1
Filed Pursuant to Rule 424(b)(2)
Registration No. 333-65218
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JULY 23, 2001)
$1,248,000,000
(DELTA AIR LINES LOGO)
PASS THROUGH CERTIFICATES, SERIES 2001-1
------------------
Delta Air Lines, Inc. is issuing, through five separate pass through trusts,
Class A-1, Class A-2, Class B, Class C and Class D Pass Through Certificates,
Series 2001-1. Only the Class A-1, Class A-2, Class B and Class C Certificates
are being offered pursuant to this prospectus supplement. The Class D
Certificates will be privately placed concurrently with the issuance of the
Class A-1, Class A-2, Class B and Class C Certificates. The Class D Certificates
are not being offered pursuant to this prospectus supplement.
Each Certificate will represent an interest in a pass through trust. The
proceeds from the sale of Certificates will be used by the trusts to acquire
equipment notes to be issued by Delta on a full recourse basis. Payments on the
equipment notes held in each trust will be passed through to the holders of
Certificates of such trust. The Certificates do not represent interests in or
obligations of Delta or any of its affiliates. The Certificates will not be
listed on any national securities exchange.
The equipment notes will be issued for each of 36 Boeing aircraft delivered
new to Delta from March 1995 through February 2001. The equipment notes issued
for each aircraft will be secured by a security interest in the related
aircraft. Interest on the equipment notes will be payable semiannually on each
March 18 and September 18, beginning March 18, 2002. The principal of the
equipment notes held for the Class A-1 Certificates is scheduled for payment on
March 18 and September 18 in certain years, beginning on March 18, 2002 and
ending on March 18, 2011. The entire principal amount of the equipment notes
held for the Class A-2 and Class B Certificates is scheduled for payment on
September 18, 2011. The entire principal amount of the equipment notes held for
the Class C and Class D Certificates is scheduled for payment on September 18,
2006.
The Class A-1 and Class A-2 Certificates will rank equally in right to
distributions and rank senior in right to distributions to the other
Certificates. The Class B Certificates will rank junior in right to
distributions to the Class A-1 and Class A-2 Certificates and will rank senior
in right to distributions to the Class C and Class D Certificates. The Class C
Certificates will rank junior in right to distributions to the Class A-1, Class
A-2 and Class B Certificates and will rank senior in right of distributions to
the Class D Certificates. The Class D Certificates will rank junior in right to
distributions to the other Certificates.
Landesbank Hessen-Thuringen Girozentrale will provide a separate liquidity
facility for each of the Class A-1, Class A-2, Class B and Class C Certificates.
Each liquidity facility will be in an amount sufficient to make three semiannual
interest distributions on the related class of Certificates.
INVESTING IN THE CERTIFICATES INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE S-13.
<Table>
<Caption>
FACE INTEREST FINAL EXPECTED PRICE TO
CERTIFICATES AMOUNT RATE DISTRIBUTION DATE PUBLIC(1)
- ------------ ------------ -------- ------------------- ---------
Class A-1............................................... $300,000,000 5.869% March 18, 2011 100%
Class A-2............................................... $571,148,000 6.361% September 18, 2011 100%
Class B................................................. $207,070,000 6.711% September 18, 2011 100%
Class C................................................. $169,782,000 6.299% September 18, 2006 100%
</Table>
- ---------------
(1) Plus accrued interest, if any, from the date of issuance.
The underwriters will purchase all of the Class A-1, Class A-2, Class B and
Class C Certificates if any are purchased. The aggregate proceeds from the sale
of the Class A-1, Class A-2, Class B and Class C Certificates will be
$1,248,000,000. Delta will pay the underwriters a commission of $8,125,000.
Delivery of the Class A-1, Class A-2, Class B and Class C Certificates in book-
entry form only will be made on or about September 17, 2001 against payment in
immediately available funds.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus supplement or the prospectus. Any
representation to the contrary is a criminal offense.
JOINT BOOKRUNNERS
SALOMON SMITH BARNEY JPMORGAN
CO-MANAGERS
COMMERZBANK SECURITIES MIZUHO INTERNATIONAL PLC SUNTRUST ROBINSON HUMPHREY
TOKYO-MITSUBISHI INTERNATIONAL PLC CREDIT LYONNAIS SECURITIES KBC FINANCIAL
PRODUCTS
September 6, 2001.
2
PRESENTATION OF INFORMATION
These offering materials consist of two documents: (a) this prospectus
supplement, which describes the terms of the Certificates that we are currently
offering, and (b) the accompanying prospectus, which provides general
information about our Certificates, some of which may not apply to the
Certificates that we are currently offering. The information in this prospectus
supplement replaces any inconsistent information included in the accompanying
prospectus.
We have given certain capitalized terms specific meanings for purposes of
this prospectus supplement. The Index of Terms attached as Appendix I to this
prospectus supplement lists the page in this prospectus supplement on which we
have defined each such term.
At varying places in this prospectus supplement and the prospectus, we
refer you to other sections of such documents for additional information by
indicating the caption heading of such other sections. The page on which each
principal caption included in this prospectus supplement and the prospectus can
be found is listed in the Table of Contents below. All such cross references in
this prospectus supplement are to captions contained in this prospectus
supplement and not in the prospectus, unless otherwise stated.
This prospectus supplement and the accompanying prospectus include
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended, which represent Delta's expectations or beliefs concerning future
events. When used in this prospectus supplement and the accompanying prospectus,
the words "expects," "plans," "anticipates" and similar expressions are intended
to identify forward-looking statements. All forward-looking statements in this
prospectus supplement are based upon information available to us on the date of
this prospectus supplement. We undertake no obligation to update publicly or
revise any forward-looking statement, whether as a result of new information,
future events or otherwise. Forward-looking statements involve risks and
uncertainties that could cause actual results to differ materially from
historical experience or our expectations. Additional information concerning
these and other factors is contained in our SEC filings, including but not
limited to Delta's Forms 10-K, 10-Q and 8-K.
----------------------
i
3
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS AND THE DOCUMENTS INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS OR TO WHICH WE HAVE
REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT
IS DIFFERENT. IF ANYONE PROVIDES YOU WITH DIFFERENT OR INCONSISTENT INFORMATION,
YOU SHOULD NOT RELY ON IT. THIS DOCUMENT MAY BE USED ONLY WHERE IT IS LEGAL TO
SELL THESE SECURITIES. YOU SHOULD NOT ASSUME THAT THE INFORMATION PROVIDED BY
THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IS ACCURATE AS OF ANY
DATE OTHER THAN THE DATE OF THIS PROSPECTUS SUPPLEMENT.
------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<Table>
<Caption>
PAGE
-----
PRESENTATION OF INFORMATION................................. i
SUMMARY..................................................... S-1
Equipment Notes and the Aircraft.......................... S-2
Loan to Aircraft Value Ratios............................. S-3
Cash Flow Structure....................................... S-4
The Offering.............................................. S-5
Selected Financial and Operating Data..................... S-11
RISK FACTORS................................................ S-13
Appraisals and Realizable Value of Aircraft............... S-13
Repossession.............................................. S-13
Priority of Distributions; Subordination.................. S-13
Control Over Collateral; Sale of Collateral............... S-14
Ratings of the Certificates............................... S-15
No Protection Against Highly Leveraged or Extraordinary
Transactions........................................... S-15
Limited Ability to Resell the Certificates................ S-15
THE COMPANY................................................. S-16
USE OF PROCEEDS............................................. S-16
DESCRIPTION OF THE CERTIFICATES............................. S-16
General................................................... S-16
Distribution of Payments on Equipment Notes............... S-17
Subordination............................................. S-19
Pool Factors.............................................. S-19
Reports to Certificateholders............................. S-20
Indenture Events of Default and Certain Rights upon an
Indenture Event of Default............................. S-21
Purchase Rights of Certificateholders..................... S-23
PTC Event of Default...................................... S-23
Merger, Consolidation and Transfer of Assets.............. S-24
Modification of the Pass Through Trust Agreements and
Certain Other Agreements............................... S-24
Termination of the Trusts................................. S-26
The Trustees.............................................. S-27
Book-Entry Registration; Delivery and Form................ S-27
DESCRIPTION OF THE LIQUIDITY FACILITIES..................... S-28
General................................................... S-28
Drawings.................................................. S-28
Replacement of Liquidity Facilities....................... S-29
Reimbursement of Drawings................................. S-31
Interest Drawings and Final Drawings................... S-31
Downgrade Drawings and Non-Extension Drawings.......... S-32
</Table>
ii
4
<Table>
<Caption>
PAGE
-----
Liquidity Events of Default............................... S-32
Liquidity Provider........................................ S-33
DESCRIPTION OF THE INTERCREDITOR AGREEMENT.................. S-33
Intercreditor Rights...................................... S-33
General................................................ S-33
Controlling Party...................................... S-33
Sale of Equipment Notes or Aircraft.................... S-34
Priority of Distributions................................. S-35
Before a Triggering Event.............................. S-35
After a Triggering Event............................... S-36
The Subordination Agent................................... S-38
DESCRIPTION OF THE AIRCRAFT AND THE APPRAISALS.............. S-39
The Aircraft.............................................. S-39
The Appraisals............................................ S-39
DESCRIPTION OF THE EQUIPMENT NOTES.......................... S-40
General................................................... S-41
Subordination............................................. S-41
Principal and Interest Payments........................... S-41
Redemption................................................ S-42
Security.................................................. S-43
Loan to Value Ratios of Equipment Notes................... S-43
Defeasance................................................ S-43
Limitation of Liability................................... S-44
Indenture Events of Default, Notice and Waiver............ S-44
Remedies.................................................. S-45
Modification of Indentures................................ S-46
Indemnification........................................... S-46
Certain Provisions of the Indentures...................... S-47
Maintenance and Operation.............................. S-47
Registration, Leasing and Possession................... S-48
Liens.................................................. S-48
Insurance.............................................. S-49
Events of Loss......................................... S-49
CERTAIN FEDERAL INCOME TAX CONSEQUENCES..................... S-51
General................................................... S-51
Sales of Offered Certificates............................. S-52
Effect of Subordination on Subordinated Certificate
Owners................................................. S-52
Bond Premium.............................................. S-53
Original Issue Discount................................... S-53
Certain Federal Income Tax Consequences to Foreign
Certificateholders..................................... S-53
Backup Withholding........................................ S-54
CERTAIN CONNECTICUT TAXES................................... S-54
CERTAIN ERISA CONSIDERATIONS................................ S-54
General................................................... S-55
Plan Assets Issues........................................ S-55
Prohibited Transaction Exemptions......................... S-55
Special Considerations Applicable to Insurance Company
General Accounts....................................... S-56
UNDERWRITING................................................ S-57
LEGAL OPINIONS.............................................. S-58
EXPERTS..................................................... S-59
APPENDIX I: INDEX OF TERMS.................................. I-1
</Table>
iii
5
<Table>
<Caption>
PAGE
-----
APPENDIX II: APPRAISAL LETTERS.............................. II-1
APPENDIX III: EQUIPMENT NOTE PRINCIPAL PAYMENTS............. III-1
APPENDIX IV: LOAN TO VALUE RATIOS OF EQUIPMENT NOTES........ IV-1
</Table>
PROSPECTUS
<Table>
<Caption>
PAGE
----
About This Prospectus....................................... 1
Delta Air Lines, Inc........................................ 1
General Outline............................................. 1
Use of Proceeds............................................. 2
Consolidated Ratios of Earnings to Fixed Charges............ 3
Description of the Certificates............................. 3
Description of the Equipment Notes.......................... 18
Certain United States Federal Income Tax Consequences....... 26
ERISA Considerations........................................ 29
Plan of Distribution........................................ 30
Validity of the Certificates................................ 31
Experts..................................................... 31
Where You Can Find More Information......................... 31
</Table>
iv
6
SUMMARY
The following is a summary and does not contain all of the information that
may be important to you. You should read the more detailed information and
consolidated financial statements appearing elsewhere in this prospectus
supplement and accompanying prospectus, as well as the materials filed by Delta
with the Securities and Exchange Commission that are considered to be part of
the prospectus. See "Where You Can Find More Information" in the prospectus.
Unless otherwise indicated, "we," "us," "our" and similar terms, as well as
references to "Delta," refer to Delta Air Lines, Inc.
SUMMARY OF TERMS OF CERTIFICATES
<Table>
<Caption>
CLASS A-1 CLASS A-2 CLASS B CLASS C CLASS D
CERTIFICATES CERTIFICATES CERTIFICATES CERTIFICATES CERTIFICATES(1)
------------------ ------------------ ------------------ ------------------ ------------------
Aggregate face
amount............. $300,000,000 $571,148,000 $207,070,000 $169,782,000 $150,000,000
Ratings:
Moody's.............. Aa2 Aa2 Aa3 A2 Not Rated
Standard & Poor's.... AAA AAA AA- A+ Not Rated
Initial Loan to
Aircraft value
ratio
(cumulative)(2).... 46.0% 46.0% 56.9% 65.9% 73.8%
Expected maximum Loan
to Aircraft value
ratio
(cumulative)....... 46.0% 46.0% 59.5% 65.9% 74.9%
Expected principal
distribution window
(in years)......... 0.5-9.5 10.0 10.0 5.0 5.0
Initial average life
(in years)......... 5.1 10.0 10.0 5.0 5.0
Regular Distribution
Dates.............. March 18 and March 18 and March 18 and March 18 and March 18 and
September 18 September 18 September 18 September 18 September 18
Final expected
Regular
Distribution
Date............... March 18, 2011 September 18, 2011 September 18, 2011 September 18, 2006 September 18, 2006
Final Legal
Distribution
Date............... September 18, 2012 March 18, 2013 March 18, 2013 March 18, 2008 September 18, 2006
Minimum
denomination....... $1,000 $1,000 $1,000 $1,000 $100,000
Section 1110
protection......... Yes Yes Yes Yes Yes
Liquidity Facility
coverage........... 3 semiannual 3 semiannual 3 semiannual 3 semiannual No
interest payments interest interest interest
payments payments payments
</Table>
- ---------------
(1) The Class D Certificates will be privately placed concurrently with the
issuance of the other classes of Certificates. We are not offering the Class
D Certificates pursuant to this prospectus supplement.
(2) The initial aggregate appraised value of the Aircraft is $1,893,800,000. See
"Loan To Aircraft Value Ratios" in this prospectus supplement summary for
the method we used in calculating the Loan to Aircraft value ratios.
S-1
7
EQUIPMENT NOTES AND THE AIRCRAFT
The Trusts will hold secured Equipment Notes issued for each of 36 Boeing
aircraft, consisting of 16 Boeing 737-832 aircraft, 13 Boeing 757-232 aircraft
and 7 Boeing 767-332ER aircraft. All of the Aircraft have been delivered to and
are being operated by Delta. The Equipment Notes issued with respect to each
Aircraft will be secured by a security interest in such Aircraft. See
"Description of the Aircraft and the Appraisals" for a description of the
Aircraft. Set forth below is information about the Aircraft and the Equipment
Notes for those Aircraft.
<Table>
<Caption>
PRINCIPAL AMOUNT OF
MANUFACTURER'S REGISTRATION DATE APPRAISED BASE SERIES A-1, A-2, B, C
AIRCRAFT TYPE SERIAL NUMBER NUMBER DELIVERED VALUE(1) AND D EQUIPMENT NOTES
- ------------- -------------- ------------ --------- -------------- ---------------------
Boeing 737-832.................. 30775 N3731T 9/29/00 $ 43,516,667 $32,123,931
Boeing 737-832.................. 30380 N3732J 10/4/00 43,630,000 32,207,593
Boeing 737-832.................. 30539 N3733Z 10/27/00 43,630,000 32,207,593
Boeing 737-832.................. 30776 N3734B 10/28/00 43,630,000 32,207,593
Boeing 737-832.................. 30381 N3735D 11/3/00 43,680,000 32,244,503
Boeing 737-832.................. 30540 N3736C 11/27/00 43,680,000 32,244,503
Boeing 737-832.................. 30799 N3737C 11/30/00 43,680,000 32,244,503
Boeing 737-832.................. 30382 N3738B 12/14/00 43,680,000 32,244,503
Boeing 737-832.................. 30541 N3739P 12/14/00 43,680,000 32,244,503
Boeing 737-832.................. 30800 N3740C 12/19/00 43,680,000 32,244,503
Boeing 737-832.................. 30487 N3741S 1/27/01 44,940,000 33,174,633
Boeing 737-832.................. 30835 N3742C 2/1/01 45,056,667 33,260,756
Boeing 737-832.................. 30836 N3743H 2/21/01 45,056,667 33,260,756
Boeing 737-832.................. 30837 N3744F 5/24/01 45,373,333 33,494,519
Boeing 737-832.................. 32373 N3745B 6/12/01 45,490,000 33,580,642
Boeing 737-832.................. 32374 N3747D 5/21/01 45,373,333 33,494,519
Boeing 757-232.................. 27588 N685DA 3/31/95 41,480,000 30,620,467
Boeing 757-232.................. 27589 N686DA 9/20/95 42,630,000 31,469,395
Boeing 757-232.................. 27586 N687DL 5/4/98 49,003,333 36,174,179
Boeing 757-232.................. 27587 N688DL 5/21/98 49,003,333 36,174,179
Boeing 757-232.................. 27172 N689DL 6/18/98 49,123,333 36,262,763
Boeing 757-232.................. 27585 N690DL 6/26/98 49,123,333 36,262,763
Boeing 757-232.................. 29724 N692DL 9/4/98 49,500,000 36,540,817
Boeing 757-232.................. 29725 N693DL 10/17/98 49,620,000 36,629,401
Boeing 757-232.................. 29726 N694DL 11/11/98 49,756,667 36,730,288
Boeing 757-232.................. 29727 N695DL 12/11/98 49,896,667 36,833,636
Boeing 757-232.................. 30485 N6714Q 12/19/00 54,440,000 40,187,517
Boeing 757-232.................. 30486 N6715C 2/14/01 55,150,000 40,711,638
Boeing 757-232.................. 30838 N6716C 3/9/01 55,200,000 40,748,548
Boeing 767-332ER................ 29689 N169DZ 6/18/98 74,176,667 54,757,092
Boeing 767-332ER................ 29690 N171DZ 9/11/98 74,690,000 55,136,033
Boeing 767-332ER................ 29691 N172DZ 9/25/98 74,690,000 55,136,033
Boeing 767-332ER................ 29692 N173DZ 11/2/98 75,090,000 55,431,313
Boeing 767-332ER................ 30573 N1608 4/21/00 81,150,000 59,904,795
Boeing 767-332ER................ 30574 N1609 4/25/00 81,150,000 59,904,795
Boeing 767-332ER................ 30594 N1610D 4/26/00 81,150,000 59,904,795
</Table>
- ---------------
(1) The appraised base value of each Aircraft set forth above is the lesser of
the average and median appraised base value of such Aircraft as appraised by
three independent appraisal and consulting firms. The appraisers based their
appraisals on varying assumptions (which may not reflect current market
conditions) and methodologies. See "Description of the Aircraft and the
Appraisals -- The Appraisals." An appraisal is only an estimate of value and
you should not rely on any appraisal as a measure of realizable value. See
"Risk Factors -- Appraisals and Realizable Value of Aircraft."
S-2
8
LOAN TO AIRCRAFT VALUE RATIOS
The following table provides Loan to Aircraft value ratios ("LTVs") for
each Class of Certificates as of the issuance date of the Certificates and each
September 18 Regular Distribution Date. The table is not a forecast or
prediction of expected or likely LTVs, but a mathematical calculation based upon
one set of assumptions. See "Risk Factors -- Appraisals and Realizable Value of
Aircraft."
We compiled the following table on an aggregate basis. However, the
Equipment Notes secured by an Aircraft will not be secured by any other
Aircraft. This means that any excess proceeds realized from the sale of an
Aircraft or other exercise of default remedies would not be available to cover
any shortfalls on the Equipment Notes relating to any other Aircraft. The
proceeds from the sale of an Aircraft, to the extent paid to the Subordination
Agent in respect of any Series of Equipment Notes secured by that Aircraft, may
be available for distribution pursuant to the Intercreditor Agreement to one or
more Senior Classes of Certificateholders in a default situation. See
"Description of the Equipment Notes -- Loan to Value Ratios of Equipment Notes"
and Appendix IV for LTVs for the Equipment Notes issued in respect of individual
Aircraft, which may be more relevant in a default situation than the aggregate
values shown below.
<Table>
<Caption>
ASSUMED OUTSTANDING BALANCE(2) LTV(3)
AGGREGATE ------------------------------------------------------------------------ ------------
AIRCRAFT CLASS A-1 CLASS A-2 CLASS B CLASS C CLASS D CLASS A-1
DATE VALUE(1) CERTIFICATES CERTIFICATES CERTIFICATES CERTIFICATES CERTIFICATES CERTIFICATES
- ---- -------------- ------------ ------------ ------------ ------------ ------------ ------------
September 17, 2001... $1,893,800,000 $300,000,000 $571,148,000 $207,070,000 $169,782,000 $150,000,000 46.0%
September 18, 2002... 1,836,714,865 262,395,096 571,148,000 207,070,000 169,782,000 150,000,000 45.4
September 18, 2003... 1,779,629,729 224,775,992 571,148,000 207,070,000 169,782,000 150,000,000 44.7
September 18, 2004... 1,722,544,594 187,156,888 571,148,000 207,070,000 169,782,000 150,000,000 44.0
September 18, 2005... 1,665,459,459 149,537,783 571,148,000 207,070,000 169,782,000 150,000,000 43.3
September 18, 2006... 1,608,374,324 129,977,115 571,148,000 207,070,000 -- -- 43.6
September 18, 2007... 1,551,289,188 126,572,363 571,148,000 207,070,000 -- -- 45.0
September 18, 2008... 1,494,204,053 110,833,412 571,148,000 207,070,000 -- -- 45.6
September 18, 2009... 1,437,118,918 76,867,756 571,148,000 207,070,000 -- -- 45.1
September 18, 2010... 1,380,033,783 42,902,101 571,148,000 207,070,000 -- -- 44.5
September 18, 2011... -- -- -- -- -- -- NA
<Caption>
LTV(3)
---------------------------------------------------------
CLASS A-2 CLASS B CLASS C CLASS D
DATE CERTIFICATES CERTIFICATES CERTIFICATES CERTIFICATES
- ---- ------------ ------------ ------------ ------------
September 17, 2001... 46.0% 56.9% 65.9% 73.8%
September 18, 2002... 45.4 56.7 65.9 74.1
September 18, 2003... 44.7 56.4 65.9 74.3
September 18, 2004... 44.0 56.0 65.9 74.6
September 18, 2005... 43.3 55.7 65.9 74.9
September 18, 2006... 43.6 56.5 NA NA
September 18, 2007... 45.0 58.3 NA NA
September 18, 2008... 45.6 59.5 NA NA
September 18, 2009... 45.1 59.5 NA NA
September 18, 2010... 44.5 59.5 NA NA
September 18, 2011... NA NA NA NA
</Table>
- ---------------
(1) In calculating the aggregate Assumed Aircraft Value, we assumed that the
appraised base value of each Aircraft determined as described under
"Equipment Notes and the Aircraft" declines by approximately 3% annually for
the first fifteen years from the date of delivery by the manufacturer of
such Aircraft and by approximately 4% annually for the next five years
thereafter. Other rates or methods of depreciation may result in materially
different LTVs. We cannot assure you that the depreciation rate and method
assumed for purposes of the table are the ones most likely to occur or
predict the actual future value of any Aircraft. See "Risk
Factors -- Appraisals and Realizable Value of Aircraft."
(2) The "pool balance" for each Class of Certificates indicates, as of any date,
the portion of the original face amount of such Class of Certificates that
has not been distributed to Certificateholders.
(3) We obtained the LTVs for each Class of Certificates for each September 18
Regular Distribution Date by dividing (i) the expected outstanding pool
balance of such Class together with the expected outstanding pool balance of
all other Classes ranking equal or senior in right to distributions to such
Class after giving effect to the distributions expected to be made on such
date, by (ii) the assumed value of all of the Aircraft on such date based on
the assumptions described above.
S-3
9
CASH FLOW STRUCTURE
This diagram illustrates the structure for the offering of the Certificates
and cash flows.
(Cash Flow Structure Chart)
- ---------------
(1) Delta will issue Series A-1, Series A-2, Series B, Series C and Series D
Equipment Notes in respect of each Aircraft. We are not offering the Class D
Certificates under this prospectus supplement. The Equipment Notes with
respect to each Aircraft will be subject to a separate Indenture. The
Equipment Notes will not be cross-collateralized. There will not be any
cross-default provisions in the Indentures.
(2) Separate Liquidity Facilities will be available with respect to the Class
A-1, Class A-2, Class B and Class C Certificates for up to three semiannual
interest distributions on the Certificates of such Class. There will be no
liquidity facility in respect of the Class D Certificates.
S-4
10
THE OFFERING
Trusts..................... The Class A-1 Trust, the Class A-2 Trust, the Class
B Trust, the Class C Trust and the Class D Trust
each will be formed pursuant to a separate trust
supplement to a basic pass through trust agreement
between Delta and State Street Bank and Trust
Company of Connecticut, National Association, as
Trustee under each Trust.
Certificates Offered....... - Class A-1 Certificates
- Class A-2 Certificates
- Class B Certificates
- Class C Certificates
Each Class of Certificates will represent
fractional undivided interests in the related
Trust.
Class D Certificates....... We are not offering the Class D Certificates under
this prospectus supplement, but will privately
place the Class D Certificates with our affiliate
concurrently with the issuance of the other
Certificates. There will be no liquidity facility
for the Class D Certificates.
Use of Proceeds............ The proceeds from the sale of the Certificates of
each Trust will be used to acquire the Equipment
Notes to be held by such Trust. The Equipment Notes
will be full recourse obligations of Delta. Delta
will use the proceeds from the issuance of the
Equipment Notes for general corporate purposes
including, among other possible uses, the repayment
of $800 million Delta borrowed in April 2001 under
its $1.25 billion revolving credit facility with a
group of banks.
Subordination Agent,
Trustee and Loan Trustee... State Street Bank and Trust Company of Connecticut,
National Association.
Liquidity Provider......... Initially, Landesbank Hessen-Thuringen
Girozentrale.
Trust Property............. The property of each Trust will include:
- Equipment Notes acquired by such Trust;
- All rights of such Trust under the Intercreditor
Agreement described below (including all monies
receivable pursuant to such rights);
- All monies receivable under the Liquidity
Facility for such Trust (other than the Class D
Trust); and
- Funds from time to time deposited with the
Trustee in accounts relating to such Trust.
Regular Distribution
Dates...................... March 18 and September 18 of each year, commencing
on March 18, 2002.
Record Dates............... The fifteenth day preceding the related
Distribution Date.
Distributions.............. The Trustee will distribute all payments of
principal, Make-Whole Amount (if any) and interest
received on the Equipment Notes held in each Trust
to the holders of the Certificates of such Trust,
subject to the subordination provisions applicable
to the Certificates.
S-5
11
Subject to the subordination provisions applicable
to the Certificates, scheduled payments of
principal and interest made on the Equipment Notes
will be distributed on the applicable Regular
Distribution Dates. Subject to the subordination
provisions applicable to the Certificates, payments
of principal, Make-Whole Amount (if any) and
interest made on the Equipment Notes resulting from
any early redemption of such Equipment Notes will
be distributed on a Special Distribution Date after
not less than 15 days' notice to
Certificateholders.
Intercreditor Agreement.... The Trusts, the Liquidity Provider and the
Subordination Agent will enter into the
Intercreditor Agreement. The Intercreditor
Agreement states how payments made on the Equipment
Notes and the Liquidity Facilities will be
distributed among the Trusts and the Liquidity
Provider. The Intercreditor Agreement also sets
forth agreements among the Trusts and the Liquidity
Provider relating to who will control the exercise
of remedies under the Equipment Notes and the
Indentures.
Subordination.............. Under the Intercreditor Agreement, after the
Liquidity Provider is reimbursed (if necessary) and
certain other fees and expenses are paid,
distributions on the Certificates generally will be
made in the following order:
- First, to the holders of the Class A-1 and Class
A-2 Certificates;
- Second, to the holders of the Class B
Certificates;
- Third, to the holders of the Class C
Certificates; and
- Fourth, to the holders of the Class D
Certificates.
However, if Delta is in bankruptcy or other
specified defaults have occurred but Delta is
continuing to meet certain of its payment
obligations, the subordination provisions
applicable to the Certificates permit distributions
to be made on junior Certificates prior to making
distributions in full on the more senior
Certificates.
Control of Loan Trustee.... The holders of at least a majority of the
outstanding principal amount of Equipment Notes
issued under any Indenture will be entitled to
direct the Loan Trustee under such Indenture in
taking action as long as no Indenture Event of
Default is continuing thereunder. If an Indenture
Event of Default is continuing under such
Indenture, subject to certain conditions, the
Controlling Party will direct the Loan Trustee in
taking action under such Indenture (including in
exercising remedies, such as accelerating such
Equipment Notes or foreclosing the lien on the
Aircraft securing such Equipment Notes).
The Controlling Party will be:
- The Class A-1 Trustee or Class A-2 Trustee,
whichever represents the Class with the larger
Pool Balance of Certificates outstanding at the
time the Indenture Event of Default occurs;
- Upon payment of Final Distributions to the
holders of such larger Class, the other of the
Class A-1 Trustee or Class A-2 Trustee;
- Upon payment of Final Distributions to the
holders of Class A-1 and Class A-2 Certificates,
the Class B Trustee;
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- Upon payment of Final Distributions to the
holders of Class B Certificates, the Class C
Trustee;
- Upon payment of Final Distributions to the
holders of Class C Certificates, the Class D
Trustee; and
- Under certain circumstances, and notwithstanding
the foregoing, the Liquidity Provider with the
greatest amount owed to it.
In exercising remedies during the nine months after
the earlier of (a) the acceleration of the
Equipment Notes issued pursuant to any Indenture or
(b) the bankruptcy of Delta, the Controlling Party
may not, without the consent of each Trustee, sell
such Equipment Notes or the Aircraft subject to the
lien of such Indenture for less than certain
specified minimums.
Right to Buy Other Classes
of Certificates............ If Delta is in bankruptcy or certain other
specified events have occurred, Certificateholders
will have the right to buy certain other Classes of
Certificates on the following basis:
- If either the Class A-1 or Class A-2
Certificateholders are then represented by the
Controlling Party, the Certificateholders of such
Class that is not so represented will have the
right to purchase all, but not less than all, of
the Certificates of such Class that is so
represented.
- The Class B Certificateholders will have the
right to purchase all, but not less than all, of
the Class A-1 and Class A-2 Certificates.
- The Class C Certificateholders will have the
right to purchase all, but not less than all, of
the Class A-1, Class A-2 and Class B
Certificates.
- The Class D Certificateholders (other than Delta
or any of its affiliates) will have the right to
purchase all, but not less than all, of the Class
A-1, Class A-2, Class B and Class C Certificates.
The purchase price in each case described above
will be the outstanding principal balance of the
applicable Class of Certificates plus accrued and
undistributed interest.
Liquidity Facilities....... Under the Liquidity Facility for each Trust (other
than the Class D Trust), the Liquidity Provider
will, if necessary, make advances in an aggregate
amount sufficient to pay interest distributions on
the applicable Class of Certificates on up to three
successive semiannual Regular Distribution Dates at
the applicable interest rate for such Certificates.
The Liquidity Facilities cannot be used to pay any
other amount in respect of the Certificates.
Notwithstanding the subordination provisions
applicable to the Certificates, the holders of the
Certificates issued by each Trust (other than the
Class D Trust) will be entitled to receive and
retain the proceeds of drawings under the Liquidity
Facility for such Trust.
Upon each drawing under any Liquidity Facility to
pay interest distributions on any of the
Certificates, the Subordination Agent will be
obligated to reimburse the applicable Liquidity
Provider for the amount of such drawing, together
with interest on such drawing. Such
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reimbursement obligation and all interest, fees and
other amounts owing to the Liquidity Provider under
each Liquidity Facility will rank senior to all of
the Certificates in right of payment.
Equipment Notes
(a) Issuer............... Under each Indenture, Delta will issue Series A-1,
Series A-2, Series B, Series C and Series D
Equipment Notes, which will be acquired,
respectively, by the Class A-1, Class A-2, Class B,
Class C and Class D Trusts.
(b) Interest............. The Equipment Notes held in each Trust will accrue
interest at the rate per annum for the Certificates
issued by such Trust. The rate per annum for the
Class A-1, Class A-2, Class B and Class C
Certificates is set forth on the cover page of this
prospectus supplement. The rate per annum for the
Class D Certificates is 6.950%. Interest on the
Equipment Notes will be payable on March 18 and
September 18 of each year, commencing on March 18,
2002. Interest will be calculated on the basis of a
360-day year consisting of twelve 30-day months.
(c) Principal............ Amortizing Notes. Principal payments on the Series
A-1 Equipment Notes are scheduled to be received in
specified amounts on March 18 and September 18 in
certain years, commencing on March 18, 2002 and
ending on March 18, 2011.
Bullet Maturity Notes. The entire principal
amounts of the Series A-2 and Series B Equipment
Notes are scheduled to be paid on September 18,
2011. The entire principal amount of the Series C
and Series D Equipment Notes is scheduled to be
paid on September 18, 2006.
(d) Redemption........... Aircraft Event of Loss. If an Event of Loss occurs
with respect to an Aircraft, all of the Equipment
Notes issued with respect to such Aircraft will be
redeemed, unless such Aircraft is replaced by Delta
under the related Indenture. The redemption price
in such case will be the unpaid principal amount of
such Equipment Notes, together with accrued
interest, but without any Make-Whole Amount. See
"Description of the Equipment Notes -- Redemption."
Optional Redemption. Delta may elect to redeem at
any time prior to maturity all of the Equipment
Notes issued with respect to an Aircraft. The
redemption price in such case will be the unpaid
principal amount of such Equipment Notes, together
with accrued interest, plus a Make-Whole Amount.
