conclusion or
dismissal of such Insolvency Proceeding without continuing jurisdiction by the
court in such Insolvency Proceeding and (ii) the date on which the Policy
Provider has made all payments required to be made under the terms of such
Policy in respect of a Preference Amount. No portion of the premium under any
Policy is refundable for any reason including payment, or provision being made
for payment.
Each Policy is issued under and pursuant to and shall be construed under, the
laws of the State of New York, without giving effect to the conflict of laws
principles that might invoke the substantive laws of other jurisdictions.
DEFINITIONS
"Insolvency Proceeding" means the commencement of any bankruptcy, insolvency,
readjustment of debt, reorganization, marshalling of assets and liabilities or
similar proceedings by or against Delta, any Liquidity Provider or any Owner
Trustee and the commencement of any proceedings by Delta, any Liquidity Provider
or any Owner Trustee for the winding up or liquidation of its affairs or the
consent to the appointment of a trustee, conservator, receiver, or liquidator in
any bankruptcy, insolvency, readjustment of debt, reorganization, marshalling of
assets and liabilities or similar proceedings of or relating to Delta, any
Liquidity Provider or any Owner Trustee.
"Order" means the order referred to in the definition of the term "Preference
Amount."
"Policy Business Day," for the purposes of this "Description of the Policies and
the Policy Provider Agreement," means any day that is not a Saturday, a Sunday
or other day on which insurance companies in New York, New York or commercial
banking institutions in the cities in which the Corporate Trust Office of the
Subordination Agent or the Policy Provider (or its fiscal agent) are located are
authorized or obligated by law or executive order to close.
"Preference Amount" means, with respect to a Policy relating to the Class G-1 or
Class G-2 Trust, any amount paid or required to be paid in respect of the
Certificates issued by such Trust to a related Certificateholder that is voided
under any applicable bankruptcy, insolvency, receivership or similar law in an
Insolvency Proceeding and, as a result, the Trustee for such Trust, the
Subordination Agent or the holders of a Certificate issued by such Trust (as the
case may be) is required to return all or any portion of such voided payment
(including any disgorgement from the holders of the Certificates issued by such
Trust resulting from an Insolvency Proceeding whether such disgorgement is
determined by a theory of preferential conveyance or otherwise) in accordance
with a final, nonappealable order of a court of competent jurisdiction.
S-55
THE POLICY PROVIDER AGREEMENT
The Subordination Agent, Delta, the Class G-1 Trustee, the Class G-2 Trustee and
the Policy Provider will enter into an insurance and indemnity agreement (the
"Policy Provider Agreement") to be dated as of the date of the issuance of the
Certificates. Under the Policy Provider Agreement, the Subordination Agent will
agree to reimburse the Policy Provider for amounts paid pursuant to Policy
Drawings under the Policies. These rights to reimbursement from the
Subordination Agent are subject, pursuant to the terms of the Policy Provider
Agreement and the Intercreditor Agreement, to the priorities set forth in the
Intercreditor Agreement. Pursuant to a policy fee letter (the "Policy Fee
Letter"), Delta and the Subordination Agent (but without duplication) will agree
to pay the Policy Provider a premium for the Policies based on the Pool Balance
of the Class G-1 and Class G-2 Certificates and a fee in connection with certain
prepayments of the Certificates and to reimburse the Policy Provider for certain
expenses.
S-56
DESCRIPTION OF THE INTERCREDITOR AGREEMENT
The following summary describes certain provisions of the Intercreditor
Agreement (the "Intercreditor Agreement") among the Trustees, the Liquidity
Provider, the Policy 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 SEC.
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 (which, with respect to any Leased Aircraft, has not been cured by the
applicable Owner Trustee or Owner Participant) has occurred and is continuing
thereunder, except that the Policy Provider may vote the Series G-1 and Series
G-2 Equipment Notes issued and outstanding under such Indenture so long as the
Final Distribution on the Class G-1 or Class G-2 Certificates has not been made
or any Policy Provider Obligations remain outstanding and no Policy Provider
Default is continuing. 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, Sections 2.06 and 8.01(b))
At any time after an Indenture Event of Default has occurred and is continuing
under an Indenture (which, with respect to any Leased Aircraft, has not been
cured by the applicable Owner Trustee or Owner Participant), 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, 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)
Notwithstanding the foregoing, no amendment, modification, consent or waiver
will, without the consent of each Liquidity Provider, the Policy Provider and
the Class G-1 or Class G-2 Certificateholders, as applicable, reduce the amount
of rent, supplemental rent, Stipulated Loss Value or termination values payable
by Delta under any Lease or reduce the amount of principal or interest payable
by Delta under any Equipment Note issued under any Owned Aircraft Indenture.
(Intercreditor Agreement, Section 8.01(b)) 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.
S-57
The "Controlling Party" will be:
- the Policy Provider or, if a Policy Provider Default has occurred and is
continuing:
(1) prior to the payment of Final Distributions to the holders of the Class
G-1 and Class G-2 Certificates, the Class G-1 Trustee or the Class G-2
Trustee, whichever represents the Class with the larger Pool Balance of
Certificates outstanding at the time that the Indenture Event of Default
occurs;
(2) upon payment of Final Distributions to the holders of such larger Class
of Certificates, the other of the Class G-1 Trustee or the Class G-2
Trustee;
- upon payment of Final Distributions to the holders of Class G-1 and Class
G-2 Certificates and, unless a Policy Provider Default has occurred and is
continuing, of any obligations to the Policy Provider, the Class C Trustee;
- upon payment of Final Distributions to the holders of the Class G-1, Class
G-2 and Class C Certificates and, unless a Policy Provider Default has
occurred and is continuing, of any obligations to the Policy Provider, the
Class D 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, provided that if the Policy Provider pays to the Liquidity
Provider all outstanding drawings and interest thereon owing to the Liquidity
Provider under the Liquidity Facilities (as so determined), the Policy Provider
shall be the Controlling Party so long as no Policy Provider Default has
occurred and is continuing (and if a Policy Provider Default has occurred and is
continuing, the Liquidity Provider, if it so elects and if Liquidity Obligations
owing to it remain outstanding, or if it does not so elect or if no such
Liquidity Obligations remain outstanding, the Class G-1 Trustee or the Class G-2
Trustee, as applicable, shall become the Controlling Party). (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."
"Policy Provider Default" means the occurrence of any of the following events
(a) the Policy Provider fails to make a payment required under either Policy in
accordance with its terms and such failure remains unremedied for 2 Business
Days following the delivery of written notice of such failure to the Policy
Provider or (b) the Policy Provider (i) files any petition or commences any case
or proceeding under any provisions of any federal or state law relating to
insolvency, bankruptcy, rehabilitation, liquidation or reorganization, (ii)
makes a general assignment for the benefit of its creditors or (iii) has an
order for relief entered against it under any federal or state
S-58
law relating to insolvency, bankruptcy, rehabilitation, liquidation or
reorganization that is final and nonappealable, or (c) a court of competent
jurisdiction, the New York Insurance Department or another competent regulatory
authority enters a final and nonappealable order, judgment or decree (i)
appointing a custodian, trustee, agent or receiver for the Policy Provider or
for all or any material portion of its property or (ii) authorizing the taking
of possession by a custodian, trustee, agent or receiver of the Policy Provider
(or taking of possession of all or any material portion of the Policy Provider's
property).
"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
Trustee, if the net proceeds from such sale would be less than the Minimum Sale
Price for such Aircraft or such Equipment Notes. In addition, with respect to
any Leased Aircraft, the amount and payment dates of rentals payable by Delta
under the Lease for such Leased Aircraft may not be adjusted, if, as a result of
such adjustment, the discounted present value of all such rentals would be less
than 75% of the discounted present value of the rentals payable by Delta under
such Lease before giving effect to such adjustment.
"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 and to the Policy Provider to the extent required to pay Policy
Expenses, pro rata;
S-59
- to each Liquidity Provider to the extent required to pay accrued and
unpaid interest on the Liquidity Obligations (as determined after giving
effect to payments made by the Policy Provider to the Liquidity Providers in
respect of interest on drawings under the Liquidity Facilities) and to the
Policy Provider to the extent required to pay interest accrued on certain
Policy Provider Obligations (as provided in the definition thereof) and, if
the Policy Provider has elected to pay to the Liquidity Providers all
outstanding drawings and interest thereon owing to the Liquidity Providers
under the Liquidity Facilities, to the extent required to reimburse the
Policy Provider for the amount of such payment made to the Liquidity
Providers attributable to interest accrued on such drawings, pro rata;
- to each Liquidity Provider to the extent required to pay or reimburse the
Liquidity Providers for certain Liquidity Obligations (other than amounts
payable pursuant to the two preceding clauses and as determined after giving
effect to payments made by the Policy Provider to the Liquidity Provider in
respect of principal of drawings under the Liquidity Facilities) and, if the
Policy Provider has elected to pay to the Liquidity Providers all
outstanding drawings and interest thereon owing to the Liquidity Providers
under the Liquidity Facilities, to the Policy Provider to the extent
required to reimburse the Policy Provider for any payment made to the
Liquidity Providers in respect of principal of drawings under the Liquidity
Facilities and/or, if applicable, to replenish each Cash Collateral Account
up to the Required Amount;
- if a Cash Collateral Account has been established with respect to a
Liquidity Facility, to each Liquidity Provider to the extent that the amount
of unreimbursed drawings under the Liquidity Facility exceeds the Required
Amount;
- to the Class G-1 Trustee and the Class G-2 Trustee to the extent required
to pay Expected Distributions on the Class G-1 Certificates and the Class
G-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 G-1 Trustee and the Class G-2 Trustee in
the same proportion as such Trustee's proportionate share of the aggregate
amount of such Expected Distributions;
- to the Policy Provider to the extent required to pay Policy Provider
Obligations (other than amounts payable pursuant to the clauses above and
any Excess Reimbursement Obligations);
- to the Class C Trustee to the extent required to pay Expected
Distributions on the Class C Certificates;
- to the Policy Provider to the extent required to pay Excess Reimbursement
Obligations and any amounts due under the Policy Fee Letter;
- 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.
"Policy Expenses" means all amounts (including amounts in respect of expenses)
owing to the Policy Provider under the Policy Provider Agreement or certain
other agreements other than any amounts due under the Policy Fee Letter, the
amount of any Excess Reimbursement Obligations, any Policy Drawing and any
interest accrued thereon, reimbursement of and interest on the Liquidity
Obligations in respect of the Liquidity Facilities paid by the Policy Provider
to the Liquidity Provider, any indemnity payments owed to the Policy Provider
and any amounts that the Policy Provider is entitled to receive by virtue of the
subrogation rights of the Policy Provider under the Intercreditor Agreement,
including, without limitation, fees and expenses incurred in connection with the
enforcement of such rights.
S-60
"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.
"Policy Provider Obligations" means all reimbursement and other amounts,
including fees and indemnities, due to the Policy Provider under the Policy
Provider Agreement but shall not include (i) any amounts due under the Policy
Fee Letter and (ii) any interest on Policy Drawings except, if a Liquidity
Provider has failed to honor its obligation to make a payment on any Interest
Drawing with respect to the Class G-1 or Class G-2 Certificates, as applicable,
interest on the portion of any Policy Drawing made to cover the shortfall
attributable to such failure by such Liquidity Provider in an amount equal to
the amount of interest that would have accrued on such Interest Drawing if such
Interest Drawing had been made at the interest rate applicable to such Interest
Drawing until such Policy Drawing has been repaid in full, up to a maximum of
three such Policy Drawings. For the avoidance of doubt and subject to the effect
of the payment priorities with respect to Excess Reimbursement Obligations,
Policy Provider Obligations include reimbursement of and interest on the
Liquidity Obligations in respect of the Liquidity Facilities paid by the Policy
Provider to the Liquidity Providers.
"Policy Drawing" means, with respect to any Policy, any payment of a claim under
such Policy.
"Excess Reimbursement Obligations" means (a) in the event of any Policy Provider
Election, the portion of the Policy Provider Obligations that represents
interest on the Equipment Note in respect of which the Policy Provider Election
has been made in excess of 18 months of interest at the interest rate applicable
to such Equipment Note and (b) any interest on the Liquidity Obligations in
respect of the Liquidity Facilities paid by the Policy Provider to the Liquidity
Providers from and after the end of the 18-month period referred to under the
caption "Description of the policies and the policy provider agreement -- The
policies -- No proceeds drawing."
"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:
(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
S-61
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, the Policy Provider 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 and to the Policy Provider to the extent required to pay the Policy
Expenses, pro rata;
- to each Liquidity Provider to the extent required to pay accrued and
unpaid interest on the Liquidity Obligations (as determined after giving
effect to payments made by the Policy Provider to the Liquidity Providers in
respect of interest on drawings under the Liquidity Facilities) and to the
Policy Provider to the extent required to pay interest accrued on certain
Policy Provider Obligations (as provided in the definition thereof) and, if
the Policy Provider has elected to pay to the Liquidity Providers all
outstanding drawings and interest thereon owing to the Liquidity Providers
under the Liquidity Facilities, to reimburse the Policy Provider for the
amount of such payment made to the Liquidity Providers, attributable to
interest accrued on such drawings, pro rata;
- (i) to each Liquidity Provider to the extent required to pay the
outstanding amount of all Liquidity Obligations (as determined after giving
effect to payments made by the Policy Provider to the Liquidity Providers in
respect of principal of drawings under the Liquidity Facilities) and, if the
Policy Provider has elected to pay to the Liquidity Providers all
outstanding drawings and interest thereon owing to the Liquidity Providers
under the Liquidity Facilities, to the Policy Provider to the extent
required to reimburse the Policy Provider for any payment made to the
Liquidity Providers in respect of principal of drawings under the Liquidity
Facilities, 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);
- if a Cash Collateral Account has been established with respect to a
Liquidity Facility Provider to the extent that the amount of unreimbursed
drawings under the Liquidity Facility exceed the Required Amount (less the
amount of any repayments of interest drawings under such Liquidity Facility
while sub-clause (x) of the preceding 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;
S-62
- to the Class G-1 Trustee and the Class G-2 Trustee to the extent required
to pay Adjusted Expected Distributions on the Class G-1 Certificates and the
Class G-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 G-1 Trustee and the Class G-2
Trustee in the same proportion as such Trustee's proportionate share of the
aggregate amount of such Adjusted Expected Distributions;
- to the Policy Provider in payment of the Policy Provider Obligations
(other than amounts payable pursuant to the first three clauses above and
any Excess Reimbursement Obligations) and any amounts due under the Policy
Fee Letter;
- to the Class C Trustee to the extent required to pay Adjusted Expected
Distributions on the Class C Certificates;
- to pay any Excess Reimbursement Obligations to the Policy Provider;
- to the Class D Trustee to the extent required to pay Adjusted Expected
Distributions on the Class D Certificates;
- to the Class G-1 Trustee and the Class G-2 Trustee to the extent required
to pay Final Distributions on the Class G-1 Certificates and the Class G-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 G-1 Trustee and the Class G-2 Trustee in the same proportion as
such Trustee's proportionate share of such amount;
- to the Class C Trustee to the extent required to pay Final Distributions
on the Class C Certificates in full; and
- 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.
S-63
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 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 G-1 or Class G-2
Certificates, a fraction the numerator of which equals the Pool Balance for the
Class G-1 or Class G-2 Certificates, as the case may be, and the denominator of
which equals the aggregate Pool Balances for the Class G-1 and Class G-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 C and the Class D 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, in the case of an Owned Aircraft, or
the relevant Lease, in the case of any Leased Aircraft, 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 Owned 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 G-1 and Class G-2 Certificates %, for the
Class C Certificates % and for the Class D Certificates %.
"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.
"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.
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).
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 (other than the Class D Trust), will be distributed to
the Trustee for such Trust and drawings under the Policy (for the
S-64
Class G-1 Trust and the Class G-2 Trust) will be distributed to the Trustee of
such Trust, notwithstanding the priority of distributions set forth in the
Intercreditor Agreement and otherwise described herein.
VOTING OF EQUIPMENT NOTES
In the event that the Subordination Agent, as the registered holder of any
Equipment Note, receives a request for its consent to any amendment,
modification or waiver under such Equipment Note or other related document, if
no Indenture Event of Default with respect thereto has occurred and is
continuing, the Subordination Agent shall request instructions for each Series
of Equipment Notes from the Trustee of the Trust which holds such Series of
Equipment Notes, except that so long as the Final Distribution on the Class G-1
or the Class G-2 Certificates has not been made or any obligations owed to the
Policy Provider under the Intercreditor Agreement remain outstanding and no
Policy Provider Default has occurred and is continuing, the Subordination Agent
shall request directions from the Policy Provider rather than the Class G-1
Trustee or Class G-2 Trustee, as applicable, with respect to the Equipment Notes
held in the related Trust. The Trustee in turn will request directions from
Certificateholders of such Trust. The Trustee is not required to request
directions if such consent will not adversely affect the Certificateholders or
an event of default has occurred and is continuing under the Pass Through Trust
Agreement of such Trust. If any Indenture Event of Default has occurred and is
continuing with respect to such Indenture, the Subordination Agent will exercise
its voting rights as directed by the Controlling Party; provided that no
amendment, waiver, modification or consent shall, without the consent of the
Policy Provider, the Liquidity Provider and the Class G-1 and the Class G-2
Certificateholders, (i) reduce the amount of principal or interest payable by
Delta under any Owned Aircraft Note or reduce the amount of rent, supplemental
rent or stipulated Loss Value payable by Delta under any Lease, (ii) create any
lien with respect to the Collateral or Indenture Estate (as defined in such
Indenture) prior to or pari passu with the lien of 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 Indenture Estate or (iii) reduce
the percentage in principal amount of the outstanding Equipment Notes issued
under such Indenture required to take or approve any action under such
Indenture. (Intercreditor Agreement, Section 8.01(b))
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)
S-65
DESCRIPTION OF THE AIRCRAFT AND THE APPRAISALS
THE AIRCRAFT
The Aircraft consist of seventeen Boeing 737-832 aircraft, one Boeing 757-232
aircraft, eight Boeing 767-332ER aircraft and six Boeing 767-432ER 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 150 or 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
is 186 seats in Delta's configuration. 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. The 767-332ER is
deployed primarily on Delta's transatlantic and South American routes. The
767-332ER Aircraft included in this transaction are powered by two PW4060 jet
engines manufactured by United Technologies Corporation.
The Boeing 767-432ER is a twin aisle commercial jet aircraft. Seating capacity
in Delta's configuration is 287 seats. The 767-432ER is deployed on Delta's
North American routes. The 767-432ER is powered by two CF6-80C2B8F jet engines
manufactured by General Electric Company.
S-66
THE APPRAISALS
The table below sets forth the appraised base values of the Aircraft as
determined by Aircraft Information Systems, Inc. ("AISI"), AvSolutions, Inc.
("AvSolutions") and BK Associates, Inc. ("BK," and together with AISI and
AvSolutions, the "Appraisers"), independent aircraft appraisal and consulting
firms, and certain additional information regarding the Aircraft.
------------------------------------------------------------------------------------------------------------
APPRAISERS' VALUATIONS
DATE --------------------------------------- APPRAISED
REGISTRATION NUMBER AIRCRAFT TYPE DELIVERED AISI AVSOLUTIONS BK BASE VALUE(1)
------------------------------------------------------------------------------------------------------------
N372DA................ Boeing 737-832 10/26/98 $36,860,000 $40,080,000 $38,350,000 $38,350,000
N373DA................ Boeing 737-832 10/27/98 36,860,000 40,080,000 38,350,000 38,350,000
N374DA................ Boeing 737-832 11/4/98 36,860,000 40,240,000 38,400,000 38,400,000
N375DA................ Boeing 737-832 11/30/98 36,860,000 40,240,000 38,400,000 38,400,000
N396DA................ Boeing 737-832 8/18/00 41,000,000 43,770,000 40,200,000 41,000,000
N397DA................ Boeing 737-832 8/24/00 41,000,000 43,770,000 40,200,000 41,000,000
N398DA................ Boeing 737-832 8/24/00 41,000,000 43,770,000 40,200,000 41,000,000
N399DA................ Boeing 737-832 9/19/00 41,000,000 43,950,000 40,300,000 41,000,000
N3730B................ Boeing 737-832 9/22/00 41,000,000 43,950,000 40,300,000 41,100,000
N3764D................ Boeing 737-832 12/22/01 42,930,000 46,410,000 41,300,000 42,930,000
N3765................. Boeing 737-832 12/21/01 42,930,000 46,410,000 41,300,000 42,930,000
N3766................. Boeing 737-832 12/22/01 42,930,000 46,410,000 41,300,000 42,930,000
N3767................. Boeing 737-832 12/18/01 42,930,000 46,410,000 41,300,000 42,930,000
N3768................. Boeing 737-832 1/24/02 46,840,000 46,550,000 41,300,000 44,896,667
N3769L................ Boeing 737-832 1/31/02 46,840,000 46,550,000 41,300,000 44,896,667
N37700................ Boeing 737-832 2/25/02 46,980,000 46,700,000 41,400,000 45,026,667
N3771K................ Boeing 737-832 4/4/02 47,120,000 46,840,000 41,400,000 45,120,000
N67171................ Boeing 757-232 4/12/01 57,270,000 56,390,000 54,750,000 56,136,667
N185DN................ Boeing 767-332ER 5/3/95 66,040,000 62,280,000 63,600,000 63,600,000
N186DN................ Boeing 767-332ER 7/7/95 66,040,000 62,800,000 63,850,000 63,850,000
N187DN................ Boeing 767-332ER 6/19/96 69,290,000 65,730,000 66,900,000 66,900,000
N188DN................ Boeing 767-332ER 10/17/96 69,290,000 66,830,000 68,000,000 68,000,000
N189DN................ Boeing 767-332ER 2/13/97 72,540,000 67,950,000 69,100,000 69,100,000
N190DN................ Boeing 767-332ER 3/25/97 72,540,000 68,230,000 69,350,000 69,350,000
N191DN................ Boeing 767-332ER 4/9/97 72,540,000 68,520,000 69,650,000 69,650,000
N192DN................ Boeing 767-332ER 6/26/97 72,540,000 69,090,000 70,200,000 70,200,000
N828MH................ Boeing 767-432ER 8/11/00 89,500,000 90,680,000 88,100,000 89,426,667
N829MH................ Boeing 767-432ER 8/22/00 89,500,000 90,680,000 88,100,000 89,426,667
N830MH................ Boeing 767-432ER 9/13/00 89,500,000 91,050,000 88,250,000 89,500,000
N831MH................ Boeing 767-432ER 9/20/00 89,500,000 91,050,000 88,250,000 89,500,000
N832MH................ Boeing 767-432ER 9/26/00 89,500,000 91,050,000 88,250,000 89,500,000
N833MH................ Boeing 767-432ER 10/13/00 89,500,000 91,430,000 88,450,000 89,500,000
------------------------------------------------------------------------------------------------------------
(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
S-67
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.
