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More tidbits from that Fitch downgrade including some comments about fuel hedging. If you're a friend of EBITDA, then you can go to : Fitch Downgrades Delta Air Lines to 'B-' on Intense Revenue Pressure; Outlook Negative - Yahoo! Finance

The 'B-' IDR reflects DAL's weak near-term margin and cash flow outlook, the anticipated erosion of cash balances driven by weak operating results in the second half of 2009, and the carrier's extremely heavy lease-adjusted debt burden. Risk of default over the next year is mitigated by DAL's liquidity and cost advantages over its more vulnerable rivals--UAL, AMR and US Airways (all with IDRs of 'CCC' by Fitch). Fitch believes that a bankruptcy filing by any of those carriers, which could occur as early as the winter if operating trends fail to stabilize, would quickly result in further capacity rationalization and a stabilization of RASM trends for better-positioned carriers like DAL.

Most of the key labor representation and seniority issues have been resolved, and DAL appears on track to meet its goal of receiving a single airline operating certificate from the FAA by early 2010.

Fitch believes that full-year passenger RASM declines in the range of 10%-15% are now far more likely for DAL and the other legacy carriers with significant international and premium passenger exposure.

The big driver of negative RASM comparisons in the second quarter remains weak business bookings on high-fare trans-Atlantic and trans-Pacific routes. In order to offset the impact of poor front cabin loads, U.S. legacy carriers and foreign flag carriers have been engaged in aggressive fare discounting. Fitch expects this fare and unit revenue pressure to continue through the summer, dampening hopes of a free cash flow turnaround in the second half of the year. Recognizing the risk of widening losses in international markets after August, DAL's most recent capacity cut will seek to trim schedules in some of the underperforming international routes. On the cargo side, extreme revenue pressure linked to the global trade collapse led DAL to shut down the dedicated freighter operation inherited from NWA.

DAL's relative liquidity strength within the U.S. legacy carrier group has been pressured over the past year as a result of poor operating trends and the outflow of cash driven by the need to post fuel hedge margin collateral with hedging counterparties. While that liquidity effect is winding down as the out-of-the-money hedges roll off this year, DAL's total unrestricted liquidity position has worsened to the point where unrestricted cash, investments and revolver availability total less than 20% of annual revenues. On June 11, management indicated that Q2-ending liquidity will total $5.3 billion (including the undrawn $500 million NWA revolving credit facility). Given the carrier's heavy maturities over the next three years and the significant refinancing risk it faces in the still-constrained credit markets, Fitch regards a cash position of over $4.0 billion as critical for DAL as it faces negative free cash flow in the second half of the year and heavy scheduled debt maturities of over $2.9 billion in 2010.

Absent strong free cash flow, extensive capital markets activity will be required to refinance maturing obligations. One positive is the fact that all near-term aircraft orders have committed financing in place, and aircraft capital commitments in 2010 are relatively light. In addition, Continental's launch of a public enhanced equipment trust certificate (EETC) deal in early June bodes well for a revival of credit market access--at least for better-positioned airlines like DAL.

Since DAL and NWA were the last major carriers to restructure in Chapter 11 this decade, they exited with a unit cost advantage over the other U.S. legacy carriers. This puts the merged carrier in a position to report somewhat better margins than UAL, AMR and US Airways--even as DAL struggles with a network strategy that is not delivering big revenue premiums to the rest of the industry. Merger-related savings are being realized this year as facilities are streamlined, capacity and headcount are reduced and aircraft are parked. For the full year, DAL expects non-fuel unit costs to rise by 4%-6%. Fitch expects unit cost inflation to moderate somewhat in 2010 and 2011 if capacity cuts abate in line with a modestly better operating environment. Fuel costs will be the biggest single contributor to cash flow this year, with fuel-related cash savings of over $5 billion expected based on the forward curve.

Fuel Hedges
Like the other large U.S. airlines, DAL paid a steep price for aggressive fuel hedging undertaken in 2008 as energy prices soared before pulling back sharply. By 4Q08, after crude oil and jet fuel prices had dropped from their July highs, DAL began to unwind some of its remaining fuel hedge exposure. Even after the early termination of many fuel swaps, DAL was required under GAAP hedge accounting rules to recognize large losses in 4Q08 and 1Q09. This will continue over the next two quarters, and the company has indicated that it will likely book $500 million in hedge-related losses in the current quarter. From a cash standpoint, the key trend will be the working down of the fuel hedge collateral account to less than $100 million by the end of the June quarter. After the late 2008 fuel price collapse, DAL began layering on more protection for 2009. In order to reduce downside liquidity risk, the airline has used call options more extensively to hedge. DAL has approximately 52% of Q3 fuel consumption hedged. For Q4, hedges cover approximately 36% of projected consumption. Based on the forward curve, DAL's projected fuel price is $2.04 per gallon for Q2, $2.17 per gallon for Q3, and $2.05 per gallon for Q4. The narrowing jet fuel crack spread in the first half of this year has kept jet fuel prices from rising as much as gasoline and other refined products, limiting some of the damage of rising energy prices over the past several weeks.