See "Description of the Equipment Notes --
Redemption."
(e) Security............. The Equipment Notes issued with respect to each
Aircraft will be secured by a security interest in
such Aircraft.
The Equipment Notes will not be
cross-collateralized. This means that the Equipment
Notes secured by an Aircraft will not be secured by
any other Aircraft. Any excess proceeds from the
sale of an Aircraft or other exercise of default
remedies with respect to such Aircraft will not be
available to cover any shortfalls on the Equipment
Notes relating to any other Aircraft.
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By virtue of the Intercreditor Agreement, all of
the Equipment Notes will be effectively
cross-subordinated. This means that payments
received on a junior series of Equipment Notes
issued in respect of one Aircraft may be applied in
accordance with the priority of payment provisions
set forth in the Intercreditor Agreement to make
distributions on a more senior Class of
Certificates.
There will be no cross-default provisions in the
Indentures. This means that if the Equipment Notes
issued with respect to one or more Aircraft are in
default and the Equipment Notes issued with respect
to the remaining Aircraft are not in default, the
Controlling Party may not exercise remedies for the
remaining Aircraft.
(f) Section 1110
Protection........... Cadwalader, Wickersham & Taft, special counsel to
Delta, will provide an opinion to the Trustees that
the benefits of Section 1110 of the Bankruptcy Code
will be available for each of the Aircraft.
Certain Federal Income Tax
Consequences............. The Trusts themselves will not be subject to
federal income tax. Each Certificate Owner should
report on its federal income tax return its pro
rata share of the income from the Equipment Notes,
if any, and other property held by the relevant
Trust, in accordance with such Certificate Owner's
method of accounting. See "Certain Federal Income
Tax Consequences."
Certain ERISA
Considerations........... Each person who acquires a Certificate will be
deemed to have represented that either:
- no assets of an employee benefit plan or an
individual retirement account or of any trust
established under such a plan or account have
been used to purchase such Certificate; or
- the purchase and holding of such Certificate by
such person are exempt from the prohibited
transaction restrictions of the Employee
Retirement Income Security Act of 1974 and the
Internal Revenue Code of 1986 pursuant to one or
more prohibited transaction statutory or
administrative exemptions.
See "Certain ERISA Considerations."
Ratings of the
Certificates............... It is a condition to the issuance of the
Certificates that the Certificates be rated by
Moody's and Standard & Poor's at not less than the
ratings set forth below:
<Table>
<Caption>
CERTIFICATES MOODY'S STANDARD & POOR'S
------------ ------- -----------------
Class A-1............................. Aa2 AAA
Class A-2............................. Aa2 AAA
Class B............................... Aa3 AA-
Class C............................... A2 A+
</Table>
A rating is not a recommendation to purchase, hold
or sell Certificates, and such rating does not
address market price or suitability for a
particular investor. There can be no assurance that
such ratings will not be lowered or withdrawn by a
Rating Agency. See "Risk Factors -- Ratings of the
Certificates."
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The Class D Certificates will not be rated.
<Table>
<Caption>
Threshold Rating
Requirements for the CERTIFICATES MOODY'S STANDARD & POOR'S
Liquidity Provider. ------------ ------- -----------------
Class A-1............................. P-1 A-1+
Class A-2............................. P-1 A-1+
Class B............................... P-1 A-1+
Class C............................... P-1 A-1
</Table>
Liquidity Provider
Rating..................... The Liquidity Provider currently meets the
Threshold Rating requirement for each Class of
Certificates.
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SELECTED FINANCIAL AND OPERATING DATA
The following table presents selected financial data and certain operating
data of Delta. We derived the annual historical financial data from Delta's
audited consolidated financial statements and the notes thereto. Those audited
consolidated financial statements are incorporated by reference in the
prospectus accompanying this prospectus supplement and the annual historical
financial data should be read in conjunction with those financial statements.
The consolidated financial data for the interim periods ended June 30, 2001 and
2000 were derived from Delta's unaudited consolidated financial statements and
may not be indicative of results for the year as a whole. See "Where You Can
Find More Information" in the accompanying prospectus.
The consolidated financial data include the results of ASA Holdings, Inc.
and Comair Holdings, Inc. since April 1, 1999 and November 22, 1999,
respectively. Effective December 31, 2000, Delta changed its fiscal year end
from June 30 to December 31.
<Table>
<Caption>
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
----------------- ----------------------------------------------------
2001(1) 2000(2) 2000(3) 1999(4) 1998 1997(5) 1996(6)
------- ------- -------- -------- -------- -------- --------
(UNAUDITED)
STATEMENT OF OPERATIONS DATA (IN
MILLIONS):
Operating revenues................... $ 7,618 $ 8,380 $ 16,741 $ 14,883 $ 14,312 $ 13,868 $ 12,898
Operating expenses................... 7,847 7,431 15,104 13,565 12,509 12,240 12,324
Operating income (loss).............. (229) 949 1,637 1,318 1,803 1,628 574
Interest expense, net(7)............. 177 136 271 126 66 98 125
Net income (loss) before cumulative
effect of change in accounting
principle.......................... (223) 677 928 1,262 1,078 934 248
OTHER DATA:
Ratio of earnings to fixed
charges(8)......................... 0.41x 3.11x 2.42x 3.56x 3.55x 3.23x 1.58x
OPERATING STATISTICS:
Revenue passengers enplaned
(thousands)........................ 55,062 60,294 119,930 110,083 105,304 103,233 97,281
Available seat miles (millions)(9)... 75,966 76,295 154,974 147,073 142,154 138,831 133,714
Revenue passenger miles
(millions)(10)..................... 53,113 55,825 112,998 106,165 103,342 99,689 93,929
Operating revenue per available seat
mile............................... 10.03c 10.98c 10.80c 10.12c 10.07c 9.99c 9.65c
Passenger mile yield(11)............. 13.43c 14.07c 13.86c 13.14c 12.99c 13.04c 12.91c
Operating cost per available seat
mile............................... 10.33c 9.74c 9.75c 9.22c 8.80c 8.82c 9.22c
Passenger load factor(12)............ 69.92% 73.17% 72.91% 72.18% 72.70% 71.81% 70.25%
Breakeven passenger load factor...... 72.16% 64.33% 65.29% 65.37% 62.94% 62.78% 66.91%
</Table>
<Table>
<Caption>
AT JUNE 30, AT DECEMBER 31, AT DECEMBER 31,
2001 2000 1999
----------- --------------- ---------------
BALANCE SHEET DATA (IN MILLIONS):
Cash and short-term investments.......................... $ 1,510 $ 1,607 $ 2,316
Total assets............................................. 22,881 21,931 19,942
Current liabilities...................................... 6,421 5,245 5,514
Long-term debt (less current maturities)................. 5,860 5,797 4,144
Obligations under capital leases (less current
obligations)........................................... 90 99 159
Shareowners' equity...................................... 5,030 5,343 4,908
</Table>
[footnotes
on next page]
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- ---------------
(1) Includes $95 million in pretax fair value adjustment related to Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" and a $60 million pretax charge related
to Delta's decision to accelerate the retirement of nine Boeing 737
aircraft.
(2) Includes pretax gains of $301 million related to Delta's equity investments
in priceline.com and an $86 million pretax charge related to an employee
early retirement medical option program.
(3) Includes pretax income of $51 million of unusual items, net, excluding the
cumulative effect of a change in accounting principle.
(4) Includes pretax income of $418 million of unusual items, net, excluding the
cumulative effect of a change in accounting principle.
(5) Includes $52 million in pretax restructuring and other unusual charges.
(6) Includes $829 million in pretax restructuring and other unusual charges.
(7) Includes interest income.
(8) The ratio of earnings to fixed charges represents the number of times that
fixed charges are covered by earnings. Earnings represent income (loss)
before income taxes, excluding the cumulative effect of accounting changes,
plus fixed charges excluding capitalized interest. Fixed charges include
interest, whether expensed or capitalized, and one-half of rental expense.
Management of Delta believes that this is representative of the interest
factor in those periods. Fixed charges exceeded earnings by $340 million
for the six months ended June 30, 2001.
(9) "Available seat miles" is a measure of capacity which is calculated by
multiplying the total number of seats available for transporting passengers
by the total number of miles flown during a reporting period.
(10) "Revenue passenger mile" means one revenue-paying passenger transported one
mile and is calculated by multiplying the number of revenue passengers by
the number of miles they are flown during the period.
(11) "Passenger mile yield" means the amount of passenger revenue earned per
revenue passenger mile during a reporting period.
(12) "Passenger load factor" is a measure of aircraft utilization which is
calculated by dividing revenue passenger miles by available seat miles for
a reporting period.
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RISK FACTORS
You should carefully consider the following risk factors as well as other
information contained in this prospectus supplement and the accompanying
prospectus.
APPRAISALS AND REALIZABLE VALUE OF AIRCRAFT
Three independent appraisal and consulting firms have prepared appraisals
of the Aircraft. The appraisal letters provided by these firms are annexed to
this prospectus supplement as Appendix II. Such appraisals are based on varying
assumptions and methodologies (which may differ among the appraisers), and may
not reflect current market conditions that could affect the current market value
of the Aircraft. Base value is the theoretical value for an aircraft that
assumes a balanced market, while current market value is the value for an
aircraft in the actual market. The appraisals were prepared without a physical
inspection of the Aircraft. Appraisals that are based on other assumptions and
methodologies may result in valuations that are materially different from those
contained in such appraisals. See "Description of the Aircraft and the
Appraisals -- The Appraisals."
An appraisal is only an estimate of value. It does not necessarily indicate
the price at which an aircraft may be purchased from the aircraft manufacturer.
Nor should an appraisal be relied upon as a measure of realizable value. The
proceeds realized upon a sale of any Aircraft may be less than its appraised
value. The value of an Aircraft if remedies are exercised under the applicable
Indenture will depend on various factors, including:
- market and economic conditions;
- the supply of similar aircraft;
- the availability of buyers;
- the condition of the Aircraft; and
- whether the Aircraft is sold separately or as part of a block.
Accordingly, we cannot assure you that the proceeds realized upon any such
exercise of remedies would be sufficient to satisfy in full payments due on the
Equipment Notes relating to such Aircraft or the full amount of distributions
expected on the Certificates.
REPOSSESSION
There will be no general geographic restrictions on our ability to operate
the Aircraft. Although we do not currently intend to do so, we will be permitted
to register the Aircraft in certain foreign jurisdictions and to lease the
Aircraft. It may be difficult, time-consuming and expensive for the Loan Trustee
to exercise its repossession rights if an Aircraft is located outside the United
States, is registered in a foreign jurisdiction or is leased to a foreign or
domestic operator. Additional difficulties may exist if a lessee is the subject
of a bankruptcy, insolvency or similar event.
In addition, some jurisdictions may allow for other liens or other third
party rights to have priority over a Loan Trustee's security interest in an
Aircraft. As a result, the benefits of the related Loan Trustee's security
interest in an Aircraft may be less than they would be if the Aircraft were
located or registered in the United States.
PRIORITY OF DISTRIBUTIONS; SUBORDINATION
Under the Intercreditor Agreement, the Liquidity Provider will receive
payment of all amounts owed to it (including reimbursement of drawings made to
pay interest on more junior Classes of Certificates) before the holders of any
Class of Certificates receive any funds. In addition, in specified default
situations, the Subordination Agent and the Trustees will receive certain
payments before the holders of any Class of Certificates receive distributions.
See "Description of the Intercreditor Agreement -- Priority of Distributions."
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Certain Classes of Certificates are subordinated to other Classes in rights
to distributions. Consequently, a payment default under any Equipment Note or a
Triggering Event may cause the distribution to more senior Classes of
Certificates of payments received on one or more junior series of Equipment
Notes. If this occurs, the interest accruing on the remaining Equipment Notes
may be less than the amount of interest expected to be distributed on the
remaining Certificates of more junior Classes. This is because the interest that
Certificates of junior Classes are expected to receive may accrue at a higher
rate than interest on the remaining Equipment Notes. As a result of this
possible interest shortfall, the holders of one or more junior Classes of
Certificates may not receive the full amount expected after a payment default
under any Equipment Note even if all Equipment Notes are eventually paid in
full.
However, if Delta is in bankruptcy or other specified defaults have
occurred but Delta is continuing to meet specified payment obligations and the
applicable Loan to Aircraft value tests are met, the subordination provisions
applicable to the Certificates permit distributions to be made to junior
Certificates prior to making distributions in full on more senior Certificates.
This could include distributions in respect of the principal paid at maturity of
the Series D Equipment Notes held in the Class D Trust. For a more detailed
discussion of the subordination provisions of the Intercreditor Agreement, see
"Description of the Certificates -- Subordination."
CONTROL OVER COLLATERAL; SALE OF COLLATERAL
If an Indenture Event of Default is continuing, subject to certain
conditions, the Loan Trustee under the related Indenture will be directed by the
Controlling Party in exercising remedies under such Indenture, including
accelerating the applicable Equipment Notes or foreclosing the lien on the
Aircraft securing such Equipment Notes. See "Description of the
Certificates -- Indenture Events of Default and Certain Rights upon an Indenture
Event of Default."
The Controlling Party will be:
- prior to payment of Final Distributions to the holders of the Class A-1
and Class A-2 Certificates, the Class A-1 Trustee or Class A-2 Trustee,
whichever represents the Class with the larger Pool Balance of
Certificates outstanding at the time the Indenture Event of Default
occurs;
- upon payment of Final Distributions to the holders of such larger Class,
the other of the Class A-1 Trustee or Class A-2 Trustee;
- upon payment of Final Distributions to the holders of Class A-1 and Class
A-2 Certificates, the Class B Trustee;
- upon payment of Final Distributions to the holders of Class B
Certificates, the Class C Trustee;
- upon payment of Final Distributions to the holders of Class C
Certificates, the Class D Trustee; and
- under certain circumstances, and notwithstanding the foregoing, the
Liquidity Provider with the greatest amount owed to it.
During the continuation of any Indenture Event of Default, the Controlling
Party may accelerate the Equipment Notes issued under the related Indenture and
sell such Equipment Notes or the related Aircraft, subject to certain
limitations. See "Description of the Intercreditor Agreement -- Intercreditor
Rights -- Sale of Equipment Notes or Aircraft." The market for any Aircraft or
Equipment Notes, as the case may be, during any Indenture Event of Default may
be very limited, and we cannot assure you as to whether they could be sold or
the price at which they could be sold. Some Certificateholders will receive a
smaller amount of principal distributions than anticipated and will not have any
claim for the shortfall
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against us (except in the second bullet point below) or any Trustee if the
Controlling Party takes the following actions:
- it sells any Equipment Notes for less than their outstanding principal
amount; or
- it sells any Aircraft for less than the outstanding principal amount of
the related Equipment Notes.
The Equipment Notes will not be cross-collateralized. This means that the
Equipment Notes secured by an Aircraft will not be secured by any other
Aircraft. Accordingly, any proceeds realized from the sale of an Aircraft or
other exercise of default remedies with respect to that Aircraft in excess of
the outstanding principal amount of the Equipment Notes related to the Aircraft
will not be available to cover shortfalls, if any, on the Equipment Notes
related to any other Aircraft. See "Description of the Equipment
Notes -- Remedies."
RATINGS OF THE CERTIFICATES
It is a condition to the issuance of the Certificates that the Class A-1
and Class A-2 Certificates be rated not lower than Aa2 by Moody's Investors
Service, Inc. ("Moody's") and AAA by Standard & Poor's Ratings Services, a
division of the McGraw-Hill Companies, Inc. ("Standard & Poor's," and together
with Moody's, the "Rating Agencies"), the Class B Certificates be rated not
lower than Aa3 by Moody's and AA- by Standard & Poor's and the Class C
Certificates be rated not lower than A2 by Moody's and A+ by Standard & Poor's.
The Class D Certificates will not be rated. A rating is not a recommendation to
purchase, hold or sell Certificates and the rating does not address market price
of the Certificates or suitability of investing in the Certificates for a
particular investor. A rating may not remain for any given period of time and
may be lowered or withdrawn entirely by a Rating Agency if in its judgment
circumstances in the future (including the downgrading of Delta or the Liquidity
Provider) so warrant.
The rating of each Class of the Certificates is based primarily on the
default risk of the Equipment Notes that are held for such Class, the
availability of the Liquidity Facility for the benefit of holders of such
Certificates, the collateral value provided by the Aircraft securing such
Equipment Notes and the subordination provisions applicable to such
Certificates. The foregoing ratings address the likelihood of timely payment of
interest when due on the Certificates and the ultimate payment of principal of
the Certificates by the Final Legal Distribution Date. Such ratings do not
address the possibility of certain defaults, voluntary redemptions or other
circumstances (such as an Event of Loss to an Aircraft) which could result in
the payment of the outstanding principal amount of the Certificates prior to the
Final Legal Distribution Date. See "Description of the Certificates."
The reduction, suspension or withdrawal of the ratings of the Certificates
will not, by itself, constitute an Event of Default.
NO PROTECTION AGAINST HIGHLY LEVERAGED OR EXTRAORDINARY TRANSACTIONS
The Certificates, the Equipment Notes and the underlying agreements will
not contain any financial or other covenants or "event risk" provisions
protecting the Certificateholders in the event of a highly leveraged or other
extraordinary transaction affecting Delta or its affiliates.
LIMITED ABILITY TO RESELL THE CERTIFICATES
Prior to this offering of the Class A-1, Class A-2, Class B and Class C
Certificates, there has been no public market for such Certificates. Neither
Delta nor any Trust intends to apply for listing of such Certificates on any
securities exchange or otherwise. The Underwriters may assist in resales of such
Certificates, but they are not required to do so, and any market-making activity
may be discontinued at any time without notice at the sole discretion of each
Underwriter. A secondary market for such Certificates may not develop. If a
secondary market does develop, it might not continue or it might not be
sufficiently liquid to allow you to resell any of your Certificates. If an
active public market does not develop, the market price and liquidity of the
Class A-1, Class A-2, Class B and Class C Certificates may be adversely
affected.
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THE COMPANY
Delta is a major air carrier that provides air transportation for
passengers and freight throughout the United States and around the world. Based
on recent data, Delta is the largest United States airline in terms of
passengers enplaned, the second largest in terms of aircraft departures and the
third largest as measured by operating revenues and revenue passenger miles
flown. In the transatlantic market, Delta serves the largest number of nonstop
routes and carries more passengers than any other United States airline. We
operate hubs at Atlanta, Cincinnati, Dallas/Fort Worth and Salt Lake City. We
also operate international gateways in Atlanta and at New York's John F. Kennedy
International Airport.
Delta is incorporated under the laws of the State of Delaware. Our
principal executive offices are located at Hartsfield Atlanta International
Airport, Atlanta, Georgia 30320, and the telephone number is (404) 715-2600.
USE OF PROCEEDS
The proceeds from the sale of the Certificates of each Trust will be used
to purchase the Equipment Notes to be held by such Trust. The Equipment Notes
will be full recourse obligations of Delta. Delta will use the proceeds from the
issuance of the Equipment Notes for general corporate purposes including, among
other possible uses, the repayment of an $800 million loan under Delta's $1.25
billion unsecured revolving credit facility with a group of banks. The loan was
made on April 30, 2001 for general corporate purposes; bears interest at LIBOR
plus a margin of 0.375% (currently 4.115%); may be repaid at any time without
penalty; and matures on May 1, 2002.
DESCRIPTION OF THE CERTIFICATES
The following summary of particular terms of the Certificates, with respect
to the Class A-1, Class A-2, Class B and Class C Certificates (the "Offered
Certificates"), supplements (and, to the extent inconsistent therewith,
replaces) the description of the general terms and provisions of the Offered
Certificates set forth in the prospectus accompanying this prospectus supplement
(the "Prospectus"). The summary does not purport to be complete and is qualified
in its entirety by reference to all of the provisions of the Basic Agreement,
the Certificates, the Trust Supplements, the Liquidity Facilities and the
Intercreditor Agreement, each of which, to the extent relating to an Offered
Certificate, will be filed as an exhibit to a Current Report on Form 8-K to be
filed by Delta with the Securities and Exchange Commission (the "SEC").
Except as otherwise indicated, the following summary relates to each of the
Trusts and the Certificates issued by each Trust. The terms and conditions
governing each of the Trusts will be substantially the same, except as described
under "-- Subordination" below and except that the principal amount and
scheduled principal repayments of the Equipment Notes held by each Trust and the
interest rate and maturity date of the Equipment Notes held by each Trust will
differ. The references to Sections in parentheses in the following summary are
to the relevant Sections of the Basic Agreement unless otherwise indicated.
GENERAL
Each pass through certificate (collectively, the "Certificates") will
represent a fractional undivided interest in one of the five Delta Air Lines
2001-1 Pass Through Trusts: the "Class A-1 Trust," the "Class A-2 Trust," the
"Class B Trust," the "Class C Trust" and the "Class D Trust," and, collectively,
the "Trusts." The Trusts will be formed pursuant to a pass through trust
agreement between Delta and State Street Bank and Trust Company of Connecticut,
National Association, as trustee, dated November 16, 2000 (the "Basic
Agreement"), and five separate supplements thereto (each, a "Trust Supplement"
and, together with the Basic Agreement, collectively, the "Pass Through Trust
Agreements"). The trustee under the Class A-1 Trust, the Class A-2 Trust, the
Class B Trust, the Class C Trust and the Class D Trust is referred to herein,
respectively, as the "Class A-1 Trustee," the "Class A-2
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Trustee," the "Class B Trustee," the "Class C Trustee" and the "Class D
Trustee," and collectively as the "Trustees," The Certificates to be issued by
the Class A-1 Trust, the Class A-2 Trust, the Class B Trust, the Class C Trust
and the Class D Trust are referred to herein, respectively, as the "Class A-1
Certificates," the "Class A-2 Certificates," the "Class B Certificates," the
"Class C Certificates" and the "Class D Certificates," The Class A-1 Trust will
purchase all of the Series A-1 Equipment Notes, the Class A-2 Trust will
purchase all of the Series A-2 Equipment Notes, the Class B Trust will purchase
all of the Series B Equipment Notes, the Class C Trust will purchase all of the
Series C Equipment Notes and the Class D Trust will purchase all of the Series D
Equipment Notes. The holders of the Class A-1 Certificates, the Class A-2
Certificates, the Class B Certificates, the Class C Certificates and the Class D
Certificates are referred to herein, respectively, as the "Class A-1
Certificateholders," the "Class A-2 Certificateholders," the "Class B
Certificateholders," the "Class C Certificateholders" and the "Class D
Certificateholders," and collectively as the "Certificateholders." The sum of
the initial principal balances of the Equipment Notes held by each Trust will
equal the initial aggregate face amount of the Certificates issued by such
Trust.
Each Certificate will represent a fractional undivided interest in the
Trust created by the Basic Agreement and the applicable Trust Supplement
pursuant to which such Certificate is issued. (Section 2.01) The property of
each Trust (the "Trust Property") will consist of:
- subject to the Intercreditor Agreement, the Equipment Notes acquired by
such Trust, all monies at any time paid thereon and all monies due and to
become due thereunder;
- the rights of such Trust under the Intercreditor Agreement (including all
rights to receive monies receivable in respect of such rights);
- for the Class A-1, Class A-2, Class B and Class C Trusts, all monies
receivable under the Liquidity Facility for such Trust; and
- funds from time to time deposited with the Trustee in accounts relating
to such Trust.
The Certificates represent interests in the respective Trusts only, and all
payments and distributions thereon will be made only from the Trust Property of
the related Trust. (Section 3.09) The Certificates do not represent indebtedness
of the Trusts, and references in this prospectus supplement to interest accruing
on the Certificates are included for purposes of computation only. The
Certificates do not represent an interest in or obligation of Delta, the
Trustees, the Subordination Agent, any of the Loan Trustees or any affiliate of
any thereof. Each Certificateholder by its acceptance of a Certificate agrees to
look solely to the income and proceeds from the Trust Property of the related
Trust for payments and distributions on such Certificate.
The Certificates of each Trust (other than the Class D Trust) will be
issued in fully registered form only and will be subject to the provisions
described below under "-- Book-Entry Registration; Delivery and Form."
Certificates will be issued only in minimum denominations of $1,000 (or $100,000
in the case of the Class D Certificates) or integral multiples thereof. (Section
3.01)
DISTRIBUTION OF PAYMENTS ON EQUIPMENT NOTES
The following description of distributions on the Certificates should be
read in conjunction with the description of the Intercreditor Agreement because
the Intercreditor Agreement may alter the following provisions in a default
situation. See "-- Subordination" and "Description of the Intercreditor
Agreement."
Payments of principal, Make-Whole Amount (if any) and interest on the
Equipment Notes or with respect to other Trust Property held in each Trust will
be distributed by the Trustee to Certificateholders of such Trust on the date
receipt of such payment is confirmed, except in the case of certain types of
Special Payments.
The Equipment Notes held in each Trust will accrue interest at the
applicable rate per annum for Certificates to be issued by such Trust, payable
on March 18 and September 18 of each year, commencing on March 18, 2002. The
rate per annum for the each of the Class A-1, Class A-2, Class B and Class C
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Certificates is set forth on the cover page of this prospectus supplement. The
rate per annum for the Class D Certificates is 6.950%. Such interest payments
will be distributed to Certificateholders of such Trust on each such date until
the final Distribution Date for such Trust, subject to the Intercreditor
Agreement. Interest will be calculated on the basis of a 360-day year consisting
of twelve 30-day months.
Distributions of interest applicable to the Certificates to be issued by
each of the Trusts (other than the Class D Trust) will be supported by a
separate Liquidity Facility to be provided by the Liquidity Provider for the
benefit of the holders of such Certificates. Each Liquidity Facility will
provide an aggregate amount sufficient to distribute interest on the Pool
Balance thereof at the Stated Interest Rate for such Trust on up to three
successive Regular Distribution Dates (without regard to any future
distributions of principal on such Certificates). The Liquidity Facility for any
Class of Certificates (other than the Class D Certificates) does not provide for
drawings thereunder to pay for principal of or Make-Whole Amount on the
Certificates of such Class, any interest with respect to the Certificates of
such Class in excess of the Stated Interest Rate, or, notwithstanding the
subordination provisions of the Intercreditor Agreement, principal of or
interest or Make-Whole Amount with respect to the Certificates of any other
Class. Therefore, only the holders of the Certificates to be issued by a
particular Trust (other than the Class D Trust) will be entitled to receive and
retain the proceeds of drawings under the Liquidity Facility for such Trust. See
"Description of the Liquidity Facilities."
Payments of principal of the Series A-1 Equipment Notes are scheduled to be
received by the Trustee in installments on March 18 and September 18 in certain
years, commencing on March 18, 2002 and ending on March 18, 2011. The entire
principal amount of the Series A-2 Equipment Notes is scheduled for payment on
September 18, 2011; the entire principal amount of the Series B Equipment Notes
is scheduled for payment on September 18, 2011; and the entire principal amount
of the Series C and Series D Equipment Notes is scheduled for payment on
September 18, 2006.
Scheduled payments of interest or principal on the Equipment Notes are
referred to herein as "Scheduled Payments," and March 18 and September 18 of
each year are referred to herein as "Regular Distribution Dates" (each Regular
Distribution Date and Special Distribution Date, a "Distribution Date"). See
"Description of the Equipment Notes -- Principal and Interest Payments." The
"Final Legal Distribution Date" for the Class A-1 Certificates is September 18,
2012, for the Class A-2 and Class B Certificates is March 18, 2013, for the
Class C Certificates is March 18, 2008 and for the Class D Certificates is
September 18, 2006.
Subject to the Intercreditor Agreement, on each Regular Distribution Date
the Trustee of each Trust will distribute to the Certificateholders of such
Trust all Scheduled Payments received in respect of Equipment Notes held on
behalf of such Trust, the receipt of which is confirmed by the Trustee on such
Regular Distribution Date. Each Certificateholder of each Trust will be entitled
to receive, subject to the Intercreditor Agreement, its proportionate share,
based upon its fractional interest in such Trust, of any distribution in respect
of Scheduled Payments of principal or interest on Equipment Notes held on behalf
of such Trust. Each such distribution of Scheduled Payments will be made by the
applicable Trustee to the Certificateholders of record of the relevant Trust on
the record date applicable to such Scheduled Payment (15 days prior to each
Regular Distribution Date) subject to certain exceptions. (Section 4.02(a)) If a
Scheduled Payment is not received by the applicable Trustee on a Regular
Distribution Date but is received within five days thereafter, it will be
distributed on the date received to such holders of record. If it is received
after such five-day period, it will be treated as a Special Payment and
distributed as described below.
Any payment in respect of, or any proceeds of, any Equipment Note or the
Collateral under, and as defined in, any Indenture other than a Scheduled
Payment (each, a "Special Payment") will be distributed on, in the case of an
early redemption of any Equipment Note, the date of such early redemption (which
shall be a Business Day), and otherwise on the Business Day specified for
distribution of such Special Payment pursuant to a notice delivered by each
Trustee as soon as practicable after the Trustee has received notice of such
Special Payment, or has received the funds for such Special Payment
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(each a "Special Distribution Date"), as described below. Any such distribution
will be subject to the Intercreditor Agreement.
The Trustee of each Trust will mail a notice to the Certificateholders of
such Trust stating the scheduled Special Distribution Date, the related record
date, the amount of the Special Payment and the reason for the Special Payment.
In the case of a redemption of the Equipment Notes held in the related Trust,
such notice will be mailed not less than 15 days prior to the date such Special
Payment is scheduled to be distributed, and in the case of any other Special
Payment, such notice will be mailed as soon as practicable after the Trustee has
confirmed that it has received funds for such Special Payment. (Section 4.02(c))
Each distribution of a Special Payment, other than a Final Distribution, on a
Special Distribution Date for any Trust will be made by the Trustee to the
Certificateholders of record of such Trust on the record date applicable to such
Special Payment. (Section 4.02(b)) See "-- Indenture Events of Default and
Certain Rights upon an Indenture Event of Default" and "Description of the
Equipment Notes -- Redemption."
Each Pass Through Trust Agreement requires that the Trustee establish and
maintain, for the related Trust and for the benefit of the Certificateholders of
such Trust, one or more non-interest bearing accounts (the "Certificate
Account") for the deposit of payments representing Scheduled Payments received
by such Trustee. Each Pass Through Trust Agreement requires that the Trustee
establish and maintain, for the related Trust and for the benefit of the
Certificateholders of such Trust, one or more accounts (the "Special Payments
Account") for the deposit of payments representing Special Payments received by
such Trustee, which will be non-interest bearing except in certain circumstances
where the Trustee may invest amounts in such account in certain Permitted
Investments. Pursuant to the terms of each Pass Through Trust Agreement, the
Trustee is required to deposit any Scheduled Payments relating to the applicable
Trust received by it in the Certificate Account of such Trust and to deposit any
Special Payments so received by it in the Special Payments Account of such
Trust. (Section 4.01) All amounts so deposited will be distributed by the
Trustee on a Regular Distribution Date or a Special Distribution Date, as
appropriate. (Section 4.02)
The Final Distribution for each Trust will be made only upon presentation
and surrender of the Certificates for such Trust at the office or agency of the
Trustee specified in the notice given by the Trustee of such Final Distribution.
See "-- Termination of the Trusts" below. Distributions in respect of
Certificates issued in global form will be made as described in "-- Book-Entry
Registration; Delivery and Form" below.
If any Distribution Date is a Saturday, a Sunday or other day on which
commercial banks are authorized or required to close in New York, New York,
Atlanta, Georgia, or the city and state in which the Trustee or any Loan Trustee
is located (any other day being a "Business Day"), distributions scheduled to be
made on such Regular Distribution Date or Special Distribution Date will be made
on the next succeeding Business Day without additional interest.
SUBORDINATION
The Certificates are subject to subordination terms set forth in the
Intercreditor Agreement which vary depending upon whether a Triggering Event has
occurred. See "Description of the Intercreditor Agreement -- Priority of
Distributions."
POOL FACTORS
The "Pool Balance" of the Certificates issued by any Trust indicates, as of
any date, the original aggregate face amount of the Certificates of such Trust
less the aggregate amount of all payments made in respect of the Certificates of
such Trust other than payments made in respect of interest or Make-Whole Amount
thereon or reimbursement of any costs and expenses incurred in connection
therewith. The Pool Balance of the Certificates issued by any Trust as of any
Distribution Date will be computed after giving effect to any payment of
principal on the Equipment Notes or other Trust Property held in such Trust and
the distribution thereof to be made on that date. (Section 1.01)
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The "Pool Factor" for each Trust as of any date is the quotient (rounded to
the seventh decimal place) computed by dividing (i) the Pool Balance as at such
date by (ii) the original aggregate face amount of the Certificates of such
Trust. The Pool Factor for each Trust as of any Distribution Date will be
computed after giving effect to any payment of principal on the Equipment Notes
or other Trust Property held in such Trust and the distribution thereof to be
made on that date. (Section 1.01) The Pool Factor for each Trust will be
1.0000000 on the date of issuance of the Certificates; thereafter, the Pool
Factor for each Trust will decline as described herein to reflect reductions in
the Pool Balance of such Trust. The amount of a Certificateholder's pro rata
share of the Pool Balance of a Trust can be determined by multiplying the
original denomination of the Certificateholder's Certificate of such Trust by
the Pool Factor for such Trust as of the applicable Distribution Date. Notice of
the Pool Factor and the Pool Balance for each Trust will be mailed to
Certificateholders of such Trust on each Distribution Date. (Section 4.03)
The following table sets forth the aggregate principal amortization
schedule for the Equipment Notes held in each Trust and resulting Pool Factors
with respect to such Trust. The actual aggregate principal amortization schedule
applicable to a Trust and the resulting Pool Factors with respect to such Trust
may differ from those set forth below because the scheduled distribution of
principal payments for any Trust would be affected if any Equipment Notes held
in such Trust are redeemed or if a default in payment of the principal of such
Equipment Notes occurred.