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. In its appraisal letter, one of the appraisers points out that,
as a result of the events of September 11, 2001, there has been a significant
negative effect on current market values of all commercial aircraft and that the
present used aircraft market is considered to be a distressed market. See "Risk
factors--Appraisals and realizable value of aircraft." 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 on 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, the Leases, and the Participation Agreements and, if applicable,
the trust agreements under which the Owner Trustees act on behalf of Owner
Participants (the "Trust 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, the Leases, the Participation Agreements and the Trust
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 SEC. Except as otherwise indicated,
the following summaries relate to the Equipment Notes, the Indenture, the Lease,
the Participation Agreement and the Trust Agreement that may be 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 Owned Aircraft
(each, an "Owned Aircraft Participation Agreement"), the Trusts will purchase
from Delta the Equipment Notes to be issued under the related Owned Aircraft
Indenture. Equipment Notes will be issued in four series with respect to each
Aircraft (other than the Boeing 737-832 Aircraft, for which there will be three
series of Equipment Notes issued): the "Series G-1 Equipment Notes," the "Series
G-2 Equipment
S-68
Notes," the "Series C Equipment Notes" and, for each Aircraft other than the
Boeing 737-832 Aircraft, the "Series D Equipment Notes" (collectively, the
"Equipment Notes"). The Equipment Notes with respect to each Owned Aircraft
("Owned Aircraft Notes") will be issued under a separate indenture (each, an
"Owned Aircraft Indenture") between Delta and State Street Bank and Trust
Company of Connecticut, National Association, as loan trustee thereunder (each,
an "Owned Aircraft Loan Trustee" or "Loan Trustee"). The Equipment Notes with
respect to any Leased Aircraft (the "Leased Aircraft Notes"), if any, will be
issued under a separate indenture (each, a "Leased Aircraft Indenture") between
Wells Fargo Bank Northwest, National Association, as owner trustee (the "Owner
Trustee") of a trust for the benefit of the owner participant that will be the
beneficial owner of such Aircraft (the "Owner Participant"), and State Street
Bank and Trust Company of Connecticut, National Association as loan trustee
(each a, "Leased Aircraft Loan Trustee" or "Loan Trustee").
If Delta decides to convert any Boeing 737-832 Aircraft to a Leased Aircraft,
the related Owner Trustee will lease such Leased Aircraft to Delta pursuant to a
separate Lease between such Owner Trustee and Delta. Under such Lease, Delta
will be obligated to make or cause to be made rent and other payments to the
related Loan Trustee on behalf of the related Owner Trustee, which rent and
other payments will be at least sufficient to pay in full when due all payments
required to be made on the Equipment Notes issued with respect to such Leased
Aircraft. The Equipment Notes issued with respect to the Leased Aircraft are
not, however, obligations of, or guaranteed by, Delta. Delta's rental
obligations under each Lease and obligations under the Equipment Notes issued
with respect to each Owned Aircraft will be general obligations of Delta.
SUBORDINATION
The Indentures provide for the following subordination provisions applicable to
the Equipment Notes:
- Series G-1 and Series G-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 C Equipment Notes issued in respect of an Aircraft will rank junior
in right of payment to the Series G-1 and Series G-2 Equipment Notes issued
in respect of such Aircraft and will rank senior in right of payment to the
Series D Equipment Notes issued in respect of such Aircraft; and
- Series D Equipment Notes issued in respect of an Aircraft will rank junior
in right of payment to the other Equipment Notes issued in respect of 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 applicable to the Certificates issued by such Trust 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 January 2 and July 2 of each
year, commencing on January 2, 2003. 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
S-69
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 plus 1.00%.
The principal payments on the Series G-1 and Series C Equipment Notes are
scheduled to be made on January 2 and July 2 in certain years, commencing on
January 2, 2003 and ending on January 2, 2023 and January 2, 2012, respectively.
The entire principal amounts of the Series G-2 and Series D Equipment Notes are
scheduled to be paid on July 2, 2012 and July 2, 2007, 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 Owned Aircraft Indenture (in the case of an
Owned Aircraft) or under the related Lease (in the case of a Leased Aircraft),
the Equipment Notes issued with respect to such Aircraft will be redeemed, 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, on a Special Distribution Date.
(Owned Aircraft Indentures, Section 2.10; Leased Aircraft Indentures, Section
2.10(a))
If Delta exercises its right to terminate a Lease under its voluntary
termination or early buyout options under such Lease, the Equipment Notes
relating to the applicable Leased Aircraft will be redeemed (unless Delta elects
to assume the Equipment Notes on a full recourse basis), in whole, on a Special
Distribution Date at a price equal to the aggregate unpaid principal amount
thereof, together with accrued interest thereon to, but excluding, the date of
redemption, plus a Make-Whole Amount (if any), provided that in lieu of
redeeming the Leased Aircraft Notes in connection with any such purchase of an
Aircraft, Delta may elect to assume all of the obligations of the relevant Owner
Trustee under the related Leased Aircraft Indenture pursuant to Section 2.17 of
the Leased Aircraft Indenture and Section 6.01(k) of the relevant Leased
Aircraft Participation Agreement. In connection with any such assumption of the
Owner Trustee's obligations in respect of the Leased Aircraft Notes, the Leased
Aircraft Indenture will be amended and restated to be substantially the same as
an Owned Aircraft Indenture. In addition, as conditions to any such assumption,
Delta shall deliver (a) an opinion of counsel that (i) the lien of the relevant
Indenture continues to be a valid and duly perfected first priority security
interest in and to the Aircraft, (ii) the Loan Trustee will be entitled to the
benefits of Section 1110 of the Bankruptcy Code (if immediately prior to such
assumption, the Owner Trustee was so entitled) and (iii) the Certificateholders
will not recognize income, gain or loss for federal income tax purposes as a
result of such assumption and will be subject to federal income tax in the same
amounts and in the same manner and at the same time as would have been the case
if such assumption had not occurred and (b) written confirmation from the Rating
Agencies that such assumption will not result in a withdrawal, suspension or
downgrading of the rating of any Class of Certificates (without regard to the
related Policy in the case of the Class G-1 and Class G-2 Certificates). Upon
the effectiveness of such assumption, the Owner Trustee and the Owner
Participant will be released from further obligations under the Lease and the
related Leased Aircraft Indenture and the related Leased Aircraft Participation
Agreement. (Leased Aircraft Indentures, Section 2.10(b) and 2.17; Leased
Aircraft Participation Agreements, Section 6.01(k); Leases, Section 19(d). See
S-70
"--Certain provisions of the owned aircraft indentures and the leases--Renewal
and purchase options."
All of the Equipment Notes issued with respect to an Owned 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 and all,
but not less than all, of the Equipment Notes issued with respect to a Leased
Aircraft may be redeemed prior to maturity as part of a refinancing thereof
under Section 13.01 of the applicable Participation Agreement or otherwise with
the consent 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, if any, 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)
If, with respect to a Leased Aircraft, (i) one or more Lease Events of Default
has occurred and is continuing or (ii) the Equipment Notes with respect to such
Aircraft have been accelerated or the Loan Trustee with respect to such
Equipment Notes takes action or notifies the applicable Owner Trustee that it
intends to take action to foreclose the lien of the related Leased Aircraft
Indenture or otherwise commence the exercise of any significant remedy under
such Indenture or the related Lease, then in each case all, but not less than
all, of the Equipment Notes issued with respect to such Leased Aircraft may be
purchased by the related Owner Trustee or Owner Participant on the applicable
purchase date at a price equal to the aggregate unpaid principal thereof,
together with accrued and unpaid interest thereon to the date of purchase, but
without any premium (provided that a Make-Whole Amount is payable if such
Equipment Notes are to be purchased pursuant to clause (i) when a Lease Event of
Default has occurred and has been continuing for less than 180 days). (Leased
Aircraft Indentures, Section 2.19) Delta, as owner of the Owned Aircraft, has no
comparable right under the Owned Aircraft Indentures to purchase the Equipment
Notes under such circumstances.
"Make-Whole Amount" means, with respect to any Equipment Note, the amount (as
determined by an independent investment bank selected by Delta (and following
the occurrence and during the continuation of an Indenture Event of Default,
reasonably acceptable to the relevant Loan Trustees and, in the case of a Leased
Aircraft Indenture, the related Owner Participant)), 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
S-71
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, the related Lease and all rents thereunder
(with respect to Leased Aircraft), as well as rents, profits and other income of
such Aircraft, certain limited rights under the aircraft purchase agreement
between Delta and Boeing, certain requisition and insurance proceeds with
respect to such Aircraft (other than, in the case of a Leased Aircraft, proceeds
under third party liability policies and under policies maintained by the Owner
Participant), and all proceeds of the foregoing. (Indentures, Granting Clause)
In the case of a Leased Aircraft, unless an Indenture Event of Default with
respect to such Aircraft has occurred and is continuing, the related Loan
Trustee may not exercise the Owner Trustee's rights under the related Lease
except such Owner Trustee's right to receive rent. The assignment by the Owner
Trustee to the Loan Trustee of its rights under the related Lease excludes the
rights of the Owner Trustee and the Owner Participant relating to the
indemnification by Delta for certain matters, certain insurance proceeds payable
to the Owner Trustee in its individual and trust capacities and to the Owner
Participant under liability insurance maintained by Delta under the Lease or by
the Owner Trustee or such Owner Participant, and certain reimbursement payments
made by Delta to the Owner Trustee and the Owner Participant. (Leased Aircraft
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."
Although the Leased Aircraft Notes will not be obligations of, or guaranteed by,
Delta, the amounts unconditionally payable by Delta as rent for lease of the
Aircraft will be sufficient to pay in full when due all amounts required to be
paid on such Equipment Notes. See "Description of the equipment notes--General."
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 January 2 Regular Distribution Date. The LTVs were
obtained by dividing (i) the outstanding principal amount
S-72
(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) Assumed Aircraft Value,
calculated based on the Depreciation Assumption, of the Aircraft securing such
Equipment Notes.
The tables in Appendix IV are based on the assumption (the "Depreciation
Assumption") that the Assumed Aircraft Value of each Aircraft depreciates by
approximately 3% annually for the first 15 years from the date of delivery by
the manufacturer of such Aircraft, by approximately 4% annually for the next
five years, and by approximately 5% annually thereafter.
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 IN CONNECTION WITH OWNED AIRCRAFT
Under certain circumstances and only in connection with an Owned Aircraft, 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 Owned Aircraft
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
Internal Revenue Service 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. (Owned Aircraft Indentures, Section 10.01)
LIMITATION OF LIABILITY
The Owned Aircraft Notes will be direct obligations of Delta.
The Leased Aircraft Notes are not obligations of, or guaranteed by, Delta, any
Owner Participant or the Loan Trustees or the Owner Trustees in their individual
capacities. None of the Owner Trustees, the Owner Participants or the Loan
Trustees, or any affiliates thereof, will be personally liable to any holder of
an Equipment Note or, in the case of the Owner Trustees and the Owner
Participants, to the Loan Trustees for any amounts payable under the Equipment
Notes or, except as provided in each Leased Aircraft Indenture, for any
liability under such Leased Aircraft Indenture. All payments of principal of,
premium, if any, and interest on the Equipment Notes
S-73
issued with respect to any Leased Aircraft (other than payments made in
connection with an optional redemption or purchase of Equipment Notes by the
related Owner Trustee or the related Owner Participant) will be made only from
the assets subject to the lien of the Indenture with respect to such Leased
Aircraft or the income and proceeds received by the related Loan Trustee
therefrom (including rent payable by Delta under the Lease with respect to such
Leased Aircraft).
Except as otherwise provided in the Indentures, no Owner Trustee or Loan
Trustee, in its individual capacity, will 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. None of the Owner
Participants will have any duty or responsibility under any of the Leased
Aircraft Indentures or the Equipment Notes to the Loan Trustees or to any holder
of any Equipment Note.
INDENTURE EVENTS OF DEFAULT, NOTICE AND WAIVER
"Indenture Events of Default" under each Indenture will include:
- in the case of a Leased Aircraft Indenture, the occurrence of any event of
default (each, a "Lease Event of Default") under the related Lease;
- the failure by Delta, in the case of any Owned Aircraft Indenture, or an
Owner Trustee (other than as a result of a Lease Default or Lease Event of
Default), in the case of a Leased Aircraft Indenture, 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, in the case of an Owned Aircraft Indenture, 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;
- in the case of a Leased Aircraft Indenture, the failure by any Owner
Trustee, in its individual or trust capacity, or by any Owner Participant,
to discharge any lien required to be discharged by such party and such lien
remains undischarged for a period of 30 days after such Owner Trustee or
Owner Participant receives written notice;
- in the case of an Owned Aircraft Indenture, the failure by Delta to carry
and maintain insurance or indemnity on or with respect to the Aircraft in
accordance with the provisions of such 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;
- the failure by Delta (in the case of an Owned Aircraft Indenture) or the
related Owner Trustee or Owner Participant (in the case of a Leased Aircraft
Indenture) 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 the Owner Trustee, Owner Participant or Delta, as
applicable, receives written notice; provided that, in the case of any Owned
Aircraft Indenture 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 case of an Owned
Aircraft) or by the related Owner Trustee or Owner Participant (in the case
of a Leased Aircraft Indenture) or 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 the Owner
Trustee, Owner
S-74
Participant or Delta, as applicable, receives written notice (or, in the
case of representations made as to the citizenship of such Owner Trustee or
Owner Participant, as soon as is reasonably practicable but in any even
within 60 days); provided that, in the case of an Owned Aircraft Indenture,
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;
- in the case of a Leased Aircraft Indenture, the registration of the
related Aircraft ceasing to be effective as a result of the Owner
Participant not being a citizen of the United States, as defined in Title 49
of the United States Code relating to aviation and such circumstances remain
unremedied for more than 60 days after such Owner Participant has actual
knowledge of the facts that resulted in such ineffectiveness and loss of
citizenship; and
- the occurrence of certain events of bankruptcy, reorganization or
insolvency of Delta (in the case of an Owned Aircraft Indenture) or the
related Owner Trustee, Owner Participant or Indenture Estate (in the case of
a Leased Aircraft Indenture). (Owned Aircraft Indentures, Section 4.01;
Leased Aircraft Indentures, Section 4.02)
There will not be any cross-default provisions in the Indentures or in the
Leases. 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, and a Lease Event of Default under any
particular Lease may or may not constitute a Lease Event of Default under any
other Lease. 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.
If Delta fails to make any semiannual basic rent payment due under any Lease,
within a specified period after such failure, the applicable Owner Trustee may
furnish to the Loan Trustee the amount due on the Equipment Notes issued with
respect to the Leased Aircraft, together with any interest thereon on account of
the delayed payment thereof, in which event the Loan Trustee and the holders of
the outstanding Equipment Notes issued under such Indenture may not exercise any
remedies otherwise available under such Indenture or such Lease as the result of
such failure to make such rent payment, unless such Owner Trustee has previously
cured each of the three immediately preceding semiannual basic rent payment
defaults or the Owner Trustee has cured an aggregate of six previous semiannual
basic rent payment defaults. The applicable Owner Trustee also may cure any
other default by Delta in the performance of its obligations under any Lease
that can be cured by the payment of money. (Leased Aircraft Indentures, Section
4.03)
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. (Owned Aircraft
Indentures, Section 4.05; Leased Aircraft Indentures, Section 4.08)
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.
S-75
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, subject to the applicable Owner
Participant's or Owner Trustee's right to cure in the case of Leased Aircraft
Indentures, as discussed above, 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. (Owned Aircraft Indentures, Section 4.02(d); Leased
Aircraft Indentures, Section 4.04(b))
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, including (if, in the case of a Leased Aircraft, the
corresponding Lease has been declared in default) one or more of the remedies
under such Indenture or such Lease with respect to the Aircraft subject to such
Lease. In the case of an Owned Aircraft, 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 Owned Aircraft Indenture. (Owned
Aircraft Indentures, Section 4.02) If a Lease Event of Default has occurred and
is continuing under the corresponding Lease in the case of Leased Aircraft
Indentures, the related Loan Trustee's right to exercise remedies under such
Indenture is subject, with certain exceptions, to its having proceeded to
exercise one or more of the remedies under the Lease to terminate the Lease or
take possession of and/or sell the Aircraft; provided that the requirement to
exercise such remedies under such Lease does not apply in circumstances where
such exercise has been involuntarily stayed or prohibited by applicable law or
court order for a continuous period in excess of the Section 1110 Period (plus
an additional period, if any, resulting from (i) Delta or its trustee in such
proceeding agreeing to perform its obligations under such Lease with the
approval of the applicable court, (ii) such Loan Trustee's consent to an
extension of such Section 1110 Period, or (iii) such Loan Trustee's failure to
give any requisite notice). See "--Certain provisions of the owned aircraft
indentures and the leases--Lease events of default." Such remedies may be
exercised by the related Loan Trustee to the exclusion of the related Owner
Trustee, subject to certain conditions specified in such Leased Aircraft
Indenture, and Delta, subject to the terms of such Lease. Any Aircraft sold in
the exercise of such remedies will be free and clear of any rights of those
parties, including, if a Lease Event of Default has occurred and is continuing,
the rights of Delta under the Lease with respect to such Aircraft. No exercise
of any remedies by the related Loan Trustee may affect the rights of Delta under
any Lease unless a Lease Event of Default has occurred and is continuing. The
Owned Aircraft Indentures will not contain such limitations on the Loan
Trustee's ability to exercise remedies upon an Indenture Event of Default under
an Owned Aircraft Indenture. (Leased Aircraft Indentures, Section 4.04, Leases,
Section 15)
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
S-76
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 non-monetary
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 (i) purchase Equipment Notes
with respect to each Owned Aircraft and (ii) allow for assumption of the
Equipment Notes with respect to any Leased 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, (x) if
such Aircraft is an Owned Aircraft, 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 or (y) if
such Aircraft is a Leased Aircraft, the Owner Trustee, as lessor under the
Lease, and the Loan Trustee, as assignee of such Owner Trustee's rights under
the Lease, pursuant to the related Leased Aircraft Indenture, would be entitled
to the benefits of Section 1110 of the Bankruptcy Code with respect to the
airframes and engines comprising the related Aircraft. 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 owned aircraft indentures and
the leases--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 Owned Aircraft or any possible
sublessee of a Leased Aircraft.
In the event of bankruptcy, insolvency, receivership or like proceedings
involving an Owner Participant, it is possible that, notwithstanding that the
applicable Leased Aircraft is owned by the related Owner Trustee in trust, such
Leased Aircraft and the related Lease and Equipment Notes might become part of
such proceeding. In such event, payments under such Lease or on such Equipment
Notes may be interrupted and the ability of the related Loan Trustee to exercise
its remedies under the related Indenture might be restricted, though such Loan
Trustee would retain its status as a secured creditor in respect of the related
Lease and the related Leased Aircraft.
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
S-77
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)
MODIFICATION OF INDENTURES AND LEASES
Without the consent of holders of a majority in principal amount of the
Equipment Notes outstanding under any Indenture, the provisions of such
Indenture and any Lease, the Participation Agreement and Trust Agreement
relating thereto may not be amended or modified, except to the extent indicated
below.
Certain provisions of any Indenture and of any Lease, the Participation
Agreement, and Trust Agreement related thereto, may be amended or modified by
the parties thereto without the consent of the relevant Loan Trustee or any
holders of the Equipment Notes outstanding under such Indenture, subject to
certain conditions. In the case of each Lease, such provisions include, among
others, provisions relating to (i) the return of the Aircraft to the Owner
Trustee at the end of the term of such Lease, (ii) the voluntary early
termination of such Lease by Delta, and (iii) the renewal of such Lease and the
option of Delta at the end of the term of such Lease to purchase the Aircraft.
(Leased Aircraft Indentures, Section 9.01) In addition, any Indenture may be
amended without the consent of the Note Holders to, among other things, cure any
defect or inconsistency in such Indenture or the Equipment Notes issued
thereunder; provided that such action does not adversely affect the interests of
any such holder or the Liquidity Provider. (Owned Aircraft Indentures, Section
9.01; Leased Aircraft Indentures, Section 9.01(c))
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,
(ii) change the date on which any principal amount of, Make-Whole Amount, if
any, or interest on any Equipment Note, is due or payable; (iii) create any lien
with respect to the Collateral or Indenture Estate (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 Indenture Estate or (iv) reduce the percentage in principal amount
of outstanding Equipment Notes issued under such Indenture required to take or
approve any action under such Indenture. (Owned Aircraft Indentures, Section
9.02(a); Leased Aircraft Indentures, Section 9.01(b))
INDEMNIFICATION
Delta will be required to indemnify each Loan Trustee, each Owner Participant
(if any), each Owner Trustee (if any), each Liquidity Provider, the Policy
Provider, the Subordination Agent, and each Trustee, but not the holders of
Certificates, for certain losses, claims and other matters. (Owned Participation
Agreements, Section 4.02; Leased Participation Agreements, Section 4.03) Delta
will be required under certain circumstances to indemnify each Owner Participant
against the loss of depreciation deductions and other certain benefits allowable
for certain income tax
S-78
purposes with respect to the related Leased Aircraft. In the case of any Leased
Aircraft, each Owner Trustee will indemnify the Loan Trustee to the extent not
reimbursed by Delta. Prior to seeking indemnification from the Indenture Estate
(as defined in the Leased Aircraft Indentures), the Loan Trustee will demand and
take necessary action to pursue indemnification under the Participation
Agreement or the Lease. If necessary, the Loan Trustee will be entitled to
indemnification from the Indenture Estate (as defined in the Leased Aircraft
Indentures) for any liability, obligation, loss, damage, penalty, claim, action,
suit, cost, expense or disbursement to the extent not reimbursed by Delta. The
Loan Trustee will not be indemnified, however, for actions arising from its
negligence or willful misconduct, or for the inaccuracy of any representation or
warranty made in its individual capacity under the Indenture.
Each Owner Participant will be required to indemnify the related Loan Trustee
and the holders of the Equipment Notes issued with respect to the Leased
Aircraft in which such Owner Participant has an interest for certain losses that
may be suffered as a result of the failure of such Owner Participant to
discharge certain liens or claims on or against the assets subject to the lien
of the related Indenture.
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 or, in the case
of Leased Aircraft Indentures, Delta's failure to pay when due any rent), unless
it has received indemnification satisfactory to it against any risks incurred in
connection therewith. (Indentures, Section 5.03)
CERTAIN PROVISIONS OF THE OWNED AIRCRAFT INDENTURES AND THE LEASES
As of the Issuance Date, each Aircraft will be an Owned Aircraft. Delta has the
option, after the Issuance Date, to enter into a sale/leaseback transaction in
connection with any Boeing 737-832 Aircraft (any such Aircraft for which this
option is exercised being referred to herein as a "Leased Aircraft") which will
have the effect of converting such Owned Aircraft into a Leased Aircraft. Each
Owned Aircraft will be owned by Delta. Each Leased Aircraft will be leased by an
Owner Trustee to Delta under a Lease.
