Originally Posted by
Rightseat Ballast
I personally think Shuttle America will be shown the door in the next two years. That is based on the assumption that Delta keeps Compass intact and as a wholly owned. Yes, I know S5 is currently updating it's fleet, and their performance numbers are fine, but BB does not like playing the whipsaw game with his 170/175's. I always feel nervous about a carrier that operates so few aircraft (16 is small for a Delta carrier), and is not slated to receive any additional airframes. Now, if S5 were awarded more aircraft, or had their flying moved to a localized market (Caribbean from the mainland) then I would say otherwise. But for now, S5 is only operating a few airplanes on routes that Compass could easily cover once the tails are repainted and the Delta/NW route structure is blended together.
Your assumtion may prove to come to fruition. In the past two or three of Delta's 10-Q reports, they have mentioned both CHQ and S5 and have contingencies as far terminating their contract. There is no other carriers mentioned.
Contingencies Related to Termination of Contract Carrier Agreements
We may terminate the Chautauqua and Shuttle America agreements without cause at any time after May 2010 and July 2015, respectively, by providing certain advance notice. If we terminate either the Chautauqua or Shuttle America agreements without cause, Chautauqua or Shuttle America, respectively, has the right to (1) assign to us leased aircraft that the airline operates for us, provided we are able to continue the leases on the same terms the airline had prior to the assignment and (2) require us to purchase or lease any of the aircraft that the airline owns and operates for us at the time of the termination. If we are required to purchase aircraft owned by Chautauqua or Shuttle America, the purchase price would be equal to the amount necessary to (1) reimburse Chautauqua or Shuttle America for the equity it provided to purchase the aircraft and (2) repay in full any debt outstanding at such time that is not being assumed in connection with such purchase. If we are required to lease aircraft owned by Chautauqua or Shuttle America, the lease would have (1) a rate equal to the debt payments of Chautauqua or Shuttle America for the debt financing of the aircraft calculated as if 90% of the aircraft was debt financed by Chautauqua or Shuttle America and (2) other specified terms and conditions.
We estimate that the total fair values, determined as of September 30, 2008, of the aircraft that Chautauqua or Shuttle America could assign to us or require that we purchase if we terminate without cause our contract carrier agreements with those airlines (the “Put Right”) are approximately $294 million and $359 million, respectively. The actual amount that we may be required to pay in these circumstances may be materially different from these estimates. If the Chautauqua or Shuttle America Put Right is exercised, we must also pay to the exercising carrier 10% interest (compounded monthly) on the equity the carrier provided when it purchased the put aircraft. These equity amounts for Chautauqua and Shuttle America total $27 million and $71 million, respectively.