<Table>
<Caption>
CLASS A-1 CLASS A-2 CLASS B CLASS C
-------------------------- --------------------------- --------------------------- ---------------
SCHEDULED EXPECTED SCHEDULED EXPECTED SCHEDULED EXPECTED SCHEDULED
PRINCIPAL POOL PAYMENTS OF POOL PAYMENTS OF POOL PAYMENTS OF
DATE PAYMENTS FACTOR PRINCIPAL FACTOR PRINCIPAL FACTOR PRINCIPAL
- ---- -------------- --------- --------------- --------- --------------- --------- ---------------
March 18, 2002....... $19,553,275.50 0.9348224 $ 0.00 1.0000000 $ 0.00 1.0000000 $ 0.00
September 18, 2002... 18,051,628.65 0.8746503 0.00 1.0000000 0.00 1.0000000 0.00
March 18, 2003....... 19,560,668.65 0.8094481 0.00 1.0000000 0.00 1.0000000 0.00
September 18, 2003... 18,058,435.47 0.7492533 0.00 1.0000000 0.00 1.0000000 0.00
March 18, 2004....... 19,560,668.64 0.6840511 0.00 1.0000000 0.00 1.0000000 0.00
September 18, 2004... 18,058,435.49 0.6238563 0.00 1.0000000 0.00 1.0000000 0.00
March 18, 2005....... 19,560,668.63 0.5586541 0.00 1.0000000 0.00 1.0000000 0.00
September 18, 2005... 18,058,435.51 0.4984593 0.00 1.0000000 0.00 1.0000000 0.00
March 18, 2006....... 19,560,668.67 0.4332570 0.00 1.0000000 0.00 1.0000000 0.00
September 18, 2006... 0.00 0.4332570 0.00 1.0000000 0.00 1.0000000 169,782,000.00
March 18, 2007....... 0.00 0.4332570 0.00 1.0000000 0.00 1.0000000 0.00
September 18, 2007... 3,404,752.27 0.4219079 0.00 1.0000000 0.00 1.0000000 0.00
March 18, 2008....... 531,356.51 0.4201367 0.00 1.0000000 0.00 1.0000000 0.00
September 18, 2008... 15,207,594.37 0.3694447 0.00 1.0000000 0.00 1.0000000 0.00
March 18, 2009....... 17,660,998.23 0.3105747 0.00 1.0000000 0.00 1.0000000 0.00
September 18, 2009... 16,304,657.25 0.2562259 0.00 1.0000000 0.00 1.0000000 0.00
March 18, 2010....... 17,660,998.23 0.1973559 0.00 1.0000000 0.00 1.0000000 0.00
September 18, 2010... 16,304,657.22 0.1430070 0.00 1.0000000 0.00 1.0000000 0.00
March 18, 2011....... 42,902,100.71 0.0000000 0.00 1.0000000 0.00 1.0000000 0.00
September 18, 2011... 0.00 0.0000000 571,148,000.00 0.0000000 207,070,000.00 0.0000000 0.00
<Caption>
CLASS C CLASS D
--------- ---------------------------
EXPECTED SCHEDULED EXPECTED
POOL PAYMENTS OF POOL
DATE FACTOR PRINCIPAL FACTOR
- ---- --------- --------------- ---------
March 18, 2002....... 1.0000000 $ 0.00 1.0000000
September 18, 2002... 1.0000000 0.00 1.0000000
March 18, 2003....... 1.0000000 0.00 1.0000000
September 18, 2003... 1.0000000 0.00 1.0000000
March 18, 2004....... 1.0000000 0.00 1.0000000
September 18, 2004... 1.0000000 0.00 1.0000000
March 18, 2005....... 1.0000000 0.00 1.0000000
September 18, 2005... 1.0000000 0.00 1.0000000
March 18, 2006....... 1.0000000 0.00 1.0000000
September 18, 2006... 0.0000000 150,000,000.00 0.0000000
March 18, 2007....... 0.0000000 0.00 0.0000000
September 18, 2007... 0.0000000 0.00 0.0000000
March 18, 2008....... 0.0000000 0.00 0.0000000
September 18, 2008... 0.0000000 0.00 0.0000000
March 18, 2009....... 0.0000000 0.00 0.0000000
September 18, 2009... 0.0000000 0.00 0.0000000
March 18, 2010....... 0.0000000 0.00 0.0000000
September 18, 2010... 0.0000000 0.00 0.0000000
March 18, 2011....... 0.0000000 0.00 0.0000000
September 18, 2011... 0.0000000 0.00 0.0000000
</Table>
The Pool Factor and Pool Balance of each Trust will be recomputed if there
has been an early redemption or default in the payment of principal or interest
in respect of one or more of the Equipment Notes held in a Trust, as described
in "-- Indenture Events of Default and Certain Rights upon an Indenture Event of
Default" and "Description of the Equipment Notes -- Redemption." Notice of the
Pool Factors and Pool Balances of each Trust as so recomputed after giving
effect to any Special Payment to Certificateholders resulting from such an early
redemption or default in respect of one more Equipment Notes will be mailed to
Certificateholders of Certificates of the related Trust with such Special
Payment, as described in "-- Reports to Certificateholders."
REPORTS TO CERTIFICATEHOLDERS
On each Distribution Date, the applicable Trustee will include with each
distribution of a Scheduled Payment or Special Payment to Certificateholders of
the related Trust a statement, giving effect to such distribution to be made on
such Distribution Date, setting forth the following information (per $1,000
aggregate principal amount of Certificates as to items (1) and (2) below):
(1) the amount of such distribution allocable to principal and the
amount allocable to Make-Whole Amount, if any;
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(2) the amount of such distribution allocable to interest; and
(3) the Pool Balance and the Pool Factor for such Trust. (Section 4.03)
As long as the Certificates are registered in the name of Cede & Co.
("Cede"), as nominee for The Depository Trust Company ("DTC"), on the record
date prior to each Distribution Date, the applicable Trustee will request from
DTC a securities position listing setting forth the names of all DTC
Participants reflected on DTC's books as holding interests in the Certificates
on such record date. On each Distribution Date, the applicable Trustee will mail
to each such DTC Participant the statement described above and will make
available additional copies as requested by such DTC Participant for forwarding
to Certificate Owners. (Section 4.03(a))
In addition, after the end of each calendar year, the applicable Trustee
will prepare for each Certificateholder of each Trust at any time during the
preceding calendar year a report containing the sum of the amounts determined
pursuant to clauses (1) and (2) above with respect to the Trust for such
calendar year or, if such person was a Certificateholder during only a portion
of such calendar year, for the applicable portion of such calendar year, and
such other items as are readily available to such Trustee and which a
Certificateholder reasonably requests as necessary for the purpose of such
Certificateholder's preparation of its U.S. federal income tax returns. Such
report and such other items will be prepared on the basis of information
supplied to the applicable Trustee by the DTC Participants and will be delivered
by such Trustee to such DTC Participants to be available for forwarding by such
DTC Participants to Certificate Owners. (Section 4.03(b))
At such time, if any, as the Certificates are issued in the form of
definitive certificates, the applicable Trustee will prepare and deliver the
information described above to each Certificateholder of record of each Trust as
the name and period of record ownership of such Certificateholder appears on the
records of the registrar of the Certificates.
INDENTURE EVENTS OF DEFAULT AND CERTAIN RIGHTS UPON AN INDENTURE EVENT OF
DEFAULT
Because the Equipment Notes issued under an Indenture will be held in more
than one Trust, a continuing Indenture Event of Default under such Indenture
would affect the Equipment Notes held by each such Trust. For a description of
the Indenture Events of Default under each Indenture, see "Description of the
Equipment Notes -- Indenture Events of Default, Notice and Waiver." There are no
cross-default or cross-acceleration provisions in the Indentures. Consequently,
events resulting in an Indenture Event of Default under any particular Indenture
may or may not result in an Indenture Event of Default under any other
Indenture. If an Indenture Event of Default occurs in fewer than all of the
Indentures related to a Trust, notwithstanding the treatment of Equipment Notes
issued under those Indentures under which an Indenture Event of Default has
occurred, payments of principal and interest on those Equipment Notes issued
pursuant to Indentures with respect to which an Indenture Event of Default has
not occurred will continue to be made as originally scheduled and distributed to
the holders of the Certificates, subject to the Intercreditor Agreement. See
"Description of the Intercreditor Agreement -- Priority of Distributions."
If the same institution acts as Trustee of multiple Trusts, in the absence
of instructions from the Certificateholders of any such Trust, such Trustee
could be faced with a potential conflict of interest upon an Indenture Event of
Default. In such event, each Trustee has indicated that it would resign as
Trustee of some or all such Trusts, and a successor trustee would be appointed
in accordance with the terms of the applicable Pass Through Trust Agreement.
State Street Bank and Trust Company of Connecticut, National Association, will
be the initial Trustee under each Trust.
Upon the occurrence and continuation of an Indenture Event of Default under
any Indenture, the Controlling Party will direct the Loan Trustee under such
Indenture in the exercise of remedies and may accelerate the Equipment Notes
issued under such Indenture and sell all (but not less than all) of such
Equipment Notes or the related Aircraft to any person, subject to certain
limitations. See "Description of the Intercreditor Agreement -- Intercreditor
Rights -- Sale of Equipment Notes or Aircraft." The
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proceeds of such sale will be distributed pursuant to the provisions of the
Intercreditor Agreement. Any proceeds so distributed to any Trustee upon any
such sale will be deposited in the applicable Special Payments Account and will
be distributed to the Certificateholders of the applicable Trust on a Special
Distribution Date. (Sections 4.01 and 4.02) The market for Equipment Notes at
the time of the existence of an Indenture Event of Default may be very limited,
and there can be no assurance whether they could be sold or as to the price at
which they could be sold. If a Loan Trustee sells any such Equipment Notes for
less than their outstanding principal amount, certain Certificateholders will
receive a smaller amount of principal distributions than anticipated and will
not have any claim for the shortfall against Delta, any Liquidity Provider or
any Trustee. Neither such Trustee nor the Certificateholders of such Trust,
furthermore, could take action with respect to any remaining Equipment Notes
held in such Trust as long as no Indenture Events of Default existed with
respect thereto.
Any amount, other than Scheduled Payments received on a Regular
Distribution Date or within five days thereafter, distributed to the Trustee of
any Trust by the Subordination Agent on account of the Equipment Notes or other
Trust Property held in such Trust following an Indenture Event of Default under
any Indenture will be deposited in the Special Payments Account for such Trust
and will be distributed to the Certificateholders of such Trust on a Special
Distribution Date. (Sections 4.01 and 4.02)
Any funds representing payments received with respect to any defaulted
Equipment Notes held in a Trust, or the proceeds from the sale of any Equipment
Notes, held by the Trustee in the Special Payments Account for such Trust will,
to the extent practicable, be invested and reinvested by such Trustee in certain
Permitted Investments pending the distribution of such funds on a Special
Distribution Date. (Section 4.04) "Permitted Investments" are defined as
obligations of the United States or agencies or instrumentalities thereof the
payment of which is backed by the full faith and credit of the United States and
which mature in not more than 60 days or such lesser time as is required for the
distribution of any such funds on a Special Distribution Date. (Section 1.01)
Each Pass Through Trust Agreement provides that the Trustee of the related
Trust will, within 90 days after the occurrence of a default (as defined below)
known to it, give to the Certificateholders of such Trust notice, transmitted by
mail, of such default, unless such default shall have been cured or waived;
provided that, except in the case of default in a payment of principal,
Make-Whole Amount, if any, or interest on any of the Equipment Notes held in
such Trust, the applicable Trustee will be protected in withholding such notice
if it in good faith determines that the withholding of such notice is in the
interests of such Certificateholders. (Section 7.02) The term "default" with
respect to a Trust, for the purpose of the provision described in this paragraph
only, means an event that is, or after notice or lapse of time or both would
become, an event of default with respect to such Trust or a Triggering Event
under the Intercreditor Agreement. The term "event of default" with respect to a
Trust means an Indenture Event of Default under any Indenture pursuant to which
Equipment Notes held by such Trust were issued.
Subject to certain qualifications set forth in each Pass Through Trust
Agreement and to the Intercreditor Agreement, the Certificateholders of each
Trust holding Certificates evidencing fractional undivided interests aggregating
not less than a majority in interest in such Trust will have the right to direct
the time, method and place of conducting any proceeding for any remedy available
to the Trustee with respect to such Trust or pursuant to the terms of the
Intercreditor Agreement, or exercising any trust or power conferred on such
Trustee under such Pass Through Trust Agreement or the Intercreditor Agreement,
including any right of such Trustee as Controlling Party under the Intercreditor
Agreement or as holder of the Equipment Notes (the "Note Holder"). (Section
6.04)
Subject to the Intercreditor Agreement, the holders of the Certificates of
a Trust evidencing fractional undivided interests aggregating not less than a
majority in interest of such Trust may on behalf of the holders of all of the
Certificates of such Trust waive any past "default" or "event of default" under
the related Pass Through Trust Agreement and its consequences or, if the Trustee
of such Trust is the Controlling Party, may direct the Trustee to instruct the
applicable Loan Trustee to waive any past Indenture Event of Default and its
consequences; provided, however, the consent of each holder of a Certificate of
a Trust is required to waive (i) a default in the deposit of any Scheduled
Payment or
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Special Payment or in the distribution thereof, (ii) a default in payment of the
principal, Make-Whole Amount, if any, or interest with respect to any of the
Equipment Notes held in such Trust and (iii) a default in respect of any
covenant or provision of the related Pass Through Trust Agreement that cannot be
modified or amended without the consent of each Certificateholder of such Trust
affected thereby. (Section 6.05) Each Indenture will provide that, with certain
exceptions, the holders of the majority in aggregate unpaid principal amount of
the Equipment Notes issued thereunder may on behalf of all such Note Holders
waive any past default or Indenture Event of Default thereunder. Notwithstanding
the foregoing provisions of this paragraph, however, pursuant to the
Intercreditor Agreement only the Controlling Party will be entitled to waive any
such past default or Indenture Event of Default.
PURCHASE RIGHTS OF CERTIFICATEHOLDERS
After the occurrence and during the continuation of a Triggering Event,
with ten days' prior written notice to the Trustee and each Certificateholder of
the same Class:
- if either the Class A-1 or Class A-2 Certificateholders are then
represented by the Controlling Party, the Certificateholders of such
Class that is not so represented will have the right to purchase all, but
not less than all, of the Certificates of such Class that is so
represented;
- the Class B Certificateholders will have the right to purchase all, but
not less than all, of the Class A-1 and Class A-2 Certificates;
- the Class C Certificateholders will have the right to purchase all, but
not less than all, of the Class A-1, Class A-2 and Class B Certificates;
and
- the Class D Certificateholders (other than Delta or any of its
affiliates) will have the right to purchase all, but not less than all,
of the Class A-1, Class A-2, Class B and Class C Certificates.
In each case the purchase price for a Class of Certificates will be equal
to the Pool Balance of such Class plus accrued and undistributed interest
thereon to the date of purchase, without Make-Whole Amount but including any
other amounts then due and payable to the Certificateholders of such Class. Such
purchase right may be exercised by any Certificateholder of the Class or Classes
entitled to such right. In each case, if prior to the end of the ten-day notice
period, any other Certificateholder of the same Class notifies the purchasing
Certificateholder that the other Certificateholder wants to participate in such
purchase, then such other Certificateholder may join with the purchasing
Certificateholder to purchase the Certificates pro rata based on the interest in
the Trust held by each Certificateholder. (Trust Supplements, Section 4.01)
PTC EVENT OF DEFAULT
A "PTC Event of Default" with respect to any Class of Certificates means
the failure to distribute within ten Business Days after the applicable
Distribution Date either:
- the outstanding Pool Balance of such Class of Certificates on the Final
Legal Distribution Date for such Class; or
- interest scheduled for distribution on such Class of Certificates on any
Distribution Date (unless the Subordination Agent has made an Interest
Drawing, or a withdrawal from the Cash Collateral Account for such Class
of Certificates, in an amount sufficient to pay such interest and has
distributed such amount to the Trustee entitled thereto).
Any failure to make expected principal distributions with respect to any
Class of Certificates on any Regular Distribution Date (other than the Final
Legal Distribution Date) will not constitute a PTC Event of Default with respect
to such Certificates.
A PTC Event of Default with respect to the most senior outstanding Class of
Certificates resulting from an Indenture Event of Default under all Indentures
will constitute a Triggering Event. For a
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discussion of the consequences of the occurrence of a Triggering Event, see
"Description of the Intercreditor Agreement -- Priority of Distributions."
MERGER, CONSOLIDATION AND TRANSFER OF ASSETS
Delta will be prohibited from consolidating with or merging into any other
corporation or transferring substantially all of its assets as an entirety to
any other person unless:
- the successor or transferee entity is organized and validly existing
under the laws of the United States or any state thereof or the District
of Columbia;
- the successor or transferee entity shall, if and to the extent required
under Section 1110 of the United States Bankruptcy Code (the "Bankruptcy
Code") in order that the Loan Trustee shall continue to be entitled to
any benefits of Section 1110 with respect to an Aircraft, be a "citizen
of the United States" (as defined in Title 49 of the United States Code
relating to aviation (the "Transportation Code")) holding an air carrier
operating certificate issued by the Secretary of Transportation pursuant
to Chapter 447 of the Transportation Code;
- the successor or transferee entity expressly assumes all of the
obligations of Delta contained in the Basic Agreement and any Trust
Supplement, the Indentures and the Participation Agreements; and
- Delta has delivered a certificate and an opinion or opinions of counsel
indicating that such transaction, in effect, complies with such
conditions.
In addition, after giving effect to such transaction, no Indenture Event of
Default shall have occurred and be continuing. (Section 5.02; Participation
Agreements, Section 6.02)
MODIFICATION OF THE PASS THROUGH TRUST AGREEMENTS AND CERTAIN OTHER AGREEMENTS
Each Pass Through Trust Agreement contains provisions permitting Delta and
the Trustee to enter into a supplement to such Pass Through Trust Agreement or,
if applicable, to the Intercreditor Agreement or any Liquidity Facility, without
the consent of the holders of any of the Certificates of such Trust to, among
other things:
- evidence the succession of another corporation or entity to Delta and the
assumption by such corporation or entity of Delta's obligations under
such Pass Through Trust Agreement, the Intercreditor Agreement or any
Liquidity Facility;
- add to the covenants of Delta for the benefit of holders of such
Certificates or surrender any right or power conferred upon Delta in such
Pass Through Trust Agreement, the Intercreditor Agreement or any
Liquidity Facility;
- to cure any ambiguity or correct any mistake or inconsistency in such
Pass Through Trust Agreement, the Intercreditor Agreement or any
Liquidity Facility;
- make or modify any other provision with respect to matters or questions
arising under such Pass Through Trust Agreement, the Intercreditor
Agreement or any Liquidity Facility as Delta may deem necessary or
desirable and that will not materially adversely affect the interests of
the holders of such Certificates;
- comply with any requirement of the SEC, any applicable law, rules or
regulations of any exchange or quotation system on which the Certificates
are listed or of any regulatory body;
- modify, eliminate or add to the provisions of such Pass Through Trust
Agreement, the Intercreditor Agreement or any Liquidity Facility to the
extent necessary to continue the qualification of such Pass Through Trust
Agreement (including any supplemental agreement), the Intercreditor
Agreement or Liquidity Facility under the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act") and add to such Pass Through Trust
Agreement, the Intercreditor Agreement or
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any Liquidity Facility such other provisions as may be expressly
permitted by the Trust Indenture Act;
- provide for a successor Trustee under such Pass Through Trust Agreement
and add to or change any of the provisions of such Pass Through Trust
Agreement, the Intercreditor Agreement or any Liquidity Facility as
necessary to facilitate the administration of the Trusts under such Pass
Through Trust Agreement by more than one Trustee or, as provided in the
Intercreditor Agreement, to provide for multiple Liquidity Facilities for
such Trust;
- provide certain information to the Trustee as required in such Pass
Through Trust Agreement;
- add to or change the Basic Agreement and any Trust Supplement to
facilitate the issuance of any Certificates in bearer form or to
facilitate or provide for the issuance of any Certificates in global form
in addition to or in place of Certificates in certificated form;
- provide for the delivery of Certificates or any supplement to such Pass
Through Trust Agreement in or by means of any computerized, electronic or
other medium, including computer diskette;
- correct or supplement the description of any property of any Trust; and
- modify, eliminate or add to the provisions of such Pass Through Trust
Agreement to reflect the substitution of a substitute aircraft for any
Aircraft;
provided, however, that no such supplement shall cause any Trust to become an
association taxable as a corporation for U.S. federal income tax purposes.
(Section 9.01)
Each Pass Through Trust Agreement also contains provisions permitting Delta
and the Trustee, with the consent of the holders of the Certificates of the
related Trust evidencing fractional undivided interests aggregating not less
than a majority in interest of such Trust, to enter into supplemental agreements
adding any provisions to or changing or eliminating any of the provisions of
such Pass Through Trust Agreement, the Intercreditor Agreement or any Liquidity
Facility or modifying the rights of the Certificateholders of such Trust, except
that no such supplemental agreement may, without the consent of the holder of
each outstanding Certificate adversely affected thereby:
- reduce in any manner the amount of, or delay the timing of, any receipt
by the Trustee of payments on the Equipment Notes held in such Trust, or
distributions in respect of any Certificate of such Trust, or change the
date or place of any payment or change the coin or currency in which such
Certificate is payable, or impair the right of any Certificateholder of
such Trust to institute suit for the enforcement of any such payment when
due;
- permit the disposition of any Equipment Note held in such Trust, except
as provided in such Pass Through Trust Agreement, the Intercreditor
Agreement or the Liquidity Facility;
- alter the priority of distributions specified in the Intercreditor
Agreement in a manner materially adverse to such Certificateholders;
- reduce the percentage of the aggregate fractional undivided interests of
the Trust provided for in such Pass Through Trust Agreement, the consent
of the holders of which is required for any such supplemental agreement
or for any waiver provided for in such Pass Through Trust Agreement; or
- cause such Trust to become an association taxable as a corporation for
U.S. Federal income tax purposes.
If a Trustee, as holder (or beneficial owner through the Subordination
Agent) of any Equipment Note in trust for the benefit of the Certificateholders
of the relevant Trust or as Controlling Party under the Intercreditor Agreement,
receives (directly or indirectly through the Subordination Agent) a request for
a consent to any amendment, modification, waiver or supplement under any
Indenture, any Participation Agreement, any Equipment Note or any other related
document, the Trustee will forthwith send a notice of such proposed amendment,
modification, waiver or supplement to each Certificateholder
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of the relevant Trust registered on the register of such Trust as of the date of
such notice. The Trustee will request from the Certificateholders a direction as
to:
- whether or not to take or refrain from taking (or direct the
Subordination Agent to take or refrain from taking) any action that a
Note Holder or the Controlling Party has the option to take or direct;
- whether or not to give or execute (or direct the Subordination Agent to
give or execute) any waivers, consents, amendments, modifications or
supplements as a Note Holder or as Controlling Party; and
- how to vote (or direct the Subordination Agent to vote) any Equipment
Note if a vote has been called for with respect thereto.
(Section 10.01; Intercreditor Agreement, Section 8.01(b))
Provided such a request for Certificateholder direction has been made, in
directing any action or casting any vote or giving any consent as the holder of
any Equipment Note (or in directing the Subordination Agent in any of the
foregoing):
- other than as the Controlling Party, the Trustee will vote for or give
consent to any such action with respect to such Equipment Note in the
same proportion as that of (x) the aggregate face amount of all
Certificates actually voted in favor of or for giving consent to such
action by such direction of Certificateholders to (y) the aggregate face
amount of all outstanding Certificates of the relevant Trust; and
- as the Controlling Party, the Trustee will vote as directed in such
Certificateholder direction by the Certificateholders evidencing
fractional undivided interests aggregating not less than a majority in
interest in the relevant Trust.
(Section 10.01)
For purposes of the preceding paragraph, a Certificate is deemed "actually
voted" if the Certificateholder has delivered to the Trustee an instrument
evidencing such Certificateholder's consent to such direction prior to one
Business Day before the Trustee directs such action or casts such vote or gives
such consent. Notwithstanding the foregoing, but subject to certain rights of
the Certificateholders under the relevant Pass Through Trust Agreement and
subject to the Intercreditor Agreement, the Trustee may, in its own discretion
and at its own direction, consent and notify the relevant Loan Trustee of such
consent (or direct the Subordination Agent to consent and notify the relevant
Loan Trustee of such consent) to any amendment, modification, waiver or
supplement under the relevant Indenture, Participation Agreement, Equipment Note
or any other related document, if an Indenture Event of Default under any
Indenture has occurred and is continuing, or if such amendment, modification,
waiver or supplement will not materially adversely affect the interests of the
Certificateholders. (Section 10.01)
TERMINATION OF THE TRUSTS
The obligations of Delta and the applicable Trustee with respect to a Trust
will terminate upon the distribution to Certificateholders of such Trust of all
amounts required to be distributed to them pursuant to the applicable Pass
Through Trust Agreement and the disposition of all property held in such Trust.
The applicable Trustee will mail to each Certificateholder of record of such
Trust notice of the termination of such Trust, the amount of the proposed final
payment and the proposed date for the distribution of such final payment for
such Trust. The Final Distribution to any Certificateholder of such Trust will
be made only upon surrender of such Certificateholder's Certificates at the
office or agency of the applicable Trustee specified in such notice of
termination. (Section 11.01)
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THE TRUSTEES
The Trustee for each Trust initially will be State Street Bank and Trust
Company of Connecticut, National Association. The Trustee's address is State
Street Bank and Trust Company of Connecticut, National Association, 225 Asylum
Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate Trust
Division.
With certain exceptions, the Trustee makes no representations as to the
validity or sufficiency of the Basic Agreement, the Trust Supplements, the
Certificates, the Equipment Notes, the Indentures, the Intercreditor Agreement,
the Participation Agreements or other related documents. (Sections 7.04 and
7.15) The Trustee of any Trust will not be liable to the Certificateholders of
such Trust for any action taken or omitted to be taken by it in good faith in
accordance with the direction of the holders of a majority in face amount of
outstanding Certificates of such Trust. Subject to certain provisions, the
Trustee will be under no obligation to exercise any of its rights or powers
under any Pass Through Trust Agreement at the request of any holders of
Certificates issued thereunder unless there has been offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
which might be incurred by such Trustee in exercising such rights or powers.
(Section 7.03(e)) Each Pass Through Trust Agreement provides that the applicable
Trustee in its individual or any other capacity may acquire and hold
Certificates issued thereunder and, subject to certain conditions, may otherwise
deal with Delta with the same rights it would have if it were not the Trustee.
(Section 7.05)
BOOK-ENTRY REGISTRATION; DELIVERY AND FORM
Upon issuance, each Class of Certificates (other than the Class D
Certificates) will be represented by one or more fully registered global
certificates. Each global certificate will be deposited with, or on behalf of,
DTC and registered in the name of Cede, the nominee of DTC. DTC was created to
hold securities for its participants ("DTC Participants") and to facilitate the
clearance and settlement of securities transactions between DTC Participants
through electronic book-entry changes in accounts of the DTC Participants,
thereby eliminating the need for physical movement of certificates. DTC
Participants include securities brokers and dealers, banks, trust companies and
clearing corporations and certain other organizations. Indirect access to the
DTC system is available to others such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly ("Indirect Participants"). See
"Description of the Pass Through Certificates -- Book-Entry Registration" in the
Prospectus for a discussion of the book-entry procedures applicable to the
Certificates and the limited circumstances under which definitive certificates
may be issued for the Certificates (other than the Class D Certificates).
So long as such book-entry procedures are applicable, no person acquiring
an interest in such Certificates ("Certificate Owner") will be entitled to
receive a certificate representing such person's interest in such Certificates.
Unless and until definitive certificates are issued under the limited
circumstances described in the Prospectus, all references in this prospectus
supplement to actions by Certificateholders (other than Class D
Certificateholders) shall refer to actions taken by DTC upon instructions from
DTC Participants, and all references to distributions, notices, reports and
statements to Certificateholders (other than Class D Certificateholders) will
refer, as the case may be, to distributions, notices, reports and statements to
DTC or Cede, as the registered holder of such Certificates, or to DTC
Participants for distribution to Certificate Owners in accordance with DTC
procedures.
Neither Delta nor the Trustee will have any responsibility or liability for
any aspect of the records relating to or payments made on account of beneficial
ownership interests in the Certificates held by Cede, as nominee for DTC, or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests or for the performance by DTC, any DTC Participant or any
Indirect Participant of their respective obligations under the rules,
regulations and procedures creating and affecting DTC and its operations or any
other statutory, regulatory, contractual or customary procedures governing their
obligations.
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DESCRIPTION OF THE LIQUIDITY FACILITIES
The following summary describes certain terms of the Liquidity Facilities
and certain provisions of the Intercreditor Agreement relating to the Liquidity
Facilities. There is no liquidity facility for the Class D Certificates.
Therefore, the statements under this caption apply only to the Class A-1, Class
A-2, Class B and Class C Trusts. The summary supplements (and, to the extent
inconsistent therewith, replaces) the description of the general terms and
provisions relating to the Liquidity Facilities and the Intercreditor Agreement
and the description of credit enhancements set forth in the Prospectus. The
summary does not purport to be complete and is qualified in its entirety by
reference to all of the provisions of the Liquidity Facilities and the
Intercreditor Agreement, each of which will be filed as an exhibit to a Current
Report on Form 8-K to be filed by Delta with the SEC. The provisions of the
Liquidity Facilities are substantially identical except as otherwise indicated.
GENERAL
The liquidity provider for each Trust (the "Liquidity Provider") will enter
into a separate revolving credit agreement (each, a "Liquidity Facility") with
the Subordination Agent with respect to such Trust (other than the Class D
Trust). Under each Liquidity Facility, the Liquidity Provider will, if
necessary, make one or more advances ("Interest Drawings") to the Subordination
Agent in an aggregate amount (the "Required Amount") sufficient to pay interest
on the Pool Balance of the related Certificates on up to three consecutive
semiannual Regular Distribution Dates at the respective interest rates shown on
the cover page of this prospectus supplement for such Certificates (the "Stated
Interest Rates"). If interest payment defaults occur which exceed the amount
covered by or available under the Liquidity Facility for any Trust, the
Certificateholders of such Trust will bear their allocable share of the
deficiencies to the extent that there are no other sources of funds. The initial
Liquidity Provider with respect to each Trust may be replaced by one or more
other entities with respect to any of such Trusts under certain circumstances.
Therefore, the Liquidity Provider for the Trusts may differ.
DRAWINGS
The initial amount available under the Liquidity Facility for each Trust
will be as follows:
<Table>
<Caption>
AVAILABLE
TRUST AMOUNT
- ----- -----------
Class A-1................................................... $26,459,408
Class A-2................................................... 54,597,005
Class B..................................................... 20,883,303
Class C..................................................... 16,071,559
</Table>
Except as otherwise provided below, the Liquidity Facility for each Trust
will enable the Subordination Agent to make Interest Drawings thereunder on any
Regular Distribution Date in order to make interest distributions then scheduled
for the Certificates of such Trust at the Stated Interest Rate for such Trust to
the extent that the amount, if any, available to the Subordination Agent on such
Regular Distribution Date is not sufficient to pay such interest. The maximum
amount available to be drawn under a Liquidity Facility with respect to any
Trust on any Regular Distribution Date to fund any shortfall of interest on
Certificates of such Trust will not exceed the then Maximum Available Commitment
under such Liquidity Facility. The "Maximum Available Commitment" at any time
under each Liquidity Facility is an amount equal to the then Required Amount of
such Liquidity Facility less the aggregate amount of each Interest Drawing then
outstanding under such Liquidity Facility at such time, provided that following
a Downgrade Drawing, a Final Drawing or a Non-Extension Drawing under a
Liquidity Facility, the Maximum Available Commitment under such Liquidity
Facility shall be zero.
The Liquidity Facility for any Class of Certificates does not provide for
drawings thereunder to pay for principal of or Make-Whole Amount on the
Certificates of such Class or any interest with respect to the Certificates of
such Class in excess of the Stated Interest Rate for such Class or for more than
three semiannual installments of interest or to pay principal of or interest or
Make-Whole Amount with respect
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to the Certificates of any other Class. (Liquidity Facilities, Section 2.02;
Intercreditor Agreement, Section 3.06)
Each payment by the Liquidity Provider will reduce by the same amount the
Maximum Available Commitment under the related Liquidity Facility, subject to
reinstatement as hereinafter described. With respect to any Interest Drawings,
upon reimbursement of the Liquidity Provider in full or in part for the amount
of such Interest Drawings plus accrued interest thereon, the Maximum Available
Commitment under such Liquidity Facility will be reinstated by the amount
reimbursed but not to exceed the then Required Amount of such Liquidity
Facility; provided, however, such Liquidity Facility will not be so reinstated
at any time if (i) a Liquidity Event of Default has occurred and is continuing
and (ii) less than 65% of the then aggregate outstanding principal amount of all
Equipment Notes are Performing Equipment Notes. With respect to any other
drawings under such Liquidity Facility, amounts available to be drawn thereunder
are not subject to reinstatement. (Liquidity Facilities, Section 2.02(a);
Intercreditor Agreement, Section 3.06(g)). Following each reduction of the Pool
Balance for the applicable Trust, the Required Amount of the Liquidity Facility
for any Trust will be reduced automatically to an amount sufficient to pay
interest on the relevant Pool Balance thereof on the next three successive
semiannual Regular Distribution Dates (without regard to expected future
distributions of principal of such Certificates) at the Stated Interest Rate for
such Trust. (Liquidity Facilities, Section 2.04)
"Performing Equipment Note" means an Equipment Note issued pursuant to an
Indenture with respect to which no payment default has occurred and is
continuing (without giving effect to any acceleration); provided that in the
event of a bankruptcy proceeding in which Delta is a debtor under the Bankruptcy
Code, (i) any payment default occurring before the date of the order for relief
for such proceedings shall not be taken into consideration during the 60-day
period under Section 1110(a)(2)(A) of the Bankruptcy Code (or such longer period
as may apply under Section 1110(b) of the Bankruptcy Code) (the "Section 1110
Period"), (ii) any payment default occurring after the date of the order for
relief in such proceeding will not be taken into consideration if such payment
default is cured under Section 1110(a)(2)(B) of the Bankruptcy Code before the
later of 30 days after the date of such default or the expiration of the Section
1110 Period and (iii) any payment default occurring after the Section 1110
Period will not be taken into consideration if such payment default is cured
before the end of the grace period, if any, set forth in the related Indenture.