MAINTENANCE AND OPERATION
Under the terms of each Owned Indenture and Lease, Delta will be obligated,
among other things and at its expense, to keep each Aircraft duly registered in
its name (in the case of an Owned Aircraft ) or cause each Aircraft to be duly
registered in the name of the relevant Owner Trustee (in the case of a Leased
Aircraft, unless in connection with re-registration of the Aircraft in certain
jurisdictions), to pay all cost of operating the Aircraft (only to the extent
set forth in the Lease in the case of a Leased Aircraft) and to maintain,
service and repair the Aircraft (or to cause the same to be done) 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, maintenance, testing or modification or during periods of grounding
by applicable governmental authorities). (Owned Aircraft Indentures, Section
7.02(c) and (e); Leases, Section 7(c) and 7(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 or sublessee) 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 or, in the case of a
Leased Aircraft, does not materially adversely affect the Owner Trustee. (Owned
Aircraft Indentures, Section 7.02(b); Leases, Section 7(b))
S-79
Delta must make (or cause to be made) 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; provided, however, that Delta (or any lessee or
sublessee) 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 or, in the case of a Leased Aircraft, does
not adversely affect the Owner Trustee or the relevant Loan Trustee. Delta (or
any lessee or sublessee) may add further parts and make other alterations,
modifications and additions to any Airframe or any Engine as Delta (or any
lessee or sublessee) 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 or Lease), 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. In the case of an Owned Aircraft 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. In the case of a Leased Aircraft, title to parts incorporated or
installed in or added to such Airframe or Engine as a result of such
alterations, modifications or additions vest in the Owner Trustee. Delta (or any
lessee or sublessee) is permitted to remove (without replacement) parts which
were added by Delta (or any lessee or sublessee) 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, 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, and can be removed
without materially diminishing the requisite value or utility of the Aircraft.
(Owned Aircraft Indentures, Section 7.04(c); Leases, Section 8(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 related Lease (in the case of
a Leased Aircraft) and the lien of the related Indenture in lieu of the part
replaced. (Owned Aircraft Indentures, Section 7.04(a); Leases, Section 8(a))
LEASE TERMS AND RENT
Each Leased Aircraft will be leased separately by an Owner Trustee to Delta for
a term commencing on a date after the Issuance Date and expiring not earlier
than the latest maturity date of the Equipment Notes issued pursuant to the
related Indenture. Basic Rent payments for each Leased Aircraft will be payable
semiannually on each January 2 and July 2 (or, if such date is not a Business
Day, on the next Business Day). Such payments will be assigned by the Owner
Trustee to the Loan Trustee under the corresponding Leased Aircraft Indenture to
provide the funds necessary to make scheduled payments of principal and interest
due or expected to be due from the Owner Trustee on the Equipment Notes to be
issued under such Leased Aircraft Indenture. In certain cases, the Basic Rent
payments under the Leases may be adjusted, but each Lease will provide that
under no circumstances will rent payments by Delta be less than the scheduled
payments on the related Equipment Notes. (Leases, Section 3). The balance of any
such semiannual Basic Rent payment and such other payments, after payment of
amounts due or expected to be due on the related Equipment Notes, will be paid
over to the related Owner Trustee. (Leased Aircraft Indentures, Section 3.01).
S-80
REGISTRATION, LEASING, SUBLEASING 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 (in the case of Owned
Aircraft) and Participation Agreement (in the case of Leased Aircraft). 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. (Owned Aircraft Indentures,
Section 7.02(e); Leases, Section 7(e); Leased Aircraft Participation Agreements,
Section 6.01(f)) Delta also will be permitted, subject to certain limitations,
to lease (in the case of an Owned Aircraft) or sublease (in the case of a Leased
Aircraft) 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 or sublease, as applicable, including transfers of possession by
Delta or any lessee or sublessee in connection with certain interchange and
pooling arrangements, transfers under the CRAF Program, transfers in connection
with "wet leases" and transfers in connection with maintenance or modifications.
There will be no general geographical restrictions on Delta's (or any lessee's
or sublessee'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 or subleased 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 sublessee or other permitted transferee is the
subject of a bankruptcy, insolvency or similar event such as protective
administration, additional limitations may apply. (Owned Aircraft Indentures,
Section 7.02(b); Leases, Section 7(a)) See "Risk factors--Repossession."
In addition, at the time of foreclosing on the lien on the Aircraft under the
related Indenture or obtaining repossession of the Aircraft under the related
Lease, an Airframe subject to such Indenture or Lease, as applicable, might not
be equipped with Engines subject to the same Indenture or Lease, as applicable.
If Delta fails to transfer title to engines not owned by Delta (in the case of
Owned Aircraft) or the Owner Trustee (in the case of Leased Aircraft) that are
attached to repossessed Aircraft, it could be difficult, expensive and
time-consuming to assemble an Aircraft consisting of an Airframe and Engines
subject to the Indenture or Lease, as applicable.
LIENS
Delta is required to maintain each Aircraft free of any liens, other than the
respective rights of Delta as provided in the Lease (in the case of a Leased
Aircraft) or as owner of the Aircraft (in the case of an Owned Aircraft) and the
applicable Owner Trustee as owner of the Aircraft (in the case of a Leased
Aircraft), 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 Owned Aircraft Indenture (in the case of an Owned Aircraft) or the Lease (in
the case of a Leased Aircraft) 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
S-81
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; (v) any other
lien as to which Delta has provided a bond or other security adequate in the
reasonable opinion of the relevant Loan Trustee (in the case of an Owned
Aircraft) or Owner Trustee (in the case of a Leased Aircraft) and (vi) any lien
approved in writing by the Loan Trustee (in the case of an Owned Aircraft) or
Owner Trustee (in the case of a Leased Aircraft). (Owned Aircraft Indentures,
Section 7.01; Leases, Section 6)
INSURANCE
Subject to certain exceptions, Delta is required to maintain or cause to be
maintained, at its or any lessee's (in the case of an Owned Aircraft) or
sublessee's (in the case of a Leased Aircraft) expense, all-risk aircraft hull
insurance covering each Aircraft, at all times in an amount not less than (i)
110% of the aggregate outstanding principal amount of the Equipment Notes
relating to such Aircraft (in the case of Owned Aircraft) or (ii) the stipulated
loss value specified in the applicable Lease (in the case of Leased Aircraft)
(the "Stipulated Loss Value"), which will be sufficient to cover principal and
interest payment on 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 either (i) 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 (in the case of an Owned Aircraft) (the "Loan Amount") or
(ii) the Stipulated Loss Value (in the case of a Leased Aircraft) 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), $15,000,000 (in the case of a Boeing 767-332ER) or $20,000,000
(in the case of a Boeing 767-432ER), proceeds in excess of such specified
amounts up to the Loan Amount (in the case of an Owned Aircraft) or Stipulated
Loss Value (in the case of a Leased Aircraft) will be payable to the applicable
Loan Trustee and the proceeds up to such specified amounts and proceeds in
excess of the Loan Amount (in the case of an Owned Aircraft) or Stipulated Loss
Value (in the case of a Leased Aircraft) will be payable directly to Delta so
long as an Indenture Event of Default or Lease Event of Default, as applicable,
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. (Owned
Aircraft Indentures, Section 7.06; Leases, Section 11)
In addition, Delta is obligated to maintain or cause to be maintained aircraft
liability insurance at its or any lessee's (in the case of an Owned Aircraft) or
sublessee's (in the case of a Leased Aircraft) expense, 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. (Owned Aircraft Indentures,
Section 7.06; Leases, Section 11)
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, any lessee (in the case of an Owned Aircraft) or any sublessee (in the
case of a Leased Aircraft) with respect to other similar
S-82
aircraft operated by Delta, such lessee or such sublessee on the same routes on
which the Aircraft is operated. (Owned Aircraft Indentures, Section 7.06;
Leases, Section 11)
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. (Owned Aircraft Indentures, Section 7.06; Leases, Section 11)
In respect of each Aircraft, Delta is required to name the relevant Owner
Trustee (in the case of a Leased Aircraft), Loan Trustee, the Subordination
Agent, each Trustee, the Policy Provider and the Liquidity Provider as
additional insured parties as their respective interests may appear under all
liability insurance policies required by the terms of the Owned Aircraft
Indenture (in the case of the Owned Aircraft) or the Lease (in the case of a
Leased Aircraft) 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 by any act or omission of Delta. (Owned Aircraft Indentures, Section
7.06; Leases, Section 11)
Subject to certain customary exceptions, Delta may not operate (or permit any
lessee or sublessee to operate) any Aircraft in any area that is excluded from
coverage by any insurance policy in effect with respect to such Aircraft and
required by the Indenture or Lease. (Owned Aircraft Indentures, 7.06; Leases,
Section 11)
LEASE TERMINATION
Delta may terminate any Lease on any Lease Payment Date occurring on or after
the fifth anniversary of the lease commencement if it determines that such
Aircraft is obsolete or surplus to its needs and subject to certain other
limitations specified in such Lease. Upon payment of termination value for such
Aircraft, which will be in an amount at least equal to the outstanding principal
amount of the related Equipment Notes plus the Make-Whole Amount, if any,
payable on such date of payment, together with certain additional amounts and
together with all accrued and unpaid interest thereon, the lien of the relevant
Indenture shall be released, the relevant Lease shall terminate, and the
obligation of Delta thereafter to make scheduled rent payments under such Lease
shall cease. (Leases, Section 9; Leased Aircraft Indentures, Sections 2.10(b)
and 2.12) See "--Description of equipment notes--Redemption."
LEASE RENEWAL AND PURCHASE OPTIONS
At the end of the term of each Lease after final maturity of the related
Equipment Notes and subject to certain conditions, Delta will have certain
options to renew such Lease for additional limited periods. In addition, Delta
will have the right at the end of the term of each Lease to purchase the
Aircraft subject thereto for an amount to be calculated in accordance with the
terms of such Lease. (Leases, Section 19)
Delta may also have the right to purchase the Aircraft subject to each Lease on
certain Lease Payment Dates occurring in or after the year 2012. In the event
Delta exercises a purchase option in respect of an Aircraft, the purchase price
therefor shall be calculated in accordance with the provisions of the related
Lease, but in any event shall be sufficient to pay all principal of, Make-Whole
Amount, if any, and interest on the related Equipment Notes in full and, upon
payment
S-83
thereof, Delta will acquire such Aircraft free of the lien of the related
Indenture, unless upon satisfaction of certain conditions, Delta chooses to
assume on a full recourse basis all of such Owner Trustee's obligations in
respect of the related Equipment Notes and acquires the Aircraft subject to the
lien of the related Indenture. (Leases, Section 19; Leased Aircraft Indentures,
Sections 2.10(b), 2.12 and 2.17; Participation Agreements, Section 6.01(k)) See
"--Description of equipment notes--Redemption."
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 (i) to replace such Airframe and any such Engines or (ii) (a) in the
case of an Owned Aircraft, to pay the applicable Loan Trustee the outstanding
principal amount of the Equipment Notes relating to such Aircraft together with
interest accrued thereon, or (b) in the case of a Leased Aircraft, to pay the
applicable Owner Trustee the applicable Stipulated Loss Value for such Aircraft.
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 (i)
(a) in the case of an Owned Aircraft, 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 (b) in the case of a Leased
Aircraft, pay the applicable Owner Trustee the applicable Stipulated Loss Value
for such Aircraft, 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. 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 and (in the case of a Leased Aircraft) the relevant Owner Trustee and
Owner Participant opinions of counsel (i) to the effect that such Loan Trustee
(in the case of a Leased Aircraft, as assignee of the relevant Owner Trustee's
rights under the Lease) and Owner Trustee (in the case of a Leased Aircraft)
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 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 Owned
Aircraft Indenture (in the case of an Owned Aircraft) or the Leased Aircraft
Indenture and the Lease (in the case of a Leased Aircraft) relating to such
replacement aircraft and the validity and perfection of the security interest
granted to the Loan Trustee in the replacement aircraft and (in the case of a
Leased Aircraft) the title of the replacement aircraft vesting in the Owner
Trustee. If Delta elects not to replace such Airframe, or Airframe and
Engine(s), then upon payment of (i) in the case of an Owned Aircraft, the
outstanding principal amount of the Equipment Notes issued with respect to such
Aircraft, together with accrued but unpaid interest thereon or (ii) in the case
of a Leased Aircraft, the applicable Stipulated Loss Value for such Aircraft,
together with all other amounts then due and unpaid with respect to such
Aircraft, which must be at least sufficient to pay in full on the date of
payment the principal amount of the related Equipment Notes and all accrued and
unpaid interest due thereon (but, in the case of either clause (i) or (ii),
without any Make-Whole Amount), the lien of the Indenture and (in the case of a
Leased Aircraft) the Lease relating to such Aircraft will terminate with respect
to such Aircraft, the obligation of Delta thereafter to make the scheduled
interest and principal payments (in the case of an Owned Aircraft) or rent
payments (in the case of a Leased Aircraft) with respect to such Equipment Notes
will cease and (in the case of a Leased Aircraft) the related Owner Trustee will
transfer all of its right, title and interest in and to the
S-84
related Aircraft to Delta. The payments made under the Indenture or Lease, as
applicable, 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 or
the applicable Owner Trustee, as the case may be. (Owned Aircraft Indentures,
Sections 2.10, 3.02, 7.05(a) and 7.05(c); Leases, Sections 3(c)(iv), 10(a) and
10(c); Leased Aircraft Indentures, Sections 3.02 and 5.06;)
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 or Lease. (Owned Aircraft
Indentures, Section 7.05(b); Leases, Section 10(b); Leased Aircraft Indentures,
Section 5.06)
An "Event of Loss" with respect to an Aircraft, Airframe or any Engine means any
of the following events:
- 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 or
sublessee, as applicable) for a period exceeding 12 consecutive months, (or,
in the case of a Leased Aircraft, such requisition for use is continuing at
the end of the term of the Lease; provided, however, that no Event of Loss
pursuant to this parenthetical shall exist if the Owner Trustee furnishes
notice to Delta in accordance with the Lease);
- 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 or Lease, as applicable, 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 permitted lessee or permitted
sublessee) 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 (or, in the case of a Leased Aircraft, if such use is prohibited at
the end of the term of the Lease);
S-85
- in the case of a Leased Aircraft, the 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 during the Basic Term or Renewal
Term (each as defined in the Lease) of the Lease and continuing for 30 days
beyond the Term (as defined in the Lease); provided however, that no Event
of Loss pursuant to this clause shall exist if the Owner Trustee furnishes
notice to Delta in accordance with the Lease; 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. (Owned Aircraft Indentures, Annex A; Leases, Annex A)
LEASE EVENTS OF DEFAULT
Lease Events of Default include: (i) failure by Delta to pay any payment of
Basic Rent or Stipulated Loss Value under such Lease within 15 days after such
payment is due; (ii) failure by Delta to carry and maintain insurance or
indemnity on or with respect to the Aircraft in accordance with the provisions
of such Lease, subject to certain exceptions; (iii) failure by Delta to pay
Supplemental Rent (other than Stipulated Loss Value) and such failure continuing
unremedied for 30 days after Delta's receipt of written notice thereof (provided
that failure to pay any amount that is excluded from the lien of the Indenture
will not constitute a Lease Event of Default unless notice is given by the Owner
Participant); (iv) failure by Delta to perform or observe any other covenant or
agreement to be performed or observed by it under such Lease or the related
Participation Agreement or certain other related operative documents (other than
the tax indemnity agreement between Delta and the Owner Participant), and such
failure continuing unremedied for a period of 60 days after Delta has received
written notice of such failure from the applicable Owner Trustee or the Loan
Trustee; provided, however, that if such failure is capable of being remedied,
no such failure will constitute a Lease 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; (v) any representation or warranty made by
Delta under any Operative Document (as defined in the Lease) (other than in the
tax indemnity agreement between Delta and the Owner Participant) proves to have
been incorrect in any material respect at the time made and continues unremedied
for a period of 60 days after written notice to Delta of such incorrectness from
the applicable Owner Trustee or the Loan Trustee; provided, however, that if
such incorrectness is capable of being remedied, no such incorrectness will
constitute a Lease 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 (vi) the occurrence of certain voluntary events of
bankruptcy, reorganization or insolvency of Delta or the occurrence of certain
involuntary events of bankruptcy, reorganization or insolvency of Delta which
continues undismissed, unvacated or unstayed for a period of 90 days. No event
will constitute a Lease Event of Default if such event is caused solely by
reason of an event that constitutes an Event of Loss and Delta is complying with
the terms relating to an Event of Loss set forth in such Lease. (Leases, Section
14)
Indenture Events of Default under an Owned Aircraft Indenture are comparable and
are discussed above under "Indenture defaults, notice and waiver." (Owned
Aircraft Indentures, Section 4.01)
If a Lease Event of Default has occurred and is continuing and the Lease has
been declared to be in default, the applicable Owner Trustee may (or, so long as
the Indenture is in effect, the applicable Loan Trustee may, subject to the
terms of the Indenture), subject to certain limitations
S-86
relating to aircraft subject to the CRAF Program, exercise one or more of the
remedies provided in such Lease with respect to the related Aircraft. Such
remedies include the right to repossess and use or operate such Aircraft, to
rescind or terminate such Lease, to sell or re-lease such Aircraft free and
clear of Delta's rights, except as provided in the Lease, and retain the
proceeds, and to require Delta to pay as liquidated damages any accrued and
unpaid Basic Rent plus an amount equal to the excess of the Stipulated Loss
Value of such Aircraft over either (i) the fair market sales value or fair
market rental value of such Aircraft (as determined by independent appraisal) or
(ii) if such Aircraft has been sold, the net sale proceeds thereof. (Leases,
Section 15)
CERTAIN DEFINED TERMS UNDER THE LEASES
"Basic Rent" means, for any Aircraft, the scheduled rent payable semiannually
for the term for such Aircraft pursuant to the related Lease.
"CRAF Program" means the Civil Reserve Air Fleet Program authorized under 10
U.S.C. Section 9511 et seq. or any similar or substitute program under the laws
of the United States.
"Lease Default" means a default under a Lease.
"Lease Payment Dates" means, with respect to each Lease, January 2 and July 2 of
each year, so long as Equipment Notes are outstanding under the related
Indenture, commencing on the first Regular Distribution Date to occur after such
Aircraft is leased by Delta.
"Supplemental Rent" means all amounts, liabilities and obligations (other than
Basic Rent) which are owed by Delta under each Lease and the agreements related
thereto.
TRANSFER OF OWNER PARTICIPANT INTERESTS
Subject to certain restrictions, each Owner Participant may transfer its
interest in the related Leased Aircraft. (Leased Aircraft Participation
Agreements, Section 6.01(n))
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of the principal U.S. federal income tax
consequences of the purchase, ownership and disposition of Offered Certificates
to a Certificate Owner that purchases Offered Certificates in the initial
offering thereof at the offering price set forth herein and holds such Offered
Certificates as capital assets. The discussion does not address all of the U.S.
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, dealers in securities or
commodities, insurance companies and holders that will hold Offered Certificates
as part of a straddle or holders that have a "functional currency" other than
the U.S. dollar). Except for the discussion below under "--Certain U.S. federal
income tax consequences to non-U.S. certificateholders," this discussion is
addressed to beneficial owners of Offered 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 (including entities treated as
partnerships), trusts or estates treated, for U.S. 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 Internal Revenue Service with respect to any of the U.S.
federal income tax consequences discussed below, and no assurance can be given
that the Internal Revenue Service will not take
S-87
contrary positions concerning the U.S. federal income tax consequences of the
purchase, ownership and disposition of Offered Certificates. 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 Offered 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
Offered 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.
TAX STATUS OF THE TRUSTS
The Trusts will not be classified as associations (or publicly traded
partnerships) taxable as corporations and, accordingly, will not themselves be
subject to U.S. federal income taxation. Based upon an interpretation of
analogous authorities under existing law, each Trust should be classified as a
grantor trust for U.S. federal income tax purposes. Each Trust will file income
tax returns and report to investors on the basis that it is a grantor trust
under Subpart E, Part I of Subchapter J of Chapter 1 of Subtitle A of the
Internal Revenue Code of 1986, as amended (the "Code"). The discussion below
assumes that the Trusts will be classified as grantor trusts.
TAXATION OF CERTIFICATE OWNERS
GENERAL
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 U.S. 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 or from a Policy will be treated for U.S. 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, the Liquidity Provider and the
Policy 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 itemized deductions will be
subject generally to additional limitations on itemized deductions under the
applicable provisions of the Code.
S-88
SALES OF OFFERED CERTIFICATES
A Certificate Owner that sells an Offered 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 Offered Certificate. Any
such gain or loss generally will be long-term capital gain or loss if the
Offered 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 Offered Certificates are taxable
to corporate taxpayers at the rates applicable to ordinary income and to
individual taxpayers at lower rates than the rates applicable to ordinary
income. 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 Offered
Certificates in the subordinated Trust would probably be treated for U.S.
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 Offered 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.
S-89
ORIGINAL ISSUE DISCOUNT
It is anticipated that the Equipment Notes will not be 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.
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES TO NON-U.S. 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 an
Offered 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 (in the case of Owned Aircraft Notes) or of the Owner
Participant (in the case of Leased Aircraft Notes) entitled to vote, (ii) such
Non-U.S. Certificateholder is not a controlled foreign corporation within the
meaning of the Code that is related to Delta or the Owner Participant, (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 on Form W-8BEN, under
penalties of perjury, that it is not a U.S. Person and provides its name and
address and certain other information to the related Trustee 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 Offered Certificate on behalf of the Non-U.S.
Certificateholder certifies on Form W-8IMY, 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 an Offered 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 U.S. 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 Offered 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 Offered Certificates, and proceeds from the sale of Offered
Certificates to or through certain brokers, may be subject to a "backup"
withholding tax of 30% (which rate will be reduced periodically to 28% for
payments in 2006) 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 U.S. federal income tax
and may entitle such
S-90
Certificate 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 an Offered Certificate and proceeds from
the sale of an Offered 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.
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
Offered 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. Further, a
S-91
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 Offered
Certificates.
Any Plan fiduciary which proposes to cause a Plan to purchase Offered
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 an Offered Certificate, the Plan's assets will
include both the Offered 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 Offered 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, the Liquidity Provider and MBIA.
Moreover, if the senior Classes of Offered Certificates are purchased by a Plan
and the subordinate Classes of Offered Certificates 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 Offered Certificates of its right to purchase
the senior Classes of Offered 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. In addition, if the subordinate Classes of Offered Certificates are
purchased by a Plan and the senior Classes of Offered Certificates are held by a
party in interest or a disqualified person with respect to such Plan, the
exercise by the holder of the subordinate Classes of Offered Certificates of its
right to purchase the senior Class of Offered 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 Offered 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
S-92
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 Offered
Certificates.
EACH PERSON WHO ACQUIRES OR ACCEPTS AN OFFERED 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 OFFERED CERTIFICATE OR AN
INTEREST THEREIN OR (II) THE PURCHASE AND HOLDING OF SUCH OFFERED CERTIFICATE OR
AN INTEREST THEREIN BY SUCH PERSON ARE EXEMPT 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 Offered 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 Offered 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 OFFERED CERTIFICATES.
S-93
UNDERWRITING
Under the terms and subject to the conditions contained in an underwriting
agreement dated April , 2002 (the "Underwriting Agreement"), Delta has agreed
to cause the Trusts to sell to the underwriters named below (the
"Underwriters"), for whom J.P. Morgan Securities Inc. ("JPMorgan") and Salomon
Smith Barney Inc. are acting as representatives, the following respective
principal amounts of the Offered Certificates.
------------------------------------------------------------------------------------------------------
PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT AMOUNT AMOUNT
OF CLASS G-1 OF CLASS G-2 OF CLASS C
UNDERWRITERS CERTIFICATES CERTIFICATES CERTIFICATES
------------------------------------------------------------------------------------------------------
J.P. Morgan Securities Inc. .......................... $ $ $
Salomon Smith Barney Inc. ............................
