Item 7.01 Regulation FD Disclosure.
In connection with commencing discussions with potential investors in the
proposed SkyMiles financing discussed below, Delta Air Lines, Inc. ("Delta,"
"we, "us" or our") is making available an investor presentation, excerpts of
which are attached to this report as Exhibit 99.1.
Item 8.01 Other Events.
Financial and Operational Outlook
Delta is providing an update to investors regarding its financial and
operational outlook:
Capacity Reductions
As previously disclosed, beginning in the second half of March, Delta
experienced a precipitous decrease in demand as COVID-19 spread throughout the
world. Since that time, Delta significantly reduced its system capacity to a
level that maintained essential services to align capacity with expected demand.
For the September 2020 quarter, system capacity is expected to be down
approximately 60% compared to the September 2019 quarter, with international
capacity to be reduced approximately 80% and domestic capacity to be reduced
approximately 50%. As a result of reduced demand expectations and lower capacity
in the September 2020 quarter and beyond, Delta has parked approximately 40% of
its mainline fleet, including the permanent retirement of certain aircraft.
Effect of COVID-19 on SkyMiles
The impact of the pandemic on demand for air travel is also negatively affecting
the performance of the SkyMiles loyalty program and its contribution to our
financial results. Travel among SkyMiles members is consistent with Delta's
overall travel patterns, as total miles redeemed in the first six months of 2020
declined by 78%. As a result, loyalty travel award revenue for Delta declined
59%, in line with the 60% decline in passenger revenue Delta reported for the
first half of 2020. However, over the same period, cash received from sales to
American Express declined by less than 5% year over year to $1.9 billion, as
SkyMiles members continue to use co-brand cards.
The CARES Act
As previously disclosed, in April 2020, Delta entered into an agreement with the
U.S. Department of the Treasury to receive $5.4 billion in emergency relief
through the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act")
payroll support program, which was paid in installments through July 2020.
The CARES Act also provides for up to $25 billion in secured loans to the
airline industry. While Delta is eligible and entered into a non-binding letter
of intent to the U.S. Department of the Treasury for $4.6 billion under the loan
program, Delta has indicated it does not intend to participate in this program.
SkyMiles Financing
On September 14, 2020, Delta issued a press release announcing it is planning a
private offering of senior secured notes in one or more tranches (the "Notes")
by Delta and SkyMiles IP Ltd., a newly formed exempted company incorporated with
limited liability under the laws of the Cayman Islands and an indirect
wholly-owned subsidiary of Delta ("SMIP"), and to enter into a new senior
secured term loan facility (the "New Credit Facility") concurrently with the
closing of the offering of the Notes. The aggregate principal
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amount of the Notes and the New Credit Facility is expected to be $6.5 billion.
The Notes and the New Credit Facility will be guaranteed by certain of Delta's
subsidiaries. The offering of the Notes is not contingent upon the closing of
the New Credit Facility. The Notes and New Credit Facility will be secured on a
pari passu senior basis by a first-priority security interest in Delta's
SkyMiles program, including Delta's rights under certain related agreements,
intellectual property, and other collateral related to the SkyMiles program. The
press release is attached as Exhibit 99.2 to this Form 8-K.
Certain of the statements above are forward-looking statements subject to the
various risks and uncertainties described in our reports filed with the U.S.
Securities and Exchange Commission. See "-Forward-Looking Statements" below.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
Exhibit 99.1 Excerpts from SkyMiles Investor Presentation
Exhibit 99.2 Press Release dated September 14, 2020 titled "Delta Air Lines
Announces Proposed Senior Secured Notes Offering and Term Loan
Facility by Delta and SkyMiles Subsidiary"
Exhibit 104 The cover page from this Current Report on Form 8-K, formatted in
Inline XBRL
Forward-Looking Statements
Statements in this Form 8-K or any exhibit hereto that are not historical facts,
including statements regarding our estimates, expectations, beliefs, intentions,
projections or strategies for the future, may be "forward-looking statements" as
defined in the Private Securities Litigation Reform Act of 1995. All
forward-looking statements involve a number of risks and uncertainties that
could cause actual results to differ materially from the estimates,
expectations, beliefs, intentions, projections and strategies reflected in or
suggested by the forward-looking statements. There can be no assurance that the
proposed offering of the Notes or entry into the New Credit Facility will be
completed as currently contemplated or at all. Risks and uncertainties that
could cause differences between actual results and forward-looking statements
include, but are not limited to, the material adverse effect that the COVID-19
pandemic is having on our business; the impact of incurring significant debt in
response to the pandemic; the possible effects of accidents involving our
aircraft; breaches or security lapses in our information technology systems;
disruptions in our information technology infrastructure; our dependence on
technology in our operations; the performance of our significant investments in
and commercial relationships with, airlines in other parts of the world; failure
to comply with the financial and other covenants in our financing agreements;
labor issues; the effects of weather, natural disasters and seasonality on our
business; the effects of an extended disruption in services provided by third
parties; the cost of aircraft fuel; the availability of aircraft fuel; failure
or inability of insurance to cover a significant liability at Monroe's Trainer
refinery; the impact of environmental regulation on the Trainer refinery,
including costs related to renewable fuel standard regulations; our ability to
retain senior management and key employees; damage to our reputation and brand
if we are exposed to significant adverse publicity; the effects of terrorist
attacks or geopolitical conflict; competitive conditions in the airline
industry; interruptions or disruptions in service at major airports at which we
operate; the effects of extensive government regulation on our business; the
impact of environmental regulation on our business; the sensitivity of the
airline industry to prolonged periods of stagnant or weak economic conditions;
and uncertainty in economic conditions and regulatory environment in the United
Kingdom related to the exit of the United Kingdom from the European Union.
Additional information concerning risks and uncertainties that could cause
differences between actual results and forward-looking statements is contained
in our Securities and Exchange Commission filings, including our Annual Report
on Form 10-K for the fiscal year ended December 31, 2019 and our
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Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2020.
Caution should be taken not to place undue reliance on our forward-looking
statements, which represent our views only as of September 14, 2020, and which
we have no current intention to update except to the extent required by law.
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