(Intercreditor Agreement, Section 1.01)
REPLACEMENT OF LIQUIDITY FACILITIES
If at any time the short-term unsecured debt rating of the Liquidity
Provider for any Trust issued by either Rating Agency (or if such Liquidity
Provider does not have a short-term unsecured debt rating issued by a given
Rating Agency, the long-term unsecured debt rating of such Liquidity Provider
issued by such Rating Agency) is lower than the Threshold Rating applicable to
such Trust, then (unless the Rating Agencies confirm in writing that such lower
rating will not result in the downgrading, withdrawal or suspension of the
ratings of the relevant Class of Certificates) the Liquidity Facility for such
Class may be replaced by a Replacement Facility. If such Liquidity Facility is
not so replaced with a Replacement Facility within 10 days after the downgrading
(or within 45 days of such downgrading solely in the event of a downgrading of
such Liquidity Provider's short-term unsecured debt rating by Standard & Poor's
from A-1+ to A-1), the Subordination Agent will draw the then Maximum Available
Commitment under such Liquidity Facility (the "Downgrade Drawing"). The
Subordination Agent will deposit the proceeds of any Downgrade Drawing into a
cash collateral account (the "Cash Collateral Account") for such Class of
Certificates and will use these proceeds for the same purposes and under the
same circumstances and subject to the same conditions as cash payments of
Interest Drawings under such Liquidity Facility would be used. (Liquidity
Facilities, Section 2.02(c); Intercreditor Agreement, Section 3.06(c))
A "Replacement Facility" for any Liquidity Facility will mean an
irrevocable revolving credit agreement (or agreements) in substantially the form
of the replaced Liquidity Facility, including reinstatement provisions, or in
such other form (which may include a letter of credit, surety bond, financial
insurance policy or guaranty) as will permit the Rating Agencies to confirm in
writing their respective ratings then in effect for the Certificates with
respect to which such Liquidity Facility was issued (before
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downgrading of such ratings, if any, as a result of the downgrading of the
Liquidity Provider), in a face amount (or in an aggregate face amount) equal to
the amount sufficient to pay interest on the Pool Balance of the Certificates of
such Trust (at the Stated Interest Rate for such Certificates, and without
regard to expected future principal distributions) on the three Regular
Distribution Dates following the date of replacement of such Liquidity Facility,
or, if such date is a Regular Distribution Date, on such day and the two Regular
Distribution Dates following such day, and issued by a person (or persons)
having debt ratings issued by both Rating Agencies that are equal to or higher
than the Threshold Rating for the relevant Class. (Intercreditor Agreement,
Section 1.01) The provider of any Replacement Facility will have the same rights
(including, without limitation, priority distribution rights and rights as
Controlling Party) under the Intercreditor Agreement as the replaced Liquidity
Provider.
"Threshold Rating" means (i) with respect to the Class A-1 Liquidity
Provider, the Class A-2 Liquidity Provider and the Class B Liquidity Provider, a
short-term unsecured debt rating of P-1 in the case of Moody's and A-1+ in the
case of Standard & Poor's, and with respect to the Class C Liquidity Provider, a
short-term unsecured debt rating of P-1 in the case of Moody's and A-1 in the
case of Standard & Poor's and (ii) in the case of any person who does not have a
short-term unsecured debt rating from either or both such Rating Agencies, then
in lieu of such short-term unsecured debt rating from such Rating Agency or
Rating Agencies, with respect to the Class A-1 Liquidity Provider, Class A-2
Liquidity Provider and the Class B Liquidity Provider, a long-term unsecured
debt rating of A1 in the case of Moody's and AA- in the case of Standard &
Poor's, and with respect to the Class C Liquidity Provider, a long-term
unsecured debt rating of A1 in the case of Moody's and A in the case of Standard
& Poor's.
The Liquidity Facility for each Trust provides that the Liquidity
Provider's obligations thereunder will expire on the earliest of:
- 364 days after the initial issuance date of the Certificates (counting
from, and including, such issuance date);
- the date on which the Subordination Agent delivers to such Liquidity
Provider a certification that Final Distributions on all of the
Certificates of such Trust have been paid in full or provision has been
made for such payment;
- the date on which the Subordination Agent delivers to such Liquidity
Provider a certification that a Replacement Facility has been substituted
for such Liquidity Facility;
- the fifth Business Day following receipt by the Subordination Agent of a
Termination Notice from such Liquidity Provider (see "-- Liquidity Events
of Default"); and
- the date on which no amount is or may (including by reason of
reinstatement) become available for drawing under such Liquidity
Facility.
Each Liquidity Facility provides that it may be extended for additional
364-day periods by mutual agreement of the relevant Liquidity Provider and the
Subordination Agent. Under specified circumstances, the initial Liquidity
Provider may extend the Liquidity Facilities beyond any such 364-day period to
as late as the date that is 15 days after the Final Legal Distribution Date for
the relevant Class of Certificates.
The Intercreditor Agreement will provide for the replacement of the
Liquidity Facility for any Trust if such Liquidity Facility is scheduled to
expire earlier than 15 days after the Final Legal Distribution Date for the
Certificates of such Trust and such Liquidity Facility is not extended at least
25 days prior to its then scheduled expiration date. If such Liquidity Facility
is not so extended or replaced by the 25th day prior to its then scheduled
expiration date, the Subordination Agent shall request a drawing in full up to
the then Maximum Available Commitment under such Liquidity Facility (the
"Non-Extension Drawing"). The Subordination Agent will hold the proceeds of the
Non-Extension Drawing in the Cash Collateral Account for the related Trust as
cash collateral to be used for the same purposes and under the same
circumstances, and subject to the same conditions, as cash payments of Interest
Drawings under such Liquidity Facility would be used. (Liquidity Facilities,
Section 2.02(b); Intercreditor Agreement, Section 3.06(d))
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Subject to certain limitations, Delta may, at its option, arrange for a
Replacement Facility at any time after 5 years (or earlier upon the occurrence
of certain events) to replace the Liquidity Facility for any Trust (including
without limitation any Replacement Facility described in the following
sentence). In addition, if any Liquidity Provider determines not to extend any
Liquidity Facility, then such Liquidity Provider may, at its option, arrange for
a Replacement Facility, which must be acceptable to Delta, to replace such
Liquidity Facility during the period no earlier than 40 days and no later than
25 days prior to the then scheduled expiration date of such Liquidity Facility
or at any time thereafter. The Liquidity Provider may also arrange for a
Replacement Liquidity Facility to replace any of its Liquidity Facilities at any
time after it has extended the expiration of such Liquidity Facility for a
period in excess of a 364-day period and as late as 15 days after the Final
Legal Distribution Date for the relevant Class of Certificates. If a Replacement
Facility is provided at any time after a Downgrade Drawing or a Non-Extension
Drawing under any Liquidity Facility, the funds with respect to such Liquidity
Facility on deposit in the Cash Collateral Account for such Trust will be
returned to the Liquidity Provider being replaced. (Intercreditor Agreement,
Section 3.06(e))
Upon receipt by the Subordination Agent of a Termination Notice with
respect to any Liquidity Facility from the relevant Liquidity Provider, the
Subordination Agent shall request a final drawing (a "Final Drawing") under such
Liquidity Facility in an amount equal to the then Maximum Available Commitment
thereunder. The Subordination Agent will hold the proceeds of the Final Drawing
in the Cash Collateral Account for the related Trust as cash collateral to be
used for the same purposes and under the same circumstances, and subject to the
same conditions, as cash payments of Interest Drawings under such Liquidity
Facility would be used. (Liquidity Facilities, Section 2.02(d); Intercreditor
Agreement, Section 3.06(i))
Drawings under any Liquidity Facility will be made by delivery by the
Subordination Agent of a certificate in the form required by such Liquidity
Facility. Upon receipt of such a certificate, the relevant Liquidity Provider is
obligated to make payment of the drawing requested thereby in immediately
available funds. Upon payment by the relevant Liquidity Provider of the amount
specified in any drawing under any Liquidity Facility, such Liquidity Provider
will be fully discharged of its obligations under such Liquidity Facility with
respect to such drawing and will not thereafter be obligated to make any further
payments under such Liquidity Facility in respect of such drawing to the
Subordination Agent or any other person.
REIMBURSEMENT OF DRAWINGS
The Subordination Agent must reimburse amounts drawn under any Liquidity
Facility by reason of an Interest Drawing, Final Drawing, Downgrade Drawing or
Non-Extension Drawing and interest thereon, but only to the extent that the
Subordination Agent has funds available therefor.
Interest Drawings and Final Drawings
Amounts drawn under any Liquidity Facility by reason of an Interest Drawing
or Final Drawing (each, a "Drawing") will be immediately due and payable,
together with interest on the amount of such drawing. From the date of such
drawing to (but excluding) the third business day following the Liquidity
Provider's receipt of the notice of such Interest Drawing, interest will accrue
at the Base Rate plus 1.50% per annum. Thereafter, interest will accrue at LIBOR
for the applicable interest period plus 1.50% per annum. In the case of a Final
Drawing, however, the Subordination Agent may convert the Final Drawing into a
drawing bearing interest at the Base Rate plus 1.50% per annum on the last day
of an interest period for such Drawing.
"Base Rate" means a fluctuating interest rate per annum in effect from time
to time, which rate per annum shall at all times be equal to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as published for each
day of the period for which the Base Rate is to be determined (or, if such day
is not a Business Day, for the next preceding Business Day) by the Federal
Reserve Bank of New York, or if such rate is not so published for any day that
is a Business Day, the average of the quotations for such day for such
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transactions received by the applicable Liquidity Provider from three Federal
funds brokers of recognized standing selected by it (and reasonably satisfactory
to Delta) plus one quarter of one percent (0.25)%.
"LIBOR" means, with respect to any interest period, the rate per annum at
which U.S. dollars are offered in the London interbank market as shown on Page
3750 of the Telerate Systems Incorporated screen service (or any successor
thereto), or if such service is not available, Page LIBO of the Reuters Money
Service Monitor System (or any successor thereto) at approximately 11:00 A.M.
(London time) two Business Days before the first day of such interest period,
for a period comparable to such interest period, or if such rate is not
available, a rate per annum determined by certain alternative methods.
Downgrade Drawings and Non-Extension Drawings
The amount drawn under any Liquidity Facility by reason of a Downgrade
Drawing or a Non-Extension Drawing and deposited in a Cash Collateral Account
will be treated as follows:
- such amount will be released on any Distribution Date to the Liquidity
Provider to pay any obligations to the Liquidity Provider to the extent
such amount exceeds the Required Amount;
- any portion of such amount withdrawn from the Cash Collateral Account for
such Certificates to pay interest distributions on such Certificates will
be treated in the same way as Interest Drawings; and
- the balance of such amount will be invested in certain specified eligible
investments.
Any Downgrade Drawing or Non-Extension Drawing under any of the Liquidity
Facilities, other than any portion thereof applied to the payment of interest
distributions on the Certificates, will bear interest (x) in the case of a
Downgrade Drawing, (i) at the Base Rate plus a margin, if applicable, with
respect to the period from the date of such Downgrade Drawing to (but excluding)
the third business day thereafter and (ii) from and after such third business
day, subject to clause (z) below, at a rate equal to LIBOR plus a margin, if
applicable, for the applicable Interest Period (and will continue to be subject
to payment of a commitment fee on the amount of such Downgrade Drawing), (y) in
the case of a Non-Extension Drawing, subject to clause (z) below, in an amount
equal to the investment earnings on amounts deposited in the Cash Collateral
Account attributable to such Liquidity Facility (and will continue to be subject
to payment of a commitment fee on the amount of such Non-Extension Drawing) and
(z) from and after the date, if any, on which such Downgrade Drawing or
Non-Extension Drawing is converted into a Final Drawing as described below under
"-- Liquidity Events of Default," at a rate equal to LIBOR for the applicable
interest period (or, as described in the first paragraph under "-- Interest
Drawings and Final Drawings," the Base Rate) plus 1.50% per annum.
LIQUIDITY EVENTS OF DEFAULT
Events of default under each Liquidity Facility (each, a "Liquidity Event
of Default") will consist of:
- the acceleration of all the Equipment Notes; or
- certain bankruptcy or similar events involving Delta. (Liquidity
Facilities, Section 1.01)
If (i) any Liquidity Event of Default under any Liquidity Facility has
occurred and is continuing and (ii) less than 65% of the aggregate outstanding
principal amount of all Equipment Notes are Performing Equipment Notes, the
applicable Liquidity Provider may, in its discretion, give a notice of
termination of such Liquidity Facility (a "Termination Notice"). The Termination
Notice will have the following consequences:
- the related Liquidity Facility will expire on the fifth Business Day
after the date on which such Termination Notice is received by the
Subordination Agent;
- the Subordination Agent will request promptly, and the Liquidity Provider
will honor, a Final Drawing thereunder in an amount equal to the then
Maximum Available Commitment thereunder;
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- any Drawing remaining unreimbursed as of the date of termination will be
converted automatically into a Final Drawing under such Liquidity
Facility; and
- all amounts owing to the Liquidity Provider will become immediately due
and payable.
Notwithstanding the foregoing, the Subordination Agent will be obligated to
pay amounts owing to the applicable Liquidity Provider only to the extent of
funds available therefor after giving effect to the payments in accordance with
the provisions set forth under "Description of the Intercreditor Agreement --
Priority of Distributions." (Liquidity Facilities, Section 6.01)
Upon the circumstances described under "Description of the Intercreditor
Agreement -- Intercreditor Rights," a Liquidity Provider may become the
Controlling Party with respect to the exercise of remedies under the Indentures.
(Intercreditor Agreement, Section 2.06(c))
LIQUIDITY PROVIDER
The initial Liquidity Provider for each Trust will be Landesbank
Hessen-Thuringen Girozentrale. Landesbank Hessen-Thuringen Girozentrale has
short-term debt ratings of P-1 from Moody's and A-1+ from Standard & Poor's.
DESCRIPTION OF THE INTERCREDITOR AGREEMENT
The following summary describes certain provisions of the Intercreditor
Agreement (the "Intercreditor Agreement") among the Trustees, the Liquidity
Provider and State Street Bank and Trust Company of Connecticut, National
Association, as subordination agent (the "Subordination Agent"). The summary
supplements (and, to the extent inconsistent therewith, replaces) the
description of the general terms and provisions relating to the Intercreditor
Agreement and the description of credit enhancements set forth in the
Prospectus. The summary does not purport to be complete and is qualified in its
entirety by reference to all of the provisions of the Intercreditor Agreement,
which will be filed as an exhibit to a Current Report on Form 8-K to be filed by
Delta with the SEC.
INTERCREDITOR RIGHTS
General
The Equipment Notes relating to each Trust will be issued to and registered
in the name of the Subordination Agent as agent and trustee for the Trustee of
such Trust.
Controlling Party
With respect to any Indenture at any given time, the Loan Trustee under
such Indenture will be directed in taking, or refraining from taking, any action
thereunder or with respect to the Equipment Notes issued under such Indenture by
the holders of at least a majority of the outstanding principal amount of the
Equipment Notes issued under such Indenture, so long as no Indenture Event of
Default shall have occurred and be continuing thereunder. For so long as the
Subordination Agent is the registered holder of the Equipment Notes, the
Subordination Agent will act with respect to the preceding sentence in
accordance with the directions of the Trustees of the Trusts in the Trust
Property of which are Equipment Notes constituting, in the aggregate, the
required principal amount of Equipment Notes. (Intercreditor Agreement, Section
2.06)
At any time after an Indenture Event of Default has occurred and is
continuing under an Indenture, the Loan Trustee under such Indenture will be
directed in taking, or refraining from taking, any action thereunder or with
respect to the Equipment Notes issued under such Indenture, including
acceleration of such Equipment Notes or foreclosing the lien on the related
Aircraft, by the Controlling Party, subject to the limitations described below.
(Intercreditor Agreement, Section 2.06) See "Description of the
Certificates -- Indenture Events of Default and Certain Rights upon an Indenture
Event of Default" for a description of the rights of the Certificateholders of
each Trust to direct the respective Trustees.
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The "Controlling Party" will be:
- the Class A-1 Trustee or Class A-2 Trustee, whichever represents the
Class with the larger Pool Balance of Certificates outstanding at the
time that the Indenture Event of Default occurs;
- upon payment of Final Distributions to the holders of such larger Class
of Certificates, the other of the Class A-1 Trustee or Class A-2 Trustee;
- upon payment of Final Distributions to the holders of Class A-1 and Class
A-2 Certificates, the Class B Trustee;
- upon payment of Final Distributions to the holders of Class B
Certificates, the Class C Trustee;
- upon payment of Final Distributions to the holders of Class C
Certificates, the Class D Trustee; and
- under certain circumstances, and notwithstanding the foregoing, the
Liquidity Provider with the greatest amount owed to it, as discussed in
the next paragraph.
At any time after 18 months from the earliest to occur of (x) the date on
which the entire available amount under any Liquidity Facility has been drawn
(for any reason other than a Downgrade Drawing or a Non-Extension Drawing) and
remains unreimbursed, (y) the date on which the entire amount of any Downgrade
Drawing or Non-Extension Drawing has been withdrawn from the relevant Cash
Collateral Account to pay interest on the relevant Class of Certificates and
remains unreimbursed and (z) the date on which all Equipment Notes have been
accelerated, the Liquidity Provider with the greatest amount of Liquidity
Obligations will have the right to become the Controlling Party with respect to
any Indenture. (Intercreditor Agreement, Section 2.06)
For purposes of giving effect to the rights of the Controlling Party, the
Trustees (other than the Controlling Party) shall irrevocably agree, and the
Certificateholders (other than the Certificateholders represented by the
Controlling Party) will be deemed to agree by virtue of their purchase of
Certificates, that the Subordination Agent, as record Note Holder, will exercise
its voting rights in respect of the Equipment Notes as directed by the
Controlling Party. (Intercreditor Agreement, Sections 2.06 and 8.01(b)) For a
description of certain limitations on the Controlling Party's rights to exercise
remedies, see "-- Sale of Equipment Notes or Aircraft" and "Description of the
Equipment Notes -- Remedies."
"Final Distributions" means, with respect to the Certificates of any Trust
on any Distribution Date, the sum of (x) the aggregate amount of all accrued and
unpaid interest in respect of such Certificates and (y) the Pool Balance of such
Certificates as of the immediately preceding Distribution Date. For purposes of
calculating Final Distributions with respect to the Certificates of any Trust,
any Make-Whole Amount paid on the Equipment Notes held in such Trust that has
not been distributed to the Certificateholders of such Trust (other than such
Make-Whole Amount or a portion thereof applied to the distributions of interest
on the Certificates of such Trust or the reduction of the Pool Balance of such
Trust) shall be added to the amount of such Final Distributions. (Intercreditor
Agreement, Section 1.01)
Sale of Equipment Notes or Aircraft
Following the occurrence and during the continuation of any Indenture Event
of Default under any Indenture, the Controlling Party may direct the
Subordination Agent to accelerate the Equipment Notes issued under such
Indenture and, subject to the provisions of the immediately following sentence,
sell all (but not less than all) of such Equipment Notes or the related Aircraft
to any person. So long as any Certificates are outstanding, during the nine
months after the earlier of (x) the acceleration of the Equipment Notes issued
under any Indenture and (y) the bankruptcy or insolvency of Delta, no Aircraft
subject to the lien of such Indenture or such Equipment Notes may be sold
without the consent of each Trustee, if the net proceeds from such sale would be
less than the Minimum Sale Price for such Aircraft or such Equipment Notes.
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"Minimum Sale Price" means, with respect to any Aircraft or the Equipment
Notes issued in respect of such Aircraft, at any time, the lesser of (i) 75% of
the Appraised Current Market Value of such Aircraft and (ii) the aggregate
outstanding principal amount of such Equipment Notes, plus accrued and unpaid
interest thereon.
PRIORITY OF DISTRIBUTIONS
The subordination terms applicable to the Certificates vary depending upon
whether a Triggering Event has occurred. "Triggering Event" means (i) the
occurrence of an Indenture Event of Default under all Indentures resulting in a
PTC Event of Default with respect to the most senior Class of Certificates then
outstanding, (ii) the acceleration of all of the outstanding Equipment Notes or
(iii) certain bankruptcy or insolvency events involving Delta.
Before a Triggering Event
So long as no Triggering Event has occurred (whether or not continuing),
all payments made in respect of the Equipment Notes and certain other payments
received on any Distribution Date will be distributed promptly by the
Subordination Agent on such Distribution Date in the following order of
priority:
- to each Liquidity Provider to the extent required to pay Liquidity
Expenses;
- to each Liquidity Provider to the extent required to pay accrued and
unpaid interest on the Liquidity Obligations;
- to each Liquidity Provider to the extent required to pay or reimburse the
Liquidity Provider for certain Liquidity Obligations (other than amounts
payable pursuant to the two preceding clauses) and/or, if applicable, to
replenish each Cash Collateral Account up to the Required Amount;
- to the Class A-1 Trustee and the Class A-2 Trustee to the extent required
to pay Expected Distributions on the Class A-1 Certificates and the Class
A-2 Certificates, except that if available funds are insufficient to pay
Expected Distributions to each such Class in full, available funds will
be distributed to each of the Class A-1 Trustee and the Class A-2 Trustee
in the same proportion as such Trustee's proportionate share of the
aggregate amount of such Expected Distributions;
- to the Class B Trustee to the extent required to pay Expected
Distributions on the Class B Certificates;
- to the Class C Trustee to the extent required to pay Expected
Distributions on the Class C Certificates;
- to the Class D Trustee to the extent required to pay Expected
Distributions on the Class D Certificates; and
- to the Subordination Agent and each Trustee for the payment of certain
fees and expenses.
"Liquidity Expenses" means the Liquidity Obligations other than (i) the
principal amount of any drawing under the Liquidity Facilities and (ii) any
interest accrued on any Liquidity Obligations.
"Liquidity Obligations" means the obligations to reimburse or to pay the
Liquidity Provider all principal, interest, fees and other amounts owing to it
under each Liquidity Facility or certain other agreements.
"Expected Distributions" means, with respect to the Certificates of any
Trust on any Distribution Date (the "Current Distribution Date"), the sum of (1)
accrued and unpaid interest in respect of such Certificates and (2) the
difference between:
(a) the Pool Balance of such Certificates as of the immediately
preceding Distribution Date (or, if the Current Distribution Date is the
first Distribution Date, the original aggregate face amount of the
Certificates of such Trust); and
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(b) the Pool Balance of such Certificates as of the Current
Distribution Date calculated on the basis that (i) the principal of the
Equipment Notes held in such Trust has been paid when due (whether at
stated maturity, upon redemption, prepayment, purchase, acceleration or
otherwise) and such payments have been distributed to the holders of such
Certificates and (ii) the principal of any Equipment Notes formerly held in
such Trust that have been sold pursuant to the Intercreditor Agreement has
been paid in full and such payments have been distributed to the holders of
such Certificates. (Intercreditor Agreement, Section 1.01)
For purposes of calculating Expected Distributions with respect to the
Certificates of any Trust, any Make-Whole Amount paid on the Equipment Notes
held in such Trust that has not been distributed to the Certificateholders of
such Trust (other than such Make-Whole Amount or a portion thereof applied to
distributions of interest on the Certificates of such Trust or the reduction of
the Pool Balance of such Trust) will be added to the amount of Expected
Distributions.
For purposes of determining the priority of distributions on account of the
redemption of Equipment Notes issued pursuant to an Indenture, clause (1) of the
definition of Expected Distributions set forth above shall be deemed to read as
follows: "(1) accrued, due and unpaid interest on such Certificates together
with (without duplication) accrued and unpaid interest on a portion of such
Certificates equal to the outstanding principal amount of the Equipment Notes
being redeemed or prepaid (immediately prior to such redemption or prepayment)."
After a Triggering Event
Subject to the terms of the Intercreditor Agreement, upon the occurrence of
a Triggering Event and at all times thereafter, all funds received by the
Subordination Agent in respect of the Equipment Notes and certain other payments
received by the Subordination Agent will be distributed promptly by the
Subordination Agent in the following order of priority:
- to the Subordination Agent and any Trustee, to the extent required to pay
certain out-of-pocket costs and expenses actually incurred by the
Subordination Agent or such Trustee in protection of, or realization of
the value of, the Equipment Notes or any Collateral under (and as defined
in) any Indenture, or to any Certificateholder or the Liquidity Provider
for payments made to the Subordination Agent or any Trustee in respect of
such amounts;
- to each Liquidity Provider to the extent required to pay Liquidity
Expenses;
- to each Liquidity Provider to the extent required to pay accrued and
unpaid interest on the Liquidity Obligations;
- (i) to each Liquidity Provider to the extent required to pay the
outstanding amount of all Liquidity Obligations and/or, (ii) if
applicable with respect to any particular Liquidity Facility (unless (x)
less than 65% of the aggregate outstanding principal amount of all
Equipment Notes are Performing Equipment Notes and a Liquidity Event of
Default has occurred and is continuing under such Liquidity Facility or
(y) a Final Drawing has occurred under such Liquidity Facility), to
replenish the Cash Collateral Account with respect to such Liquidity
Facility up to the Required Amount for the related Class of Certificates
(less the amount of any repayments of Interest Drawings under such
Liquidity Facility while sub-clause (x) of this clause is applicable);
- to the Subordination Agent and any Trustee to the extent required to pay
certain fees, taxes, charges and other amounts payable or to any
Certificateholder for payments made to the Subordination Agent or any
Trustee in respect of such amounts;
- to the Class A-1 Trustee and the Class A-2 Trustee to the extent required
to pay Adjusted Expected Distributions on the Class A-1 Certificates and
the Class A-2 Certificates, except that if available funds are
insufficient to pay Adjusted Expected Distributions to each such Class in
full, available funds will be distributed to each of the Class A-1
Trustee and the Class A-2 Trustee in
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the same proportion as such Trustee's proportionate share of the
aggregate amount of such Adjusted Expected Distributions;
- to the Class B Trustee to the extent required to pay Adjusted Expected
Distributions on the Class B Certificates;
- to the Class C Trustee to the extent required to pay Adjusted Expected
Distributions on the Class C Certificates;
- to the Class D Trustee to the extent required to pay Adjusted Expected
Distributions on the Class D Certificates;
- to the Class A-1 Trustee and the Class A-2 Trustee to the extent required
to pay Final Distributions on the Class A-1 Certificates and the Class
A-2 Certificates in full, except that if available funds are insufficient
so to pay each such Class in full, available funds will be distributed to
each of the Class A-1 Trustee and the Class A-2 Trustee in the same
proportion as such Trustee's proportionate share of such amount;
- to the Class B Trustee to the extent required to pay Final Distributions
on the Class B Certificates in full;
- to the Class C Trustee to the extent required to pay Final Distributions
on the Class C Certificates in full; and
- to the Class D Trustee to the extent required to pay Final Distributions
on the Class D Certificates in full.
"Adjusted Expected Distributions" means, with respect to the Certificates
of any Trust on any Current Distribution Date, the sum of (1) accrued and unpaid
interest in respect of such Certificates and (2) the greater of:
(a) the difference between (x) the Pool Balance of such Certificates
as of the immediately preceding Distribution Date (or, if the Current
Distribution Date is the first Distribution Date, the original aggregate
face amount of the Certificates of such Trust) and (y) the Pool Balance of
such Certificates as of the Current Distribution Date calculated on the
basis that (i) the principal of the Equipment Notes other than Performing
Equipment Notes (the "Non-Performing Equipment Notes") held in such Trust
has been paid in full and such payments have been distributed to the
holders of such Certificates, (ii) the principal of the Performing
Equipment Notes held in such Trust has been paid when due (but without
giving effect to any acceleration of Performing Equipment Notes) and such
payments have been distributed to the holders of such Certificates and
(iii) the principal of any Equipment Notes formerly held in such Trust that
have been sold pursuant to the Intercreditor Agreement has been paid in
full and such payments have been distributed to the holders of such
Certificates; and
(b) the amount of the excess, if any, of (i) the Pool Balance of such
Class of Certificates as of the immediately preceding Distribution Date
(or, if the Current Distribution Date is the first Distribution Date, the
original aggregate face amount of the Certificates of such Trust), over
(ii) the Aggregate LTV Collateral Amount for such Class of Certificates for
the Current Distribution Date;
provided that, until the date of the initial LTV Appraisals for all of the
Aircraft, clause (b) shall not apply.
For purposes of calculating Adjusted Expected Distributions with respect to
the Certificates of any Trust, any Make-Whole Amount paid on the Equipment Notes
held in such Trust that has not been distributed to the Certificateholders of
such Trust (other than such Make-Whole Amount or a portion thereof applied to
distributions of interest on the Certificates of such Trust or the reduction of
the Pool Balance of such Trust) will be added to the amount of Adjusted Expected
Distributions.
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"Aggregate LTV Collateral Amount" for any Class of Certificates for any
Distribution Date means an amount, not less than zero, equal to the product of
(i) the sum of the applicable LTV Collateral Amounts for such Class of
Certificates for all Aircraft, minus the Pool Balance for each Class of
Certificates, if any, senior to such Class, after giving effect to any
distribution of principal on such Distribution Date with respect to such senior
Class or Classes multiplied by (ii) (a) in the case of Class A-1 Certificates or
Class A-2 Certificates, a fraction the numerator of which equals the Pool
Balance for the Class A-1 Certificates or Class A-2 Certificates, as the case
may be, and the denominator of which equals the aggregate Pool Balances for the
Class A-1 Certificates and the Class A-2 Certificates, in each case prior to
giving effect to any distribution of principal on such Distribution Date with
respect to either such Class of Certificates, and (b) in the case of the Class
B, Class C and the Class D Certificates, 1.0.
"LTV Collateral Amount" of any Aircraft for any Class of Certificates
means, as of any Distribution Date, the lesser of (i) the LTV Ratio for such
Class of Certificates multiplied by the Appraised Current Market Value of such
Aircraft (or with respect to any such Aircraft that has suffered an Event of
Loss under and as defined in the relevant Indenture, the amount of the insurance
proceeds paid to the related Loan Trustee in respect thereof to the extent then
held by such Loan Trustee (and/or on deposit in the Special Payments Account) or
payable to such Loan Trustee in respect thereof or with respect to any such
Aircraft that has been released from the related Indenture pursuant to the
defeasance provisions thereof, the amount of money and U.S. Government
Obligations deposited with the Loan Trustee pursuant thereto as of such
Distribution Date) and (ii) the outstanding principal amount of the Equipment
Notes secured by such Aircraft after giving effect to any principal payments of
such Equipment Notes on or before such Distribution Date.
"LTV Ratio" means for the Class A-1 Certificates and the Class A-2
Certificates 46.0%, for the Class B Certificates 60.0%, for the Class C
Certificates 66.0% and for the Class D Certificates 75.0%.
"Appraised Current Market Value" of any Aircraft means the lower of the
average and the median of the three most recent LTV Appraisals of such Aircraft.
After a Triggering Event occurs and any Equipment Note becomes a Non-Performing
Equipment Note, the Subordination Agent will obtain LTV Appraisals of all of the
Aircraft as soon as practicable and additional LTV Appraisals on or prior to
each anniversary of the date of such initial LTV Appraisals; provided that if
the Controlling Party reasonably objects to the appraised value of the Aircraft
shown in such LTV Appraisals, the Controlling Party shall have the right to
obtain or cause to be obtained substitute LTV Appraisals (including LTV
Appraisals based upon physical inspection of such Aircraft).
"LTV Appraisal" means a current fair market value appraisal (which may be a
"desk-top" appraisal) performed by any Appraiser or any other nationally
recognized appraiser on the basis of an arm's-length transaction between an
informed and willing purchaser under no compulsion to buy and an informed and
willing seller under no compulsion to sell and both having knowledge of all
relevant facts.
Interest Drawings under the Liquidity Facility and withdrawals from the
Cash Collateral Account, in each case in respect of interest distributable on
the Certificates of any Trust (other than the Class D Trust), will be
distributed to the Trustee for such Trust, notwithstanding the priority of
distributions set forth in the Intercreditor Agreement and otherwise described
herein.
THE SUBORDINATION AGENT
State Street Bank and Trust Company of Connecticut, National Association,
initially will be the Subordination Agent under the Intercreditor Agreement.
Delta and its affiliates may from time to time enter into banking and trustee
relationships with the Subordination Agent and its affiliates. The Subordination
Agent's address is State Street Bank and Trust Company of Connecticut, National
Association, 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103,
Attention: Corporate Trust Division.
The Subordination Agent may resign at any time, in which event a successor
Subordination Agent will be appointed as provided in the Intercreditor
Agreement. Delta or the Controlling Party may at any
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time remove the Subordination Agent as provided in the Intercreditor Agreement.
In such circumstances, a successor Subordination Agent will be appointed as
provided in the Intercreditor Agreement. Any resignation or removal of the
Subordination Agent and appointment of a successor Subordination Agent does not
become effective until acceptance of the appointment by the successor
Subordination Agent. (Intercreditor Agreement, Section 7.01)
DESCRIPTION OF THE AIRCRAFT AND THE APPRAISALS
THE AIRCRAFT
The Aircraft consist of 16 Boeing 737-832 aircraft, 13 Boeing 757-232
aircraft and 7 Boeing 767-332ER aircraft (collectively, the "Aircraft"), all of
which have been delivered new to Delta by the manufacturer. The Aircraft have
been designed to be in compliance with Stage 3 noise level standards, which are
the most restrictive regulatory standards currently in effect in the United
States for aircraft noise abatement.