--------------------------------------------
Total................................................. $ $ $
------------------------------------------------------------------------------------------------------
The Underwriting Agreement provides that the Underwriters are obligated to
purchase all of the Offered Certificates in the offering if any are purchased.
The Underwriting Agreement also provides that if an Underwriter defaults on its
purchase commitments, the purchase commitments of non-defaulting Underwriters
may be increased or the offering or the Offered Certificates may be terminated.
Delta estimates that the expenses associated with the offer and sale of the
Offered Certificates will be approximately $ (exclusive of the ongoing
costs of the Policies and the Liquidity Facilities).
The Underwriters proposed to offer the Offered Certificates initially at the
public offering prices on the cover page of this prospectus supplement and to
selling group members at those prices less the concessions set forth below. The
Underwriters and the selling group members may allow a discount to other
broker/dealers set forth below. After the initial public offering, the public
offering prices and concessions and discounts to broker/dealers may be changed
by the Underwriters.
----------------------------------------------------------------------------------------
CONCESSION TO DISCOUNT
SELLING GROUP TO BROKER/
CERTIFICATE MEMBERS DEALERS
----------------------------------------------------------------------------------------
Class G-1................................................... % %
Class G-2...................................................
Class C.....................................................
----------------------------------------------------------------------------------------
The Offered Certificates are a new issue of securities with no established
trading market. One or more of the Underwriters intend to make a secondary
market for the Offered Certificates. However, they are not obligated to do so
and may discontinue any market making at any time without notice. No assurance
can be given as to the liquidity of the trading market for the Offered
Certificates.
Delta has agreed to indemnify the Underwriters against any liabilities under the
Securities Act of 1933, as amended (the "Securities Act"), or contribute to
payments which the Underwriters may be required to make in that respect.
From time to time, several of the Underwriters or their affiliates perform
investment banking and advisory services for, and provide general financing and
banking services to, Delta and its affiliates. Affiliates of JPMorgan and
Salomon Smith Barney Inc. are lenders under the $625 million 1997 Bank Credit
Agreement discussed in "Use of proceeds" that may be repaid by Delta with the
S-94
proceeds of the issuance of the Equipment Notes. Because more than 10% of the
net proceeds of the offering will be paid to affiliates of the Underwriters, the
offering is being made pursuant to Rule 2710(c)(8) of the Conduct Rules of the
National Association of Securities Dealers Inc.
JPMorgan will make the securities available for distribution on the internet
through a proprietary website and/or a third-party system operated by Market
Axess Inc., an internet-based communications technology provider. Market Axess
Inc. is providing the system as a conduit for communications between JPMorgan
and its customers and is not a party to any transactions. Market Axess Inc., a
registered broker-dealer, will receive compensation from JPMorgan based on
transactions JPMorgan conducts through the system. JPMorgan will make the
securities available to its customers through the internet distributions,
whether made through a proprietary or third-party system, on the same terms as
distributions made through other channels.
The Underwriters may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with the
Regulation M under the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
- Over-allotment involves syndicate sales in excess of the offering size,
which creates a syndicate short position.
- Stabilizing transactions permit bids to purchase the underlying security
as long as the stabilizing bids do not exceed a specified maximum.
- Syndicate covering transactions involve purchase of the Offered
Certificates in the open market after the distribution has been completed in
order to cover syndicate short positions.
- Penalty bids permit the Underwriters to reclaim a selling concession from
a stabilizing or syndicate member when the Offered Certificates originally
sold by such syndicate member are purchased in a syndicate covering
transactions to cover syndicate short positions.
The stabilizing transactions, syndicate covering transactions and penalty bids
may cause the prices of the Offered Certificates to be higher than they would
otherwise be in the absence of such transactions. These transactions, if
commenced, may be discontinued at any time.
Delta expects that delivery of the Offered Certificates will be made against
payment therefor on or about the closing date specified in the second to the
last paragraph of the cover page of this prospectus supplement, which will be
the business day following the date of pricing of the Offered
Certificates (such settlement cycle being referred to herein as "T+ "). Under
Rule 15c6-1 of the SEC under the Exchange Act, trades in the secondary market
are generally required to settle in three business days, unless the parties to
any such trade expressly agree otherwise. Accordingly, purchasers who wish to
trade the Offered Certificates on the date of pricing or the following
business days will be required, by virtue of the fact that the Offered
Certificates initially will settle in T+ , to specify an alternate settlement
cycle at the time of any trade to prevent a failed settlement and should consult
their own advisor.
In connection with the offering of the Offered Certificates, the Underwriters
have agreed to reimburse certain fees and expenses of Delta in the amount of
approximately $600,000.
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
S-95
and delivery of the Basic Agreement, each Trust Supplement and the Certificates,
and the valid and binding effect thereof, and on the opinion of 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.
EXPERTS
The consolidated balance sheets as of December 31, 2001 and 2000 and the related
consolidated statements of income, cash flows and shareowners' equity for each
of the three years in the period ended December 31, 2001, and related 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 methods of accounting for derivative instruments and hedging activities as
discussed in Note 4 to the audited consolidated financial statements.
With respect to the unaudited interim financial information for the quarter
ended March 31, 2001, Arthur Andersen LLP has applied limited procedures in
accordance with professional standards for a review of that information.
However, their report thereon states that they did not audit and they do not
express an opinion on that interim financial information. Accordingly, the
degree of reliance on their report on that information should be restricted in
light of the limited nature of the review procedures applied. In addition, the
accountants are not subject to the liability provision of Section 11 of the
Securities Act for their report on the unaudited interim financial information
because that report is not a "report" or "part" of the registration statement
prepared or certified by the accountants within the meaning of Sections 7 and 11
of the Securities Act.
On March 6, 2002, Delta's Board of Directors decided to retain Deloitte & Touche
LLP as Delta's independent public accountants and dismissed Arthur Andersen LLP,
Delta's former auditors. There were no disagreements with the former auditors on
any matter of accounting principles or practices, financial statement disclosure
or auditing scope or procedure at the time of the change or with respect to
Delta's financial statements for fiscal years 2000 and 2001, which, if not
resolved to the former auditor's satisfaction, would have caused them to make
reference to the subject matter of the disagreement in connection with their
report. Prior to retaining Deloitte & Touche LLP, Delta had not consulted with
Deloitte & Touche LLP regarding accounting principles.
The consolidated balance sheets of MBIA Inc. and subsidiaries and MBIA Insurance
Corporation and subsidiaries, as of December 31, 2001 and December 31, 2000 and
the related consolidated statements of income, changes in shareholders' equity,
and cash flows for each of the three years in the period ended December 31,
2001, incorporated by reference into this prospectus supplement, have been
incorporated herein in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
The references to AISI, AvSolutions and BK, 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-96
APPENDIX I:
INDEX OF DEFINED TERMS
A
Adjusted Expected
Distributions.................. S-63
Aggregate LTV Collateral Amount.. S-64
Aircraft......................... S-66
AISI............................. S-67
Appraised Current Market Value... S-64
Appraisers....................... S-67
Assumed Aircraft Value........... S-38
Average Life Date................ S-72
AvSolutions...................... S-67
B
Bankruptcy Code.................. S-40
Base Rate........................ S-50
Basic Agreement.................. S-27
Basic Rent....................... S-87
BK............................... S-67
Business Day..................... S-30
C
Cash Collateral Account.......... S-48
Cede............................. S-33
Certificate Account.............. S-30
Certificate Owner................ S-44
Certificateholders............... S-27
Certificates..................... S-27
citizen of the United States..... S-40
Class C Certificateholders....... S-27
Class C Certificates............. S-27
Class C Trust.................... S-27
Class C Trustee.................. S-27
Class D Certificateholders....... S-27
Class D Certificates............. S-27
Class D Trust.................... S-27
Class D Trustee.................. S-27
Class Exemptions................. S-93
Class G-1 Certificateholders..... S-27
Class G-1 Certificates........... S-27
Class G-1 Trust.................. S-27
Class G-1 Trustee................ S-27
Class G-2 Certificateholders..... S-27
Class G-2 Certificates........... S-27
Class G-2 Trust.................. S-27
Class G-2 Trustee................ S-27
Code............................. S-88
Controlling Party................ S-58
CRAF Program..................... S-87
Current Distribution Date........ S-61
D
date of determination............ S-72
Defaulted Series G Equipment
Note........................... S-8
Depreciation Assumption.......... S-73
Disposition...................... S-9
Distribution Date................ S-29
Downgrade Drawing................ S-48
Drawing.......................... S-50
DTC.............................. S-33
DTC Participants................. S-44
E
Election Distribution Date....... S-54
Equipment Notes.................. S-69
ERISA............................ S-91
event of default................. S-35
Event of Loss.................... S-85
Excess Reimbursement
Obligations.................... S-61
Exchange Act..................... S-95
Expected Distributions........... S-61
F
FAA.............................. S-80
Final Distributions.............. S-59
Final Drawing.................... S-49
Final Legal Distribution Date.... S-29
financial institution............ S-90
full defeasance.................. S-73
G
GAAP............................. S-25
General Account Regulations...... S-93
H
H.15(519)........................ S-72
I
Indenture Events of Default...... S-74
Indentures....................... S-37
Indirect Participants............ S-44
Insolvency Proceeding............ S-55
Intercreditor Agreement.......... S-57
Interest Drawings................ S-46
Issuance Date.................... S-37
J
JPMorgan......................... S-94
L
Lease Default.................... S-87
Lease Event of Default........... S-74
Lease Payment Dates.............. S-87
Leased Aircraft.................. S-37
Leased Aircraft Indenture........ S-37
Leased Aircraft Loan Trustee..... S-69
Leased Aircraft Notes............ S-69
Leased Aircraft Operative
Agreements..................... S-39
Leased Aircraft Participation
Agreement...................... S-37
LIBOR............................ S-50
Liquidity Event of Default....... S-51
Liquidity Expenses............... S-60
Liquidity Facility............... S-46
Liquidity Obligations............ S-61
Liquidity Provider............... S-46
I-1
]
Loan Amount...................... S-82
Loan Trustee..................... S-69
LTV Appraisal.................... S-64
LTV Collateral Amount............ S-64
LTV Ratio........................ S-64
LTVs............................. S-3
M
Make-Whole Amount................ S-71
Mandatory Document Terms......... S-39
Mandatory Economic Terms......... S-37
Maximum Available Commitment..... S-47
MBIA............................. S-24
Minimum Sale Price............... S-59
Moody's.......................... S-22
most recent H.15(519)............ S-72
N
Non-Extension Drawing............ S-49
Non-Performing Equipment Notes... S-63
Non-U.S. Certificateholder....... S-90
Note Holder...................... S-35
O
Offered Certificates............. S-27
Order............................ S-55
Owned Aircraft................... S-37
Owned Aircraft Indenture......... S-37
Owned Aircraft Loan Trustee...... S-69
Owned Aircraft Notes............. S-69
Owned Aircraft Participation
Agreement...................... S-37
Owner Participant................ S-69
Owner Trustee.................... S-69
P
Parent Company................... S-24
Participation Agreements......... S-37
Pass Through Trust Agreements.... S-27
Performing Equipment Note........ S-47
Permitted Investments............ S-35
Plan............................. S-91
Plan Asset Regulation............ S-92
Policy........................... S-52
Policy Account................... S-54
Policy Business Day.............. S-55
Policy Drawing................... S-61
Policy Expenses.................. S-60
Policy Fee Letter................ S-56
Policy Provider.................. S-24
Policy Provider Agreement........ S-56
Policy Provider Default.......... S-58
Policy Provider Election......... S-53
Policy Provider Obligations...... S-61
Pool Balance..................... S-31
Pool Factor...................... S-31
Preference Amount................ S-55
Prior Funds...................... S-8
Prospectus....................... S-27
PTC Event of Default............. S-36
PTCE............................. S-92
R
Rating Agencies.................. S-22
Regular Distribution Dates....... S-29
Remaining Weighted Average Life.. S-72
Replacement Facility............. S-48
Required Amount.................. S-46
S
SAP.............................. S-25
Scheduled Payments............... S-29
SEC.............................. S-27
Section 1110..................... S-76
Section 1110 Period.............. S-47
Securities Act................... S-94
Series C Equipment Notes......... S-69
Series D Equipment Notes......... S-69
Series G-1 Equipment Notes....... S-68
Series G-2 Equipment Notes....... S-68
Similar Law...................... S-91
Special Distribution Date........ S-29
Special Payment.................. S-29
Special Payments Account......... S-30
Standard & Poor's................ S-22
Stated Interest Rates............ S-46
Stipulated Loss Value............ S-82
Subordination Agent.............. S-57
Supplemental Rent................ S-87
T
T+ ............................. S-95
Termination Notice............... S-51
Threshold Rating................. S-48
Transportation Code.............. S-40
Treasury Yield................... S-71
Triggering Event................. S-59
Trust Agreements................. S-68
Trust Indenture Act.............. S-41
Trust Property................... S-27
Trust Supplement................. S-27
Trustees......................... S-27
Trusts........................... S-27
U
U.S. Government Obligations...... S-73
U.S. Persons..................... S-87
Underwriters..................... S-94
Underwriting Agreement........... S-94
I-2
APPENDIX II: APPRAISAL LETTERS
II-1
AIRCRAFT
(LOGO) INFORMATION
SERVICES, INC.
DELTA AIR LINES
HARTSFIELD INTERNATIONAL AIRPORT
ATLANTA, GA 30320
HALF-LIFE AND NEW BASE VALUE OPINION
32 SELECTED DELTA AIRCRAFT
AISI FILE NO.: A2S005BVO
REPORT DATE: 19 APRIL 2002
VALUES AS OF: JANUARY 2002
HEADQUARTERS, 26072 MERIT CIRCLE, SUITE 123, LAGUANA HILLS, CA 92653
TEL: 949-582-8888 FAX: 949-582-8887 e-MAIL: AISINews@aol.com
(This page intentionally left blank)
AIRCRAFT
(LOGO) INFORMATION
SERVICES, INC.
19 April 2002
DELTA AIR LINES
Hartsfield International Airport
Atlanta, GA 30320
Subject: Half-Life and New Base Value Opinion - 32 Aircraft.
AISI File number:A2S005BVO
Ref: (a) E-mail, J P Morgan to AISI 27/29 January, 19 April 2002
Dear Ladies and Gentlemen:
Aircraft Information Services, Inc. (AISI) is pleased to offer our opinion to
Delta Air Lines (Delta) of the half-life base values (new base values for year
2002 aircraft) of the Fleet of 32 selected 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 'base value'
and `current market value' of an 'average' aircraft. Base value is a theoretical
value that assumes a hypothetical balanced market while current market value is
the value in the real market; both assume a hypothetical average aircraft
condition. All other values are derived from these values. 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 Appraiser.
AISI defines a 'base value' as that of a transaction between an 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, with supply and
demand of the sale item roughly in balance and with no event which would cause
a short term change in the market. Base values are typically given for aircraft
in 'new' condition, 'average half-life' condition, or 'adjusted' for an aircraft
in a specifically described condition 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
normal for its intended use and age. AISI assumes average condition unless
otherwise specified in this report.
HEADQUARTERS, 26072 MERIT CIRCLE, SUITE 123, LAGUANA HILLS, CA 92653
TEL: 949-582-8888 FAX: 949-582-8887 e-MAIL: AISINews@aol.com
19 April 2002 (LOGO)
AISI File No. A2S005BVO
Page - 2 -
AISI also assumes that airframe, engine and component maintenance and essential
records are sufficient to permit normal commercial operation under a strict
airworthiness authority.
'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.
An 'adjusted' appraisal reflects an adjustment from half life condition for the
actual condition, utilization, life remaining or time remaining of an
airframe, engine or component.
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
including short term events, 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.
If more than one aircraft is contained in this report than it should be noted
that the values given are not directly additive, that is, the total of the given
values is not the value of the fleet but rather the sum of the values of the
individual aircraft if sold individually over time so as not to exceed demand.
19 April 2002 (LOGO)
AISI File No. A2S005BVO
Page - 3 -
2. VALUATION
The aircraft are valued predicated upon the reference (a) data which describes
the aircraft MTOW and any engine upgrades. Following is AISI's opinion of the
half-life base value (new base value for year 2002 aircraft) for the subject
aircraft in January 2002 US dollars. Valuations are presented in Table I
subject to the assumptions, definitions and disclaimers herein.
The terrorist actions that occurred in the United States on 11 September 2001
have had a significant negative effect on current market values of all
commercial aircraft as demand for air travel has declined sharply. The amount
of decline varies considerably with new aircraft affected the least and older
aircraft affected the most. The present used aircraft market is considered to
be a distressed market and is very tenuous, with very few transactions upon
which to determine value opinions.
Base value opinions normally decline regularly with time; declines of base
value in excess of the norm have occurred only where irreversible market
changes have occurred with regard to specific aircraft types in the judgment of
AISI. Typically an irreversible market change occurs when it is believed that
the decline in current market value is permanent, thus causing a corresponding
but usually smaller decline in base value. AISI does not consider that any
aircraft in this report has suffered an irreversible market change.
19 April 2002 (LOGO)
AISI File No. A2S005BVO
Page - 4 -
TABLE I
----------------------------------------------------------------------------------------------------------
Aircraft Half-Life Base Value
Manufacturer's Delivery Aircraft Serial Registration January 2002 US Dollars
Date Number Number Except as noted
----------------------------------------------------------------------------------------------------------
BOEING 737-832; CFM56-7B24*, 157,200 LB. MTOW
----------------------------------------------------------------------------------------------------------
26 Oct 98 29620 N372DA 36,860,000
----------------------------------------------------------------------------------------------------------
27 Oct 98 29621 N373DA 36,860,000
----------------------------------------------------------------------------------------------------------
04 Nov 98 29622 N374DA 36,860,000
----------------------------------------------------------------------------------------------------------
30 Nov 98 29623 N375DA 36,860,000
----------------------------------------------------------------------------------------------------------
18 Aug 00 30378 N396DA 41,000,000
----------------------------------------------------------------------------------------------------------
24 Aug 00 30537 N397DA 41,000,000
----------------------------------------------------------------------------------------------------------
24 Aug 00 30774 N398DA 41,000,000
----------------------------------------------------------------------------------------------------------
19 Sep 00 30397 N399DA 41,000,000
----------------------------------------------------------------------------------------------------------
22 Sep 00 30538 N3730B 41,000,000
----------------------------------------------------------------------------------------------------------
22 Dec 01 30818 N3764D 42,930,000
----------------------------------------------------------------------------------------------------------
21 Dec 01 30819 N3765 42,930,000
----------------------------------------------------------------------------------------------------------
22 Dec 01 30820 N3766 42,930,000
----------------------------------------------------------------------------------------------------------
18 Dec 01 30821 N3767 42,930,000
----------------------------------------------------------------------------------------------------------
24 Jan 02 29630 N3768 46,840,000 (New)
----------------------------------------------------------------------------------------------------------
31 Jan 02 30822 N3769L 46,840,000 (New)
----------------------------------------------------------------------------------------------------------
25 Feb 02 29631 N37700 46,980,000 (New)
----------------------------------------------------------------------------------------------------------
04 Apr 02 29632 N3771K 47,120,000 (New)
----------------------------------------------------------------------------------------------------------
BOEING 757-232; P&W PW2037, 232,000 LB. MTOW
----------------------------------------------------------------------------------------------------------
12 Apr 01 30839 N67171 57,270,000
----------------------------------------------------------------------------------------------------------
BOEING 767-332ER; P&W PW4060, 407,000 LB. MNTOW
----------------------------------------------------------------------------------------------------------
03 May 95 27961 N185DN 66,040,000
----------------------------------------------------------------------------------------------------------
07 Jul 95 27962 N186DN 66,040,000
----------------------------------------------------------------------------------------------------------
19 Jun 96 27582 N187DN 66,290,000
----------------------------------------------------------------------------------------------------------
17 Oct 96 27583 N188DN 66,290,000
----------------------------------------------------------------------------------------------------------
13 Feb 97 25990 N189DN 72,540,000
----------------------------------------------------------------------------------------------------------
25 Mar 97 28447 N190DN 72,540,000
----------------------------------------------------------------------------------------------------------
09 Apr 97 28448 N191DN 72,540,000
----------------------------------------------------------------------------------------------------------
26 Jun 97 28449 N192DN 72,540,000
----------------------------------------------------------------------------------------------------------
* Note -- the B737-832 aircraft are listed above with CFM56-7B24 engines. 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.
19 April 2002
AISI File No. A2S005BVO
Page - 5 -
TABLE I (CONTINUED)
----------------------------------------------------------------------------------------------------------
Aircraft Half-Life Base Value
Manufacturer's Delivery Aircraft Serial Registration January 2002 US Dollars
Date Number Number Except as noted
----------------------------------------------------------------------------------------------------------
BOEING 767-432ER; GE CF6-80C2B8FG01,400,000 LB. MTOW
----------------------------------------------------------------------------------------------------------
11 Aug 00 29699 N828MH 89,500,000
----------------------------------------------------------------------------------------------------------
22 Aug 00 29700 N829MH 89,500,000
----------------------------------------------------------------------------------------------------------
13 Sep 00 29701 N830MH 89,500,000
----------------------------------------------------------------------------------------------------------
20 Sep 00 29702 N831MH 89,500,000
----------------------------------------------------------------------------------------------------------
26 Sep 00 29704 N832MH 89,500,000
----------------------------------------------------------------------------------------------------------
13 Oct 00 29706 N833MH 89,500,000
----------------------------------------------------------------------------------------------------------
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 party's action or failure to act as a result of
reliance or alleged reliance on this report.
Sincerely,
AIRCRAFT INFORMATION SERVICES, INC.
/s/ John McNicol
----------------------------------
John McNicol
Vice President
Appraisals & Forecasts
(This page intentionally left blank)
(AvSOLUTIONS LOGO)
--------------------------------------------------------------------------------
April 15, 2002
Delta Air Lines
Kenneth Morge
Manager, Capital Markets
Hartsfield International Airport
Atlanta, GA 30320
Dear Mr. Morge:
AvSOLUTIONS is pleased to provide its opinion on the base values as of
January 2002 of 17 Boeing 737-832 aircraft, one Boeing 757-232 aircraft, eight
Boeing 767-332ER aircraft, and six Boeing 767-432ER aircraft (collectively, the
"Aircraft"). A list of the thirty-two (342) aircraft, along with their delivery
dates, engine types and serial numbers is provieded as Attachment 1 of this
document.
Set forth below is a summary of the methodology, considerations and
assumptions utilized in this appraisal.
BASE VALUE
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 future 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.
APPRAISAL METHODOLOGY
The method employed by AvSOLUTIONS to appraise the base values and
fair market values of aircraft and associated equipment addresses the factors
that influence the market value of an aircraft, such as its age, condition,
configuration, the population of similar aircraft, similar aircraft on the
market, operating costs, cost to acquire a new aircraft, and the state of
demand for transportation services.
To achieve this objective, cross-sectional data concerning the values
of aircraft in each of several general categories is collected and analyzed.
Cross-sectional data is then compared with reported market values at a
specified point in time. Such data reflects the effect of deterioration in
aircraft performance due to usage and exposure to the elements, as well as the
effect of obsolescence due to the evolutionary development and implementation of
new designs and materials.
The product of the analysis identifies the relationship between the value
of each aircraft and its characteristics, such as age, model designation,
service configuration and engine type. Once the relationship is identified, one
can then postulate the effects of the difference between the economic
circumstances at the time when the cross-sectional data were collected and the
current situation.
