Delta Air Lines has closed on a transaction allowing the Atlanta-hubbed carrier to borrow the entire amount in its $1 billion revolving credit facility to bolster its financial position as it moves to finalize its merger with Northwest Airlines by yearend.
Recently Delta outlined integration costs of roughly $600 million over three years for the merger as it posted a $1 billion loss during the second quarter driven by a $1 billion rise in its fuel bill and special charges of $1.2 billion.
Carrier President and CFO Ed Bastian told employees yesterday in a memo that borrowing the $1 billion will provide the carrier "with the utmost flexibility - at minimal cost - as we prepare for this critical transition".
As of 31 July Delta has $3.7 billion in liquidity, says Bastian, who notes Delta believes "we will have more than sufficient cash on hand at closing to manage the integration process and run the day-to-day business".
Delta also amended its credit card processing agreement with Visa/MasterCard, extending the contract period through the end of 2011.
"Importantly there will be no cash holdback, or reserve, required under the revised terms of the agreement," says Bastian.
US carriers have rushed to publicize their solid positions with credit card processors in the aftermath of Denver-based Frontier Airlines filing for Chapter 11 in April largely due its primary processor unexpectedly informing the carrier it was holding back receipts. As it entered into bankruptcy protection Frontier noted the holdbacks were a major threat to its liquidity.