The Boeing 737-832 is a single aisle commercial jet aircraft. Seating
capacity is 154 seats in Delta's standard configuration and 150 or 156 seats in
Delta's Shuttle configuration. The 737-832 is deployed on Delta's North American
routes, as well as to points in the Caribbean, Central America and the northern
rim of South America. The 737-832 is powered by two CFM56-7B26 jet engines
manufactured by CFM International, Inc.
The Boeing 757-232 is a single aisle commercial jet aircraft. Seating
capacity in Delta's configuration is 186 seats. The 757-232 is deployed on
Delta's North American routes, as well as to points in Central and South America
and the Caribbean. The 757-232 is powered by two PW2037 jet engines manufactured
by United Technologies Corporation.
The Boeing 767-332ER is a twin aisle commercial jet aircraft. Seating
capacities are 190 and 195 seats for Delta's transatlantic configuration and 252
seats for Delta's domestic configuration. The 767-332ER is powered by two
CF6-80C2B6F jet engines manufactured by General Electric Company.
THE APPRAISALS
The table below sets forth the appraised base values of the Aircraft as
determined by Aircraft Information Systems, Inc. ("AISI"), AvSolutions, Inc.
("AvSolutions") and BK Associates, Inc. ("BK," and together with AISI and
AvSolutions, the "Appraisers"), independent aircraft appraisal and consulting
firms, and certain additional information regarding the Aircraft.
<Table>
<Caption>
APPRAISERS' VALUATIONS
REGISTRATION AIRCRAFT DATE --------------------------------------- APPRAISED
NUMBER TYPE DELIVERED AISI AVSOLUTIONS BK BASE VALUE(1)
- ------------ ----------------- -------------- ----------- ----------- ----------- -------------
N3731T Boeing 737-832 09/29/00 $43,680,000 $46,020,000 $40,850,000 $43,516,667
N3732J Boeing 737-832 10/04/00 43,680,000 46,260,000 40,950,000 43,630,000
N3733Z Boeing 737-832 10/27/00 43,680,000 46,260,000 40,950,000 43,630,000
N3734B Boeing 737-832 10/28/00 43,680,000 46,260,000 40,950,000 43,630,000
N3735D Boeing 737-832 11/03/00 43,680,000 46,500,000 41,000,000 43,680,000
N3736C Boeing 737-832 11/27/00 43,680,000 46,500,000 41,000,000 43,680,000
N3737C Boeing 737-832 11/30/00 43,680,000 46,500,000 41,000,000 43,680,000
N3738B Boeing 737-832 12/14/00 43,680,000 46,750,000 41,100,000 43,680,000
N3739P Boeing 737-832 12/14/00 43,680,000 46,750,000 41,100,000 43,680,000
N3740C Boeing 737-832 12/19/00 43,680,000 46,750,000 41,100,000 43,680,000
N3741S Boeing 737-832 01/27/01 46,580,000 46,990,000 41,250,000 44,940,000
N3742C Boeing 737-832 02/01/01 46,580,000 47,240,000 41,350,000 45,056,667
N3743H Boeing 737-832 02/21/01 46,580,000 47,240,000 41,350,000 45,056,667
N3744F Boeing 737-832 05/24/01 46,580,000 47,990,000 41,550,000 45,373,333
N3745B Boeing 737-832 06/12/01 46,580,000 48,240,000 41,650,000 45,490,000
N3747D Boeing 737-832 05/21/01 46,580,000 47,990,000 41,550,000 45,373,333
N685DA Boeing 757-232 03/31/95 41,480,000 41,370,000 44,500,000 41,480,000
N686DA Boeing 757-232 09/20/95 41,480,000 42,630,000 45,400,000 42,630,000
N687DL Boeing 757-232 05/04/98 47,010,000 50,000,000 50,000,000 49,003,333
</Table>
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<Table>
<Caption>
APPRAISERS' VALUATIONS
REGISTRATION AIRCRAFT DATE --------------------------------------- APPRAISED
NUMBER TYPE DELIVERED AISI AVSOLUTIONS BK BASE VALUE(1)
- ------------ ----------------- -------------- ----------- ----------- ----------- -------------
N688DL Boeing 757-232 05/21/98 47,010,000 50,000,000 50,000,000 49,003,333
N689DL Boeing 757-232 06/18/98 47,010,000 50,210,000 50,150,000 49,123,333
N690DL Boeing 757-232 06/26/98 47,010,000 50,210,000 50,150,000 49,123,333
N692DL Boeing 757-232 09/04/98 47,010,000 50,840,000 50,650,000 49,500,000
N693DL Boeing 757-232 10/17/98 47,010,000 51,050,000 50,800,000 49,620,000
N694DL Boeing 757-232 11/11/98 47,010,000 51,260,000 51,000,000 49,756,667
N695DL Boeing 757-232 12/11/98 47,010,000 51,480,000 51,200,000 49,896,667
N6714Q Boeing 757-232 12/19/00 51,520,000 56,900,000 54,900,000 54,440,000
N6715C Boeing 757-232 02/14/01 54,220,000 57,380,000 55,150,000 55,150,000
N6716C Boeing 757-232 03/09/01 54,220,000 57,620,000 55,200,000 55,200,000
N169DZ Boeing 767-332ER 06/18/98 75,090,000 72,440,000 75,000,000 74,176,667
N171DZ Boeing 767-332ER 09/11/98 75,090,000 73,430,000 75,550,000 74,690,000
N172DZ Boeing 767-332ER 09/25/98 75,090,000 73,430,000 75,550,000 74,690,000
N173DZ Boeing 767-332ER 11/02/98 75,090,000 74,160,000 76,100,000 75,090,000
N1608 Boeing 767-332ER 04/21/00 83,190,000 80,330,000 81,150,000 81,150,000
N1609 Boeing 767-332ER 04/25/00 83,190,000 80,330,000 81,150,000 81,150,000
N1610D Boeing 767-332ER 04/26/00 83,190,000 80,330,000 81,150,000 81,150,000
</Table>
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(1) The appraised base value of each Aircraft is the lesser of the average and
median base values of such Aircraft as determined by the Appraisers.
According to the International Society of Transport Aircraft Trading,
"appraised base value" is defined as each Appraiser's opinion of the underlying
economic value of an Aircraft in an open, unrestricted, stable market
environment with a reasonable balance of supply and demand, and assumes full
consideration of its "highest and best use." An Aircraft's appraised base value
is founded in the historical trend of values and in the projection of value
trends and presumes an arm's length, cash transaction between willing, able and
knowledgeable parties, acting prudently, with an absence of duress and with a
reasonable period of time available for marketing.
Each Appraiser was asked to provide its opinion as to the appraised base
value of each Aircraft. All three Appraisers performed "desk-top" appraisals
without any physical inspection of the Aircraft. The Appraisals are based on
various assumptions and methodologies which vary among the Appraisals and may
not reflect current market conditions. Appraisals that are based on different
assumptions and methodologies may result in valuations that are materially
different from those contained in the Appraisals.
The Appraisers have delivered letters setting forth their respective
appraisals, copies of which are annexed to this prospectus supplement as
Appendix II. For a discussion of the assumptions and methodologies used in each
of the Appraisals, you should read such letters.
An appraisal is only an estimate of value. It does not necessarily indicate
the price at which an aircraft may be purchased from the manufacturer or any
other seller. Nor should it be relied upon as a measure of realizable value. The
proceeds realized upon a sale of any Aircraft may be less than its appraised
value. In addition, the value of the Aircraft in the event of the exercise of
remedies under the applicable Indenture will depend on market and economic
conditions at the time, the availability of buyers, the condition of the
Aircraft, whether the Aircraft are sold separately or in one or more groups and
other factors. Accordingly, there can be no assurance that the proceeds realized
upon any such exercise of remedies with respect to the Aircraft pursuant to the
applicable Indenture would equal the appraised value of such Aircraft or be
sufficient to satisfy in full payments due on the Equipment Notes relating to
such Aircraft or the Certificates.
DESCRIPTION OF THE EQUIPMENT NOTES
The following summary describes certain terms of the Equipment Notes and
supplements (and, to the extent inconsistent therewith, replaces) the
description of the general terms and provisions relating to the Equipment Notes,
the Indentures and the Participation Agreements set forth in the Prospectus. The
summaries do not purport to be complete and make use of terms defined in and are
qualified in their
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entirety by reference to all of the provisions of the Equipment Notes, the
Indentures and the Participation Agreements, forms of each of which will be
filed as exhibits to a Current Report on Form 8-K to be filed by Delta with the
SEC. Except as otherwise indicated, the following summaries relate to the
Equipment Notes, the Indenture and the Participation Agreement applicable to
each Aircraft.
GENERAL
Pursuant to the terms of a Participation Agreement among Delta, the
Trustees, the Subordination Agent and the Loan Trustee with respect to each
Aircraft (each, a "Participation Agreement"), the Trusts will purchase from
Delta the Equipment Notes to be issued under the related Indenture. Equipment
Notes will be issued in five series with respect to each Aircraft: the "Series
A-1 Equipment Notes," the "Series A-2 Equipment Notes," the "Series B Equipment
Notes," the "Series C Equipment Notes" and the "Series D Equipment Notes"
(collectively, the "Equipment Notes"). The Equipment Notes with respect to each
Aircraft will be issued under a separate indenture (each, an "Indenture")
between Delta and State Street Bank and Trust Company of Connecticut, National
Association, as loan trustee thereunder (each, a "Loan Trustee"). The Equipment
Notes will be direct, full recourse obligations of Delta.
SUBORDINATION
The Indentures provide for the following subordination provisions
applicable to the Equipment Notes:
- Series A-1 and Series A-2 Equipment Notes issued in respect of an
Aircraft will rank equally in right of payment and will rank senior in
right of payment to other Equipment Notes issued in respect of such
Aircraft;
- Series B Equipment Notes issued in respect of an Aircraft will rank
junior in right of payment to the Series A-1 and Series A-2 Equipment
Notes issued in respect of such Aircraft and will rank senior in right of
payment to the Series C and Series D Equipment Notes issued in respect of
such Aircraft;
- Series C Equipment Notes issued in respect of an Aircraft will rank
junior in right of payment to the Series A-1, Series A-2 and Series B
Equipment Notes issued in respect of such Aircraft and senior in right of
payment to the Series D Equipment Notes issued in respect of such
Aircraft; and
- Series D Equipment Notes issued in respect of an Aircraft will rank
junior in right of payment to the other Equipment Notes issued in respect
of such Aircraft.
PRINCIPAL AND INTEREST PAYMENTS
Subject to the provisions of the Intercreditor Agreement, scheduled
installments of interest paid on the Equipment Notes held in each Trust will be
passed through to the Certificateholders of such Trust on the dates and at the
rate per annum applicable to the Certificates issued by such Trust until the
final expected Regular Distribution Date for such Trust. Subject to the
provisions of the Intercreditor Agreement, principal paid on the Equipment Notes
held in each Trust will be passed through to the Certificateholders of such
Trust in scheduled amounts on the dates set forth herein until the final
expected Regular Distribution Date for such Trust.
Interest will be payable on the unpaid principal amount of each Equipment
Note at the rate applicable to such Equipment Note on March 18 and September 18
of each year, commencing on March 18, 2002. Such interest will be computed on
the basis of a 360-day year of twelve 30-day months. Overdue amounts of
principal, Make-Whole Amount (if any) and interest on such series of Equipment
Notes will, to the extent permitted by applicable law, bear interest at the
interest rate applicable to such series of Equipment Notes, which interest rate
will be equal to the rate per annum applicable to the Certificates issued by the
Trust that will hold such series of Equipment Notes plus 1.00%.
The principal payments on the Series A-1 Equipment Notes are scheduled to
be made on March 18 and September 18 in certain years, commencing on March 18,
2002 and ending on March 18, 2011. The
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entire principal amounts of the Series A-2, Series B, Series C and Series D
Equipment Notes are scheduled to be paid on September 18, 2011, September 18,
2011, September 18, 2006 and September 18, 2006, respectively. See "Description
of the Certificates -- Pool Factors" for a discussion of the scheduled payments
of principal of the Equipment Notes and Appendix III for the schedule of
payments of principal of each Equipment Note issued with respect to each
Aircraft.
If any due date for a payment of principal, Make-Whole Amount (if any) or
interest with respect to the Equipment Notes is not a Business Day, such payment
will be due on the next succeeding Business Day without any additional interest.
REDEMPTION
If an Event of Loss occurs with respect to an Aircraft and such Aircraft is
not replaced by Delta under the related Indenture, Delta is required to redeem
the Equipment Notes issued with respect to such Aircraft, in whole, at a price
equal to the aggregate unpaid principal amount thereof, together with accrued
and unpaid interest thereon to (but excluding) the date of redemption, but
without any Make-Whole Amount. Any amount paid by Delta in connection with such
redemption will be distributed to the Certificateholders on a Special
Distribution Date. (Indentures, Section 2.10)
All of the Equipment Notes issued with respect to an Aircraft may be
redeemed in whole prior to maturity at any time at the option of Delta, at a
price equal to the aggregate unpaid principal amount thereof, together with
accrued and unpaid interest thereon to (but excluding) the date of redemption,
plus the Make-Whole Amount for the applicable series of Equipment Notes.
(Indentures, Section 2.11) Notice of redemption will be given to each holder of
Equipment Notes not less than 15 nor more than 60 days prior to the applicable
redemption date. A notice of optional redemption may be revoked not later than
three days before the proposed redemption date. (Indentures, Sections 2.11 and
2.12)
"Make-Whole Amount" means, with respect to any Equipment Note, the amount
(as determined by an independent investment bank selected by Delta), if any, by
which (a) the present value of the remaining scheduled payments of principal and
interest from the redemption date to maturity of such Equipment Note computed by
discounting each such payment on a semiannual basis from its respective payment
date under the applicable Indenture (assuming a 360-day year of twelve 30-day
months) using a discount rate equal to the Treasury Yield exceeds (b) the
outstanding principal amount of such Equipment Note plus accrued but unpaid
interest thereon to the redemption date. (Indentures, Annex A)
For purposes of determining the Make-Whole Amount, "Treasury Yield" means,
at the date of determination with respect to any Equipment Note, the interest
rate (expressed as a semiannual equivalent and as a decimal and, in the case of
United States Treasury bills, converted to a bond equivalent yield) determined
to be the per annum rate equal to the semiannual yield to maturity for United
States Treasury securities maturing on the Average Life Date of such Equipment
Note and trading in the public securities markets either as determined by
interpolation between the most recent weekly average yield to maturity for two
series of United States Treasury securities trading in the public securities
markets, (A) one maturing as close as possible to, but earlier than, the Average
Life Date of such Equipment Note and (B) the other maturing as close as possible
to, but later than, the Average Life Date of such Equipment Note, in each case
as published in the most recent H.15(519) or, if a weekly average yield to
maturity for United States Treasury securities maturing on the Average Life Date
of such Equipment Note is reported in the most recent H.15(519), such weekly
average yield to maturity as published in such H.15(519). "H.15(519)" means the
weekly statistical release designated as such, or any successor publication,
published by the Board of Governors of the Federal Reserve System, and the "most
recent H.15(519)" means the H.15(519) published prior to the close of business
on the third Business Day prior to the applicable redemption date. The "date of
determination" of a Make-Whole Amount will be the third Business Day prior to
the applicable redemption date. (Indentures, Annex A)
"Average Life Date" for any Equipment Note means the date that follows the
redemption date by a period equal to the Remaining Weighted Average Life at the
redemption date of such Equipment Note.
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"Remaining Weighted Average Life" at the redemption date of such Equipment
Note means the number of days equal to the quotient obtained by dividing (a) the
sum of each of the products obtained by multiplying (i) the amount of each then
remaining installment of principal of such Equipment Note, including the payment
due on the maturity date of such Equipment Note, by (ii) the number of days from
and including the redemption date to but excluding the scheduled payment date of
such principal installment, by (b) the then unpaid principal amount of such
Equipment Note.
SECURITY
The Equipment Notes issued with respect to each Aircraft will be secured by
a security interest in the Aircraft, certain limited rights under the aircraft
purchase agreement between Delta and Boeing, certain requisition and insurance
proceeds with respect to such Aircraft, and all proceeds of the foregoing.
(Indentures, Granting Clause)
The Equipment Notes will not be cross-collateralized and, consequently, the
Equipment Notes issued in respect of any one Aircraft will not be secured by any
of the other Aircraft. See "-- Remedies."
LOAN TO VALUE RATIOS OF EQUIPMENT NOTES
The tables in Appendix IV set forth Loan to Aircraft value ratios for the
Equipment Notes issued in respect of each Aircraft as of the issuance date of
the Certificates and each September 18 Regular Distribution Date. The LTVs were
obtained by dividing (i) the outstanding principal amount (assuming no payment
default or early redemption) of such Equipment Notes determined immediately
after giving effect to the payments scheduled to be made on each such Regular
Distribution Date by (ii) the assumed value (the "Assumed Aircraft Value") of
the Aircraft securing such Equipment Notes.
The tables in Appendix IV are based on the assumption that the appraised
base value of the Aircraft set forth opposite the initial Regular Distribution
Date included in each table depreciates by approximately 3% annually for the
first fifteen years from the date of delivery by the manufacturer of such
Aircraft and by approximately 4% annually for the next five years thereafter.
Other rates or methods of depreciation would result in materially different
LTVs, and no assurance can be given (i) that the depreciation rate and method
assumed for the purposes of the tables are the ones most likely to occur or (ii)
as to the actual future value of any Aircraft. Thus the tables should not be
considered a forecast or prediction of expected or likely LTVs, but simply a
mathematical calculation based on one set of assumptions.
DEFEASANCE
Under certain circumstances, Delta may legally release itself from any
payment or other obligations on all, but not less than all, of the Equipment
Notes issued under one or more Indentures if Delta puts in place the following
arrangements for the benefit of the holders of such Equipment Notes (a "full
defeasance"):
- Delta must deposit in trust for the benefit of the holders of such
Equipment Notes a combination of money and direct obligations of the
United States (and certain depository receipts representing interests in
such direct obligations) ("U.S. Government Obligations") that will
generate enough money to pay when due the principal of and interest on
the Equipment Notes; and
- Delta must deliver to the relevant Loan Trustee a legal opinion stating
that there has been a change in the federal tax law from such law as in
effect on the date of this prospectus supplement or that there has been
an IRS ruling, in either case that lets Delta make the above deposit
without causing the holders of the Certificates to be taxed on their
Certificates any differently than if Delta did not make the deposit and
simply repaid the Equipment Notes itself.
If Delta were to accomplish full defeasance, as described above, holders of
the Equipment Notes so defeased would rely solely on the trust deposit for
repayment on such Equipment Notes. Holders of such Equipment Notes could not
look to Delta for repayment if a shortfall in the payment of principal of or
interest on such Equipment Notes occurred. In addition, the holders of such
Equipment Notes would have
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no beneficial interest in or other rights with respect to the related Aircraft
or other assets subject to the lien of the related Indenture and such lien would
terminate. (Indentures, Section 10.01)
LIMITATION OF LIABILITY
Except as otherwise provided in the Indentures, the Loan Trustee, in its
individual capacity, will not be answerable or accountable under the Indentures
or the Equipment Notes under any circumstances except, among other things, for
its own willful misconduct or negligence.
INDENTURE EVENTS OF DEFAULT, NOTICE AND WAIVER
"Indenture Events of Default" under each Indenture will include:
- the failure by Delta to pay any interest or principal or Make-Whole
Amount, if any, within 15 days after the same has become due on any
Equipment Note;
- the failure by Delta to pay any amount (other than interest, principal or
Make-Whole Amount, if any) when due under the Indenture, any Equipment
Note or any other operative documents for more than 30 days after Delta
receives written notice;
- the failure by Delta to carry and maintain insurance or indemnity on or
with respect to the Aircraft in accordance with the provisions of the
Indenture; provided that no such failure to carry and maintain insurance
will constitute an Indenture Event of Default until the earlier of (i)
the date such failure has continued unremedied for a period of 30 days
after the Loan Trustee receives notice of the cancellation or lapse of
such insurance or (ii) the date such insurance is not in effect as to the
Loan Trustee;
- the failure by Delta to perform or observe any other covenant or
condition to be performed or observed by it under any operative document
that continues for a period of 60 days after Delta receives written
notice; provided that, if such failure is capable of being remedied, no
such failure will constitute an Indenture Event of Default for a period
of one year after such notice is received by Delta so long as Delta is
diligently proceeding to remedy such failure;
- any representation or warranty made by Delta in the related operative
documents proves to have been incorrect in any material respect when
made, and such incorrectness continues to be material to the transactions
contemplated by the Indenture and remains unremedied for a period of 60
days after Delta receives written notice; provided that, if such
incorrectness is capable of being remedied, no such incorrectness will
constitute an Indenture Event of Default for a period of one year after
such notice is received by Delta so long as Delta is diligently
proceeding to remedy such incorrectness; and
- the occurrence of certain events of bankruptcy, reorganization or
insolvency of Delta. (Indentures, Section 4.01)
There will not be any cross-default provisions in the Indentures.
Consequently, events resulting in an Indenture Event of Default under any
particular Indenture may or may not result in an Indenture Event of Default
occurring under any other Indenture. If the Equipment Notes issued with respect
to one or more Aircraft are in default and the Equipment Notes issued with
respect to the remaining Aircraft are not in default, no remedies will be
exercisable under the Indentures with respect to such remaining Aircraft.
The holders of a majority in aggregate unpaid principal amount of the
Equipment Notes outstanding on a given date and issued with respect to any
Aircraft, by written instruction to the Loan Trustee, may on behalf of all the
Note Holders waive any existing default and its consequences under the Indenture
with respect to such Aircraft, except a default in the payment of the principal
of, Make-Whole Amount, if any, or interest due under any such Equipment Notes or
a default in respect of any covenant or provision of such Indenture that cannot
be modified or amended without the consent of each Note Holder. (Indentures,
Section 4.05)
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REMEDIES
The exercise of remedies under the Indentures will be subject to the terms
of the Intercreditor Agreement, and the following description should be read in
conjunction with the description of the Intercreditor Agreement.
If an Indenture Event of Default occurs and is continuing under an
Indenture, the related Loan Trustee may, and upon receipt of written
instructions of the holders of a majority in principal amount of the Equipment
Notes then outstanding under such Indenture will, declare the principal of all
such Equipment Notes issued thereunder immediately due and payable, together
with all accrued but unpaid interest thereon (but without any Make-Whole
Amount). The holders of a majority in principal amount of Equipment Notes
outstanding under an Indenture may rescind any declaration of acceleration of
such Equipment Notes if (i) there has been paid to the related Loan Trustee an
amount sufficient to pay all overdue installments of principal and interest on
any such Equipment Notes, and all other amounts owing under the operative
documents, that have become due otherwise than by such declaration of
acceleration and (ii) all other Indenture Events of Default, other than
nonpayment of principal amount or interest on the Equipment Notes that have
become due solely because of such acceleration, have been cured or waived.
(Indentures, Section 4.02(d))
Each Indenture provides that if an Indenture Event of Default under such
Indenture has occurred and is continuing, the related Loan Trustee may exercise
certain rights or remedies available to it under such Indenture or under
applicable law. Such remedies include the right to take possession of the
Aircraft and to sell all or any part of the airframe or any engine comprising
the Aircraft subject to such Indenture. (Indentures, Section 4.02(a))
If the Equipment Notes issued in respect of one Aircraft are in default,
the Equipment Notes issued in respect of the other Aircraft may not be in
default, and, if not, no remedies will be exercisable under the applicable
Indentures with respect to such other Aircraft.
Section 1110 of the Bankruptcy Code ("Section 1110") provides that, subject
to the limitations specified therein, the right of a secured party with a
security interest in "equipment" (as defined in Section 1110) to take possession
of such equipment in compliance with the provisions of a security agreement and
to enforce any of its rights or remedies thereunder is not affected after 60
days after the date of the order for relief in a case under Chapter 11 of the
Bankruptcy Code by any provision of the Bankruptcy Code. Section 1110 provides
that the right to take possession of an aircraft and enforce other remedies may
not be exercised for 60 days following the date of the order for relief in
reorganization proceedings and may not be exercised at all after such 60-day
period (or such longer period consented to by the holder of a security interest
and approved by the court), if the trustee in reorganization agrees, subject to
the approval of the court, to perform the debtor's obligations under the
security agreement and cures all defaults (other than defaults resulting solely
from the financial condition, bankruptcy, insolvency or reorganization of the
debtor, the appointment of a trustee or custodian or the failure to satisfy any
penalty rate or provision relating to a default arising from any failure by the
debtor to perform nonmonetary obligations under the applicable agreement).
"Equipment" is defined in Section 1110, in part, as "an aircraft, aircraft
engine, propeller, appliance, or spare part (as defined in section 40102 of
title 49 of the United States Code) that is subject to a security interest
granted by, leased to, or conditionally sold to a debtor that, at the time such
transaction is entered into, holds an air carrier operating certificate issued
pursuant to chapter 447 of title 49 of the United States Code for aircraft
capable of carrying 10 or more individuals or 6,000 pounds or more of cargo."
It is a condition to the Trustee's obligation to purchase Equipment Notes
with respect to each Aircraft that Cadwalader, Wickersham & Taft, special
counsel to Delta, provide an opinion to the Trustees that, if Delta were to
become a debtor under Chapter 11 of the Bankruptcy Code, the Loan Trustee would
be entitled to the benefits of Section 1110 with respect to the airframe and
engines comprising the Aircraft originally subjected to the lien of the relevant
Indenture. This opinion is subject to certain qualifications and assumptions.
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The opinion of Cadwalader, Wickersham & Taft will not address the possible
replacement of an Aircraft after an Event of Loss in the future, the
consummation of which is conditioned upon the contemporaneous delivery of an
opinion of counsel to the effect that the related Loan Trustee will be entitled
to Section 1110 benefits with respect to the replacement airframe unless there
is a change in law or court interpretation that results in Section 1110 not
being available. See "-- Certain Provisions of the Indentures -- Events of
Loss." The opinion of Cadwalader, Wickersham & Taft also will not address the
availability of Section 1110 with respect to the bankruptcy proceedings of any
possible lessee of an Aircraft if it is leased by Delta.
In certain circumstances following the bankruptcy or insolvency of Delta
where the obligations of Delta under any Indenture exceed the value of the
Aircraft collateral under such Indenture, post-petition interest will not accrue
on the related Equipment Notes. In addition, to the extent that distributions
are made to any Certificateholders, whether under the Intercreditor Agreement or
from drawings on the Liquidity Facilities, in respect of amounts that would have
been funded by post-petition interest payments on such Equipment Notes had such
payments been made, there would be a shortfall between the claim allowable
against Delta on such Equipment Notes after the disposition of the Aircraft
collateral securing such Equipment Notes and the remaining balance of the
Certificates. Such shortfall would first reduce some or all of the remaining
claim against Delta available to the Trustees for the most junior Classes.
If an Indenture Event of Default under any Indenture occurs and is
continuing, any sums held or received by the related Loan Trustee may be applied
to reimburse such Loan Trustee for any tax, expense or other loss incurred by it
and to pay any other amounts due to such Loan Trustee prior to any payments to
holders of the Equipment Notes issued under such Indenture. (Indentures, Section
3.03)
MODIFICATION OF INDENTURES
Without the consent of holders of a majority in principal amount of the
Equipment Notes outstanding under any Indenture, the provisions of such
Indenture may not be amended or modified, except to the extent indicated below.
Any Indenture may be amended without the consent of the Note Holders to,
among other things: (i) cure any defect or inconsistency in such Indenture or
the Equipment Notes issued thereunder; (ii) make any other provisions or
amendments with respect to matters or questions arising under such Indenture or
such Equipment Notes, or to amend, modify or supplement any provision thereof,
provided that such action does not adversely affect the interests of any such
holder or the Liquidity Provider; (iii) cure any ambiguity or correct any
mistake; or (iv) provide for compliance with applicable law. (Indentures,
Section 9.01)
Without the consent of the holder of each Equipment Note outstanding under
any Indenture affected thereby, no amendment or modification of such Indenture
may, among other things, (i) reduce the principal amount of, or Make-Whole
Amount, if any, or interest payable on, any Equipment Notes issued under such
Indenture or change the date on which any principal, Make-Whole Amount, if any,
or interest is due and payable, (ii) change the date on which any principal
amount of, Make-Whole Amount, if any, or interest on any Equipment Note, is due
or payable; (iii) create any lien with respect to the Collateral (as defined in
such Indenture) prior to or pari passu with the lien of such Indenture, except
as provided in such Indenture, or deprive any holder of an Equipment Note issued
under such Indenture of the benefit of the lien of such Indenture upon the
Collateral or (iv) reduce the percentage in principal amount of outstanding
Equipment Notes issued under such Indenture required to take or approve any
action under such Indenture. (Indentures, Section 9.02(a))
INDEMNIFICATION
Delta will be required to indemnify each Loan Trustee, each Liquidity
Provider, the Subordination Agent, and each Trustee, but not the holders of
Certificates, for certain losses, claims and other matters. (Participation
Agreements, Section 4.02)
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The Loan Trustee will not be required to take any action or refrain from
taking any action (other than notifying the Note Holders if it knows of an Event
of Default or of a default arising from Delta's failure to pay overdue
principal, interest or Make-Whole Amount, if any, under any Equipment Note),
unless it has received indemnification satisfactory to it against any risks
incurred in connection therewith. (Indentures, Section 5.03)
CERTAIN PROVISIONS OF THE INDENTURES
Maintenance and Operation
Under the terms of each Indenture, Delta will be obligated, among other
things and at its expense, to keep each Aircraft duly registered, and to
maintain, service, repair and overhaul the Aircraft so as to keep it in such
condition as necessary to maintain the airworthiness certificate for the
Aircraft in good standing at all times (other than during temporary periods of
storage, during permitted maintenance or modification or during periods of
grounding by applicable governmental authorities). (Indentures, Section 7.02(c)
and (e))
Delta will agree not to maintain, use or operate any Aircraft in violation
of any law, rule or regulation of any government having jurisdiction over such
Aircraft, or in violation of any airworthiness certificate, license or
registration relating to such Aircraft, except to the extent Delta (or any
lessee) is contesting in good faith the validity or application of any such law,
rule or regulation in any manner that does not involve any material risk of
sale, forfeiture or loss of the Aircraft. (Indentures, Section 7.02(b))
Delta must make all alterations, modifications and additions to each
Airframe and Engine necessary to meet the applicable requirements of the Federal
Aviation Administration (the "FAA") or any other applicable governmental
authority of another jurisdiction in which the Aircraft may then be registered;
provided, however, that Delta (or any lessee) may in good faith contest the
validity or application of any such requirement in any manner that does not
involve a material risk of sale, forfeiture or loss of the Aircraft. Delta (or
any lessee) may add further parts and make other alterations, modifications and
additions to any Airframe or any Engine as Delta (or any lessee) deems desirable
in the proper conduct of its business, including removal (without replacement)
of parts, so long as such alterations, modifications, additions or removals do
not materially diminish the value or utility of such Airframe or Engine below
its value or utility immediately prior to such alteration, modification,
addition or removal (assuming such Airframe or Engine was maintained in
accordance with the Indenture), except that the value (but not the utility) of
any Airframe or Engine may be reduced from time to time by the value of any such
parts which have been removed that Delta deems obsolete or no longer suitable or
appropriate for use on such Airframe or Engine. All parts (with certain
exceptions) incorporated or installed in or added to such Airframe or Engine as
a result of such alterations, modifications or additions will be subject to the
lien of the Indenture. Delta (or any lessee) is permitted to remove (without
replacement) parts that are in addition to, and not in replacement of or
substitution for, any part originally incorporated or installed in or attached
to an Airframe or Engine at the time of delivery thereof to Delta, as well as
any part that is not required to be incorporated or installed in or attached to
any Airframe or Engine pursuant to applicable requirements of the FAA or other
jurisdiction in which the Aircraft may then be registered, or any part that can
be removed without materially diminishing the requisite value or utility of the
Aircraft. (Indentures, Section 7.04(c))
Except as set forth above, Delta will be obligated to replace or cause to
be replaced all parts that are incorporated or installed in or attached to any
Airframe or any Engine and become worn out, lost, stolen, destroyed, seized,
confiscated, damaged beyond repair or permanently rendered unfit for use. Any
such replacement parts will become subject to the lien of the related Indenture
in lieu of the part replaced. (Indentures, Section 7.04(a))
Registration, Leasing and Possession
Although Delta has no current intention to do so, Delta will be permitted
to register an Aircraft in certain jurisdictions outside the United States,
subject to certain conditions specified in the related
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Indenture. These conditions include a requirement that the laws of the new
jurisdiction of registration will give effect to the lien of and the security
interest created by the related Indenture in the applicable Aircraft.
(Indentures, Section 7.02(e)) Delta also will be permitted, subject to certain
limitations, to lease any Aircraft to any United States certificated air carrier
or to certain foreign air carriers. In addition, subject to certain limitations,
Delta will be permitted to transfer possession of any Airframe or any Engine
other than by lease, including transfers of possession by Delta or any lessee in
connection with certain interchange and pooling arrangements, transfers to the
government of Canada, France, Germany, Japan, The Netherlands, Sweden,
Switzerland, the United Kingdom or the United States or any instrumentality or
agency thereof, and transfers in connection with maintenance or modifications.
(Indentures, Section 7.02(a)) There will be no general geographical restrictions
on Delta's (or any lessee's) ability to operate the Aircraft. The extent to
which the relevant Loan Trustee's lien would be recognized in an Aircraft if
such Aircraft were located in certain countries is uncertain. In addition, any
exercise of the right to repossess an Aircraft may be difficult, expensive and
time-consuming, particularly when such Aircraft is located outside the United
States or has been registered in a foreign jurisdiction or leased to a foreign
operator, and may be subject to the limitations and requirements of applicable
law, including the need to obtain consents or approvals for deregistration or
re-export of the Aircraft, which may be subject to delays and political risk.