The manufacturer and size of the aircraft usually determine the specific
category to which it is assigned. Segregating the world airplane fleet in this
manner accommodates the potential effects of different size and different design
philosophies. Limiting Conditions and Assumptions
Limiting Conditions and Assumptions
-----------------------------------
In order to conduct this valuation, AvSOLUTIONS is primarily relying on
information supplied by Delta Air Lines and from data within AvSOLUTIONS' own
database. In determining the base value of the Aircraft, the following
assumptions have been researched and determined:
1. AvSOLUTIONS has not inspected the Aircraft or their maintenance
records; accordingly, AvSOLUTIONS cannot attest to their specific
location or condition.
2. The Aircraft have been delivered to Delta Air Lines with the exception
of two, which are scheduled for delivery by the end of the first
quarter 2002.
3. The Aircraft are certified, maintained and operated under United States
Federal Aviation Regulation (FAR) part 121.
4. All mandatory inspections and Airworthiness Directives have been
complied with.
5. The Aircraft have half-time remaining to their next major overhaul or
scheduled shop visit on their airframes, engines, landing gear and
auxiliary power units.
6. The Aircraft have no damage history.
7. The Aircraft are in good condition.
8. AvSOLUTIONS considers the economic useful life of these aircraft to be
at least 32 years.
Based upon the above methodology, considerations and assumptions, it is
AvSOLUTIONS' opinion that the base values of each Aircraft are as listed in
Attachment 1.
STATEMENT OF INDEPENDENCE
This appraisal report represents the opinion of AvSOLUTIONS, Inc. and
is intended to be advisory in nature. Therefore, AvSOLUTIONS assumes no
responsibility or legal liability for actions taken or not taken by the Client
or any other party with regard to the Aircraft. By accepting this report, the
Client agrees that AvSOLUTIONS shall bear no responsibility or legal liability
regarding this report. Further, this report is prepared for the exclusive use of
the Client and shall not be provided to other parties without the Client's
express consent.
AvSOLUTIONS hereby states that this valuation report has been
independently prepared and fairly represents the Aircraft and AvSOLUTIONS'
opinion of their values. AvSOLUTIONS further states that it has no present or
contemplated future interest or association with the Aircraft.
Sincerely yours,
/s/ Scott E. Daniels
Scott E. Daniels
Director, Asset Management
Attachment 1
DELTA AIR LINES
Serial
Number Registration Delivery Engine MTOW Base Value
MSN Number Date Type* (lb) $ millions
Boeing 737-832
1 29620 N372DA 26-Oct-98 CFM 56-7B26 157,200 40.08
2 29621 N373DA 27-Oct-98 CFM 56-7B26 157,200 40.08
3 29622 N374DA 04-Nov-98 CFM 56-7B26 157,200 40.24
4 29623 N375DA 30-Nov-98 CFM 56-7B26 157,200 40.24
5 30378 N396DA 18-Aug-00 CFM 56-7B26 157,200 43.77
6 30537 N397DA 24-Aug-00 CFM 56-7B26 157,200 43.77
7 30774 N398DA 24-Aug-00 CFM 56-7B26 157,200 43.77
8 30379 N399DA 19-Sep-00 CFM 56-7B26 157,200 43.95
9 30538 N3730B 22-Sep-00 CFM 56-7B26 157,200 43.95
10 30818 N3764D 22-Dec-01 CFM 56-7B26 157,200 46.41
11 30819 N3765 21-Dec-01 CFM 56-7B26 157,200 46.41
12 30820 N3766 22-Dec-01 CFM 56-7B26 157,200 46.41
13 30821 N3767 18-Dec-01 CFM 56-7B26 157,200 46.41
14 29630 N3768 24-Jan-02 CFM 56-7B26 157,200 46.55
15 30822 N3769L 31-Jan-02 CFM 56-7B26 157,200 46.55
16 29631 N37700 25-Feb-02 CFM 56-7B26 157,200 46.70
17 29632 N3771K 04-Apr-02 CFM 56-7B26 157,200 46.84
Boeing 757-232
18 30839 N67171 12-Apr-01 PW2037 232,000 56.39
Boeing 767-332ER
19 27961 N185DN 03-May-95 PW4060 407,000 62.28
20 27962 N186DN 07-Jul-95 PW4060 407,000 62.80
21 27582 N187DN 19-Jun-96 PW4060 407,000 65.73
22 27583 N188DN 17-Oct-96 PW4060 407,000 66.83
23 25990 N189DN 13-Feb-97 PW4060 407,000 67.95
24 28447 N190DN 25-Mar-97 PW4060 407,000 68.23
25 28448 N191DN 09-Apr-97 PW4060 407,000 68.52
26 28449 N192DN 26-Jun-97 PW4060 407,000 69.09
Boeing 767-432ER
27 29699 N828MH 11-Aug-00 CF6-80C2B8FG01 400,000 90.68
28 29700 N829MH 22-Aug-00 CF6-80C2B8FG01 400,000 90.68
29 29701 N830MH 13-Sep-00 CF6-80C2B8FG01 400,000 91.05
30 29702 N831MH 20-Sep-00 CF6-80C2B8FG01 400,000 91.05
31 29704 N832MH 26-Sep-00 CF6-80C2B8FG01 400,000 91.05
32 29706 N833MH 13-Oct-00 CF6-80C2B8FG01 400,000 91.43
* Note - the Boeing 737-832 aircraft are listed with CFM56-7B26 engines.
However, AvSOLUTIONS has been informed the engines installed are CFM56-7B26
engines purchased with an operating limit to CFM56-7B24 status. With this limit,
AvSOLUTIONS has valued the aircraft as though they are powered by the CFM56-7B24
engine.
BK Associates, Inc.
1295 Northern Boulevard
Manhasset, New York 11030
(516) 365-6272 Fax (516) 365-6287
April 15, 2002
Mr. Paul Jacobson
Delta Air Lines
Hartsfield International Airport
Atlanta, GA 30320
Dear Paul:
In response to your request, BK Associates, Inc. is pleased to provide this
opinion of the current Base Value on each of 32 commercial jet transport
aircraft, identified as the Delta EETC Series 2002-1 Portfolio (Aircraft). The
Aircraft are further identified in the attached Figure 1 by type, serial number,
manufacture date, engine model and maximum takeoff weight.
Set forth below is a summary of the methodology, considerations and assumptions
utilized in this appraisal.
CURRENT FAIR MARKET VALUE
According to the International Society of Transport Aircraft Trading's (ISTAT)
definition of FMV, to which BK Associates subscribes, the quoted FMV is the
Appraiser's opinion of the most likely trading price that may be generated for
an aircraft under the market circumstances that are perceived to exist at the
time in question. The FMV assumes that the aircraft is valued for its highest
and 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, which
BK Associates considers to be 12 to 18 months.
BASE VALUE
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 future 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.
April 15, 2002
Page 2
VALUE METHODOLOGY
As the definition suggests, Base Value is determined from historic and future
value trends and is not influenced by current market conditions. It is often
determined as a function of the original cost of the aircraft, technical
characteristics of competing aircraft, and development of new models. BK
Associates has determined from analysis of historic data, a relationship between
aircraft age and its value as a percentage of original value for the average
aircraft. These data form the basis for base value and forecast value
determinations but must be adjusted to reflect the value of engine and gross
weight options and other features of the aircraft.
LIMITING CONDITIONS AND ASSUMPTIONS
BK has neither inspected the Aircraft nor their maintenance records but relied
upon information supplied by Delta Air Lines and from BK's own database.
In determining the base value of an aircraft, the following assumptions apply
to the aircraft:
1. Each aircraft has half-time remaining to its next major overhaul or
scheduled shop visit on its airframe, engines, landing gear and
auxiliary power unit. (Unless is a new delivery.)
2. The aircraft is in compliance under a Federal Aviation Administration
approved airline maintenance program, with all airworthiness
directives, mandatory modifications and applicable service bulletins
currently up to industry standard.
3. The interior of the aircraft is in a standard configuration for its
specific type, with the buyer furnished equipment and options of the
types and models generally accepted and utilized in the industry.
4. The aircraft is in current flight operations.
5. The aircraft is sold for cash without seller financing.
6. The aircraft is in average or better condition.
7. There is no accident damage.
CONCLUSIONS
Our base value opinion stated herein is given after consideration of the
significant event of terrorism that occurred within the United States on
September 11, 2001. During the ensuing days since that event, we have begun to
see how our industry has been adversely
April 15, 2002
Page 3
affected. Passenger demand for air travel has dropped dramatically causing
airlines to reduce flight schedules and ground significant quantities of their
fleets. In response to this initial industry reaction, BK Associates has
selectively reduced our opinion of aircraft current fair market values. Today,
we are unsure of the long-term effect on aircraft values and will continue to
review the industry status. Since our base values, as provided in this appraisal
letter, are derived from historical value trends and are not immediately
influenced by current supply and demand issues, we have not affected base values
at this time.
Based on the above methodology, considerations and assumptions, it is our
opinion that the current base value of each aircraft as of today is as shown in
Figure 1 attached hereto.
BK Associates, Inc. has no present or contemplated future interest in the
Aircraft, nor any interest that would preclude our making a fair and unbiased
estimate. This appraisal represents the opinion of BK Associates, Inc. and
reflects our best judgment based on the information available to us at the time
of preparation and the time and budget constraints imposed by the client. It is
not given as a recommendation, or as an inducement, for any financial
transaction and further, BK Associates, Inc. assumes no responsibility or legal
liability for any action taken or not taken by the addressee, or any other
party, with regard to the appraised equipment. By accepting this appraisal, the
addressee agrees that BK Associates, Inc. shall bear no such responsibility or
legal liability. This appraisal is prepared for the use of the addressee and
shall not be provided to other parties without the express consent of the
addressee.
Sincerely yours,
BK ASSOCIATES, INC.
/s/ R. L. Britton
R. L. Britton
Vice President
ISTAT Senior Certified Appraiser
RLB/kf
Attachment
DELTA AIRLINES
SERIES 2002 - 1
EETC PORTFOLIO
BASE
ACFT SERIAL MFG. MTOW VALUE
ITEM TYPE NUMBER DATE ENGINE* LBS. ($MIL)
---- -------- ------ ---------- ----------- ------- -------
1 B737-800 29620 10/26/1998 CFM 56-7B26 157,200 38.35
2 B737-800 29621 10/27/1998 CFM 56-7B26 157,200 38.35
3 B737-800 29622 11/4/1998 CFM 56-7B26 157,200 38.40
4 B737-800 29623 11/30/1998 CFM 56-7B26 157,200 38.40
5 B737-800 30378 8/18/2000 CFM 56-7B26 157,200 40.20
6 B737-800 30537 8/24/2000 CFM 56-7B26 157,200 40.20
7 B737-800 30774 8/24/2000 CFM 56-7B26 157,200 40.20
8 B737-800 30379 9/19/2000 CFM 56-7B26 157,200 40.30
9 B737-800 30538 9/22/2000 CFM 56-7B26 157,200 40.30
10 B737-800 30821 12/18/2001 CFM 56-7B26 157,200 41.30
11 B737-800 30819 12/21/2001 CFM 56-7B26 157,200 41.30
12 B737-800 30818 12/22/2001 CFM 56-7B26 157,200 41.30
13 B737-800 30820 12/22/2001 CFM 56-7B26 157,200 41.30
14 B737-800 29630 1/24/2002 CFM 56-7B26 157,200 41.30
15 B737-800 30822 1/31/2002 CFM 56-7B26 157,200 41.30
16 B737-800 29631 2/25/2002 CFM 56-7B26 157,200 41.40
17 B737-800 29632 4/4/2002 CFM 56-7B26 157,200 41.40
18 B757-200 30839 4/12/2001 PW2037 232,000 54.75
19 B767-300ER 27961 5/3/1995 PW4060 407,000 63.60
20 B767-300ER 27962 7/7/1995 PW4060 407,000 63.85
21 B767-300ER 27582 6/19/1996 PW4060 407,000 66.90
22 B767-300ER 27583 10/17/1996 PW4060 407,000 68.00
23 B767-300ER 25990 2/13/1997 PW4060 407,000 69.10
24 B767-300ER 28447 3/25/1997 PW4060 407,000 69.35
25 B767-300ER 28448 4/9/1997 PW4060 407,000 69.65
26 B767-300ER 28449 6/26/1997 PW4060 407,000 70.20
27 B767-400ER 29699 8/11/2000 CF6-80C2B8F 400,000 88.10
28 B767-400ER 29700 8/22/2000 CF6-80C2B8F 400,000 88.10
29 B767-400ER 29701 9/13/2000 CF6-80C2B8F 400,000 88.25
30 B767-400ER 29702 9/20/2000 CF6-80C2B8F 400,000 88.25
31 B767-400ER 29704 9/26/2000 CF6-80C2B8F 400,000 88.25
32 B767-400ER 29706 10/13/2000 CF6-80C2B8F 400,000 88.45
TOTALS 1810.10
* Note the B737-800 aircraft are listed with CFM56-7B26 engines. However, BK
Associates has been informed the engines installed are CFM56-7B26 engines
purchased with an operating limit to CFM56-7B24 status. With this limit, BK
Associates has valued the aircraft as though they are powered by the CFM56-7B24
engines.
APPENDIX III: EQUIPMENT NOTE PRINCIPAL PAYMENTS
III-1
APPENDIX III: EQUIPMENT NOTE PRINCIPAL PAYMENTS
SERIES G-1 EQUIPMENT NOTES
----------------------------------------------------------------------------------------------------------------------------
REGULAR B737-832 B737-832 B737-832 B737-832 B737-832 B737-832
DISTRIBUTION DATES (N372DA) (N373DA) (N374DA) (N375DA) (N396DA) (N397DA)
----------------------------------------------------------------------------------------------------------------------------
January 2, 2003.................... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 687,420.00 $ 687,420.00
July 2, 2003....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2004.................... 655,785.00 655,785.00 636,112.24 636,112.24 687,420.00 687,420.00
July 2, 2004....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2005.................... 655,785.00 655,785.00 656,640.00 656,640.00 687,420.00 687,420.00
July 2, 2005....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2006.................... 655,785.00 655,785.00 656,640.00 656,640.00 687,420.00 687,420.00
July 2, 2006....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2007.................... 655,785.00 655,785.00 656,640.00 656,640.00 687,420.00 687,420.00
July 2, 2007....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2008.................... 655,785.00 655,785.00 656,640.00 656,640.00 687,420.00 687,420.00
July 2, 2008....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2009.................... 655,785.00 655,785.00 656,640.00 656,640.00 687,420.00 687,420.00
July 2, 2009....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2010.................... 655,785.00 655,785.00 656,640.00 656,640.00 687,420.00 687,420.00
July 2, 2010....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2011.................... 655,785.00 655,785.00 656,640.00 656,640.00 687,420.00 687,420.00
July 2, 2011....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2012.................... 655,785.00 655,785.00 656,640.00 656,640.00 687,420.00 687,420.00
July 2, 2012....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2013.................... 609,765.00 609,765.00 610,560.00 610,560.00 639,180.00 639,180.00
July 2, 2013....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2014.................... 609,765.00 609,765.00 610,560.00 610,560.00 639,180.00 639,180.00
July 2, 2014....................... 245,440.00 245,440.00 245,760.00 245,760.00 257,280.00 257,280.00
January 2, 2015.................... 598,260.00 598,260.00 599,040.00 599,040.00 627,120.00 627,120.00
July 2, 2015....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2016.................... 598,260.00 598,260.00 599,040.00 599,040.00 627,120.00 627,120.00
July 2, 2016....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2017.................... 598,260.00 598,260.00 599,040.00 599,040.00 627,120.00 627,120.00
July 2, 2017....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2018.................... 598,260.00 598,260.00 599,040.00 599,040.00 627,120.00 627,120.00
July 2, 2018....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2019.................... 2,589,365.48 2,589,365.48 3,050,297.72 3,050,297.72 627,120.00 627,120.00
July 2, 2019....................... 636,458.31 636,458.31 188,874.70 188,874.70 0.00 0.00
January 2, 2020.................... 2,201,881.13 2,201,881.13 2,201,928.38 2,201,928.38 627,120.00 627,120.00
July 2, 2020....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2021.................... 2,485,869.22 2,485,869.22 2,485,919.76 2,485,919.76 4,526,426.63 4,526,426.63
July 2, 2021....................... 0.00 0.00 0.00 0.00 2,029,150.12 2,029,150.12
January 2, 2022.................... 2,456,265.87 2,456,265.87 2,456,339.44 2,456,339.44 2,598,308.22 2,598,308.22
July 2, 2022....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2023.................... 0.00 0.00 0.00 0.00 461,955.03 461,955.03
----------------------------------------------------------------------------------------------------------------------------
----------------------------------- ------------------------------------------
REGULAR B737-832 B737-832 B737-832
DISTRIBUTION DATES (N398DA) (N399DA) (N3730B)
----------------------------------- ------------------------------------------
January 2, 2003.................... $ 687,420.00 $ 689,130.00 $ 689,130.00
July 2, 2003....................... 0.00 0.00 0.00
January 2, 2004.................... 687,420.00 689,130.00 689,130.00
July 2, 2004....................... 0.00 0.00 0.00
January 2, 2005.................... 687,420.00 689,130.00 689,130.00
July 2, 2005....................... 0.00 0.00 0.00
January 2, 2006.................... 687,420.00 689,130.00 689,130.00
July 2, 2006....................... 0.00 0.00 0.00
January 2, 2007.................... 687,420.00 689,130.00 689,130.00
July 2, 2007....................... 0.00 0.00 0.00
January 2, 2008.................... 687,420.00 689,130.00 689,130.00
July 2, 2008....................... 0.00 0.00 0.00
January 2, 2009.................... 687,420.00 689,130.00 689,130.00
July 2, 2009....................... 0.00 0.00 0.00
January 2, 2010.................... 687,420.00 689,130.00 689,130.00
July 2, 2010....................... 0.00 0.00 0.00
January 2, 2011.................... 687,420.00 689,130.00 689,130.00
July 2, 2011....................... 0.00 0.00 0.00
January 2, 2012.................... 687,420.00 689,130.00 689,130.00
July 2, 2012....................... 0.00 0.00 0.00
January 2, 2013.................... 639,180.00 640,770.00 640,770.00
July 2, 2013....................... 0.00 0.00 0.00
January 2, 2014.................... 639,180.00 640,770.00 640,770.00
July 2, 2014....................... 257,280.00 257,920.00 257,920.00
January 2, 2015.................... 627,120.00 628,680.00 628,680.00
July 2, 2015....................... 0.00 0.00 0.00
January 2, 2016.................... 627,120.00 628,680.00 628,680.00
July 2, 2016....................... 0.00 0.00 0.00
January 2, 2017.................... 627,120.00 628,680.00 628,680.00
July 2, 2017....................... 0.00 0.00 0.00
January 2, 2018.................... 627,120.00 628,680.00 628,680.00
July 2, 2018....................... 0.00 0.00 0.00
January 2, 2019.................... 627,120.00 628,680.00 628,680.00
July 2, 2019....................... 0.00 0.00 0.00
January 2, 2020.................... 627,120.00 628,680.00 628,680.00
July 2, 2020....................... 0.00 0.00 0.00
January 2, 2021.................... 4,526,426.63 4,533,328.52 4,533,328.52
July 2, 2021....................... 2,029,150.12 2,042,478.54 2,042,478.54
January 2, 2022.................... 2,598,308.22 2,601,066.26 2,601,066.26
July 2, 2022....................... 0.00 0.00 0.00
January 2, 2023.................... 461,955.03 462,886.68 462,886.68
--------------------------------------------------------------------------------------------
III-2
APPENDIX III: EQUIPMENT NOTE PRINCIPAL PAYMENTS
SERIES G-1 EQUIPMENT NOTES
----------------------------------------------------------------------------------------------------------------------------------
REGULAR B737-832 B737-832 B737-832 B737-832 B737-832 B737-832
DISTRIBUTION DATES (N3764D) (N3765) (N3766) (N3767) (N3768) (N3769L)
----------------------------------------------------------------------------------------------------------------------------------
January 2, 2003.................... $ 706,230.00 $ 706,230.00 $ 706,230.00 $ 706,230.00 $ 706,230.00 $ 706,230.00
July 2, 2003....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2004.................... 706,230.00 706,230.00 706,230.00 706,230.00 706,230.00 706,230.00
July 2, 2004....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2005.................... 706,230.00 706,230.00 706,230.00 706,230.00 706,230.00 706,230.00
July 2, 2005....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2006.................... 706,230.00 706,230.00 706,230.00 706,230.00 706,230.00 706,230.00
July 2, 2006....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2007.................... 706,230.00 706,230.00 706,230.00 706,230.00 706,230.00 706,230.00
July 2, 2007....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2008.................... 706,230.00 706,230.00 706,230.00 706,230.00 706,230.00 706,230.00
July 2, 2008....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2009.................... 706,230.00 706,230.00 706,230.00 706,230.00 706,230.00 706,230.00
July 2, 2009....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2010.................... 706,230.00 706,230.00 706,230.00 706,230.00 706,230.00 706,230.00
July 2, 2010....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2011.................... 706,230.00 706,230.00 706,230.00 706,230.00 706,230.00 706,230.00
July 2, 2011....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2012.................... 706,230.00 706,230.00 706,230.00 706,230.00 706,230.00 706,230.00
July 2, 2012....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2013.................... 656,670.00 656,670.00 656,670.00 656,670.00 656,670.00 656,670.00
July 2, 2013....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2014.................... 656,670.00 656,670.00 656,670.00 656,670.00 656,670.00 656,670.00
July 2, 2014....................... 264,320.00 264,320.00 264,320.00 264,320.00 264,320.00 264,320.00
January 2, 2015.................... 644,280.00 644,280.00 644,280.00 644,280.00 644,280.00 644,280.00
July 2, 2015....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2016.................... 644,280.00 644,280.00 644,280.00 644,280.00 644,280.00 644,280.00
July 2, 2016....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2017.................... 644,280.00 644,280.00 644,280.00 644,280.00 644,280.00 644,280.00
July 2, 2017....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2018.................... 644,280.00 644,280.00 644,280.00 644,280.00 644,280.00 644,280.00
July 2, 2018....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2019.................... 644,280.00 644,280.00 644,280.00 644,280.00 644,280.00 644,280.00
July 2, 2019....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2020.................... 644,280.00 644,280.00 644,280.00 644,280.00 644,280.00 644,280.00
July 2, 2020....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2021.................... 4,674,341.95 4,674,341.95 4,674,341.95 4,674,341.95 4,746,336.49 4,746,336.49
July 2, 2021....................... 2,038,959.71 2,038,959.71 2,038,959.71 2,038,959.71 1,902,156.74 1,902,156.74
January 2, 2022.................... 2,689,862.09 2,689,862.09 2,689,862.09 2,689,862.09 2,751,077.46 2,751,077.46
July 2, 2022....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2023.................... 475,796.25 475,796.25 475,796.25 475,796.25 479,389.31 479,389.31
----------------------------------- ---------------------------------------------
REGULAR B737-832 B737-832 B757-232
DISTRIBUTION DATES (N37700) (N3771K) (N67171)
----------------------------------- ---------------------------------------------
January 2, 2003.................... $ 707,940.00 $ 707,940.00 $1,256,607.40
July 2, 2003....................... 0.00 0.00 0.00
January 2, 2004.................... 707,940.00 707,940.00 1,126,320.00
July 2, 2004....................... 0.00 0.00 0.00
January 2, 2005.................... 707,940.00 707,940.00 1,126,320.00
July 2, 2005....................... 0.00 0.00 0.00
January 2, 2006.................... 707,940.00 707,940.00 1,126,320.00
July 2, 2006....................... 0.00 0.00 0.00
January 2, 2007.................... 707,940.00 707,940.00 1,126,320.00
July 2, 2007....................... 0.00 0.00 0.00
January 2, 2008.................... 707,940.00 707,940.00 1,126,320.00
July 2, 2008....................... 0.00 0.00 0.00
January 2, 2009.................... 707,940.00 707,940.00 1,126,320.00
