Does Delta own the E-170&175's flown by the connection carriers?

 

Forsure Compass's, maybe some of Shuttle's.

 

Yes. Table will not post. Page 29.

10-Q

 

From 10-K:


Contingencies Related to Termination of Contract Carrier Agreements




We have two agreements with Shuttle America that relate to its operation of Embraer 145 and Embraer 170/175 aircraft under capacity purchase agreements. The Embraer 145 aircraft were operated by Chautauqua Airlines at December 31, 2014 and assigned with our consent to Shuttle America in January 2015. By providing required advance notice, we may terminate the Embraer 145 agreement without cause at any time. Similarly, we may terminate the Embraer 170/175 agreement without cause at any time after January 2016. If we terminate either of the agreements without cause, Shuttle America has the right to (1) assign to us certain 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 certain of the aircraft the airline owns and operates for us at the time of the termination. If we are required to purchase aircraft owned by Shuttle America, the purchase price would be equal to the amount necessary to (1) reimburse 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 Shuttle America, the lease would have (1) a rate equal to the aircraft-related debt payments of Shuttle America as if 90% of the aircraft was financed by Shuttle America and (2) other specified terms and conditions. Because these contingencies depend on our termination of the agreements without cause prior to their expiration dates, no obligation exists unless such termination occurs.




We estimate that the total fair values, determined as of December 31, 2014, of the aircraft Shuttle America could assign to us or require that we purchase if we terminate without cause our contract carrier agreement are approximately $111 million with respect to the Embraer 145 aircraft and $290 million with respect to the Embraer 170/175 aircraft. The actual amount we may be required to pay in these circumstances may be materially different from these estimates. If Shuttle America exercises this right, we must also pay Shuttle America 10% interest (compounded monthly) on the equity it provided when it purchased the aircraft. These equity amounts for the Embraer 145 and the Embraer 170/175 aircraft total $25 million and $52 million, respectively.

 

So if I read the above correctly, Shuttle owns their 170s/175s but can require Delta to purchase them if DL terminates the contract without cause after 1/16 (at appx $9.7m/copy). I don't see anything about Shuttle being required to sell them to DL...they'd possibly just turn around and fly 'em for AA. And then there's the other scenario - DL terminating the contract *with* cause, which seems like a plausible outcome considering they're suing em for breach of contract. Interested to know what's actually in that CPA, but I'd imagine it's hidden somewhere in the good Rev. Bedford's vault...

 

Delta back stopped the financing and if they terminate the agreement Shuttle America can assign the airplanes to Delta or not. After the end of the contract they are still required to make finance payments unless they are assigned to Delta under the terms. If SA continues to operate them for another carrier, then its a good deal for them but a risk for sure.

 

You nailed it with the last part. The RAH pilots may not accept that reality, but if RAH continues to have staffing issues, Delta will cancel their CPA, with cause, and the RAH can try and place them elsewhere, but that really won't work too well with their staffing issues that led to the cancellation in the first place. As for placing them with AA, the winds are already turning back to Envoy as the only regional that will be able to staff the Eagle flying for AA on a consistent basis. RAH has been cancelling Q400 and 50 seat lift just to keep up their staffing on 76 seat flying.

I wager Delta only keeps RAH around until it can replace that flying with mainline pilots.

I've said it a couple times over on the regional forum, the mainline partners are the ones in the driver seat and really "own" the aircraft.

 

Back in the 1990's, Delta owned both Com Air and ASA, and bought them about 600RJ's to fly as Delta parked mainline DC9's and furloughed pilots., while Com Air and ASA hired pilots.

A big chunk of the debt Delta is still paying off today was accumulated buying all those RJ's that are being parked today.

 

I feel that this money train won't last too much longer. If we can secure a good contract, maybe it would be beneficial to have it go 4/5 years. I wouldn't want a two year contract extension right now in this environment (UAL). That would put my pointer right in the time frame of a reducing market. Not a good negotiating environment.

 

If the last decade plus has taught nothing else it should be crystal clear when the money train ends.... so does any 'good' contract.