When a defaulting lessee or other permitted transferee is the subject of a
bankruptcy, insolvency or similar event such as protective administration,
additional limitations may apply. See "Risk Factors -- Repossession."
In addition, at the time of foreclosing on the lien on the Aircraft under
the related Indenture, an Airframe subject to such Indenture might not be
equipped with Engines subject to the same Indenture. If Delta fails to transfer
title to engines not owned by Delta that are attached to repossessed Aircraft,
it could be difficult, expensive and time-consuming to assemble an Aircraft
consisting of an Airframe and Engines subject to the Indenture.
Liens
Delta is required to maintain each Aircraft free of any liens, other than
the rights of Delta, the lien of the Indenture, and any other rights existing
pursuant to the other operative documents and pass through documents related
thereto, the rights of others in possession of the Aircraft in accordance with
the terms of the Indenture and liens attributable to other parties to the
operative documents and pass through documents related thereto and other than
certain other specified liens, including but not limited to (i) liens for taxes
either not yet due or being contested in good faith by appropriate proceedings
so long as such proceedings do not involve any material risk of the sale,
forfeiture or loss of the Airframe or any Engine or the Loan Trustee's interest
therein; (ii) materialmen's, mechanics' and other similar liens arising in the
ordinary course of business and securing obligations that either are not yet
overdue for more than 60 days or are being contested in good faith by
appropriate proceedings so long as such proceedings do not involve any material
risk of the sale, forfeiture or loss of the Airframe or any Engine or the Loan
Trustee's interest therein; (iii) judgment liens so long as such judgment is
discharged or vacated within 60 days or the execution of such judgment is stayed
pending appeal or such judgment is discharged, vacated or reversed within 60
days after expiration of such stay; (iv) salvage or similar rights of insurers
under insurance policies maintained by Delta; and (v) any other lien as to which
Delta has provided a bond or other security adequate in the reasonable opinion
of the Loan Trustee. (Indentures, Section 7.01)
Insurance
Subject to certain exceptions, Delta is required to maintain or cause to be
maintained, at its expense (or at the expense of a lessee), all-risk aircraft
hull insurance covering each Aircraft, at all times in an amount not less than
110% of the aggregate outstanding principal amount of the Equipment Notes
relating to such Aircraft. However, after giving effect to self-insurance
permitted as described below, the amount payable under such insurance may be
less than such amounts payable with respect to the Equipment Notes. If an
Aircraft suffers an Event of Loss, insurance proceeds up to an amount equal to
the outstanding principal amount of the Equipment Notes, together with accrued
but unpaid interest thereon,
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plus an amount equal to the interest that will accrue on the outstanding
principal amount of the Equipment Notes during the period commencing on the date
following the date of payment of such insurance proceeds to the Loan Trustee and
ending on the loss payment date (the sum of those amounts being the "Loan
Amount"), will be paid to the applicable Loan Trustee. If an Aircraft or Engine
suffers loss or damage not constituting an Event of Loss but involving insurance
proceeds in excess of $8,000,000 (in the case of a Boeing 737-832), $12,000,000
(in the case of a Boeing 757-232) or $15,000,000 (in the case of a Boeing
767-332ER), proceeds in excess of such specified amounts up to the Loan Amount
will be payable to the applicable Loan Trustee, and the proceeds up to such
specified amounts and proceeds in excess of the Loan Amount will be payable
directly to Delta so long as an Indenture Event of Default does not exist. So
long as the loss does not constitute an Event of Loss, insurance proceeds will
be applied to repair or replace the equipment. (Indentures, Section 7.06)
In addition, Delta is obligated to maintain or cause to be maintained
aircraft liability insurance at its expense (or at the expense of a lessee),
including, without limitation, bodily injury, personal injury and property
damage liability insurance (exclusive of manufacturer's product liability
insurance) and contractual liability insurance with respect to each Aircraft.
Such liability insurance must be underwritten by insurers of recognized
responsibility. The amount of such liability insurance coverage may not be less
than the amount of aircraft liability insurance from time to time applicable to
similar aircraft in Delta's fleet on which Delta carries insurance. (Indentures,
Section 7.06)
Delta also is required to maintain or cause to be maintained war-risk
insurance with respect to each Aircraft if and to the extent such insurance is
maintained by Delta (or any lessee) with respect to other similar aircraft
operated by Delta (or such lessee) on the same routes on which the Aircraft is
operated. (Indentures, Section 7.06)
Delta may self-insure under a program applicable to all aircraft in its
fleet, but the amount of such self-insurance in the aggregate may not exceed for
any 12-month policy year 1% of the average aggregate insurable value (during the
preceding policy year) of all aircraft on which Delta carries insurance, unless
an insurance broker of national standing certifies that the standard among other
major U.S. airlines is a higher level of self-insurance, in which case Delta may
self-insure the Aircraft to such higher level. In addition, Delta may
self-insure to the extent of (i) any applicable deductible per Aircraft that is
not in excess of the amount customarily allowed as a deductible in the industry
or is required to facilitate claims handling, or (ii) any applicable mandatory
minimum per aircraft (or, if applicable, per annum or other period) liability
insurance or hull insurance deductibles imposed by the aircraft liability or
hull insurers. (Indentures, Section 7.06)
In respect of each Aircraft, Delta is required to name the relevant Loan
Trustee, the Subordination Agent, each Trustee and the Liquidity Provider as
additional insured parties under the liability insurance policy required with
respect to such Aircraft. In addition, the hull and liability insurance policies
will be required to provide that, in respect of the interests of such additional
insured party, the insurance shall not be invalidated or impaired by any act or
omission of Delta. (Indentures, Section 7.06)
Events of Loss
If an Event of Loss occurs with respect to the Airframe or the Airframe and
one or more Engines of an Aircraft, Delta must elect within 90 days after such
occurrence either to make payment with respect to such Event of Loss or to
replace such Airframe and any such Engines. Depending upon Delta's election, not
later than the first Business Day after the 120th day following the date of
occurrence of such Event of Loss, Delta will either (i) redeem the Equipment
Notes under the applicable Indenture by paying to the Loan Trustee the
outstanding unpaid principal amount of such Equipment Notes, together with
accrued interest thereon, but without any Make-Whole Amount or (ii) substitute
an airframe (or airframe and one or more engines, as the case may be) for the
Airframe, or Airframe and Engine(s), that suffered such Event of Loss.
(Indentures, Sections 2.10 and 7.05(a)) See "-- Redemption."
If Delta elects to replace an Airframe (or Airframe and one or more
Engines, as the case may be) that suffered such Event of Loss, it will do so
with an airframe or airframe and engines of the same model
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as the Airframe or Airframe and Engines to be replaced or a comparable or
improved model, with a value and utility (without regard to hours or cycles) at
least equal to the Airframe or Airframe and Engines to be replaced, assuming
that such Airframe and such Engines were in the condition and repair required by
the related Indenture. Delta is also required to provide to the relevant Loan
Trustee opinions of counsel (i) to the effect that such Loan Trustee will be
entitled to the benefits of Section 1110 with respect to the replacement
airframe (unless, as a result of a change in law or governmental or judicial
interpretation, such benefits were not available to the Loan Trustee with
respect to the Aircraft immediately prior to such replacement), and (ii) as to
the due registration of the replacement aircraft and the due recordation of a
supplement to the Indenture relating to such replacement aircraft and the
validity and perfection of the security interest granted to the Loan Trustee in
the replacement aircraft. (Indentures, Section 7.05(a))
If Delta elects not to replace such Airframe, or Airframe and Engine(s),
then upon payment of the outstanding principal amount of the Equipment Notes
issued with respect to such Aircraft, together with accrued but unpaid interest
thereon, the lien of the Indenture relating to such Aircraft will terminate with
respect to such Aircraft, and the obligation of Delta thereafter to make the
scheduled interest and principal payments with respect thereto will cease. The
payments made under the Indenture by Delta will be deposited with the applicable
Loan Trustee. Amounts in excess of the amounts due and owing under the Equipment
Notes issued with respect to such Aircraft will be distributed by such Loan
Trustee to Delta. (Indentures, Sections 2.10, 3.02, 7.05(a) and 7.05(c))
If an Event of Loss occurs with respect to an Engine alone, Delta will be
required to replace such Engine within 120 days after the occurrence of such
Event of Loss with another engine, free and clear of all liens (other than
certain permitted liens). Such replacement engine will be the same model as the
Engine to be replaced, or a comparable or improved model of the same or another
manufacturer, suitable for installation and use on the Airframe, and will have a
value and utility (without regard to hours or cycles) at least equal to the
Engine to be replaced, assuming that such Engine was in the condition and repair
required by the terms of the relevant Indenture. (Indentures, Section 7.05(b))
An "Event of Loss" with respect to an Aircraft, Airframe or any Engine
means any of the following events with respect to such property:
- the destruction of such property, damage to such property beyond repair
or rendition of such property permanently unfit for normal use;
- any damage to such property that results in an insurance settlement with
respect to such property on the basis of a total loss or a compromised or
constructive total loss;
- any theft or disappearance of such property for a period exceeding 180
days;
- the requisition for use of such property by any government (other than a
requisition for use by the government of Canada, France, Germany, Japan,
The Netherlands, Sweden, Switzerland, the United Kingdom or the United
States or the government of the country of registry of the Aircraft) that
results in the loss of possession of such property by Delta (or any
lessee) for a period exceeding 12 consecutive months;
- the operation or location of the Aircraft, while under requisition for
use by any government, in an area excluded from coverage by any insurance
policy required by the terms of the Indenture, unless Delta has obtained
indemnity or insurance in lieu thereof from such government;
- any requisition of title, capture, seizure, deprivation, confiscation or
detention (excluding requisition for use or hire not involving a
requisition of title) of the Aircraft by any government that results in
the loss of title or use of the Aircraft by Delta (or a lessee) for a
period in excess of 180 days;
- as a result of any law, rule, regulation, order or other action by the
FAA or other government of the country of registry, the use of the
Aircraft in the normal business of air transportation is prohibited by
virtue of a condition affecting all aircraft of the same type for a
period of 18 consecutive months, unless Delta is diligently carrying
forward all steps that are necessary or
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desirable to permit the normal use of the Aircraft or, in any event, if
such use is prohibited for a period of three consecutive years; and
- with respect to any Engine, any divestiture of title to such Engine or,
in certain circumstances, the installation of such Engine on an airframe
that is subject to a conditional sale or other security agreement.
An Event of Loss with respect to an Aircraft is deemed to have occurred if
an Event of Loss occurs with respect to the Airframe that is a part of such
Aircraft. (Indentures, Annex A)
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of the principal federal income tax
consequences of the purchase, ownership and disposition of Offered Certificates
to a Certificate Owner that purchases Offered Certificates in the initial
offering thereof at the offering price set forth herein and holds such Offered
Certificates as capital assets. The discussion is based on laws, regulations,
rulings and decisions in effect as of the date hereof, all of which are subject
to change, possibly with retroactive effect, or different interpretation. The
discussion does not address all of the federal income tax consequences that may
be relevant to all Certificate Owners in light of their particular circumstances
(including, for example, any special rules applicable to tax-exempt
organizations, banks, broker-dealers and insurance companies). Except for the
discussion below under "-- Certain Federal Income Tax Consequences to Foreign
Certificateholders," this discussion is addressed to beneficial owners of
Offered Certificates that are (i) individual citizens or residents of the United
States, (ii) corporations created or organized in or under the laws of the
United States, any state thereof or the District of Columbia or (iii)
partnerships, trusts or estates treated, for federal income tax purposes, as
domestic partnerships, trusts or estates ("U.S. Persons"). The statements of law
and legal conclusions set forth herein are based upon the opinion of Cadwalader,
Wickersham & Taft, special counsel to Delta. This discussion is based upon the
tax laws of the United States as in effect on the date of this prospectus
supplement, as well as judicial and administrative interpretations thereof (in
final or proposed form) available on or before such date. All of the foregoing
are subject to change or differing interpretations, which could apply
retroactively. Prospective investors should note that no rulings have been or
will be sought from the IRS with respect to any of the United States federal
income tax consequences discussed below, and no assurance can be given that the
IRS will not take contrary positions. This discussion supplements the discussion
in the Prospectus under the heading "Certain United States Federal Income Tax
Consequences" and supersedes it to the extent it is inconsistent. Persons
considering an investment in the Offered Certificates should consult their own
tax advisors regarding the federal, state, local and any other tax consequences
to them of the purchase, ownership and disposition of Offered Certificates in
light of their own particular circumstances. The Trusts, the Subordination Agent
and the Loan Trustee are not indemnified for any federal income taxes or with
certain exceptions other taxes that may be imposed upon them, and the imposition
of any such taxes could result in a reduction in the amounts available for
distribution to the Certificate Owners.
GENERAL
The Trusts will not be classified as associations (or publicly traded
partnerships) taxable as corporations and, accordingly, will not themselves be
subject to federal income taxation. Based upon an interpretation of analogous
authorities under existing law, each Trust should be classified as a grantor
trust for federal income tax purposes. The discussion below assumes that the
Trusts will be classified as grantor trusts.
Each Certificate Owner will be treated as the owner of a pro rata undivided
interest in each Equipment Note and any other property held in the related Trust
and will be required to report on its federal income tax return its pro rata
share of the entire income from each of the Equipment Notes and any other
property held in the related Trust, in accordance with such Certificate Owner's
method of accounting. A Certificate Owner using the cash method of accounting
must take into account its pro rata share of income as and when received by the
Trustee. A Certificate Owner using an accrual method of
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accounting must take into account its pro rata share of income as it accrues or
is received by the Trustee, whichever is earlier. A Certificate Owner's share of
interest or original issue discount, if any, paid on the related Equipment Note
will be taxable as ordinary income, and a Certificate Owner's share of any Make-
Whole Amount paid on the related Equipment Note will be treated as capital gain.
Any amounts received by a Trust from Interest Drawings under the relevant
Liquidity Facility will be treated for United States federal income tax purposes
as having the same characteristics as the payments they replace.
Each Certificate Owner will be entitled to deduct, consistent with its
method of accounting, its pro rata share of fees and expenses paid or incurred
by the corresponding Trust as provided in Section 162 or 212 of the Code.
Certain fees and expenses, including fees paid to the Trustee and the Liquidity
Provider, will be borne by parties other than the Certificate Owners. It is
possible that such fees and expenses will be treated as constructively received
by the Trust, in which event a Certificate Owner will be required to include in
income and will be entitled to deduct its pro rata share of such fees and
expenses. If a Certificate Owner is an individual, estate or trust, the
deduction for such holder's share of such fees and expenses will be allowed only
to the extent that all of such holder's miscellaneous itemized deductions,
including such holder's share of such fees and expenses, exceed 2% of such
holder's adjusted gross income. In addition, in the case of Certificate Owners
who are individuals, certain otherwise allowable itemized deductions will be
subject generally to additional limitations on itemized deductions under the
applicable provisions of the Code.
SALES OF OFFERED CERTIFICATES
A Certificate Owner that sells an Offered Certificate will recognize
capital gain or loss (in the aggregate) equal to the difference between the
amount realized on the sale (except to the extent attributable to accrued
interest, which will be taxable as interest income if not previously included in
income) and such Certificate Owner's adjusted tax basis in the Offered
Certificate. Any such gain or loss generally will be long-term capital gain or
loss if the Offered Certificate was held for more than one year (except to the
extent attributable to any property held by the related Trust for one year or
less). Any long-term capital gains with respect to the Offered Certificates are
taxable to corporate taxpayers at the rates applicable to ordinary income and to
individual taxpayers at lower rates than the rates applicable to ordinary
income. Any capital losses will be deductible by corporate taxpayers only to the
extent of capital gains and by an individual taxpayer only to the extent of
capital gains plus $3,000 of other income.
EFFECT OF SUBORDINATION ON SUBORDINATED CERTIFICATE OWNERS
If any Trust is subordinated with respect to other Trusts and incurs a
shortfall in its receipts of principal or interest paid with respect to the
Equipment Notes held by it because of the subordination of the Equipment Notes
held by such Trust under the Intercreditor Agreement, the Certificate Owners of
Offered Certificates in the subordinated Trust would probably be treated for
federal income tax purposes as if they had (i) received as distributions their
full share of such principal and interest, (ii) paid over to the relevant senior
class of Certificate Owners an amount equal to their share of the amount of the
shortfall, and (iii) retained the right to reimbursement of such amount to the
extent of future amounts payable to such subordinated Certificate Owners with
respect to the shortfall.
Under this analysis, (i) subordinated Certificate Owners incurring a
shortfall would be required to include as current income any interest or other
income of the corresponding subordinated Trust that was a component of such
shortfall, even though such amount was in fact paid to the relevant senior class
of Certificate Owners, (ii) a loss would be allowed to such subordinated
Certificate Owners when their right to receive reimbursement of such shortfall
became worthless (i.e., when it became clear that funds would not be available
from any source to reimburse such shortfall), and (iii) reimbursement of such
shortfall would not be taxable income to subordinated Certificate Owners because
the amount of such shortfall was previously included in income. These results
should not significantly affect the inclusion of income for subordinated
Certificate Owners on the accrual method of accounting, but could accelerate
inclusion of income for subordinated Certificate Owners on the cash method of
accounting by, in effect, placing them on the accrual method.
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BOND PREMIUM
A Certificate Owner generally will be considered to have acquired an
interest in an Equipment Note held in the related Trust at a bond premium to the
extent such Certificate Owner's tax basis allocable to such Equipment Note
exceeds the remaining principal amount of the Equipment Note allocable to such
Certificate Owner's Offered Certificate. In that event, a Certificate Owner may,
in certain circumstances, be able to amortize that bond premium (generally on a
constant yield basis) as an offset to interest income with corresponding
reductions in such Certificate Owner's tax basis in such Equipment Note. Special
rules apply to an Equipment Note that may be called at a redemption premium
prior to maturity. It is unclear how these rules apply to an Equipment Note when
there is more than one possible call date and the amount of any redemption
premium is uncertain. Certificate Owners should consult their own tax advisors
regarding the advisability and consequences of an election to amortize any bond
premium with respect to the Equipment Notes.
ORIGINAL ISSUE DISCOUNT
The Equipment Notes will not be issued with original issue discount unless
certain aggregation rules set forth in the Treasury regulations apply. Under
those rules, if one investor purchases Offered Certificates issued by more than
one Trust, certain of that investor's interests in the Equipment Notes in those
Trusts must in certain circumstances be treated together as a single debt
instrument, which, for purposes of calculating and amortizing any original issue
discount, has a single issue price, maturity date, stated redemption price at
maturity and yield to maturity. If the aggregation rules apply to an investor,
such Equipment Notes could be treated with respect to such investor as having
been issued with original issue discount. Generally, a holder of a debt
instrument issued with original issue discount that is not de minimis must
include such original issue discount in income for federal income tax purposes
as it accrues, in advance of the receipt of the cash attributable to such
income, under a method that takes into account the compounding of interest.
Certificate Owners should consult their own tax advisors regarding the
aggregation rules.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES TO FOREIGN CERTIFICATEHOLDERS
Subject to the discussion of backup withholding below, payments of
principal and interest on the Equipment Notes to, or on behalf of, any
beneficial owner of an Offered Certificate that is not a U.S. Person (a
"Non-U.S. Certificateholder") will not be subject to U.S. federal withholding
tax, provided, in the case of interest, that (i) such Non-U.S. Certificateholder
does not actually or constructively own 10% or more of the total combined voting
power of all classes of stock of Delta entitled to vote, (ii) such Non-U.S.
Certificateholder is not a controlled foreign corporation for U.S. tax purposes
that is related to Delta, (iii) such Non-U.S. Certificateholder is not a bank
receiving interest pursuant to a loan agreement entered into in the ordinary
course of its trade or business and (iv) either (A) the Non-U.S.
Certificateholder certifies, under penalties of perjury, that it is not a U.S.
Person and provides its name and address and certain other information to the
related Trustee or (B) a securities clearing organization, bank or other
financial institution that holds customers' securities in the ordinary course of
its trade or business (a "financial institution") and that holds the Offered
Certificate on behalf of the Non-U.S. Certificateholder certifies, under
penalties of perjury, that such a certification and the Non-U.S.
Certificateholder's name and address have been received from the Non-U.S.
Certificateholder by it or by another financial institution and furnishes to the
withholding agent the name and address of the Non-U.S. Certificateholder and a
copy of the Non-U.S. Certificateholder's certification, provided that the U.S.
Treasury Department has not published a determination that a certification from
such financial institution may not be relied upon.
Any capital gain realized by a Non-U.S. Certificateholder upon the sale or
retirement of an Offered Certificate or upon receipt of any Make-Whole Amount
paid on an Equipment Note will not be subject to U.S. federal income or
withholding taxes if (i) such gain is not effectively connected with a U.S.
trade or business of the Non-U.S. Certificateholder and (ii) in the case of an
individual, such Non-U.S.
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Certificateholder is not present in the United States for 183 days or more in
the taxable year of the sale, retirement or receipt.
Any interest or gain described in the two preceding paragraphs will be
subject to regular United States federal income tax at graduated rates if it is
effectively connected with the conduct of a United States trade or business by a
Non-U.S. Certificateholder.
Prospective investors that are not U.S. Persons should consult their own
tax advisors regarding the income and other tax consequences to them of the
purchase, ownership and disposition of the Offered Certificates under U.S.
federal, state and local, and any other relevant law, in light of their own
particular circumstances.
BACKUP WITHHOLDING
Payments made on Offered Certificates, and proceeds from the sale of
Offered Certificates to or through certain brokers, may be subject to a "backup"
withholding tax of 30.5% (which rate will be reduced periodically to 28% for
payments in 2006) unless the Certificate Owner complies with certain reporting
procedures or is exempt from such requirements. Any such withheld amounts will
be allowed as a credit against the Certificate Owner's federal income tax and
may entitle such Certificate Owner to a refund if the required information is
furnished to the Internal Revenue Service. Certain penalties may be imposed by
the Internal Revenue Service on a Certificate Owner who is required to supply
information but who does not do so in the proper manner. With respect to
Non-U.S. Certificateholders, payments made on an Offered Certificate and
proceeds from the sale of an Offered Certificate owned by a Non-U.S.
Certificateholder will generally not be subject to such backup withholding tax
if such Non-U.S. Certificateholder provides the applicable statement as to its
non-U.S. status or otherwise establishes an exemption.
CERTAIN CONNECTICUT TAXES
The Trustee is a national banking association with its corporate trust
office in Connecticut. Bingham Dana LLP, counsel to the Trustee, has advised
Delta that, in its opinion, under currently applicable law, assuming that each
Trust will not be taxable as a corporation for federal income tax purposes, but,
rather, will be classified for such purposes as a grantor trust or as a
partnership, (i) the Trusts will not be subject to any tax (including, without
limitation, net or gross income, tangible or intangible property, net worth,
capital, franchise or doing business tax), fee or other governmental charge
under the laws of the State of Connecticut or any political subdivision thereof
and (ii) Certificate Owners that are not residents of or otherwise subject to
tax in Connecticut will not be subject to any tax (including, without
limitation, net or gross income, tangible or intangible property, net worth,
capital, franchise or doing business tax), fee or other governmental charge
under the laws of the State of Connecticut or any political subdivision thereof
as a result of purchasing, owning (including receiving payments with respect to)
or selling a Certificate. Neither the Trusts nor the Certificate Owners will be
indemnified for any state or local taxes imposed on them, and the imposition of
any such taxes on a Trust could result in a reduction in the amounts available
for distribution to the Certificate Owners of such Trust. In general, should a
Certificate Owner or a Trust be subject to any state or local tax that would not
be imposed if the Trust were administered in a different jurisdiction in the
United States or if the Trustee were located in a different jurisdiction in the
United States, the Trustee will either relocate the administration of the Trust
to such other jurisdiction or resign and, in the event of such a resignation, a
new Trustee in such other jurisdiction will be appointed.
CERTAIN ERISA CONSIDERATIONS
The following discussion supplements the discussion in the Prospectus under
the heading "ERISA Considerations" and supersedes it to the extent it is
inconsistent.
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GENERAL
A fiduciary of a retirement plan or other employee benefit plan or
arrangement, including for this purpose an individual retirement account,
annuity or Keogh plan, that is subject to Title I of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") or Section 4975 of the Code,
or such a plan or arrangement which is a foreign, church or governmental plan or
arrangement exempt from Title I of ERISA and Section 4975 of the Code but
subject to a foreign, federal, state, or local law which is substantially
similar to the provisions of Title I of ERISA or Section 4975 of the Code (each,
a "Similar Law") (in each case, a "Plan"), should consider whether an investment
in the Offered Certificates is appropriate for the Plan, taking into account the
provisions of the Plan documents, the overall investment policy of the Plan and
the composition of the Plan's investment portfolio, as there are imposed on Plan
fiduciaries certain fiduciary requirements, including those of investment
prudence and diversification and the requirement that a Plan's investments be
made in accordance with the documents governing the Plan. Further, a fiduciary
should consider the fact that in the future there may be no market in which such
fiduciary would be able to sell or otherwise dispose of the Offered
Certificates.
Any Plan fiduciary which proposes to cause a Plan to purchase Offered
Certificates should consult with its counsel regarding the applicability of the
fiduciary responsibility and prohibited transaction provisions of ERISA and the
Code and Similar Law to such an investment, and to confirm that such purchase
and holding will not constitute or result in a non-exempt prohibited transaction
or any other violation of an applicable requirement of ERISA.
PLAN ASSETS ISSUES
The Department of Labor has promulgated a regulation, 29 CFR Section
2510.3-101 (the "Plan Asset Regulation"), describing what constitutes the assets
of a Plan with respect to the Plan's investment in an entity for purposes of
ERISA and Section 4975 of the Code. Under the Plan Asset Regulation, if a Plan
invests (directly or indirectly) in an Offered Certificate, the Plan's assets
will include both the Offered Certificate and an undivided interest in each of
the underlying assets of the corresponding Trust, including the Equipment Notes
held by such Trust, unless it is established that equity participation in the
Trust by benefit plan investors (including but not limited to Plans and entities
whose underlying assets include Plan assets by reason of an employee benefit
plan's investment in the entity) is not significant within the meaning of the
Plan Asset Regulation. In this regard, the extent to which there is equity
participation in a particular Trust by, or on behalf of, benefit plan investors
will not be monitored. If the assets of a Trust are deemed to constitute the
assets of a Plan, transactions involving the assets of such Trust could be
subject to the prohibited transaction provisions of ERISA and Section 4975 of
the Code or materially similar provisions of similar law unless a statutory or
administrative exemption is applicable to the transaction.
PROHIBITED TRANSACTION EXEMPTIONS
In addition, whether or not the assets of a Trust are deemed to be Plan
assets under the Plan Asset Regulation, the fiduciary of a Plan that proposes to
purchase and hold any Offered Certificates should consider, among other things,
whether such purchase and holding may involve (i) the direct or indirect
extension of credit to a party in interest or a disqualified person, (ii) the
sale or exchange of any property between a Plan and a party in interest or a
disqualified person, or (iii) the transfer to, or use by or for the benefit of,
a party in interest or a disqualified person, of any Plan assets. Such parties
in interest or disqualified persons could include, without limitation, Delta and
its affiliates, the Underwriters, the Trustees and the Liquidity Provider.
Moreover, if Offered Certificates are purchased by a Plan and Offered
Certificates of a subordinate Class are held by a party in interest or a
disqualified person with respect to such Plan, the exercise by the holder of the
subordinate Class of Offered Certificates of its right to purchase the senior
Classes of Offered Certificates upon the occurrence and during the continuation
of a Triggering Event could be considered to constitute a prohibited transaction
unless a statutory or administrative exemption were applicable. Depending on the
satisfaction of certain conditions which may include the identity of the Plan
fiduciary making the decision to acquire or hold Offered Certificates on
S-55
61
behalf of a Plan, Prohibited Transaction Class Exemption ("PTCE") 91-38
(relating to investments by bank collective investment funds), PTCE 84-14
(relating to transactions effected by a "qualified professional asset manager"),
PTCE 95-60 (relating to investments by an insurance company general account),
PTCE 96-23 (relating to transactions directed by an in-house asset manager) or
PTCE 90-1 (relating to investments by insurance company pooled separate
accounts) (collectively, the "Class Exemptions") could provide an exemption from
the prohibited transaction provisions of ERISA and Section 4975 of the Code.
However, there can be no assurance that any of these Class Exemptions or any
other exemption will be available with respect to any particular transaction
involving the Offered Certificates.
EACH PERSON WHO ACQUIRES OR ACCEPTS AN OFFERED CERTIFICATE OR AN INTEREST
THEREIN WILL BE DEEMED BY SUCH ACQUISITION OR ACCEPTANCE TO HAVE REPRESENTED AND
WARRANTED THAT EITHER: (I) NO ASSETS OF A PLAN OR ANY TRUST ESTABLISHED WITH
RESPECT TO A PLAN HAVE BEEN USED TO ACQUIRE SUCH OFFERED CERTIFICATE OR AN
INTEREST THEREIN OR (II) THE PURCHASE AND HOLDING OF SUCH OFFERED CERTIFICATE OR
AN INTEREST THEREIN BY SUCH PERSON ARE EXEMPT FROM THE PROHIBITED TRANSACTION
RESTRICTIONS OF ERISA AND THE CODE OR MATERIALLY SIMILAR PROVISIONS OF SIMILAR
LAW PURSUANT TO ONE OR MORE PROHIBITED TRANSACTION STATUTORY OR ADMINISTRATIVE
EXEMPTIONS.
SPECIAL CONSIDERATIONS APPLICABLE TO INSURANCE COMPANY GENERAL ACCOUNTS
Any insurance company proposing to purchase Offered Certificates should
consider the implications of the United States Supreme Court's decision in John
Hancock Mutual Life Insurance Co. v. Harris Trust and Savings Bank, 510 U.S. 86,
114 S. Ct. 517 (1993), which in certain circumstances treats such general
account assets as assets of a Plan that owns a policy or other contract with
such insurance company, as well as the effect of Section 401(c) of ERISA as
interpreted by regulations issued by the United States Department of Labor in
January, 2000 (the "General Account Regulations"). The General Account
Regulations should not, however, adversely affect the applicability of PTCE
95-60 to purchases of Offered Certificates by insurance company general
accounts. The plan asset status of insurance company separate accounts is
unaffected by Section 401(c) of ERISA, and separate account assets continue to
be treated as the assets of any Plan invested in a separate account, except to
the extent provided in the Plan Asset Regulation.
EACH PLAN FIDUCIARY SHOULD CONSULT WITH ITS LEGAL ADVISOR CONCERNING THE
POTENTIAL CONSEQUENCES TO THE PLAN UNDER ERISA, THE CODE OR SIMILAR LAW OF AN
INVESTMENT IN ANY OF THE OFFERED CERTIFICATES.
S-56
62
UNDERWRITING
Under the terms and subject to the conditions contained in an underwriting
agreement dated September 6, 2001 (the "Underwriting Agreement"), Delta has
agreed to sell to the underwriters named below (the "Underwriters"), for whom
Salomon Smith Barney Inc. and J.P. Morgan Securities Inc. are acting as
representatives, the following respective principal amounts of the Offered
Certificates.
<Table>
<Caption>
PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT AMOUNT AMOUNT OF AMOUNT OF
OF CLASS A-1 OF CLASS A-2 CLASS B CLASS C
UNDERWRITERS CERTIFICATES CERTIFICATES CERTIFICATES CERTIFICATES
- ------------ ------------ ------------ ------------ ------------
Salomon Smith Barney Inc. .............. $ 37,500,000 $ 71,395,000 $ 25,886,000 $ 21,225,000
J.P. Morgan Securities Inc. ............ 37,500,000 71,395,000 25,886,000 21,225,000
Commerzbank Capital Markets Corp. ...... 37,500,000 71,393,000 25,883,000 21,222,000
Mizuho International plc................ 37,500,000 71,393,000 25,883,000 21,222,000
SunTrust Capital Markets Inc. .......... 37,500,000 71,393,000 25,883,000 21,222,000
Tokyo-Mitsubishi International plc...... 37,500,000 71,393,000 25,883,000 21,222,000
Credit Lyonnais Securities (USA)
Inc. ................................. 37,500,000 71,393,000 25,883,000 21,222,000
KBC Financial Products USA Inc.......... 37,500,000 71,393,000 25,883,000 21,222,000
------------ ------------ ------------ ------------
Total......................... $300,000,000 $571,148,000 $207,070,000 $167,782,000
============ ============ ============ ============
</Table>
The Underwriting Agreement provides that the Underwriters are obligated to
purchase all of the Offered Certificates in the offering if any are purchased.
The Underwriting Agreement also provides that if an Underwriter defaults on its
purchase commitments, the purchase commitments of non-defaulting Underwriters
may be increased or the offering or the Offered Certificates may be terminated.
Delta estimates that the expenses associated with the offer and sale of the
Offered Certificates will be approximately $975,000 (exclusive of the ongoing
costs of the Liquidity Facilities).
The Underwriters proposed to offer the Offered Certificates initially at
the public offering prices on the cover page of this prospectus supplement and
to selling group members at those prices less the concessions set forth below.
The Underwriters and the selling group members may allow a discount to other
broker/dealers set forth below. After the initial public offering, the public
offering prices and concessions and discounts to broker/dealers may be changed
by the Underwriters.
<Table>
<Caption>
CONCESSION TO
SELLING DISCOUNT
GROUP TO BROKER/
CERTIFICATE MEMBERS DEALERS
- ----------- ------------- ----------
Class A-1................................................... 0.30% 0.25%
Class A-2................................................... 0.30 0.25
Class B..................................................... 0.30 0.25
Class C..................................................... 0.30 0.25
</Table>
The Offered Certificates are a new issue of securities with no established
trading market. One or more of the Underwriters intend to make a secondary
market for the Offered Certificates. However, they are not obligated to do so
and may discontinue any market making at any time without notice. No assurance
can be given as to the liquidity of the trading market for the Offered
Certificates.