July 2, 2009....................... 0.00 0.00 0.00
January 2, 2010.................... 707,940.00 707,940.00 1,126,320.00
July 2, 2010....................... 0.00 0.00 0.00
January 2, 2011.................... 707,940.00 707,940.00 1,126,320.00
July 2, 2011....................... 0.00 0.00 0.00
January 2, 2012.................... 707,940.00 707,940.00 1,128,675.41
July 2, 2012....................... 0.00 0.00 0.00
January 2, 2013.................... 658,260.00 658,260.00 0.00
July 2, 2013....................... 0.00 0.00 0.00
January 2, 2014.................... 658,260.00 658,260.00 0.00
July 2, 2014....................... 264,960.00 264,960.00 0.00
January 2, 2015.................... 645,840.00 645,840.00 0.00
July 2, 2015....................... 0.00 0.00 0.00
January 2, 2016.................... 645,840.00 645,840.00 0.00
July 2, 2016....................... 0.00 0.00 0.00
January 2, 2017.................... 645,840.00 645,840.00 0.00
July 2, 2017....................... 0.00 0.00 0.00
January 2, 2018.................... 645,840.00 645,840.00 0.00
July 2, 2018....................... 0.00 0.00 0.00
January 2, 2019.................... 645,840.00 645,840.00 0.00
July 2, 2019....................... 0.00 0.00 0.00
January 2, 2020.................... 645,840.00 645,840.00 0.00
July 2, 2020....................... 0.00 0.00 0.00
January 2, 2021.................... 4,753,238.38 4,753,238.38 0.00
July 2, 2021....................... 1,915,485.16 1,915,485.16 0.00
January 2, 2022.................... 2,753,835.51 2,753,835.51 0.00
July 2, 2022....................... 0.00 0.00 0.00
January 2, 2023.................... 480,320.96 480,320.96 0.00
III-3
APPENDIX III: EQUIPMENT NOTE PRINCIPAL PAYMENTS
SERIES G-1 EQUIPMENT NOTES
----------------------------------------------------------------------------------------------------------------------------------
REGULAR B767-332ER B767-332ER B767-332ER B767-332ER B767-332ER B767-332ER
DISTRIBUTION DATES (N185DN) (N186DN) (N187DN) (N188DN) (N189DN) (N190DN)
----------------------------------------------------------------------------------------------------------------------------------
January 2, 2003.................... $1,420,172.47 $1,420,172.47 $1,481,477.57 $1,481,477.57 $1,542,782.67 $1,542,782.67
July 2, 2003....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2004.................... 1,272,924.00 1,272,924.00 1,327,872.00 1,327,872.00 1,382,820.00 1,382,820.00
July 2, 2004....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2005.................... 1,272,924.00 1,272,924.00 1,327,872.00 1,327,872.00 1,382,820.00 1,382,820.00
July 2, 2005....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2006.................... 1,272,924.00 1,272,924.00 1,327,872.00 1,327,872.00 1,382,820.00 1,382,820.00
July 2, 2006....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2007.................... 1,272,924.00 1,272,924.00 1,327,872.00 1,327,872.00 1,382,820.00 1,382,820.00
July 2, 2007....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2008.................... 1,272,924.00 1,272,924.00 1,327,872.00 1,327,872.00 1,382,820.00 1,382,820.00
July 2, 2008....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2009.................... 1,272,924.00 1,272,924.00 1,327,872.00 1,327,872.00 1,382,820.00 1,382,820.00
July 2, 2009....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2010.................... 1,272,924.00 1,272,924.00 1,327,872.00 1,327,872.00 1,382,820.00 1,382,820.00
July 2, 2010....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2011.................... 1,272,924.00 1,272,924.00 1,327,872.00 1,327,872.00 1,382,820.00 1,382,820.00
July 2, 2011....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2012.................... 1,275,590.70 1,275,590.74 1,330,654.05 1,330,654.05 1,385,717.35 1,385,717.35
July 2, 2012....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2013.................... 0.00 0.00 0.00 0.00 0.00 0.00
July 2, 2013....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2014.................... 0.00 0.00 0.00 0.00 0.00 0.00
July 2, 2014....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2015.................... 0.00 0.00 0.00 0.00 0.00 0.00
July 2, 2015....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2016.................... 0.00 0.00 0.00 0.00 0.00 0.00
July 2, 2016....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2017.................... 0.00 0.00 0.00 0.00 0.00 0.00
July 2, 2017....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2018.................... 0.00 0.00 0.00 0.00 0.00 0.00
July 2, 2018....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2019.................... 0.00 0.00 0.00 0.00 0.00 0.00
July 2, 2019....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2020.................... 0.00 0.00 0.00 0.00 0.00 0.00
July 2, 2020....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2021.................... 0.00 0.00 0.00 0.00 0.00 0.00
July 2, 2021....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2022.................... 0.00 0.00 0.00 0.00 0.00 0.00
July 2, 2022....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2023.................... 0.00 0.00 0.00 0.00 0.00 0.00
----------------------------------------------------------------------------------------------------------------------------------
----------------------------------- ---------------------------------------------
REGULAR B767-332ER B767-332ER B767-432ER
DISTRIBUTION DATES (N191DN) (N192DN) (N828MH)
----------------------------------- ---------------------------------------------
January 2, 2003.................... $1,542,782.67 $1,542,782.67 $1,826,898.97
July 2, 2003....................... 0.00 0.00 0.00
January 2, 2004.................... 1,382,820.00 1,382,820.00 1,618,822.80
July 2, 2004....................... 0.00 0.00 0.00
January 2, 2005.................... 1,382,820.00 1,382,820.00 1,618,822.80
July 2, 2005....................... 0.00 0.00 0.00
January 2, 2006.................... 1,382,820.00 1,382,820.00 1,618,822.80
July 2, 2006....................... 0.00 0.00 0.00
January 2, 2007.................... 1,382,820.00 1,382,820.00 1,618,822.80
July 2, 2007....................... 0.00 0.00 0.00
January 2, 2008.................... 1,382,820.00 1,382,820.00 1,618,822.80
July 2, 2008....................... 0.00 0.00 0.00
January 2, 2009.................... 1,382,820.00 1,382,820.00 1,618,822.80
July 2, 2009....................... 0.00 0.00 0.00
January 2, 2010.................... 1,382,820.00 1,382,820.00 1,618,822.80
July 2, 2010....................... 0.00 0.00 0.00
January 2, 2011.................... 1,382,820.00 1,382,820.00 1,618,822.80
July 2, 2011....................... 0.00 0.00 0.00
January 2, 2012.................... 1,385,717.35 1,385,717.35 1,622,343.40
July 2, 2012....................... 0.00 0.00 0.00
January 2, 2013.................... 0.00 0.00 0.00
July 2, 2013....................... 0.00 0.00 0.00
January 2, 2014.................... 0.00 0.00 0.00
July 2, 2014....................... 0.00 0.00 0.00
January 2, 2015.................... 0.00 0.00 0.00
July 2, 2015....................... 0.00 0.00 0.00
January 2, 2016.................... 0.00 0.00 0.00
July 2, 2016....................... 0.00 0.00 0.00
January 2, 2017.................... 0.00 0.00 0.00
July 2, 2017....................... 0.00 0.00 0.00
January 2, 2018.................... 0.00 0.00 0.00
July 2, 2018....................... 0.00 0.00 0.00
January 2, 2019.................... 0.00 0.00 0.00
July 2, 2019....................... 0.00 0.00 0.00
January 2, 2020.................... 0.00 0.00 0.00
July 2, 2020....................... 0.00 0.00 0.00
January 2, 2021.................... 0.00 0.00 0.00
July 2, 2021....................... 0.00 0.00 0.00
January 2, 2022.................... 0.00 0.00 0.00
July 2, 2022....................... 0.00 0.00 0.00
January 2, 2023.................... 0.00 0.00 0.00
----------------------------------------------------------------------------------------------------------
III-4
APPENDIX III: EQUIPMENT NOTE PRINCIPAL PAYMENTS
SERIES G-1 EQUIPMENT NOTES
----------------------------------------------------------------------------------------------------------------------------------
REGULAR B767-432ER B767-432ER B767-432ER B767-432ER B767-432ER
DISTRIBUTION DATES (N829MH) (N830MH) (N831MH) (N832MH) (N833MH)
----------------------------------------------------------------------------------------------------------------------------------
January 2, 2003.................... $1,826,898.97 $1,834,309.47 $1,834,309.47 $1,834,309.47 $1,883,006.99
July 2, 2003....................... 0.00 0.00 0.00 0.00 0.00
January 2, 2004.................... 1,618,822.80 1,625,389.20 1,625,389.20 1,625,389.20 1,632,160.80
July 2, 2004....................... 0.00 0.00 0.00 0.00 0.00
January 2, 2005.................... 1,618,822.80 1,625,389.20 1,625,389.20 1,625,389.20 1,632,160.80
July 2, 2005....................... 0.00 0.00 0.00 0.00 0.00
January 2, 2006.................... 1,618,822.80 1,625,389.20 1,625,389.20 1,625,389.20 1,632,160.80
July 2, 2006....................... 0.00 0.00 0.00 0.00 0.00
January 2, 2007.................... 1,618,822.80 1,625,389.20 1,625,389.20 1,625,389.20 1,632,160.80
July 2, 2007....................... 0.00 0.00 0.00 0.00 0.00
January 2, 2008.................... 1,618,822.80 1,625,389.20 1,625,389.20 1,625,389.20 1,632,160.80
July 2, 2008....................... 0.00 0.00 0.00 0.00 0.00
January 2, 2009.................... 1,618,822.80 1,625,389.20 1,625,389.20 1,625,389.20 1,632,160.80
July 2, 2009....................... 0.00 0.00 0.00 0.00 0.00
January 2, 2010.................... 1,618,822.80 1,625,389.20 1,625,389.20 1,625,389.20 1,632,160.80
July 2, 2010....................... 0.00 0.00 0.00 0.00 0.00
January 2, 2011.................... 1,618,822.80 1,625,389.20 1,625,389.20 1,625,389.20 1,632,160.80
July 2, 2011....................... 0.00 0.00 0.00 0.00 0.00
January 2, 2012.................... 1,623,581.01 1,630,166.72 1,630,166.72 1,630,166.72 1,595,747.04
July 2, 2012....................... 0.00 0.00 0.00 0.00 0.00
January 2, 2013.................... 0.00 0.00 0.00 0.00 0.00
July 2, 2013....................... 0.00 0.00 0.00 0.00 0.00
January 2, 2014.................... 0.00 0.00 0.00 0.00 0.00
July 2, 2014....................... 0.00 0.00 0.00 0.00 0.00
January 2, 2015.................... 0.00 0.00 0.00 0.00 0.00
July 2, 2015....................... 0.00 0.00 0.00 0.00 0.00
January 2, 2016.................... 0.00 0.00 0.00 0.00 0.00
July 2, 2016....................... 0.00 0.00 0.00 0.00 0.00
January 2, 2017.................... 0.00 0.00 0.00 0.00 0.00
July 2, 2017....................... 0.00 0.00 0.00 0.00 0.00
January 2, 2018.................... 0.00 0.00 0.00 0.00 0.00
July 2, 2018....................... 0.00 0.00 0.00 0.00 0.00
January 2, 2019.................... 0.00 0.00 0.00 0.00 0.00
July 2, 2019....................... 0.00 0.00 0.00 0.00 0.00
January 2, 2020.................... 0.00 0.00 0.00 0.00 0.00
July 2, 2020....................... 0.00 0.00 0.00 0.00 0.00
January 2, 2021.................... 0.00 0.00 0.00 0.00 0.00
July 2, 2021....................... 0.00 0.00 0.00 0.00 0.00
January 2, 2022.................... 0.00 0.00 0.00 0.00 0.00
July 2, 2022....................... 0.00 0.00 0.00 0.00 0.00
January 2, 2023.................... 0.00 0.00 0.00 0.00 0.00
----------------------------------------------------------------------------------------------------------------------------------
III-5
APPENDIX III: EQUIPMENT NOTE PRINCIPAL PAYMENTS
SERIES G-2 EQUIPMENT NOTES
----------------------------------------------------------------------------------------------------------------------------
REGULAR B737-832 B737-832 B737-832 B737-832 B737-832 B737-832
DISTRIBUTION DATES (N372DA) (N373DA) (N374DA) (N375DA) (N396DA) (N397DA)
----------------------------------------------------------------------------------------------------------------------------
January 2, 2003.................... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
July 2, 2003....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2004.................... 0.00 0.00 0.00 0.00 0.00 0.00
July 2, 2004....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2005.................... 0.00 0.00 0.00 0.00 0.00 0.00
July 2, 2005....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2006.................... 0.00 0.00 0.00 0.00 0.00 0.00
July 2, 2006....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2007.................... 0.00 0.00 0.00 0.00 0.00 0.00
July 2, 2007....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2008.................... 0.00 0.00 0.00 0.00 0.00 0.00
July 2, 2008....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2009.................... 0.00 0.00 0.00 0.00 0.00 0.00
July 2, 2009....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2010.................... 0.00 0.00 0.00 0.00 0.00 0.00
July 2, 2010....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2011.................... 0.00 0.00 0.00 0.00 0.00 0.00
July 2, 2011....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2012.................... 0.00 0.00 0.00 0.00 0.00 0.00
July 2, 2012....................... 1,073,800.00 1,073,800.00 1,075,200.00 1,075,200.00 1,125,600.00 1,125,600.00
----------------------------------------------------------------------------------------------------------------------------
----------------------------------- -------------------------------------------
REGULAR B737-832 B737-832 B737-832
DISTRIBUTION DATES (N398DA) (N399DA) (N3730B)
----------------------------------- -------------------------------------------
January 2, 2003.................... $ 0.00 $ 0.00 $ 0.00
July 2, 2003....................... 0.00 0.00 0.00
January 2, 2004.................... 0.00 0.00 0.00
July 2, 2004....................... 0.00 0.00 0.00
January 2, 2005.................... 0.00 0.00 0.00
July 2, 2005....................... 0.00 0.00 0.00
January 2, 2006.................... 0.00 0.00 0.00
July 2, 2006....................... 0.00 0.00 0.00
January 2, 2007.................... 0.00 0.00 0.00
July 2, 2007....................... 0.00 0.00 0.00
January 2, 2008.................... 0.00 0.00 0.00
July 2, 2008....................... 0.00 0.00 0.00
January 2, 2009.................... 0.00 0.00 0.00
July 2, 2009....................... 0.00 0.00 0.00
January 2, 2010.................... 0.00 0.00 0.00
July 2, 2010....................... 0.00 0.00 0.00
January 2, 2011.................... 0.00 0.00 0.00
July 2, 2011....................... 0.00 0.00 0.00
January 2, 2012.................... 0.00 0.00 0.00
July 2, 2012....................... 1,125,600.00 1,128,400.00 1,128,400.00
----------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------
REGULAR B737-832 B737-832 B737-832 B737-832 B737-832 B737-832
DISTRIBUTION DATES (N3764D) (N3765) (N3766) (N3767) (N3768) (N3769L)
----------------------------------------------------------------------------------------------------------------------------
January 2, 2003.................... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
July 2, 2003....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2004.................... 0.00 0.00 0.00 0.00 0.00 0.00
July 2, 2004....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2005.................... 0.00 0.00 0.00 0.00 0.00 0.00
July 2, 2005....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2006.................... 0.00 0.00 0.00 0.00 0.00 0.00
July 2, 2006....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2007.................... 0.00 0.00 0.00 0.00 0.00 0.00
July 2, 2007....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2008.................... 0.00 0.00 0.00 0.00 0.00 0.00
July 2, 2008....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2009.................... 0.00 0.00 0.00 0.00 0.00 0.00
July 2, 2009....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2010.................... 0.00 0.00 0.00 0.00 0.00 0.00
July 2, 2010....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2011.................... 0.00 0.00 0.00 0.00 0.00 0.00
July 2, 2011....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2012.................... 0.00 0.00 0.00 0.00 0.00 0.00
July 2, 2012....................... 1,156,400.00 1,156,400.00 1,156,400.00 1,156,400.00 1,156,400.00 1,156,400.00
----------------------------------------------------------------------------------------------------------------------------
----------------------------------- -------------------------------------------
REGULAR B737-832 B737-832 B757-232
DISTRIBUTION DATES (N37700) (N3771K) (N67171)
----------------------------------- -------------------------------------------
January 2, 2003.................... $ 0.00 $ 0.00 $ 0.00
July 2, 2003....................... 0.00 0.00 0.00
January 2, 2004.................... 0.00 0.00 0.00
July 2, 2004....................... 0.00 0.00 0.00
January 2, 2005.................... 0.00 0.00 0.00
July 2, 2005....................... 0.00 0.00 0.00
January 2, 2006.................... 0.00 0.00 0.00
July 2, 2006....................... 0.00 0.00 0.00
January 2, 2007.................... 0.00 0.00 0.00
July 2, 2007....................... 0.00 0.00 0.00
January 2, 2008.................... 0.00 0.00 0.00
July 2, 2008....................... 0.00 0.00 0.00
January 2, 2009.................... 0.00 0.00 0.00
July 2, 2009....................... 0.00 0.00 0.00
January 2, 2010.................... 0.00 0.00 0.00
July 2, 2010....................... 0.00 0.00 0.00
January 2, 2011.................... 0.00 0.00 0.00
July 2, 2011....................... 0.00 0.00 0.00
January 2, 2012.................... 0.00 0.00 0.00
July 2, 2012....................... 1,159,200.00 1,159,200.00 16,892,444.59
----------------------------------------------------------------------------------------------------------------------------
III-6
APPENDIX III: EQUIPMENT NOTE PRINCIPAL PAYMENTS
SERIES G-2 EQUIPMENT NOTES
----------------------------------------------------------------------------------------------------------------------------------
REGULAR B767-332ER B767-332ER B767-332ER B767-332ER B767-332ER B767-332ER
DISTRIBUTION DATES (N185DN) (N186DN) (N187DN) (N188DN) (N189DN) (N190DN)
----------------------------------------------------------------------------------------------------------------------------------
January 2, 2003.................... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
July 2, 2003....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2004.................... 0.00 0.00 0.00 0.00 0.00 0.00
July 2, 2004....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2005.................... 0.00 0.00 0.00 0.00 0.00 0.00
July 2, 2005....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2006.................... 0.00 0.00 0.00 0.00 0.00 0.00
July 2, 2006....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2007.................... 0.00 0.00 0.00 0.00 0.00 0.00
July 2, 2007....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2008.................... 0.00 0.00 0.00 0.00 0.00 0.00
July 2, 2008....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2009.................... 0.00 0.00 0.00 0.00 0.00 0.00
July 2, 2009....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2010.................... 0.00 0.00 0.00 0.00 0.00 0.00
July 2, 2010....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2011.................... 0.00 0.00 0.00 0.00 0.00 0.00
July 2, 2011....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2012.................... 0.00 0.00 0.00 0.00 0.00 0.00
July 2, 2012....................... 19,091,193.30 19,091,193.26 19,915,297.95 19,915,297.95 20,739,402.65 20,739,402.65
----------------------------------------------------------------------------------------------------------------------------------
----------------------------------- ---------------------------------------------
REGULAR B767-332ER B767-332ER B767-432ER
DISTRIBUTION DATES (N191DN) (N192DN) (N828MH)
----------------------------------- ---------------------------------------------
January 2, 2003.................... $ 0.00 $ 0.00 $ 0.00
July 2, 2003....................... 0.00 0.00 0.00
January 2, 2004.................... 0.00 0.00 0.00
July 2, 2004....................... 0.00 0.00 0.00
January 2, 2005.................... 0.00 0.00 0.00
July 2, 2005....................... 0.00 0.00 0.00
January 2, 2006.................... 0.00 0.00 0.00
July 2, 2006....................... 0.00 0.00 0.00
January 2, 2007.................... 0.00 0.00 0.00
July 2, 2007....................... 0.00 0.00 0.00
January 2, 2008.................... 0.00 0.00 0.00
July 2, 2008....................... 0.00 0.00 0.00
January 2, 2009.................... 0.00 0.00 0.00
July 2, 2009....................... 0.00 0.00 0.00
January 2, 2010.................... 0.00 0.00 0.00
July 2, 2010....................... 0.00 0.00 0.00
January 2, 2011.................... 0.00 0.00 0.00
July 2, 2011....................... 0.00 0.00 0.00
January 2, 2012.................... 0.00 0.00 0.00
July 2, 2012....................... 20,739,402.65 20,739,402.65 28,775,551.40
----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
REGULAR B767-432ER B767-432ER B767-432ER B767-432ER B767-432ER
DISTRIBUTION DATES (N829MH) (N830MH) (N831MH) (N832MH) (N833MH)
----------------------------------------------------------------------------------------------------------------------------------
January 2, 2003.................... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
July 2, 2003....................... 0.00 0.00 0.00 0.00 0.00
January 2, 2004.................... 0.00 0.00 0.00 0.00 0.00
July 2, 2004....................... 0.00 0.00 0.00 0.00 0.00
January 2, 2005.................... 0.00 0.00 0.00 0.00 0.00
July 2, 2005....................... 0.00 0.00 0.00 0.00 0.00
January 2, 2006.................... 0.00 0.00 0.00 0.00 0.00
July 2, 2006....................... 0.00 0.00 0.00 0.00 0.00
January 2, 2007.................... 0.00 0.00 0.00 0.00 0.00
July 2, 2007....................... 0.00 0.00 0.00 0.00 0.00
January 2, 2008.................... 0.00 0.00 0.00 0.00 0.00
July 2, 2008....................... 0.00 0.00 0.00 0.00 0.00
January 2, 2009.................... 0.00 0.00 0.00 0.00 0.00
July 2, 2009....................... 0.00 0.00 0.00 0.00 0.00
January 2, 2010.................... 0.00 0.00 0.00 0.00 0.00
July 2, 2010....................... 0.00 0.00 0.00 0.00 0.00
January 2, 2011.................... 0.00 0.00 0.00 0.00 0.00
July 2, 2011....................... 0.00 0.00 0.00 0.00 0.00
January 2, 2012.................... 0.00 0.00 0.00 0.00 0.00
July 2, 2012....................... 28,774,313.79 28,891,030.48 28,891,030.48 28,891,030.48 29,052,605.76
III-7
APPENDIX III: EQUIPMENT NOTE PRINCIPAL PAYMENTS
SERIES C EQUIPMENT NOTES
----------------------------------------------------------------------------------------------------------------------------------
REGULAR B737-832 B737-832 B737-832 B737-832 B737-832 B737-832
DISTRIBUTION DATES (N372DA) (N373DA) (N374DA) (N375DA) (N396DA) (N397DA)
----------------------------------------------------------------------------------------------------------------------------------
January 2, 2003.................... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 144,720.00 $ 144,720.00
July 2, 2003....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2004.................... 120,249.01 120,249.01 105,739.69 105,739.69 144,720.00 144,720.00
July 2, 2004....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2005.................... 138,060.00 138,060.00 138,240.00 138,240.00 144,720.00 144,720.00
July 2, 2005....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2006.................... 138,060.00 138,060.00 138,240.00 138,240.00 144,720.00 144,720.00
July 2, 2006....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2007.................... 138,060.00 138,060.00 138,240.00 138,240.00 144,720.00 144,720.00
July 2, 2007....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2008.................... 138,060.00 138,060.00 138,240.00 138,240.00 144,720.00 144,720.00
July 2, 2008....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2009.................... 138,060.00 138,060.00 138,240.00 138,240.00 144,720.00 144,720.00
July 2, 2009....................... 2,215,978.07 2,215,978.07 2,361,654.12 2,361,654.12 955,730.75 955,730.75
January 2, 2010.................... 508,005.56 508,005.56 372,625.24 372,625.24 1,653,257.67 1,653,257.67
July 2, 2010....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2011.................... 911,596.37 911,596.37 906,040.64 906,040.64 1,116,717.79 1,116,717.79
July 2, 2011....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2012.................... 0.00 0.00 0.00 0.00 85,253.79 85,253.79
----------------------------------------------------------------------------------------------------------------------------------
----------------------------------- ---------------------------------------------
REGULAR B737-832 B737-832 B737-832
DISTRIBUTION DATES (N398DA) (N399DA) (N3730B)
----------------------------------- ---------------------------------------------
January 2, 2003.................... $ 144,720.00 $ 145,080.00 $ 145,080.00
July 2, 2003....................... 0.00 0.00 0.00
January 2, 2004.................... 144,720.00 145,080.00 145,080.00
July 2, 2004....................... 0.00 0.00 0.00
January 2, 2005.................... 144,720.00 145,080.00 145,080.00
July 2, 2005....................... 0.00 0.00 0.00
January 2, 2006.................... 144,720.00 145,080.00 145,080.00
July 2, 2006....................... 0.00 0.00 0.00
January 2, 2007.................... 144,720.00 145,080.00 145,080.00
July 2, 2007....................... 0.00 0.00 0.00
January 2, 2008.................... 144,720.00 145,080.00 145,080.00
July 2, 2008....................... 0.00 0.00 0.00
January 2, 2009.................... 144,720.00 145,080.00 145,080.00
July 2, 2009....................... 955,730.75 932,572.40 932,572.40
January 2, 2010.................... 1,653,257.67 1,691,305.96 1,691,305.96
July 2, 2010....................... 0.00 0.00 0.00
January 2, 2011.................... 1,116,717.79 1,115,463.73 1,115,463.73
July 2, 2011....................... 0.00 0.00 0.00
January 2, 2012.................... 85,253.79 81,097.90 81,097.90
----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
REGULAR B737-832 B737-832 B737-832 B737-832 B737-832 B737-832
DISTRIBUTION DATES (N3764D) (N3765) (N3766) (N3767) (N3768) (N3769L)
----------------------------------------------------------------------------------------------------------------------------------
January 2, 2003.................... $ 148,680.00 $ 148,680.00 $ 148,680.00 $ 148,680.00 $ 148,680.00 $ 148,680.00
July 2, 2003....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2004.................... 148,680.00 148,680.00 148,680.00 148,680.00 148,680.00 148,680.00
July 2, 2004....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2005.................... 148,680.00 148,680.00 148,680.00 148,680.00 148,680.00 148,680.00
July 2, 2005....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2006.................... 148,680.00 148,680.00 148,680.00 148,680.00 148,680.00 148,680.00
July 2, 2006....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2007.................... 148,680.00 148,680.00 148,680.00 148,680.00 148,680.00 148,680.00
July 2, 2007....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2008.................... 148,680.00 148,680.00 148,680.00 148,680.00 148,680.00 148,680.00
July 2, 2008....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2009.................... 148,680.00 148,680.00 148,680.00 148,680.00 293,722.49 293,722.49
July 2, 2009....................... 1,122,854.11 1,122,854.11 1,122,854.11 1,122,854.11 1,254,634.31 1,254,634.31
January 2, 2010.................... 1,511,152.32 1,511,152.32 1,511,152.32 1,511,152.32 1,095,558.21 1,095,558.21
July 2, 2010....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2011.................... 1,169,533.41 1,169,533.41 1,169,533.41 1,169,533.41 1,236,143.69 1,236,143.69
July 2, 2011....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2012.................... 111,700.16 111,700.16 111,700.16 111,700.16 183,861.30 183,861.30
----------------------------------------------------------------------------------------------------------------------------------
----------------------------------- ---------------------------------------------
REGULAR B737-832 B737-832 B757-232
DISTRIBUTION DATES (N37700) (N3771K) (N67171)
----------------------------------- ---------------------------------------------
January 2, 2003.................... $ 149,040.00 $ 149,040.00 $ 575,270.78
July 2, 2003....................... 0.00 0.00 0.00
January 2, 2004.................... 149,040.00 149,040.00 594,386.88
July 2, 2004....................... 0.00 0.00 0.00
January 2, 2005.................... 149,040.00 149,040.00 643,890.24
July 2, 2005....................... 0.00 0.00 0.00
January 2, 2006.................... 149,040.00 149,040.00 641,792.64
July 2, 2006....................... 0.00 0.00 0.00
January 2, 2007.................... 149,040.00 149,040.00 688,359.36
July 2, 2007....................... 0.00 0.00 0.00
January 2, 2008.................... 149,040.00 149,040.00 525,345.46
July 2, 2008....................... 0.00 0.00 0.00
January 2, 2009.................... 254,766.43 254,766.43 420,135.60
July 2, 2009....................... 1,310,108.07 1,310,108.07 0.00
January 2, 2010.................... 1,094,290.45 1,094,290.45 209,304.00
July 2, 2010....................... 0.00 0.00 0.00
January 2, 2011.................... 1,234,889.63 1,234,889.63 0.00
July 2, 2011....................... 0.00 0.00 0.00
January 2, 2012.................... 179,705.42 179,705.42 0.00
----------------------------------------------------------------------------------------------------------------------------------
III-8
APPENDIX III: EQUIPMENT NOTE PRINCIPAL PAYMENTS
SERIES C EQUIPMENT NOTES
----------------------------------------------------------------------------------------------------------------------------------
REGULAR B767-332ER B767-332ER B767-332ER B767-332ER B767-332ER B767-332ER
DISTRIBUTION DATES (N185DN) (N186DN) (N187DN) (N188DN) (N189DN) (N190DN)
----------------------------------------------------------------------------------------------------------------------------------
January 2, 2003.................... $ 650,146.73 $ 650,146.73 $ 678,210.65 $ 678,210.65 $ 706,274.59 $ 706,274.59
July 2, 2003....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2004.................... 671,753.43 671,753.43 700,750.85 700,750.85 729,748.26 729,748.26
July 2, 2004....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2005.................... 727,700.24 727,700.24 759,112.70 759,112.70 790,525.16 790,525.16
July 2, 2005....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2006.................... 725,329.62 725,329.62 756,639.74 756,639.74 787,949.87 787,949.87
July 2, 2006....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2007.................... 777,957.55 777,957.55 811,539.46 811,539.46 845,121.36 845,121.36
July 2, 2007....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2008.................... 593,727.85 593,727.85 619,357.96 619,357.96 644,988.06 644,988.06
July 2, 2008....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2009.................... 474,821.27 474,821.27 495,317.76 495,317.76 515,814.25 515,814.25
July 2, 2009....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2010.................... 236,547.42 236,547.42 246,758.40 246,758.40 256,969.38 256,969.38
July 2, 2010....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2011.................... 0.00 0.00 0.00 0.00 0.00 0.00
July 2, 2011....................... 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2012.................... 0.00 0.00 0.00 0.00 0.00 0.00
----------------------------------------------------------------------------------------------------------------------------------
----------------------------------- ---------------------------------------------
REGULAR B767-332ER B767-332ER B767-432ER
DISTRIBUTION DATES (N191DN) (N192DN) (N828MH)
----------------------------------- ---------------------------------------------
January 2, 2003.................... $ 706,274.59 $ 706,274.59 $ 864,202.74
July 2, 2003....................... 0.00 0.00 0.00
January 2, 2004.................... 729,748.26 729,748.26 898,258.77
July 2, 2004....................... 0.00 0.00 0.00
January 2, 2005.................... 790,525.16 790,525.16 982,388.77
July 2, 2005....................... 0.00 0.00 0.00
January 2, 2006.................... 787,949.87 787,949.87 984,398.64
July 2, 2006....................... 0.00 0.00 0.00
January 2, 2007.................... 845,121.36 845,121.36 1,066,820.25
July 2, 2007....................... 0.00 0.00 0.00
January 2, 2008.................... 644,988.06 644,988.06 1,031,519.67
July 2, 2008....................... 0.00 0.00 0.00
January 2, 2009.................... 515,814.25 515,814.25 689,685.51
July 2, 2009....................... 0.00 0.00 0.00
January 2, 2010.................... 256,969.38 256,969.38 347,249.51
July 2, 2010....................... 0.00 0.00 0.00
January 2, 2011.................... 0.00 0.00 0.00
July 2, 2011....................... 0.00 0.00 0.00
January 2, 2012.................... 0.00 0.00 0.00
----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
REGULAR B767-432ER B767-432ER B767-432ER B767-432ER B767-432ER
DISTRIBUTION DATES (N829MH) (N830MH) (N831MH) (N832MH) (N833MH)
----------------------------------------------------------------------------------------------------------------------------------
January 2, 2003.................... $ 864,202.74 $ 867,708.10 $ 867,708.10 $ 867,708.10 $ 829,918.19
July 2, 2003....................... 0.00 0.00 0.00 0.00 0.00
January 2, 2004.................... 898,258.77 901,902.36 901,902.36 901,902.36 905,659.82
July 2, 2004....................... 0.00 0.00 0.00 0.00 0.00
January 2, 2005.................... 982,388.77 986,373.61 986,373.61 986,373.61 990,482.99
July 2, 2005....................... 0.00 0.00 0.00 0.00 0.00
January 2, 2006.................... 984,398.64 988,391.64 988,391.64 988,391.64 992,509.42
July 2, 2006....................... 0.00 0.00 0.00 0.00 0.00
January 2, 2007.................... 1,066,820.25 1,071,147.57 1,071,147.57 1,071,147.57 1,075,610.12
July 2, 2007....................... 0.00 0.00 0.00 0.00 0.00
January 2, 2008.................... 1,031,519.67 1,035,703.88 1,035,703.88 1,035,703.88 951,018.85
July 2, 2008....................... 0.00 0.00 0.00 0.00 0.00
January 2, 2009.................... 689,685.51 692,483.07 692,483.07 692,483.07 695,368.05
July 2, 2009....................... 0.00 0.00 0.00 0.00 0.00
January 2, 2010.................... 347,249.51 348,658.05 348,658.05 348,658.05 350,110.61
July 2, 2010....................... 0.00 0.00 0.00 0.00 0.00
January 2, 2011.................... 0.00 0.00 0.00 0.00 0.00
July 2, 2011....................... 0.00 0.00 0.00 0.00 0.00
January 2, 2012.................... 0.00 0.00 0.00 0.00 0.00
----------------------------------------------------------------------------------------------------------------------------------
III-9
APPENDIX III: EQUIPMENT NOTE PRINCIPAL PAYMENTS
SERIES D EQUIPMENT NOTES(1)
----------------------------------------------------------------------------------------------------------------------------
REGULAR B757-232 B767-332ER B767-332ER B767-332ER B767-332ER B767-332ER
DISTRIBUTION DATES (N67171) (N185DN) (N186DN) (N187DN) (N188DN) (N189DN)
----------------------------------------------------------------------------------------------------------------------------
January 2, 2003.............. $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
July 2, 2003................. 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2004.............. 0.00 0.00 0.00 0.00 0.00 0.00
July 2, 2004................. 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2005.............. 0.00 0.00 0.00 0.00 0.00 0.00
July 2, 2005................. 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2006.............. 0.00 0.00 0.00 0.00 0.00 0.00
July 2, 2006................. 0.00 0.00 0.00 0.00 0.00 0.00
January 2, 2007.............. 0.00 0.00 0.00 0.00 0.00 0.00
July 2, 2007................. 4,463,226.14 5,044,165.92 5,044,165.92 5,261,905.40 5,261,905.40 5,479,644.89
----------------------------------------------------------------------------------------------------------------------------
----------------------------- -------------------------------------------------------------
REGULAR B767-332ER B767-332ER B767-332ER B767-432ER
DISTRIBUTION DATES (N190DN) (N191DN) (N192DN) (N828MH)
----------------------------- -------------------------------------------------------------
January 2, 2003.............. $ 0.00 $ 0.00 $ 0.00 $ 0.00
July 2, 2003................. 0.00 0.00 0.00 0.00
January 2, 2004.............. 0.00 0.00 0.00 0.00
July 2, 2004................. 0.00 0.00 0.00 0.00
January 2, 2005.............. 0.00 0.00 0.00 0.00
July 2, 2005................. 0.00 0.00 0.00 0.00
January 2, 2006.............. 0.00 0.00 0.00 0.00
July 2, 2006................. 0.00 0.00 0.00 0.00
January 2, 2007.............. 0.00 0.00 0.00 0.00
July 2, 2007................. 5,479,644.89 5,479,644.89 5,479,644.89 7,127,598.48
----------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
REGULAR B767-432ER B767-432ER B767-432ER B767-432ER B767-432ER
DISTRIBUTION DATES (N829MH) (N830MH) (N831MH) (N832MH) (N833MH)
-----------------------------------------------------------------------------------------------------------------------------
January 2, 2003............ $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
July 2, 2003............... 0.00 0.00 0.00 0.00 0.00
January 2, 2004............ 0.00 0.00 0.00 0.00 0.00
July 2, 2004............... 0.00 0.00 0.00 0.00 0.00
January 2, 2005............ 0.00 0.00 0.00 0.00 0.00
July 2, 2005............... 0.00 0.00 0.00 0.00 0.00
January 2, 2006............ 0.00 0.00 0.00 0.00 0.00
July 2, 2006............... 0.00 0.00 0.00 0.00 0.00
January 2, 2007............ 0.00 0.00 0.00 0.00 0.00
July 2, 2007............... 7,127,598.48 7,156,509.94 7,156,509.94 7,156,509.94 7,275,324.89
-----------------------------------------------------------------------------------------------------------------------------
(1) There are no Series D Equipment Notes issued with respect to the Boeing
737-832 Aircraft.
III-10
APPENDIX IV: LOAN TO VALUE RATIOS OF EQUIPMENT NOTES
SERIES G-1 EQUIPMENT NOTES
-----------------------------------------------------------------------------------------------------------------------------
B737-832 B737-832 B737-832 B737-832 B737-832 B737-832 B737-832
DATES (N372DA) (N373DA) (N374DA) (N375DA) (N396DA) (N397DA) (N398DA)
-----------------------------------------------------------------------------------------------------------------------------
April , 2002..................... 55.3% 55.3% 55.2% 55.2% 55.9% 55.9% 55.9%
January 2, 2003.................... 57.2 57.2 57.1 57.1 56.0 56.0 56.0
January 2, 2004.................... 57.4 57.4 57.4 57.4 56.0 56.0 56.0
January 2, 2005.................... 57.6 57.6 57.6 57.6 56.1 56.1 56.1
January 2, 2006.................... 57.9 57.9 57.9 57.9 56.2 56.2 56.2
January 2, 2007.................... 58.1 58.1 58.1 58.1 56.3 56.3 56.3
January 2, 2008.................... 58.4 58.4 58.4 58.4 56.4 56.4 56.4
January 2, 2009.................... 58.7 58.7 58.7 58.7 56.5 56.5 56.5
January 2, 2010.................... 59.1 59.1 59.1 59.1 56.6 56.6 56.6
January 2, 2011.................... 59.4 59.4 59.4 59.4 56.8 56.8 56.8
January 2, 2012.................... 59.8 59.8 59.8 59.8 56.9 56.9 56.9
January 2, 2013.................... 56.1 56.1 56.1 56.1 53.0 53.0 53.0
January 2, 2014.................... 56.5 56.5 56.5 56.5 53.2 53.2 53.2
January 2, 2015.................... 57.1 57.1 57.1 57.1 52.4 52.4 52.4
January 2, 2016.................... 59.0 59.0 59.0 59.0 52.6 52.6 52.6
January 2, 2017.................... 61.3 61.3 61.3 61.3 53.8 53.8 53.8
January 2, 2018.................... 64.0 64.0 64.0 64.0 55.3 55.3 55.3
January 2, 2019.................... 53.7 53.7 50.5 50.5 57.1 57.1 57.1
January 2, 2020.................... 40.0 40.0 39.9 39.9 59.2 59.2 59.2
January 2, 2021.................... 24.0 24.0 24.0 24.0 35.0 35.0 35.0
January 2, 2022.................... NA NA NA NA 3.7 3.7 3.7
January 2, 2023.................... NA NA NA NA NA NA NA
-----------------------------------------------------------------------------------------------------------------------------
----------------------------------- -----------------------
B737-832 B737-832
DATES (N399DA) (N3730B)
----------------------------------- -----------------------
April , 2002..................... 56.0% 56.0%
January 2, 2003.................... 56.1 56.1
January 2, 2004.................... 56.2 56.2
January 2, 2005.................... 56.3 56.3
January 2, 2006.................... 56.3 56.3
January 2, 2007.................... 56.4 56.4
January 2, 2008.................... 56.5 56.5
January 2, 2009.................... 56.6 56.6
January 2, 2010.................... 56.8 56.8
January 2, 2011.................... 56.9 56.9
January 2, 2012.................... 57.0 57.0
January 2, 2013.................... 53.2 53.2
January 2, 2014.................... 53.3 53.3
January 2, 2015.................... 52.5 52.5
January 2, 2016.................... 52.7 52.7
January 2, 2017.................... 54.0 54.0
January 2, 2018.................... 55.4 55.4
January 2, 2019.................... 57.2 57.2
January 2, 2020.................... 59.4 59.4
January 2, 2021.................... 35.1 35.1
January 2, 2022.................... 3.7 3.7
January 2, 2023.................... NA NA
-----------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
B737-832 B737-832 B737-832 B737-832 B737-832 B737-832 B737-832
DATES (N3764D) (N3765) (N3766) (N3767) (N3768) (N3769L) (N37700)
-----------------------------------------------------------------------------------------------------------------------------
April , 2002..................... 54.8% 54.8% 54.8% 54.8% 52.4% 52.4% 52.4%
January 2, 2003.................... 54.9 54.9 54.9 54.9 52.4 52.4 52.4
January 2, 2004.................... 54.9 54.9 54.9 54.9 52.5 52.5 52.4
January 2, 2005.................... 54.9 54.9 54.9 54.9 52.5 52.5 52.5
January 2, 2006.................... 54.9 54.9 54.9 54.9 52.5 52.5 52.5
January 2, 2007.................... 54.9 54.9 54.9 54.9 52.5 52.5 52.5
January 2, 2008.................... 55.0 55.0 55.0 55.0 52.5 52.5 52.5
January 2, 2009.................... 55.0 55.0 55.0 55.0 52.6 52.6 52.5
January 2, 2010.................... 55.0 55.0 55.0 55.0 52.6 52.6 52.6
January 2, 2011.................... 55.0 55.0 55.0 55.0 52.6 52.6 52.6
January 2, 2012.................... 55.1 55.1 55.1 55.1 52.7 52.7 52.6
January 2, 2013.................... 51.2 51.2 51.2 51.2 49.0 49.0 49.0
January 2, 2014.................... 51.3 51.3 51.3 51.3 49.0 49.0 49.0
January 2, 2015.................... 50.3 50.3 50.3 50.3 48.1 48.1 48.1
January 2, 2016.................... 50.4 50.4 50.4 50.4 48.2 48.2 48.1
January 2, 2017.................... 50.4 50.4 50.4 50.4 48.2 48.2 48.2
January 2, 2018.................... 51.5 51.5 51.5 51.5 49.2 49.2 49.2
January 2, 2019.................... 52.7 52.7 52.7 52.7 50.4 50.4 50.4
January 2, 2020.................... 54.2 54.2 54.2 54.2 51.8 51.8 51.8
January 2, 2021.................... 31.6 31.6 31.6 31.6 29.8 29.8 29.8
January 2, 2022.................... 3.2 3.2 3.2 3.2 3.1 3.1 3.1
January 2, 2023.................... NA NA NA NA NA NA NA
-----------------------------------------------------------------------------------------------------------------------------
----------------------------------- -----------------------
B737-832 B757-232
DATES (N3771K) (N67171)
----------------------------------- -----------------------
April , 2002..................... 52.3% 50.4%
January 2, 2003.................... 52.3 50.3
January 2, 2004.................... 52.3 50.4
January 2, 2005.................... 52.4 50.5
January 2, 2006.................... 52.4 50.7
January 2, 2007.................... 52.4 50.9
January 2, 2008.................... 52.4 51.1
January 2, 2009.................... 52.4 51.3
January 2, 2010.................... 52.5 51.5
January 2, 2011.................... 52.5 51.8
January 2, 2012.................... 52.5 NA
January 2, 2013.................... 48.9 NA
January 2, 2014.................... 48.9 NA
January 2, 2015.................... 48.0 NA
January 2, 2016.................... 48.1 NA
January 2, 2017.................... 48.1 NA
January 2, 2018.................... 49.1 NA
January 2, 2019.................... 50.3 NA
January 2, 2020.................... 51.7 NA
January 2, 2021.................... 29.7 NA
January 2, 2022.................... 3.1 NA
January 2, 2023.................... NA NA
-----------------------------------------------------------------------------------------------------------------------------
IV-1
APPENDIX IV: LOAN TO VALUE RATIOS OF EQUIPMENT NOTES
SERIES G-1 EQUIPMENT NOTES
-----------------------------------------------------------------------------------------------------------------------------
B767-332ER B767-332ER B767-332ER B767-332ER B767-332ER B767-332ER B767-332ER
DATES (N185DN) (N186DN) (N187DN) (N188DN) (N189DN) (N190DN) (N191DN)
-----------------------------------------------------------------------------------------------------------------------------
April , 2002................... 50.3% 50.1% 49.9% 49.0% 50.3% 50.1% 49.9%
January 2, 2003.................... 50.9 50.6 50.3 49.4 50.6 50.4 50.2
January 2, 2004.................... 51.9 51.4 51.1 50.0 51.2 51.0 50.8
January 2, 2005.................... 53.0 52.3 52.0 50.7 51.9 51.8 51.5
January 2, 2006.................... 54.3 53.3 53.0 51.5 52.7 52.6 52.3
January 2, 2007.................... 55.8 54.4 54.2 52.4 53.7 53.5 53.2
January 2, 2008.................... 57.6 55.8 55.6 53.4 54.7 54.5 54.3
January 2, 2009.................... 59.6 57.4 57.1 54.6 55.9 55.7 55.5
January 2, 2010.................... 62.1 59.3 59.0 55.9 57.3 57.1 56.9
January 2, 2011.................... 65.2 61.6 61.3 57.6 59.0 58.8 58.5
January 2, 2012.................... NA NA NA NA NA NA NA
January 2, 2013.................... NA NA NA NA NA NA NA
January 2, 2014.................... NA NA NA NA NA NA NA
January 2, 2015.................... NA NA NA NA NA NA NA
January 2, 2016.................... NA NA NA NA NA NA NA
January 2, 2017.................... NA NA NA NA NA NA NA
January 2, 2018.................... NA NA NA NA NA NA NA
January 2, 2019.................... NA NA NA NA NA NA NA
January 2, 2020.................... NA NA NA NA NA NA NA
January 2, 2021.................... NA NA NA NA NA NA NA
January 2, 2022.................... NA NA NA NA NA NA NA
January 2, 2023.................... NA NA NA NA NA NA NA
-----------------------------------------------------------------------------------------------------------------------------
----------------------------------- -----------------------
B767-332ER B767-432ER
DATES (N192DN) (N828MH)
----------------------------------- -----------------------
April , 2002................... 49.5% 50.5%
January 2, 2003.................... 49.8 50.4
January 2, 2004.................... 50.4 50.5
January 2, 2005.................... 51.1 50.6
January 2, 2006.................... 51.9 50.7
January 2, 2007.................... 52.8 50.8
January 2, 2008.................... 53.8 51.0
January 2, 2009.................... 55.0 51.1
January 2, 2010.................... 56.4 51.3
January 2, 2011.................... 58.1 51.5
January 2, 2012.................... NA NA
January 2, 2013.................... NA NA
January 2, 2014.................... NA NA
January 2, 2015.................... NA NA
January 2, 2016.................... NA NA
January 2, 2017.................... NA NA
January 2, 2018.................... NA NA
January 2, 2019.................... NA NA
January 2, 2020.................... NA NA
January 2, 2021.................... NA NA
January 2, 2022.................... NA NA
January 2, 2023.................... NA NA