Delta has agreed to indemnify the Underwriters against any liabilities
under the Securities Act of 1933, as amended (the "Securities Act"), or
contribute to payments which the Underwriters may be required to make in that
respect.
From time to time, several of the Underwriters or their affiliates perform
investment banking and advisory services for, and provide general financing and
banking services to, Delta and its affiliates.
S-57
63
The Underwriters may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with the
Regulation M under the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
- Over-allotment involves syndicate sales in excess of the offering size,
which creates a syndicate short position.
- Stabilizing transactions permit bids to purchase the underlying security
as long as the stabilizing bids do not exceed a specified maximum.
- Syndicate covering transactions involve purchase of the Offered
Certificates in the open market after the distribution has been completed
in order to cover syndicate short positions.
- Penalty bids permit the Underwriters to reclaim a selling concession from
a stabilizing or syndicate member when the Offered Certificates
originally sold by such syndicate member are purchased in a syndicate
covering transactions to cover syndicate short positions.
The stabilizing transactions, syndicate covering transactions and penalty
bids may cause the prices of the Offered Certificates to be higher than they
would otherwise be in the absence of such transactions. These transactions, if
commenced, may be discontinued at any time.
Delta expects that delivery of the Offered Certificates will be made
against payment therefor on or about the closing date specified in the second to
the last paragraph of the cover page of this prospectus supplement, which will
be the seventh business day following the date of pricing of the Offered
Certificates (such settlement cycle being referred to herein as "T+7"). Under
Rule 15c6-1 of the SEC under the Exchange Act, trades in the secondary market
are generally required to settle in three business days, unless the parties to
any such trade expressly agree otherwise. Accordingly, purchasers who wish to
trade the Offered Certificates on the date of pricing or the following three
business days will be required, by virtue of the fact that the Offered
Certificates initially will settle in T+7, to specify an alternate settlement
cycle at the time of any trade to prevent a failed settlement and should consult
their own advisor.
Tokyo-Mitsubishi International plc and Mizuho International plc are not
registered as broker-dealers under United States law and will not conduct any
selling activity within the United States.
In connection with the offering of the Offered Certificates, the
Underwriters have agreed to reimburse certain fees and expenses of Delta in the
amount of approximately $1,872,000.
Affiliates of Salomon Smith Barney Inc., J.P. Morgan Securities Inc.,
Mizuho International plc, SunTrust Capital Markets Inc., Tokyo-Mitsubishi
International plc, Credit Lyonnais Securities (USA) Inc. and KBC Financial
Products USA Inc. are lenders under that certain $1.25 billion revolving credit
agreement discussed in "Use of Proceeds".
LEGAL OPINIONS
The validity of the Certificates is being passed upon for Delta by
Cadwalader, Wickersham & Taft, New York, New York, special counsel to Delta, and
for the Underwriters by Shearman & Sterling, New York, New York. The respective
counsel for Delta and the Underwriters will rely upon Bingham Dana LLP,
Hartford, Connecticut, counsel to State Street Bank and Trust Company of
Connecticut, National Association, as to certain matters relating to the
authorization, execution and delivery of the Basic Agreement, each Trust
Supplement and the Certificates, and the valid and binding effect thereof, and
on the opinion of Leslie P. Klemperer, Vice President -- Associate General
Counsel of Delta, as to certain matters relating to the authorization, execution
and delivery of the Basic Agreement and each Trust Supplement by Delta.
S-58
64
EXPERTS
The consolidated balance sheets as of December 31, 2000 and 1999 and the
related consolidated statements of income, cash flows and shareowners' equity
for each of the three years in the period ended December 31, 2000, and related
schedules incorporated by reference in the Prospectus and elsewhere in the
registration statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
accounting and auditing in giving said reports. Reference is made to said
report, which includes an explanatory paragraph with respect to the changes in
the methods of accounting for derivative instruments and hedging activities and
the sale of mileage credits as discussed in Notes 3 and 5, respectively, to the
audited consolidated financial statements.
With respect to the unaudited interim financial information for the
quarters ended March 31, 2001 and 2000 and the quarters and six-month periods
ended June 30, 2001 and 2000, Arthur Andersen LLP has applied limited procedures
in accordance with professional standards for a review of that information,
However, their separate reports thereon state that they did not audit and they
do not express an opinion on that interim financial information. Accordingly,
the degree of reliance on their report on that information should be restricted
in light of the limited nature of the review procedures applied. In addition,
the accountants are not subject to the liability provision of Section 11 of the
Securities Act for their report on the unaudited interim financial information
because that report is not a "report" or a "part" of the registration statement
prepared or certified by the accountants within the meaning of Sections 7 and 11
of the Securities Act.
The references to AISI, AvSolutions and BK, and to their respective
appraisal reports, are included herein in reliance upon the authority of each
such firm as an expert with respect to the matters contained in its appraisal
report.
S-59
65
APPENDIX I
INDEX OF TERMS
The following is an index showing the page in this prospectus supplement
where certain defined terms appear.
<Table>
<Caption>
DEFINED TERM PAGE
- ------------ ----
Adjusted Expected Distributions............................. S-37
Aggregate LTV Collateral Amount............................. S-38
Aircraft.................................................... S-39
AISI........................................................ S-39
Appraised Current Market Value.............................. S-38
Appraisers.................................................. S-39
Assumed Aircraft Value...................................... S-43
Average Life Date........................................... S-43
AvSolutions................................................. S-39
Bankruptcy Code............................................. S-24
Base Rate................................................... S-31
Basic Agreement............................................. S-16
BK.......................................................... S-39
Business Day................................................ S-19
Cash Collateral Account..................................... S-29
Cede........................................................ S-21
Certificate Account......................................... S-19
Certificate Owner........................................... S-27
Certificateholders.......................................... S-17
Certificates................................................ S-16
citizen of the United States................................ S-24
Class A-1 Certificateholders................................ S-17
Class A-1 Certificates...................................... S-17
Class A-1 Trust............................................. S-16
Class A-1 Trustee........................................... S-16
Class A-2 Certificateholders................................ S-17
Class A-2 Certificates...................................... S-17
Class A-2 Trust............................................. S-16
Class A-2 Trustee........................................... S-16
Class B Certificateholders.................................. S-17
Class B Certificates........................................ S-17
Class B Trust............................................... S-16
Class B Trustee............................................. S-17
Class C Certificateholders.................................. S-17
Class C Certificates........................................ S-17
Class C Trust............................................... S-16
Class C Trustee............................................. S-17
Class D Certificateholders.................................. S-17
Class D Certificates........................................ S-17
Class D Trust............................................... S-16
Class D Trustee............................................. S-17
Class Exemptions............................................ S-56
Controlling Party........................................... S-34
Current Distribution Date................................... S-35
date of determination....................................... S-42
</Table>
I-1
66
<Table>
<Caption>
DEFINED TERM PAGE
- ------------ ----
Distribution Date........................................... S-18
Downgrade Drawing........................................... S-29
Drawing..................................................... S-31
DTC......................................................... S-21
DTC Participants............................................ S-27
Equipment Notes............................................. S-41
ERISA....................................................... S-55
event of default............................................ S-22
Event of Loss............................................... S-50
Exchange Act................................................ S-58
Expected Distributions...................................... S-35
FAA......................................................... S-47
Final Distributions......................................... S-34
Final Drawing............................................... S-31
Final Legal Distribution Date............................... S-18
financial institution....................................... S-53
full defeasance............................................. S-43
General Account Regulations................................. S-56
H.15(519)................................................... S-42
Indenture................................................... S-41
Indenture Events of Default................................. S-44
Indirect Participants....................................... S-27
Intercreditor Agreement..................................... S-33
Interest Drawings........................................... S-28
LIBOR....................................................... S-32
Liquidity Expenses.......................................... S-35
Liquidity Event of Default.................................. S-32
Liquidity Facility.......................................... S-28
Liquidity Obligations....................................... S-35
Liquidity Provider.......................................... S-28
Loan Amount................................................. S-49
Loan Trustee................................................ S-41
LTV Appraisal............................................... S-38
LTV Collateral Amount....................................... S-38
LTV Ratio................................................... S-38
LTVs........................................................ S-3
Make-Whole Amount........................................... S-42
Maximum Available Commitment................................ S-28
Minimum Sale Price.......................................... S-35
Moody's..................................................... S-15
most recent H.15(519)....................................... S-42
Non-Extension Drawing....................................... S-30
Non-Performing Equipment Notes.............................. S-37
Non-U.S. Certificateholder.................................. S-53
Note Holder................................................. S-22
Offered Certificates........................................ S-16
Participation Agreement..................................... S-41
Pass Through Trust Agreements............................... S-16
Performing Equipment Note................................... S-29
Permitted Investments....................................... S-22
Plan........................................................ S-55
</Table>
I-2
67
<Table>
<Caption>
DEFINED TERM PAGE
- ------------ ----
Plan Asset Regulation....................................... S-55
Pool Balance................................................ S-19
Pool Factor................................................. S-20
Prospectus.................................................. S-16
PTC Event of Default........................................ S-23
PTCE........................................................ S-56
Rating Agencies............................................. S-15
Regular Distribution Dates.................................. S-18
Remaining Weighted Average Life............................. S-43
Replacement Facility........................................ S-29
Required Amount............................................. S-28
Scheduled Payments.......................................... S-18
SEC......................................................... S-16
Section 1110................................................ S-45
Section 1110 Period......................................... S-29
Securities Act.............................................. S-57
Series A-1 Equipment Notes.................................. S-41
Series A-2 Equipment Notes.................................. S-41
Series B Equipment Notes.................................... S-41
Series C Equipment Notes.................................... S-41
Series D Equipment Notes.................................... S-41
Similar Law................................................. S-55
Special Distribution Date................................... S-19
Special Payment............................................. S-18
Special Payments Account.................................... S-19
Standard & Poor's........................................... S-15
Stated Interest Rates....................................... S-28
Subordination Agent......................................... S-33
Termination Notice.......................................... S-32
Threshold Rating............................................ S-30
Transportation Code......................................... S-24
Treasury Yield.............................................. S-42
Triggering Event............................................ S-35
Trust Indenture Act......................................... S-24
Trust Property.............................................. S-17
Trust Supplement............................................ S-16
Trustees.................................................... S-17
Trusts...................................................... S-16
U.S. Government Obligations................................. S-43
U.S. Persons................................................ S-51
Underwriters................................................ S-57
Underwriting Agreement...................................... S-57
</Table>
I-3
68
APPENDIX II
APPRAISAL LETTERS
II-1
69
(AIRCRAFT INFORMATION SERVICES LOGO)
DELTA AIR LINES
HARTSFIELD INTERNATIONAL AIRPORT
ATLANTA, GA 30320
HALF-LIFE BASE VALUE OPINION
36 VARIOUS DELTA 2001-1 AIRCRAFT
AISI FILE NO.: A1S042BVO
31 AUGUST 2001
HEADQUARTERS, 26072 MERIT CIRCLE, SUITE 123, LAGUNA HILLS, CA 92653
TEL: 949-582-8888 FAX: 949-582-8887 E-MAIL: AISINEWS@AOL.COM
70
(AIRCRAFT INFORMATION SERVICES LOGO)
31 August 2001
DELTA AIR LINES
Hartsfield International Airport
Atlanta, GA 30320
<Table>
Subject: Half Life Base Value Opinion -- 36 Aircraft.
AISI File number: A1S042BVO
Ref: (a) eMail Salomon Smith Barney to AISI 30 July 02/07/22/27
August 2001
</Table>
Dear Ladies and Gentlemen:
Aircraft Information Services, Inc. (AISI) is pleased to offer our opinion to
Delta Air Lines (Delta) of the half life base values of the Fleet of 36 various
Delta Aircraft as identified and defined in Table I and reference (a) data above
(the 'Aircraft').
1. METHODOLOGY AND DEFINITIONS
The standard terms of reference for commercial aircraft value are 'base value'
and 'current market value' of an 'average' aircraft. Base value is a theoretical
value that assumes a hypothetical balanced market while current market value is
the value in the real market; both assume a hypothetical average aircraft
condition. All other values are derived from these values. AISI value
definitions are consistent with the current definitions of the International
Society of Transport Aircraft Trading (ISTAT), those of 01 January 1994. AISI is
a member of that organization and employs an ISTAT Certified and Senior
Certified Appraiser.
AISI defines a 'base value' as that of a transaction between an equally willing
and informed buyer and seller, neither under compulsion to buy or sell, for a
single unit cash transaction with no hidden value or liability, with supply and
demand of the sale item roughly in balance and with no event which would cause a
short term change in the market. Base values are typically given for aircraft in
'new' condition, 'average half-life' condition, or 'adjusted' for an aircraft in
a specifically described condition at a specific time. An 'average' aircraft is
an operable airworthy aircraft in average physical condition and with average
accumulated flight hours and cycles, with clear title and standard unrestricted
certificate of airworthiness, and registered in an authority which does not
represent a penalty to aircraft value or liquidity, with no damage history and
with inventory configuration and level of modification which is normal
HEADQUARTERS, 26072 MERIT CIRCLE, SUITE 123, LAGUNA HILLS, CA 92653
TEL: 949-582-8888 FAX: 949-582-8887 E-MAIL: AISINEWS@AOL.COM
71
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31 August 2001
AISI File No. A1S042BVO
Page -2-
for its intended use and age. AISI assumes average condition unless otherwise
specified in this report.
AISI also assumes that airframe, engine and component maintenance and essential
records are sufficient to permit normal commercial operation under a strict
airworthiness authority.
'Half-life' condition assumes that every component or maintenance service which
has a prescribed interval that determines its service life, overhaul interval or
interval between maintenance services, is at a condition which is one-half of
the total interval.
It should be noted that AISI and ISTAT value definitions apply to a transaction
involving a single aircraft, and that transactions involving more than one
aircraft are often executed at considerable and highly variable discounts to a
single aircraft price, for a variety of reasons relating to an individual buyer
or seller.
AISI defines a 'current market value', which is synonymous with the older term
'fair market value' as that value which reflects the real market conditions
including short term events, whether at, above or below the base value
conditions. Assumption of a single unit sale and definitions of aircraft
condition, buyer/seller qualifications and type of transaction remain unchanged
from that of base value. Current market value takes into consideration the
status of the economy in which the aircraft is used, the status of supply and
demand for the particular aircraft type, the value of recent transactions and
the opinions of informed buyers and sellers. Current market value assumes that
there is no short term time constraint to buy or sell.
AISI encourages the use of base values to consider historical trends, to
establish a consistent baseline for long term value comparisons and future value
considerations, or to consider how actual market values vary from theoretical
base values. Base values are less volatile than current market values and tend
to diminish regularly with time. Base values are normally inappropriate to
determine near term values. AISI encourages the use of current market values to
consider the probable near term value of an aircraft.
If more than one aircraft is contained in this report than it should be noted
that the values given are not directly additive, that is, the total of the given
values is not the value of the fleet but rather the sum of the values of the
individual aircraft if sold individually over time so as not to exceed demand.
HEADQUARTERS, 26072 MERIT CIRCLE, SUITE 123, LAGUNA HILLS, CA 92653
TEL: 949-582-8888 FAX: 949-582-8887 E-MAIL: AISINEWS@AOL.COM
72
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31 August 2001
AISI File No. A1S042BVO
Page -3-
2. VALUATION
The aircraft are valued predicated upon the reference (a) data which describes
the aircraft MTOW and any engine upgrades. Following is AISI's opinion of the
half-life base value for the subject aircraft in August 2001 US Dollars.
Valuations are presented in Table I subject to the assumptions, definitions and
disclaimers herein.
TABLE I
<Table>
<Caption>
- --------------------------------------------------------------------------------
Aircraft Aircraft
Manufacturer's Serial Registration Half-Life Base Value
Delivery Date Number Number August 2001 US Dollar
- --------------------------------------------------------------------------------
BOEING 737-832; CFM 56-7B24*, 157,200 LB. MTOW
- --------------------------------------------------------------------------------
Sep-00 30775 N3731T 43,680,000
- --------------------------------------------------------------------------------
Oct-00 30380 N3732J 43,680,000
- --------------------------------------------------------------------------------
Oct-00 30539 N3733Z 43,680,000
- --------------------------------------------------------------------------------
Oct-00 30776 N3734B 43,680,000
- --------------------------------------------------------------------------------
Nov-00 30381 N3735D 43,680,000
- --------------------------------------------------------------------------------
Nov-00 30540 N3736C 43,680,000
- --------------------------------------------------------------------------------
Nov-00 30799 N3737C 43,680,000
- --------------------------------------------------------------------------------
Dec-00 30382 N3738B 43,680,000
- --------------------------------------------------------------------------------
Dec-00 30541 N3739P 43,680,000
- --------------------------------------------------------------------------------
Dec-00 30800 N3740C 43,680,000
- --------------------------------------------------------------------------------
Jan-01 30487 N3741S 46,580,000
- --------------------------------------------------------------------------------
Feb-01 30835 N3742C 46,580,000
- --------------------------------------------------------------------------------
Feb-01 30836 N3743H 46,580,000
- --------------------------------------------------------------------------------
May-01 30837 N3744F 46,580,000
- --------------------------------------------------------------------------------
May-01 32374 N3747D 46,580,000
- --------------------------------------------------------------------------------
Jun-01 32373 N3745B 46,580,000
- --------------------------------------------------------------------------------
</Table>
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31 August 2001
AISI File No. A1S042BVO
Page -4-
<Table>
<Caption>
- --------------------------------------------------------------------------------
Aircraft Aircraft
Manufacturer's Serial Registration Half-Life Base Value
Delivery Date Number Number August 2001 US Dollar
- --------------------------------------------------------------------------------
BOEING 757-232; P&W PW2037, 232,000 LB. MTOW
- --------------------------------------------------------------------------------
Mar-95 27588 N685DA 41,480,000
- --------------------------------------------------------------------------------
Sep-95 27589 N686DA 41,480,000
- --------------------------------------------------------------------------------
May-98 27586 N687DL 47,010,000
- --------------------------------------------------------------------------------
May-98 27587 N688DL 47,010,000
- --------------------------------------------------------------------------------
Jun-98 27172 N689DL 47,010,000
- --------------------------------------------------------------------------------
Jun-98 27585 N690DL 47,010,000
- --------------------------------------------------------------------------------
Sep-98 29724 N692DL 47,010,000
- --------------------------------------------------------------------------------
Oct-98 29725 N693DL 47,010,000
- --------------------------------------------------------------------------------
Nov-98 29726 N694DL 47,010,000
- --------------------------------------------------------------------------------
Dec-98 29727 N695DL 47,010,000
- --------------------------------------------------------------------------------
Dec-00 30485 N6714Q 51,520,000
- --------------------------------------------------------------------------------
Feb-01 30486 N6715C 54,220,000
- --------------------------------------------------------------------------------
Mar-01 30838 N6716C 54,220,000
- --------------------------------------------------------------------------------
BOEING 767-332ER; GE CF6-80C2B6F, 407,000 LB. MTOW
- --------------------------------------------------------------------------------
Jun-98 29689 N169DZ 75,090,000
- --------------------------------------------------------------------------------
Sep-98 29690 N171DZ 75,090,000
- --------------------------------------------------------------------------------
Sep-98 29691 N172DZ 75,090,000
- --------------------------------------------------------------------------------
Nov-98 29692 N173DZ 75,090,000
- --------------------------------------------------------------------------------
Apr-00 30573 N1608 83,190,000
- --------------------------------------------------------------------------------
Apr-00 30574 N1609 83,190,000
- --------------------------------------------------------------------------------
Apr-00 30594 N1610D 83,190,000
- --------------------------------------------------------------------------------
</Table>
* Note - the B737-832 aircraft are listed with CFM56-7B24 engines. However, AISI
has been informed the engines installed are actually CFM56-7B26 engines
purchased with an operating limit to CFM56-7B24 status. With this limit, AISI
has valued the aircraft as though they are powered by the CFM56-7B24 engine.
74
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31 August 2001
AISI File No. A1S042BVO
Page -5-
Unless otherwise agreed by Aircraft Information Services, Inc. (AISI) in
writing, this report shall be for the sole use of the client/addressee. This
report is offered as a fair and unbiased assessment of the subject aircraft or
equipment. AISI has no past, present, or anticipated future interest in the
subject aircraft or equipment. The conclusions and opinions expressed in this
report are based on published information, information provided by others,
reasonable interpretations and calculations thereof and are given in good faith.
Such conclusions and opinions are judgments that reflect conditions and values
which are current at the time of this report. The values and conditions reported
upon are subject to any subsequent change. AISI shall not be liable to any party
for damages arising out of reliance or alleged reliance on this report, or for
any parties action or failure to act as a result of reliance or alleged reliance
on this report.
Sincerely,
AIRCRAFT INFORMATION SERVICES, INC.
/s/ John D. McNicol
John D. McNicol
Vice President
Appraisals & Forecasts
75
(AV SOLUTIONS LOGO)
- --------------------------------------------------------------------------------
August 23, 2001
Delta Air Lines
Kenneth Morge
Manager, Capital Markets
Hartsfield International Airport
Atlanta, GA 30320
Dear Mr. Morge:
AvSOLUTIONS is pleased to provide its opinion on the base values as of
August 2001 of 16 Boeing 737-832 aircraft, 13 Boeing 757-232 aircraft, and seven
Boeing 767-332ER aircraft (collectively, the "Aircraft"). A list of the
thirty-six (36) aircraft, along with their delivery dates, engine types and
serial numbers is provided as Attachment 1 of this document.
Set forth below is a summary of the methodology, considerations and
assumptions utilized in this appraisal.
BASE VALUE
Base value is the appraiser's opinion of the underlying economic value of
an aircraft in an open, unrestricted, stable market environment with a
reasonable balance of supply and demand, and assumes full consideration of its
"highest and best use". An aircraft's base value is founded in the historical
trend of values and in the projection of future value trends and presumes an
arm's length, cash transaction between willing, able and knowledgeable parties
acting prudently, with an absence of duress and with a reasonable period of time
available for marketing.
APPRAISAL METHODOLOGY
The method employed by AvSOLUTIONS to appraise the base values of aircraft
and associated equipment addresses the factors that influence the market value
of an aircraft, such as its age, condition, configuration, the population of
similar aircraft, similar aircraft on the market, operating costs, cost to
acquire a new aircraft, and the state of demand for transportation services.
To achieve this objective, cross-sectional data concerning the values of
aircraft in each of several general categories is collected and analyzed.
Cross-sectional data is then compared with reported market values at a specified
point in time. Such data reflects the effect of deterioration in aircraft
performance due to usage and exposure to the elements, as well as the effect of
obsolescence due to the evolutionary development and implementation of new
designs and materials.
The product of the analysis identifies the relationship between the value
of each aircraft
76
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- --------------------------------------------------------------------------------
and its characteristics, such as age, model designation, service configuration
and engine type. Once the relationship is identified, one can then postulate the
effects of the difference between the economic circumstances at the time when
the cross-sectional data were collected and the current situation.
The manufacturer and size of the aircraft usually determine the specific
category to which it is assigned. Segregating the world airplane fleet in this
manner accommodates the potential effects of different size and different design
philosophies.
LIMITING CONDITIONS AND ASSUMPTIONS
In order to conduct this valuation, AvSOLUTIONS is primarily relying on
information supplied by Delta Air Lines and from data within AvSOLUTIONS' own
database. In determining the base value of the subject aircraft, the following
assumptions have been researched and determined:
1. AvSOLUTIONS has not inspected the subject Aircraft or their maintenance
records; accordingly, AvSOLUTIONS cannot attest to their specific location
or condition.
2. The Aircraft already have been delivered to Delta Air Lines.
3. The Aircraft are certified, maintained and operated under United States
Federal Aviation Regulation (FAR) part 121.
4. All mandatory inspections and Airworthiness Directives have been complied
with.
5. The Aircraft have half-time remaining to their next major overhaul or
scheduled shop visit on their airframes, engines, landing gear and
auxiliary power units.
6. The Aircraft have no damage history.
7. The Aircraft are in good condition.
8. AvSOLUTIONS considers the economic useful life of these aircraft to be at
least 32 years.
Based upon the above methodology, considerations and assumptions, it is
AvSOLUTIONS' opinion that the base values of each Aircraft are as listed in
Attachment 1.
STATEMENT OF INDEPENDENCE
This appraisal report represents the opinion of AvSOLUTIONS, Inc. and is
intended to be advisory in nature. Therefore, AvSOLUTIONS assumes no
responsibility or legal liability for actions taken or not taken by the Client
or any other party with regard to the subject Aircraft. By accepting this
report, the Client agrees that AvSOLUTIONS shall bear no responsibility or legal
liability regarding this report. Further, this report is prepared for the
77
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- --------------------------------------------------------------------------------
exclusive use of the Client and shall not be provided to other parties without
the Client's express consent.
AvSOLUTIONS hereby states that this valuation report has been independently
prepared and fairly represents the subject aircraft and AvSOLUTIONS' opinion of
their values. AvSOLUTIONS further states that it has no present or contemplated
future interest or association with the subject Aircraft.
Sincerely yours,
/s/ Scott E. Daniels
Scott E. Daniels
Director, Asset Management
78
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- --------------------------------------------------------------------------------
Attachment 1
DELTA AIR LINES
<Table>
<Caption>
SERIAL
NUMBER REGISTRATION DELIVERY ENGINE MTOW BASE VALUE
MSN NUMBER DATE TYPE* (LB) $ MILLIONS
BOEING 737-832
1 30775 N3731T 29-Sep-00 CFM56-7B26 157,200 46.02
2 30380 N3732J 04-Oct-00 CFM56-7B26 157,200 46.26
3 30539 N3733Z 27-Oct-00 CFM56-7B26 157,200 46.26
4 30776 N3734B 28-Oct-00 CFM56-7B26 157,200 46.26
5 30381 N3735D 03-Nov-00 CFM56-7B26 157,200 46.50
6 30540 N3736C 27-Nov-00 CFM56-7B26 157,200 46.50
7 30799 N3737C 30-Nov-00 CFM56-7B26 157,200 46.50
8 30382 N3738B 14-Dec-00 CFM56-7B26 157,200 46.75
9 30541 N3739P 14-Dec-00 CFM56-7B26 157,200 46.75
10 30800 N3740C 19-Dec-00 CFM56-7B26 157,200 46.75
11 30487 N3741S 27-Jan-01 CFM56-7B26 157,200 46.99
12 30835 N3742C 01-Feb-01 CFM56-7B26 157,200 47.24
13 30836 N3743H 21-Feb-01 CFM56-7B26 157,200 47.24
14 30837 N3744F 24-May-01 CFM56-7B26 157,200 47.99
15 32374 N3747D 21-May-01 CFM56-7B26 157,200 47.99
16 32373 N3745B 12-Jun-01 CFM56-7B26 157,200 48.24
BOEING 757-232
17 27588 N685DA 31-Mar-95 PW2037 232,000 41.37
18 27589 N686DA 20-Sep-95 PW2037 232,000 42.63
19 27586 N687DL 04-May-98 PW2037 232,000 50.00
20 27587 N688DL 21-May-98 PW2037 232,000 50.00
21 27172 N689DL 18-Jun-98 PW2037 232,000 50.21
22 27585 N690DL 26-Jun-98 PW2037 232,000 50.21
23 29724 N692DL 04-Sep-98 PW2037 232,000 50.84
24 29725 N693DL 17-Oct-98 PW2037 232,000 51.05
25 29726 N694DL 11-Nov-98 PW2037 232,000 51.26
26 29727 N695DL 11-Dec-98 PW2037 232,000 51.48
27 30485 N6714Q 19-Dec-00 PW2037 232,000 56.90
28 30486 N6715C 14-Feb-01 PW2037 232,000 57.38
29 30838 N6716C 09-Mar-01 PW2037 232,000 57.62
BOEING 767-332ER
30 29689 N169DZ 18-Jun-98 CF6-80C2B6F 407,000 72.44
31 29690 N171DZ 11-Sep-98 CF6-80C2B6F 407,000 73.43
32 29691 N172DZ 25-Sep-98 CF6-80C2B6F 407,000 73.43
33 29692 N173DZ 02-Nov-98 CF6-80C2B6F 407,000 74.16
34 30573 N1608 21-Apr-00 CF6-80C2B6F 407,000 80.33
35 30574 N1609 25-Apr-00 CF6-80C2B6F 407,000 80.33
36 30594 N1610D 26-Apr-00 CF6-80C2B6F 407,000 80.33
</Table>
* Note - the Boeing 737-832 aircraft are listed with CFM56-7B26 engines.
However, AvSOLUTIONS has been informed the engines installed are CFM56-7B26
engines purchased with an operating limit to CFM56-7B24 status. With this limit,
AvSOLUTIONS has valued the aircraft as though they are powered by the CFM56-7B24
engine.
79
BK ASSOCIATES, INC.
1295 Northern Boulevard
Manhasset, New York 11030
(516) 365-6272 - Fax (516) 365-6287
September 4, 2001
Mr. Paul Jacobson
Delta Air Lines
Hartsfield International Airport
Atlanta, GA 30320
Dear Paul:
In response to your request, BK Associates, Inc. is pleased to provide this
opinion of the current Base Value on each of 36 commercial jet transport
aircraft, identified as the Delta 2001-1 Aircraft Collateral Pool (Aircraft).
The Aircraft are further identified in the attached Figure 1 by type, serial
number, manufacture date, engine model and maximum takeoff weight.
Set forth below is a summary of the methodology, considerations and assumptions
utilized in this appraisal.
CURRENT FAIR MARKET VALUE
According to the International Society of Transport Aircraft Trading's (ISTAT)
definition of FMV, to which BK Associates subscribes, the quoted FMV is the
Appraiser's opinion of the most likely trading price that may be generated for
an aircraft under the market circumstances that are perceived to exist at the
time in question. The FMV assumes that the aircraft is valued for its highest
and best use, that the parties to the hypothetical sale transaction are willing,
able, prudent and knowledgeable, and under no unusual pressure for a prompt
sale, and that the transaction would be negotiated in an open and unrestricted
market on an arm's length basis, for cash or equivalent consideration, and given
an adequate amount of time for effective exposure to prospective buyers, which
BK Associates considers to be 12 to 18 months.
BASE VALUE
Base value is the Appraiser's opinion of the underlying economic value of an
aircraft in an open, unrestricted, stable market environment with a reasonable
balance of supply and demand, and assumes full consideration of its "highest and
best use". An aircraft's base value is founded in the historical trend of values
and in the projection of future value trends and presumes an arm's length, cash
transaction between willing, able and knowledgeable parties, acting prudently,
with an absence of duress and with a reasonable period of time available for
marketing.
80
BK ASSOCIATES, INC.
September 4, 2001
Page 2
VALUE METHODOLOGY
As the definition suggests, Base Value is determined from historic and future
value trends and is not influenced by current market conditions. It is often
determined as a function of the original cost of the aircraft, technical
characteristics of competing aircraft, and development of new models. BK
Associates has determined from analysis of historic data, a relationship between
aircraft age and its value as a percentage of original value for the average
aircraft. These data form the basis for base value and forecast value
determinations but must be adjusted to reflect the value of engine and gross
weight options and other features of the aircraft.
LIMITING CONDITIONS AND ASSUMPTIONS
BK has neither inspected the Aircraft nor their maintenance records but relied
upon information supplied by Delta Air Lines and from BK's own database. In
determining the base value of an aircraft, the following assumptions apply to
the aircraft.
1. Each aircraft has half-time remaining to its next major overhaul or
scheduled shop visit on its airframe, engines, landing gear and auxiliary
power unit.
2. The aircraft is in compliance under a Federal Aviation Administration
approved airline maintenance program, with all airworthiness directives,
mandatory modifications and applicable service bulletins currently up to
industry standard.
3. The interior of the aircraft is in a standard configuration for its
specific type, with the buyer furnished equipment and options of the types
and models generally accepted and utilized in the industry.
4. The aircraft is in current flight operations.
5. The aircraft is sold for cash without seller financing.
6. The aircraft is in average or better condition.
7. There is no accident damage.
CONCLUSIONS
Based on the above methodology, considerations and assumptions, it is our
opinion that the current base value of each aircraft as of today is as shown in
Figure 1 attached hereto.
81
BK ASSOCIATES, INC.
September 4, 2001
Page 3
BK Associates, Inc. has no present or contemplated future interest in the
Aircraft, nor any interest that would preclude our making a fair and unbiased
estimate. This appraisal represents the opinion of BK Associates, Inc. and
reflects our best judgment based on the information available to us at the time
of preparation and the time and budget constraints imposed by the client. It is
not given as a recommendation, or as an inducement, for any financial
transaction and further, BK Associates, Inc. assumes no responsibility or legal
liability for any action taken or not taken by the addressee, or any other
party, with regard to the appraised equipment. By accepting this appraisal, the
addressee agrees that BK Associates, Inc. shall bear no such responsibility or
legal liability. This appraisal is prepared for the use of the addressee and
shall not be provided to other parties without the express consent of the
addressee.
Sincerely yours,
BK ASSOCIATES, INC.