-----------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
B767-432ER B767-432ER B767-432ER B767-432ER B767-432ER
DATES (N829MH) (N830MH) (N831MH) (N832MH) (N833MH)
-----------------------------------------------------------------------------------------------------------------------------
April , 2002................... 50.5% 50.7% 50.7% 50.7% 50.9%
January 2, 2003.................... 50.4 50.5 50.5 50.5 50.8
January 2, 2004.................... 50.5 50.6 50.6 50.6 50.9
January 2, 2005.................... 50.6 50.8 50.8 50.8 51.0
January 2, 2006.................... 50.7 50.9 50.9 50.9 51.1
January 2, 2007.................... 50.8 51.0 51.0 51.0 51.2
January 2, 2008.................... 51.0 51.1 51.1 51.1 51.4
January 2, 2009.................... 51.1 51.3 51.3 51.3 51.5
January 2, 2010.................... 51.3 51.5 51.5 51.5 51.7
January 2, 2011.................... 51.5 51.7 51.7 51.7 51.9
January 2, 2012.................... NA NA NA NA NA
January 2, 2013.................... NA NA NA NA NA
January 2, 2014.................... NA NA NA NA NA
January 2, 2015.................... NA NA NA NA NA
January 2, 2016.................... NA NA NA NA NA
January 2, 2017.................... NA NA NA NA NA
January 2, 2018.................... NA NA NA NA NA
January 2, 2019.................... NA NA NA NA NA
January 2, 2020.................... NA NA NA NA NA
January 2, 2021.................... NA NA NA NA NA
January 2, 2022.................... NA NA NA NA NA
January 2, 2023.................... NA NA NA NA NA
-----------------------------------------------------------------------------------------------------------------------------
IV-2
APPENDIX IV: LOAN TO VALUE RATIOS OF EQUIPMENT NOTES
SERIES G-2 EQUIPMENT NOTES
---------------------------------------------------------------------------------------------------------------------------------
B737-832 B737-832 B737-832 B737-832 B737-832 B737-832 B737-832 B737-832 B737-832
DATES (N372DA) (N373DA) (N374DA) (N375DA) (N396DA) (N397DA) (N398DA) (N399DA) (N3730B)
---------------------------------------------------------------------------------------------------------------------------------
April , 2002................. 55.3% 55.3% 55.2% 55.2% 55.9% 55.9% 55.9% 56.0% 56.0%
January 2, 2003................ 57.2 57.2 57.1 57.1 56.0 56.0 56.0 56.1 56.1
January 2, 2004................ 57.4 57.4 57.4 57.4 56.0 56.0 56.0 56.2 56.2
January 2, 2005................ 57.6 57.6 57.6 57.6 56.1 56.1 56.1 56.3 56.3
January 2, 2006................ 57.9 57.9 57.9 57.9 56.2 56.2 56.2 56.3 56.3
January 2, 2007................ 58.1 58.1 58.1 58.1 56.3 56.3 56.3 56.4 56.4
January 2, 2008................ 58.4 58.4 58.4 58.4 56.4 56.4 56.4 56.5 56.5
January 2, 2009................ 58.7 58.7 58.7 58.7 56.5 56.5 56.5 56.6 56.6
January 2, 2010................ 59.1 59.1 59.1 59.1 56.6 56.6 56.6 56.8 56.8
January 2, 2011................ 59.4 59.4 59.4 59.4 56.8 56.8 56.8 56.9 56.9
January 2, 2012................ 59.8 59.8 59.8 59.8 56.9 56.9 56.9 57.0 57.0
January 2, 2013................ NA NA NA NA NA NA NA NA NA
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
B737-832 B737-832 B737-832 B737-832 B737-832 B737-832 B737-832 B737-832 B757-232
DATES (N3764D) (N3765) (N3766) (N3767) (N3768) (N3769L) (N37700) (N3771K) (N67171)
---------------------------------------------------------------------------------------------------------------------------------
April , 2002................. 54.8% 54.8% 54.8% 54.8% 52.4% 52.4% 52.4% 52.3% 50.4%
January 2, 2003................ 54.9 54.9 54.9 54.9 52.4 52.4 52.4 52.3 50.3
January 2, 2004................ 54.9 54.9 54.9 54.9 52.5 52.5 52.4 52.3 50.4
January 2, 2005................ 54.9 54.9 54.9 54.9 52.5 52.5 52.5 52.4 50.5
January 2, 2006................ 54.9 54.9 54.9 54.9 52.5 52.5 52.5 52.4 50.7
January 2, 2007................ 54.9 54.9 54.9 54.9 52.5 52.5 52.5 52.4 50.9
January 2, 2008................ 55.0 55.0 55.0 55.0 52.5 52.5 52.5 52.4 51.1
January 2, 2009................ 55.0 55.0 55.0 55.0 52.6 52.6 52.5 52.4 51.3
January 2, 2010................ 55.0 55.0 55.0 55.0 52.6 52.6 52.6 52.5 51.5
January 2, 2011................ 55.0 55.0 55.0 55.0 52.6 52.6 52.6 52.5 51.8
January 2, 2012................ 55.1 55.1 55.1 55.1 52.7 52.7 52.6 52.5 52.1
January 2, 2013................ NA NA NA NA NA NA NA NA NA
---------------------------------------------------------------------------------------------------------------------------------
IV-3
APPENDIX IV: LOAN TO VALUE RATIOS OF EQUIPMENT NOTES
SERIES G-2 EQUIPMENT NOTES
-----------------------------------------------------------------------------------------------------------------------------
B767-332ER B767-332ER B767-332ER B767-332ER B767-332ER B767-332ER B767-332ER
DATES (N185DN) (N186DN) (N187DN) (N188DN) (N189DN) (N190DN) (N191DN)
-----------------------------------------------------------------------------------------------------------------------------
April , 2002..................... 50.3% 50.1% 49.9% 49.0% 50.3% 50.1% 49.9%
January 2, 2003.................... 50.9 50.6 50.3 49.4 50.6 50.4 50.2
January 2, 2004.................... 51.9 51.4 51.1 50.0 51.2 51.0 50.8
January 2, 2005.................... 53.0 52.3 52.0 50.7 51.9 51.8 51.5
January 2, 2006.................... 54.3 53.3 53.0 51.5 52.7 52.6 52.3
January 2, 2007.................... 55.8 54.4 54.2 52.4 53.7 53.5 53.2
January 2, 2008.................... 57.6 55.8 55.6 53.4 54.7 54.5 54.3
January 2, 2009.................... 59.6 57.4 57.1 54.6 55.9 55.7 55.5
January 2, 2010.................... 62.1 59.3 59.0 55.9 57.3 57.1 56.9
January 2, 2011.................... 65.2 61.6 61.3 57.6 59.0 58.8 58.5
January 2, 2012.................... 69.1 64.3 64.1 59.5 61.0 60.8 60.5
January 2, 2013.................... NA NA NA NA NA NA NA
-----------------------------------------------------------------------------------------------------------------------------
----------------------------------- -----------------------
B767-332ER B767-432ER
DATES (N192DN) (N828MH)
----------------------------------- -----------------------
April , 2002..................... 49.5% 50.5%
January 2, 2003.................... 49.8 50.4
January 2, 2004.................... 50.4 50.5
January 2, 2005.................... 51.1 50.6
January 2, 2006.................... 51.9 50.7
January 2, 2007.................... 52.8 50.8
January 2, 2008.................... 53.8 51.0
January 2, 2009.................... 55.0 51.1
January 2, 2010.................... 56.4 51.3
January 2, 2011.................... 58.1 51.5
January 2, 2012.................... 60.1 51.7
January 2, 2013.................... NA NA
-----------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
B767-432ER B767-432ER B767-432ER B767-432ER B767-432ER
DATES (N829MH) (N830MH) (N831MH) (N832MH) (N833MH)
-----------------------------------------------------------------------------------------------------------------------------
April , 2002..................... 50.5% 50.7% 50.7% 50.7% 50.9%
January 2, 2003.................... 50.4 50.5 50.5 50.5 50.8
January 2, 2004.................... 50.5 50.6 50.6 50.6 50.9
January 2, 2005.................... 50.6 50.8 50.8 50.8 51.0
January 2, 2006.................... 50.7 50.9 50.9 50.9 51.1
January 2, 2007.................... 50.8 51.0 51.0 51.0 51.2
January 2, 2008.................... 51.0 51.1 51.1 51.1 51.4
January 2, 2009.................... 51.1 51.3 51.3 51.3 51.5
January 2, 2010.................... 51.3 51.5 51.5 51.5 51.7
January 2, 2011.................... 51.5 51.7 51.7 51.7 51.9
January 2, 2012.................... 51.7 51.9 51.9 51.9 52.2
January 2, 2013.................... NA NA NA NA NA
-----------------------------------------------------------------------------------------------------------------------------
IV-4
APPENDIX IV: LOAN TO VALUE RATIOS OF EQUIPMENT NOTES
SERIES C EQUIPMENT NOTES
---------------------------------------------------------------------------------------------------------------------------------
B737-832 B737-832 B737-832 B737-832 B737-832 B737-832 B737-832 B737-832 B737-832
DATES (N372DA) (N373DA) (N374DA) (N375DA) (N396DA) (N397DA) (N398DA) (N399DA) (N3730B)
---------------------------------------------------------------------------------------------------------------------------------
April , 2002................. 66.9% 66.9% 66.8% 66.8% 67.7% 67.7% 67.7% 67.8% 67.8%
January 2, 2003................ 69.2 69.2 69.1 69.1 67.7 67.7 67.7 67.9 67.9
January 2, 2004................ 69.5 69.5 69.5 69.5 67.8 67.8 67.8 68.0 68.0
January 2, 2005................ 69.8 69.8 69.8 69.8 67.9 67.9 67.9 68.1 68.1
January 2, 2006................ 70.1 70.1 70.1 70.1 68.0 68.0 68.0 68.2 68.2
January 2, 2007................ 70.4 70.4 70.4 70.4 68.1 68.1 68.1 68.3 68.3
January 2, 2008................ 70.7 70.7 70.7 70.7 68.3 68.3 68.3 68.4 68.4
January 2, 2009................ 71.1 71.1 71.1 71.1 68.4 68.4 68.4 68.6 68.6
January 2, 2010................ 62.3 62.3 62.3 62.3 60.5 60.5 60.5 60.7 60.7
January 2, 2011................ NA NA NA NA 57.0 57.0 57.0 57.2 57.2
January 2, 2012................ NA NA NA NA NA NA NA NA NA
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
B737-832 B737-832 B737-832 B737-832 B737-832 B737-832 B737-832 B737-832 B757-232
DATES (N3764D) (N3765) (N3766) (N3767) (N3768) (N3769L) (N37700) (N3771K) (N67171)
---------------------------------------------------------------------------------------------------------------------------------
April , 2002................. 66.4% 66.4% 66.4% 66.4% 63.5% 63.5% 63.4% 63.3% 58.0%
January 2, 2003................ 66.4 66.4 66.4 66.4 63.5 63.5 63.5 63.3 57.2
January 2, 2004................ 66.4 66.4 66.4 66.4 63.5 63.5 63.5 63.4 56.5
January 2, 2005................ 66.4 66.4 66.4 66.4 63.5 63.5 63.5 63.4 55.6
January 2, 2006................ 66.5 66.5 66.5 66.5 63.6 63.6 63.5 63.4 54.6
January 2, 2007................ 66.5 66.5 66.5 66.5 63.6 63.6 63.6 63.4 53.5
January 2, 2008................ 66.5 66.5 66.5 66.5 63.6 63.6 63.6 63.4 52.6
January 2, 2009................ 66.6 66.6 66.6 66.6 63.2 63.2 63.3 63.2 51.8
January 2, 2010................ 58.9 58.9 58.9 58.9 56.8 56.8 56.7 56.6 NA
January 2, 2011................ 55.4 55.4 55.4 55.4 53.2 53.2 53.1 53.0 NA
January 2, 2012................ NA NA NA NA NA NA NA NA NA
---------------------------------------------------------------------------------------------------------------------------------
IV-5
APPENDIX IV: LOAN TO VALUE RATIOS OF EQUIPMENT NOTES
SERIES C EQUIPMENT NOTES
----------------------------------------------------------------------------------------------------------------------------------
B767-332ER B767-332ER B767-332ER B767-332ER B767-332ER B767-332ER B767-332ER B767-332ER
DATES (N185DN) (N186DN) (N187DN) (N188DN) (N189DN) (N190DN) (N191DN) (N192DN)
----------------------------------------------------------------------------------------------------------------------------------
April , 2002............. 57.9% 57.7% 57.4% 56.5% 57.9% 57.7% 57.4% 57.0%
January 2, 2003............ 57.9 57.5 57.3 56.2 57.6 57.4 57.1 56.7
January 2, 2004............ 58.2 57.6 57.3 56.0 57.4 57.2 57.0 56.5
January 2, 2005............ 58.3 57.5 57.2 55.8 57.2 56.9 56.7 56.3
January 2, 2006............ 58.6 57.4 57.2 55.5 56.9 56.7 56.4 56.0
January 2, 2007............ 58.7 57.2 57.0 55.0 56.4 56.2 56.0 55.5
January 2, 2008............ 59.3 57.4 57.2 54.9 56.3 56.1 55.9 55.4
January 2, 2009............ 60.3 58.0 57.7 55.1 56.5 56.3 56.0 55.6
January 2, 2010............ NA NA NA NA NA NA NA NA
----------------------------------------------------------------------------------------------------------------------------------
--------------------------- ----------
B767-432ER
DATES (N828MH)
--------------------------- ----------
April , 2002............. 58.2%
January 2, 2003............ 57.4
January 2, 2004............ 56.7
January 2, 2005............ 55.8
January 2, 2006............ 54.8
January 2, 2007............ 53.7
January 2, 2008............ 52.5
January 2, 2009............ 51.7
January 2, 2010............ NA
----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
B767-432ER B767-432ER B767-432ER B767-432ER B767-432ER
DATES (N829MH) (N830MH) (N831MH) (N832MH) (N833MH)
----------------------------------------------------------------------------------------------------------------------------------
April , 2002............. 58.2% 58.4% 58.4% 58.4% 58.5%
January 2, 2003............ 57.4 57.5 57.5 57.5 57.7
January 2, 2004............ 56.7 56.8 56.8 56.8 57.0
January 2, 2005............ 55.8 56.0 56.0 56.0 56.1
January 2, 2006............ 54.8 55.0 55.0 55.0 55.1
January 2, 2007............ 53.7 53.9 53.9 53.9 54.0
January 2, 2008............ 52.5 52.7 52.7 52.7 52.9
January 2, 2009............ 51.7 51.8 51.8 51.8 52.1
January 2, 2010............ NA NA NA NA NA
----------------------------------------------------------------------------------------------------------------------------------
IV-6
APPENDIX IV: LOAN TO VALUE RATIOS OF EQUIPMENT NOTES
SERIES D EQUIPMENT NOTES(1)
------------------------------------------------------------------------------------------------------------------------
B757-232 B767-332ER B767-332ER B767-332ER B767-332ER B767-332ER
DATES (N67171) (N185DN) (N186DN) (N187DN) (N188DN) (N189DN)
------------------------------------------------------------------------------------------------------------------------
April , 2002............................. 66.0% 65.8% 65.6% 65.3% 64.2% 65.8%
January 2, 2003............................ 65.5 66.3 65.9 65.6 64.3 65.9
January 2, 2004............................ 65.2 67.1 66.4 66.1 64.6 66.2
January 2, 2005............................ 64.7 67.9 66.9 66.6 64.9 66.5
January 2, 2006............................ 64.2 68.8 67.5 67.2 65.2 66.8
January 2, 2007............................ 63.6 69.7 68.0 67.7 65.4 67.0
January 2, 2008............................ NA NA NA NA NA NA
------------------------------------------- -------------------------------------------------
B767-332ER B767-332ER B767-332ER
DATES (N190DN) (N191DN) (N192DN)
------------------------------------------- -------------------------------------------------
April , 2002............................. 65.6% 65.3% 64.8%
January 2, 2003............................ 65.7 65.4 64.9
January 2, 2004............................ 66.0 65.7 65.2
January 2, 2005............................ 66.3 66.0 65.5
January 2, 2006............................ 66.6 66.3 65.8
January 2, 2007............................ 66.8 66.5 66.0
January 2, 2008............................ NA NA NA
------------------------------------------------------------------------------------------------------------------------
B767-432ER B767-432ER B767-432ER B767-432ER B767-432ER B767-432ER
DATES (N828MH) (N829MH) (N830MH) (N831MH) (N832MH) (N833MH)
------------------------------------------------------------------------------------------------------------------------
April , 2002............................. 66.2% 66.2% 66.4% 66.4% 66.4% 66.7%
January 2, 2003............................ 65.6 65.6 65.8 65.8 65.8 66.1
January 2, 2004............................ 65.3 65.3 65.5 65.5 65.5 65.8
January 2, 2005............................ 64.8 64.8 65.0 65.0 65.0 65.3
January 2, 2006............................ 64.2 64.2 64.4 64.4 64.4 64.7
January 2, 2007............................ 63.5 63.5 63.7 63.7 63.7 64.0
January 2, 2008............................ NA NA NA NA NA NA
------------------------------------------------------------------------------------------------------------------------
---------------
(1) There are no Series D Equipment Notes issued with respect to the Boeing
737-832 Aircraft.
IV-7
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
$2,546,381,000.
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 July 23, 2001
TABLE OF CONTENTS
PAGE
----
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.......................... 18
Certain United States Federal Income Tax Consequences....... 26
ERISA Considerations........................................ 29
Plan of Distribution........................................ 30
Validity of the Certificates................................ 31
Experts..................................................... 31
Where You Can Find More Information......................... 31
-------------------------
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.
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 $2,546,381,000.
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 pages 31-32.
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 through our principal domestic hubs in Atlanta,
Cincinnati, Dallas/Fort Worth and Salt Lake City. We also operate our principal
international gateways in Atlanta and New York -- John F. Kennedy International
Airport.
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
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;
2
- 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.
General corporate purposes of Delta may include, among other possible uses, the
repayment of short-term or long-term indebtedness, capital expenditures and
repurchases of common stock.
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 page 17 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:
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
-------------------------------- ------------------
1996 1997 1998 1999 2000 2000 2001
---- ---- ---- ---- ---- ------- --------
1.58 3.23 3.55 3.56 2.42 2.34 .19
Earnings represent:
- Income before income taxes, excluding the cumulative effect of accounting
changes; plus
- Fixed charges, excluding capitalized interest.
Fixed charges include:
- Interest, whether expensed or capitalized; and
- One-half of rental expense. 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
3
between the Trustee and us. The statements made under this caption are summaries
of detailed provisions of the Basic Agreement.
We have filed a form 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 applicable agreements
listed below and discussed in this prospectus or the accompanying prospectus
supplement:
- Trust Supplement
- Note Purchase Agreement
- Indenture
- Lease
- Trust Agreement
- Participation Agreement, and
- Liquidity Facility Agreement
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 pages 31-32 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
$2,546,381,000 aggregate public offering price.
The prospectus supplement accompanying this prospectus contains an index of
terms. You should refer to the index for the location of 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.
4
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.
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;
5
- 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
-- 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.
6
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 9.
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 9 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
7
- 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.
8
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.
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.
9
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.
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
10
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;
- 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;
11
- 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 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 pages 16-17, 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
12
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, it is anticipated that the Trustee 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 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.
13
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 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 21-22 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.
14
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 Certificateholders, 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;
- 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
15
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 that 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 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.
16
Payments made on account of Certificates may also be subordinated to the
rights of the provider of any related Liquidity Facility, as described below
under "Liquidity Facility."
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.
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 25 for a description of
how the Equipment Notes may be similarly supported by a Liquidity Facility.
17
THE TRUSTEE
REPRESENTATIONS, LIABILITIES, OBLIGATIONS AND POWERS
The Trustee for each series of Certificates will be named in the applicable
prospectus supplement. 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.
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 31 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.
18
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.
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.
19
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 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
20
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
21
penalty rates based on a failure to perform non-monetary obligations are cured
before the later of the expiration of that 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.
22
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 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.
23
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 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.
24
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 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.
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.
25
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 Cadwalader, Wickersham &
Taft, 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. CERTIFICATEHOLDERS
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 or partnership;
- 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 28.
26
TAX STATUS OF THE TRUSTS
Except as otherwise specified in the applicable prospectus supplement, each
Trust will be classified as a grantor trust for United States federal income tax
purposes. The following discussion assumes that the related trust will be
treated as a grantor trust.
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 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%.
27
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,
- - 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, under certain circumstances, a
partnership or other pass-through entity in which you hold an
interest furnishes a statement and attaches your certification, 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, under certain circumstances,
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.
28
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 30.5% (phasing down to 28% by
2006) 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.
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-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
- 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.
29
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 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
30
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.
EXPERTS
The consolidated financial statements and schedule included or incorporated
by reference in our Transition Report on Form 10-K for the fiscal year ended
December 31, 2000 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.
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.
- Transition Report on Form 10-K for the fiscal year ended December 31,
2000;
- Quarterly Report on Form 10-Q for the quarter ended March 31, 2001; and
- Current Report on Form 8-K dated June 15, 2001.
31
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
Dept. No. 829
P.O. Box 20706
Atlanta, Georgia 30320
(404) 715-2600
32
(DELTA LOGO)