/s/ R.L. Britton
R.L. Britton
Vice President
ISTAT Senior Certified Appraiser
RLB/kf
Attachment
82
FIGURE I
DELTA 2001-1 AIRCRAFT
COLLATERAL POOL
<Table>
<Caption>
HALFTIME
ACFT SERIAL MFG. BASE VALUE
ITEM TYPE NUMBER DATE ENGINE* MTOW ($ MIL)
- ---- ---------- ------ ------ ----------- ----- ----------
1 B737-800 30775 Sep-00 CFM 56-7B26 157,200 40.85
2 B737-800 30380 Oct-00 CFM 56-7B26 157,200 40.95
3 B737-800 30539 Oct-00 CFM 56-7B26 157,200 40.95
4 B737-800 30776 Oct-00 CFM 56-7B26 157,200 40.95
5 B737-800 30381 Nov-00 CFM 56-7B26 157,200 41.00
6 B737-800 30540 Nov-00 CFM 56-7B26 157,200 41.00
7 B737-800 30799 Nov-00 CFM 56-7B26 157,200 41.00
8 B737-800 30382 Dec-00 CFM 56-7B26 157,200 41.10
9 B737-800 30541 Dec-00 CFM 56-7B26 157,200 41.10
10 B737-800 30800 Dec-00 CFM 56-7B26 157,200 41.10
11 B737-800 30487 Jan-01 CFM 56-7B26 157,200 41.25
12 B737-800 30835 Feb-01 CFM 56-7B26 157,200 41.35
13 B737-800 30836 Feb-01 CFM 56-7B26 157,200 41.35
14 B737-800 30837 May-01 CFM 56-7B26 157,200 41.55
15 B737-800 32374 May-01 CFM 56-7B26 157,200 41.55
16 B737-800 32373 June-01 CFM 56-7B26 157,200 41.65
17 B757-200 27588 Mar-95 PW2037 232,000 44.50
18 B757-200 27589 Sep-95 PW2037 232,000 45.40
19 B757-200 27586 May-98 PW2037 232,000 50.00
20 B757-200 27587 May-98 PW2037 232,000 50.00
21 B757-200 27172 June-98 PW2037 232,000 50.15
22 B757-200 27585 June-98 PW2037 232,000 50.15
23 B757-200 29724 Sep-98 PW2037 232,000 50.65
24 B757-200 29725 Oct-98 PW2037 233,000 50.80
25 B757-200 29726 Nov-98 PW2037 232,000 51.00
26 B757-200 29727 Dec-98 PW2037 232,000 51.20
27 B757-200 30485 Dec-00 PW2037 232,000 54.90
28 B757-200 30486 Feb-01 PW2037 232,000 55.15
29 B757-200 30838 Mar-01 PW2037 232,000 55.20
30 B767-300ER 29689 June-98 CF6-80C2B6F 407,000 75.00
31 B767-300ER 29690 Sep-98 CF6-80C2B6F 407,000 75.55
32 B767-300ER 29691 Sep-98 CF6-80C2B6F 407,000 75.55
33 B767-300ER 29692 Nov-98 CF6-80C2B6F 407,000 76.10
34 B767-300ER 30573 Apr-00 CF6-80C2B6F 407,000 81.15
35 B767-300ER 30574 Apr-00 CF6-80C2B6F 407,000 81.15
36 B767-300ER 30594 Apr-00 CF6-80C2B6F 407,000 81.15
TOTAL 1,863.45
</Table>
* Note the B737-800 aircraft are listed with
CFM56-7B26 engines. However, BK Associates
has been informed the engines installed are
CFM56-7B26 engines purchased with an
operating limit to CFM56-7B24 status. With
this limit, BK Associates has valued the
aircraft as though they are powered by the
CFM56-7B24 engines.
SEPTEMBER 4, 2001
83
APPENDIX III
EQUIPMENT NOTE PRINCIPAL PAYMENTS
III-1
84
APPENDIX III
EQUIPMENT NOTE PRINCIPAL PAYMENTS
SERIES A-1 EQUIPMENT NOTES
<Table>
<Caption>
REGULAR
DISTRIBUTION DATES N3731T N3732J N3733Z N3734B N3735D N3736C
- ------------------ ------------- ------------- ------------- ------------- ------------- -------------
March 18, 2002..................... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
September 18, 2002................. 862,327.37 864,573.19 864,573.19 864,573.19 865,563.99 865,563.99
March 18, 2003..................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2003................. 862,653.67 864,900.33 864,900.33 864,900.33 865,891.50 865,891.50
March 18, 2004..................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2004................. 862,653.66 864,900.33 864,900.33 864,900.33 865,891.51 865,891.51
March 18, 2005..................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2005................. 862,653.67 864,900.33 864,900.33 864,900.33 865,891.51 865,891.51
March 18, 2006..................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2006................. 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2007..................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2007................. 162,646.56 163,070.15 163,070.15 163,070.15 163,257.03 163,257.03
March 18, 2008..................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2008................. 722,599.50 724,481.41 724,481.41 724,481.41 725,311.67 725,311.67
March 18, 2009..................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2009................. 778,875.46 780,903.95 780,903.95 780,903.95 781,798.86 781,798.86
March 18, 2010..................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2010................. 778,875.47 780,903.94 780,903.94 780,903.94 781,798.85 781,798.85
March 18, 2011..................... 697,323.31 699,139.39 699,139.39 699,139.39 699,940.62 699,940.62
September 18, 2011................. 0.00 0.00 0.00 0.00 0.00 0.00
<Caption>
REGULAR
DISTRIBUTION DATES N3737C N3738B N3739P
- ------------------ ------------- ------------- -----------
March 18, 2002..................... $ 0.00 $ 0.00 $ 0.00
September 18, 2002................. 865,563.99 865,563.99 865,563.99
March 18, 2003..................... 0.00 0.00 0.00
September 18, 2003................. 865,891.50 865,891.50 865,891.50
March 18, 2004..................... 0.00 0.00 0.00
September 18, 2004................. 865,891.51 865,891.51 865,891.51
March 18, 2005..................... 0.00 0.00 0.00
September 18, 2005................. 865,891.51 865,891.51 865,891.51
March 18, 2006..................... 0.00 0.00 0.00
September 18, 2006................. 0.00 0.00 0.00
March 18, 2007..................... 0.00 0.00 0.00
September 18, 2007................. 163,257.03 163,257.03 163,257.03
March 18, 2008..................... 0.00 0.00 0.00
September 18, 2008................. 725,311.67 725,311.67 725,311.67
March 18, 2009..................... 0.00 0.00 0.00
September 18, 2009................. 781,798.86 781,798.86 781,798.86
March 18, 2010..................... 0.00 0.00 0.00
September 18, 2010................. 781,798.85 781,798.85 781,798.85
March 18, 2011..................... 699,940.62 699,940.62 699,940.62
September 18, 2011................. 0.00 0.00 0.00
</Table>
<Table>
<Caption>
REGULAR
DISTRIBUTION DATES N3740C N3741S N3742C N3743H N3744F N3745B
- ------------------ ----------- ------------- ------------- ------------- ------------- -------------
March 18, 2002..................... $865,563.99 $ 888,126.83 $ 890,432.46 $ 890,432.46 $ 896,690.58 $ 898,996.21
September 18, 2002................. 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2003..................... 865,891.50 888,463.80 890,770.30 890,770.30 897,030.80 899,337.30
September 18, 2003................. 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2004..................... 865,891.51 888,463.80 890,770.30 890,770.30 897,030.80 899,337.30
September 18, 2004................. 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2005..................... 865,891.51 888,463.80 890,770.30 890,770.30 897,030.80 899,337.30
September 18, 2005................. 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2006..................... 865,891.51 888,463.80 890,770.30 890,770.30 897,030.80 899,337.30
September 18, 2006................. 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2007..................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2007................. 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2008..................... 22,677.19 20,155.85 20,208.16 20,208.16 20,350.20 20,402.52
September 18, 2008................. 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2009..................... 781,798.86 802,179.00 804,261.50 804,261.50 809,914.00 811,996.50
September 18, 2009................. 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2010..................... 781,798.85 802,179.00 804,261.50 804,261.50 809,914.00 811,996.50
September 18, 2010................. 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2011..................... 1,255,864.76 1,296,194.42 1,299,559.42 1,299,559.42 1,308,692.96 1,312,057.95
September 18, 2011................. 0.00 0.00 0.00 0.00 0.00 0.00
<Caption>
REGULAR
DISTRIBUTION DATES N3747D N685DA N686DA
- ------------------ ------------- ------------- -----------
March 18, 2002..................... $ 896,690.58 $ 833,252.31 $ 0.00
September 18, 2002................. 0.00 0.00 856,353.56
March 18, 2003..................... 897,030.80 833,563.32 0.00
September 18, 2003................. 0.00 0.00 856,673.20
March 18, 2004..................... 897,030.80 833,563.33 0.00
September 18, 2004................. 0.00 0.00 856,673.21
March 18, 2005..................... 897,030.80 833,563.32 0.00
September 18, 2005................. 0.00 0.00 856,673.20
March 18, 2006..................... 897,030.80 833,563.33 0.00
September 18, 2006................. 0.00 0.00 0.00
March 18, 2007..................... 0.00 0.00 0.00
September 18, 2007................. 0.00 0.00 161,514.61
March 18, 2008..................... 20,350.20 36,431.39 0.00
September 18, 2008................. 0.00 0.00 732,600.03
March 18, 2009..................... 809,914.00 752,610.28 0.00
September 18, 2009................. 0.00 0.00 773,475.80
March 18, 2010..................... 809,914.00 752,610.29 0.00
September 18, 2010................. 0.00 0.00 773,475.81
March 18, 2011..................... 1,308,692.96 1,351,754.70 655,890.00
September 18, 2011................. 0.00 0.00 0.00
</Table>
III-2
85
EQUIPMENT NOTE PRINCIPAL PAYMENTS
SERIES A-1 EQUIPMENT NOTES
<Table>
<Caption>
REGULAR
DISTRIBUTION DATES N687DL N688DL N689DL N690DL N692DL N693DL
- ------------------ ------------- ------------- ------------- ------------- ------------- -------------
March 18, 2002.................... $ 976,339.79 $ 976,339.79 $ 978,730.67 $ 0.00 $ 0.00 $ 0.00
September 18, 2002................ 0.00 0.00 0.00 978,730.67 986,235.35 988,626.23
March 18, 2003.................... 976,707.23 976,707.23 979,099.00 0.00 0.00 0.00
September 18, 2003................ 0.00 0.00 0.00 979,099.00 986,606.52 988,998.28
March 18, 2004.................... 976,707.23 976,707.23 979,099.00 0.00 0.00 0.00
September 18, 2004................ 0.00 0.00 0.00 979,099.00 986,606.51 988,998.29
March 18, 2005.................... 976,707.23 976,707.23 979,099.00 0.00 0.00 0.00
September 18, 2005................ 0.00 0.00 0.00 979,099.00 986,606.51 988,998.28
March 18, 2006.................... 976,707.23 976,707.23 979,099.00 0.00 0.00 0.00
September 18, 2006................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2007.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2007................ 0.00 0.00 0.00 184,599.41 186,014.88 186,465.82
March 18, 2008.................... 32,422.66 32,422.66 32,502.07 0.00 0.00 0.00
September 18, 2008................ 0.00 0.00 0.00 827,001.66 833,342.92 835,363.15
March 18, 2009.................... 881,852.51 881,852.51 884,011.99 0.00 0.00 0.00
September 18, 2009................ 0.00 0.00 0.00 884,011.99 890,790.40 892,949.89
March 18, 2010.................... 881,852.50 881,852.50 884,012.00 0.00 0.00 0.00
September 18, 2010................ 0.00 0.00 0.00 884,012.00 890,790.40 892,949.90
March 18, 2011.................... 1,399,897.92 1,399,897.92 1,403,326.00 774,719.79 780,660.17 782,552.68
September 18, 2011................ 0.00 0.00 0.00 0.00 0.00 0.00
<Caption>
REGULAR
DISTRIBUTION DATES N694DL N695DL N6714Q
- ------------------ ------------- ------------- -------------
March 18, 2002.................... $ 0.00 $ 0.00 $1,078,784.42
September 18, 2002................ 991,349.17 994,138.52 0.00
March 18, 2003.................... 0.00 0.00 1,079,192.62
September 18, 2003................ 991,722.25 994,512.65 0.00
March 18, 2004.................... 0.00 0.00 1,079,192.62
September 18, 2004................ 991,722.25 994,512.65 0.00
March 18, 2005.................... 0.00 0.00 1,079,192.62
September 18, 2005................ 991,722.25 994,512.66 0.00
March 18, 2006.................... 0.00 0.00 1,079,192.62
September 18, 2006................ 0.00 0.00 0.00
March 18, 2007.................... 0.00 0.00 0.00
September 18, 2007................ 186,979.40 187,505.50 0.00
March 18, 2008.................... 0.00 0.00 28,263.42
September 18, 2008................ 837,663.95 840,020.88 0.00
March 18, 2009.................... 0.00 0.00 974,384.84
September 18, 2009................ 895,409.32 897,928.72 0.00
March 18, 2010.................... 0.00 0.00 974,384.84
September 18, 2010................ 895,409.31 897,928.73 0.00
March 18, 2011.................... 784,708.04 786,915.96 1,565,230.72
September 18, 2011................ 0.00 0.00 0.00
</Table>
<Table>
<Caption>
REGULAR
DISTRIBUTION DATES N6715C N6716C N169DZ N171DZ N172DZ N173DZ
- ------------------ ------------- ------------- ------------- ------------- ------------- -------------
March 18, 2002.................... $1,089,901.98 $1,090,890.10 $1,477,891.95 $ 0.00 $ 0.00 $ 0.00
September 18, 2002................ 0.00 0.00 0.00 1,488,119.56 1,488,119.56 1,496,089.14
March 18, 2003.................... 1,090,315.50 1,091,304.00 1,478,448.13 0.00 0.00 0.00
September 18, 2003................ 0.00 0.00 0.00 1,488,679.61 1,488,679.61 1,496,652.19
March 18, 2004.................... 1,090,315.50 1,091,304.00 1,478,448.13 0.00 0.00 0.00
September 18, 2004................ 0.00 0.00 0.00 1,488,679.60 1,488,679.60 1,496,652.18
March 18, 2005.................... 1,090,315.50 1,091,304.00 1,478,448.13 0.00 0.00 0.00
September 18, 2005................ 0.00 0.00 0.00 1,488,679.61 1,488,679.61 1,496,652.18
March 18, 2006.................... 1,090,315.50 1,091,304.00 1,478,448.13 0.00 0.00 0.00
September 18, 2006................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2007.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2007................ 0.00 0.00 0.00 280,675.78 280,675.78 282,178.93
March 18, 2008.................... 24,735.08 24,757.51 49,078.39 0.00 0.00 0.00
September 18, 2008................ 0.00 0.00 0.00 1,257,421.87 1,257,421.87 1,264,155.96
March 18, 2009.................... 984,427.50 985,320.00 1,334,865.91 0.00 0.00 0.00
September 18, 2009................ 0.00 0.00 0.00 1,344,103.74 1,344,103.74 1,351,302.04
March 18, 2010.................... 984,427.50 985,320.00 1,334,865.92 0.00 0.00 0.00
September 18, 2010................ 0.00 0.00 0.00 1,344,103.74 1,344,103.74 1,351,302.05
March 18, 2011.................... 1,590,679.18 1,592,121.32 2,119,034.64 1,177,929.46 1,177,929.46 1,184,237.82
September 18, 2011................ 0.00 0.00 0.00 0.00 0.00 0.00
<Caption>
REGULAR
DISTRIBUTION DATES N1608 N1609 N1610D
- ------------------ ------------- ------------- -------------
March 18, 2002.................... $1,608,070.46 $1,608,070.46 $1,608,070.46
September 18, 2002................ 0.00 0.00 0.00
March 18, 2003.................... 1,608,678.94 1,608,678.94 1,608,678.94
September 18, 2003................ 0.00 0.00 0.00
March 18, 2004.................... 1,608,678.93 1,608,678.93 1,608,678.93
September 18, 2004................ 0.00 0.00 0.00
March 18, 2005.................... 1,608,678.93 1,608,678.93 1,608,678.93
September 18, 2005................ 0.00 0.00 0.00
March 18, 2006.................... 1,608,678.94 1,608,678.94 1,608,678.94
September 18, 2006................ 0.00 0.00 0.00
March 18, 2007.................... 0.00 0.00 0.00
September 18, 2007................ 0.00 0.00 0.00
March 18, 2008.................... 42,130.35 42,130.35 42,130.35
September 18, 2008................ 0.00 0.00 0.00
March 18, 2009.................... 1,452,449.11 1,452,449.11 1,452,449.11
September 18, 2009................ 0.00 0.00 0.00
March 18, 2010.................... 1,452,449.11 1,452,449.11 1,452,449.11
September 18, 2010................ 0.00 0.00 0.00
March 18, 2011.................... 2,333,182.82 2,333,182.82 2,333,182.82
September 18, 2011................ 0.00 0.00 0.00
</Table>
III-3
86
EQUIPMENT NOTE PRINCIPAL PAYMENTS
SERIES A-2 EQUIPMENT NOTES
<Table>
<Caption>
REGULAR
DISTRIBUTION DATES N3731T N3732J N3733Z N3734B N3735D
- ------------------ -------------- -------------- -------------- -------------- --------------
March 18, 2002................. $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
September 18, 2002............. 0.00 0.00 0.00 0.00 0.00
March 18, 2003................. 0.00 0.00 0.00 0.00 0.00
September 18, 2003............. 0.00 0.00 0.00 0.00 0.00
March 18, 2004................. 0.00 0.00 0.00 0.00 0.00
September 18, 2004............. 0.00 0.00 0.00 0.00 0.00
March 18, 2005................. 0.00 0.00 0.00 0.00 0.00
September 18, 2005............. 0.00 0.00 0.00 0.00 0.00
March 18, 2006................. 0.00 0.00 0.00 0.00 0.00
September 18, 2006............. 0.00 0.00 0.00 0.00 0.00
March 18, 2007................. 0.00 0.00 0.00 0.00 0.00
September 18, 2007............. 0.00 0.00 0.00 0.00 0.00
March 18, 2008................. 0.00 0.00 0.00 0.00 0.00
September 18, 2008............. 0.00 0.00 0.00 0.00 0.00
March 18, 2009................. 0.00 0.00 0.00 0.00 0.00
September 18, 2009............. 0.00 0.00 0.00 0.00 0.00
March 18, 2010................. 0.00 0.00 0.00 0.00 0.00
September 18, 2010............. 0.00 0.00 0.00 0.00 0.00
March 18, 2011................. 0.00 0.00 0.00 0.00 0.00
September 18, 2011............. 13,427,058.00 13,462,026.98 13,462,026.98 13,462,026.98 13,477,454.46
<Caption>
REGULAR
DISTRIBUTION DATES N3736C N3737C N3738B N3739P
- ------------------ -------------- -------------- -------------- --------------
March 18, 2002................. $ 0.00 $ 0.00 $ 0.00 $ 0.00
September 18, 2002............. 0.00 0.00 0.00 0.00
March 18, 2003................. 0.00 0.00 0.00 0.00
September 18, 2003............. 0.00 0.00 0.00 0.00
March 18, 2004................. 0.00 0.00 0.00 0.00
September 18, 2004............. 0.00 0.00 0.00 0.00
March 18, 2005................. 0.00 0.00 0.00 0.00
September 18, 2005............. 0.00 0.00 0.00 0.00
March 18, 2006................. 0.00 0.00 0.00 0.00
September 18, 2006............. 0.00 0.00 0.00 0.00
March 18, 2007................. 0.00 0.00 0.00 0.00
September 18, 2007............. 0.00 0.00 0.00 0.00
March 18, 2008................. 0.00 0.00 0.00 0.00
September 18, 2008............. 0.00 0.00 0.00 0.00
March 18, 2009................. 0.00 0.00 0.00 0.00
September 18, 2009............. 0.00 0.00 0.00 0.00
March 18, 2010................. 0.00 0.00 0.00 0.00
September 18, 2010............. 0.00 0.00 0.00 0.00
March 18, 2011................. 0.00 0.00 0.00 0.00
September 18, 2011............. 13,477,454.46 13,477,454.46 13,477,454.46 13,477,454.46
</Table>
<Table>
<Caption>
REGULAR
DISTRIBUTION DATES N3740C N3741S N3742C N3743H N3744F
- ------------------ -------------- -------------- -------------- -------------- --------------
March 18, 2002................. $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
September 18, 2002............. 0.00 0.00 0.00 0.00 0.00
March 18, 2003................. 0.00 0.00 0.00 0.00 0.00
September 18, 2003............. 0.00 0.00 0.00 0.00 0.00
March 18, 2004................. 0.00 0.00 0.00 0.00 0.00
September 18, 2004............. 0.00 0.00 0.00 0.00 0.00
March 18, 2005................. 0.00 0.00 0.00 0.00 0.00
September 18, 2005............. 0.00 0.00 0.00 0.00 0.00
March 18, 2006................. 0.00 0.00 0.00 0.00 0.00
September 18, 2006............. 0.00 0.00 0.00 0.00 0.00
March 18, 2007................. 0.00 0.00 0.00 0.00 0.00
September 18, 2007............. 0.00 0.00 0.00 0.00 0.00
March 18, 2008................. 0.00 0.00 0.00 0.00 0.00
September 18, 2008............. 0.00 0.00 0.00 0.00 0.00
March 18, 2009................. 0.00 0.00 0.00 0.00 0.00
September 18, 2009............. 0.00 0.00 0.00 0.00 0.00
March 18, 2010................. 0.00 0.00 0.00 0.00 0.00
September 18, 2010............. 0.00 0.00 0.00 0.00 0.00
March 18, 2011................. 0.00 0.00 0.00 0.00 0.00
September 18, 2011............. 12,921,530.32 13,309,709.70 13,344,262.43 13,344,262.43 13,438,048.39
<Caption>
REGULAR
DISTRIBUTION DATES N3745B N3747D N685DA N686DA
- ------------------ -------------- -------------- -------------- --------------
March 18, 2002................. $ 0.00 $ 0.00 $ 0.00 $ 0.00
September 18, 2002............. 0.00 0.00 0.00 0.00
March 18, 2003................. 0.00 0.00 0.00 0.00
September 18, 2003............. 0.00 0.00 0.00 0.00
March 18, 2004................. 0.00 0.00 0.00 0.00
September 18, 2004............. 0.00 0.00 0.00 0.00
March 18, 2005................. 0.00 0.00 0.00 0.00
September 18, 2005............. 0.00 0.00 0.00 0.00
March 18, 2006................. 0.00 0.00 0.00 0.00
September 18, 2006............. 0.00 0.00 0.00 0.00
March 18, 2007................. 0.00 0.00 0.00 0.00
September 18, 2007............. 0.00 0.00 0.00 0.00
March 18, 2008................. 0.00 0.00 0.00 0.00
September 18, 2008............. 0.00 0.00 0.00 0.00
March 18, 2009................. 0.00 0.00 0.00 0.00
September 18, 2009............. 0.00 0.00 0.00 0.00
March 18, 2010................. 0.00 0.00 0.00 0.00
September 18, 2010............. 0.00 0.00 0.00 0.00
March 18, 2011................. 0.00 0.00 0.00 0.00
September 18, 2011............. 13,472,601.12 13,438,048.39 12,019,887.73 13,086,470.58
</Table>
III-4
87
EQUIPMENT NOTE PRINCIPAL PAYMENTS
SERIES A-2 EQUIPMENT NOTES
<Table>
<Caption>
REGULAR
DISTRIBUTION DATES N687DL N688DL N689DL N690DL N692DL
- ------------------ -------------- -------------- -------------- -------------- --------------
March 18, 2002................. $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
September 18, 2002............. 0.00 0.00 0.00 0.00 0.00
March 18, 2003................. 0.00 0.00 0.00 0.00 0.00
September 18, 2003............. 0.00 0.00 0.00 0.00 0.00
March 18, 2004................. 0.00 0.00 0.00 0.00 0.00
September 18, 2004............. 0.00 0.00 0.00 0.00 0.00
March 18, 2005................. 0.00 0.00 0.00 0.00 0.00
September 18, 2005............. 0.00 0.00 0.00 0.00 0.00
March 18, 2006................. 0.00 0.00 0.00 0.00 0.00
September 18, 2006............. 0.00 0.00 0.00 0.00 0.00
March 18, 2007................. 0.00 0.00 0.00 0.00 0.00
September 18, 2007............. 0.00 0.00 0.00 0.00 0.00
March 18, 2008................. 0.00 0.00 0.00 0.00 0.00
September 18, 2008............. 0.00 0.00 0.00 0.00 0.00
March 18, 2009................. 0.00 0.00 0.00 0.00 0.00
September 18, 2009............. 0.00 0.00 0.00 0.00 0.00
March 18, 2010................. 0.00 0.00 0.00 0.00 0.00
September 18, 2010............. 0.00 0.00 0.00 0.00 0.00
March 18, 2011................. 0.00 0.00 0.00 0.00 0.00
September 18, 2011............. 14,462,339.03 14,462,339.03 14,497,754.60 15,126,360.81 15,242,346.34
<Caption>
REGULAR
DISTRIBUTION DATES N693DL N694DL N695DL N6714Q
- ------------------ -------------- -------------- -------------- --------------
March 18, 2002................. $ 0.00 $ 0.00 $ 0.00 $ 0.00
September 18, 2002............. 0.00 0.00 0.00 0.00
March 18, 2003................. 0.00 0.00 0.00 0.00
September 18, 2003............. 0.00 0.00 0.00 0.00
March 18, 2004................. 0.00 0.00 0.00 0.00
September 18, 2004............. 0.00 0.00 0.00 0.00
March 18, 2005................. 0.00 0.00 0.00 0.00
September 18, 2005............. 0.00 0.00 0.00 0.00
March 18, 2006................. 0.00 0.00 0.00 0.00
September 18, 2006............. 0.00 0.00 0.00 0.00
March 18, 2007................. 0.00 0.00 0.00 0.00
September 18, 2007............. 0.00 0.00 0.00 0.00
March 18, 2008................. 0.00 0.00 0.00 0.00
September 18, 2008............. 0.00 0.00 0.00 0.00
March 18, 2009................. 0.00 0.00 0.00 0.00
September 18, 2009............. 0.00 0.00 0.00 0.00
March 18, 2010................. 0.00 0.00 0.00 0.00
September 18, 2010............. 0.00 0.00 0.00 0.00
March 18, 2011................. 0.00 0.00 0.00 0.00
September 18, 2011............. 15,279,297.48 15,321,380.73 15,364,490.40 16,104,581.28
</Table>
<Table>
<Caption>
REGULAR
DISTRIBUTION DATES N6715C N6716C N169DZ N171DZ N172DZ
- ------------------ -------------- -------------- -------------- -------------- --------------
March 18, 2002................. $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
September 18, 2002............. 0.00 0.00 0.00 0.00 0.00
March 18, 2003................. 0.00 0.00 0.00 0.00 0.00
September 18, 2003............. 0.00 0.00 0.00 0.00 0.00
March 18, 2004................. 0.00 0.00 0.00 0.00 0.00
September 18, 2004............. 0.00 0.00 0.00 0.00 0.00
March 18, 2005................. 0.00 0.00 0.00 0.00 0.00
September 18, 2005............. 0.00 0.00 0.00 0.00 0.00
March 18, 2006................. 0.00 0.00 0.00 0.00 0.00
September 18, 2006............. 0.00 0.00 0.00 0.00 0.00
March 18, 2007................. 0.00 0.00 0.00 0.00 0.00
September 18, 2007............. 0.00 0.00 0.00 0.00 0.00
March 18, 2008................. 0.00 0.00 0.00 0.00 0.00
September 18, 2008............. 0.00 0.00 0.00 0.00 0.00
March 18, 2009................. 0.00 0.00 0.00 0.00 0.00
September 18, 2009............. 0.00 0.00 0.00 0.00 0.00
March 18, 2010................. 0.00 0.00 0.00 0.00 0.00
September 18, 2010............. 0.00 0.00 0.00 0.00 0.00
March 18, 2011................. 0.00 0.00 0.00 0.00 0.00
September 18, 2011............. 16,333,566.76 16,348,375.07 21,891,737.34 22,999,007.03 22,999,007.03
<Caption>
REGULAR
DISTRIBUTION DATES N173DZ N1608 N1609 N1610D
- ------------------ -------------- -------------- -------------- --------------
March 18, 2002................. $ 0.00 $ 0.00 $ 0.00 $ 0.00
September 18, 2002............. 0.00 0.00 0.00 0.00
March 18, 2003................. 0.00 0.00 0.00 0.00
September 18, 2003............. 0.00 0.00 0.00 0.00
March 18, 2004................. 0.00 0.00 0.00 0.00
September 18, 2004............. 0.00 0.00 0.00 0.00
March 18, 2005................. 0.00 0.00 0.00 0.00
September 18, 2005............. 0.00 0.00 0.00 0.00
March 18, 2006................. 0.00 0.00 0.00 0.00
September 18, 2006............. 0.00 0.00 0.00 0.00
March 18, 2007................. 0.00 0.00 0.00 0.00
September 18, 2007............. 0.00 0.00 0.00 0.00
March 18, 2008................. 0.00 0.00 0.00 0.00
September 18, 2008............. 0.00 0.00 0.00 0.00
March 18, 2009................. 0.00 0.00 0.00 0.00
September 18, 2009............. 0.00 0.00 0.00 0.00
March 18, 2010................. 0.00 0.00 0.00 0.00
September 18, 2010............. 0.00 0.00 0.00 0.00
March 18, 2011................. 0.00 0.00 0.00 0.00
September 18, 2011............. 23,122,177.51 24,006,002.41 24,006,002.41 24,006,002.41
</Table>
III-5
88
EQUIPMENT NOTE PRINCIPAL PAYMENTS
SERIES B EQUIPMENT NOTES
<Table>
<Caption>
REGULAR
DISTRIBUTION DATES N3731T N3732J N3733Z N3734B N3735D N3736C
- ------------------ ------------- ------------- ------------- ------------- ------------- -------------
March 18, 2002.................... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
September 18, 2002................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2003.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2003................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2004.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2004................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2005.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2005................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2006.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2006................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2007.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2007................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2008.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2008................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2009.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2009................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2010.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2010................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2011.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2011................ 4,758,156.18 4,770,548.16 4,770,548.16 4,770,548.16 4,776,015.21 4,776,015.21
<Caption>
REGULAR
DISTRIBUTION DATES N3737C N3738B N3739P
- ------------------ ------------- ------------- -------------
March 18, 2002.................... $ 0.00 $ 0.00 $ 0.00
September 18, 2002................ 0.00 0.00 0.00
March 18, 2003.................... 0.00 0.00 0.00
September 18, 2003................ 0.00 0.00 0.00
March 18, 2004.................... 0.00 0.00 0.00
September 18, 2004................ 0.00 0.00 0.00
March 18, 2005.................... 0.00 0.00 0.00
September 18, 2005................ 0.00 0.00 0.00
March 18, 2006.................... 0.00 0.00 0.00
September 18, 2006................ 0.00 0.00 0.00
March 18, 2007.................... 0.00 0.00 0.00
September 18, 2007................ 0.00 0.00 0.00
March 18, 2008.................... 0.00 0.00 0.00
September 18, 2008................ 0.00 0.00 0.00
March 18, 2009.................... 0.00 0.00 0.00
September 18, 2009................ 0.00 0.00 0.00
March 18, 2010.................... 0.00 0.00 0.00
September 18, 2010................ 0.00 0.00 0.00
March 18, 2011.................... 0.00 0.00 0.00
September 18, 2011................ 4,776,015.21 4,776,015.21 4,776,015.21
</Table>
<Table>
<Caption>
REGULAR
DISTRIBUTION DATES N3740C N3741S N3742C N3743H N3744F N3745B
- ------------------ ------------- ------------- ------------- ------------- ------------- -------------
March 18, 2002.................... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
September 18, 2002................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2003.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2003................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2004.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2004................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2005.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2005................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2006.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2006................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2007.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2007................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2008.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2008................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2009.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2009................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2010.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2010................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2011.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2011................ 4,776,015.21 4,913,784.88 4,926,541.32 4,926,541.32 4,961,165.98 4,973,922.43
<Caption>
REGULAR
DISTRIBUTION DATES N3747D N685DA N686DA
- ------------------ ------------- ------------- -------------
March 18, 2002.................... $ 0.00 $ 0.00 $ 0.00
September 18, 2002................ 0.00 0.00 0.00
March 18, 2003.................... 0.00 0.00 0.00
September 18, 2003................ 0.00 0.00 0.00
March 18, 2004.................... 0.00 0.00 0.00
September 18, 2004................ 0.00 0.00 0.00
March 18, 2005.................... 0.00 0.00 0.00
September 18, 2005................ 0.00 0.00 0.00
March 18, 2006.................... 0.00 0.00 0.00
September 18, 2006................ 0.00 0.00 0.00
March 18, 2007.................... 0.00 0.00 0.00
September 18, 2007................ 0.00 0.00 0.00
March 18, 2008.................... 0.00 0.00 0.00
September 18, 2008................ 0.00 0.00 0.00
March 18, 2009.................... 0.00 0.00 0.00
September 18, 2009................ 0.00 0.00 0.00
March 18, 2010.................... 0.00 0.00 0.00
September 18, 2010................ 0.00 0.00 0.00
March 18, 2011.................... 0.00 0.00 0.00
September 18, 2011................ 4,961,165.98 4,535,464.99 4,661,207.15
</Table>
III-6
89
EQUIPMENT NOTE PRINCIPAL PAYMENTS
SERIES B EQUIPMENT NOTES
<Table>
<Caption>
REGULAR
DISTRIBUTION DATES N687DL N688DL N689DL N690DL N692DL N693DL
- ------------------ ------------- ------------- ------------- ------------- ------------- -------------
March 18, 2002.................... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
September 18, 2002................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2003.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2003................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2004.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2004................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2005.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2005................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2006.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2006................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2007.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2007................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2008.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2008................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2009.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2009................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2010.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2010................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2011.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2011................ 5,358,073.84 5,358,073.84 5,371,194.76 5,371,194.76 5,412,379.87 5,425,500.79
<Caption>
REGULAR
DISTRIBUTION DATES N694DL N695DL N6714Q
- ------------------ ------------- ------------- -------------
March 18, 2002.................... $ 0.00 $ 0.00 $ 0.00
September 18, 2002................ 0.00 0.00 0.00
March 18, 2003.................... 0.00 0.00 0.00
September 18, 2003................ 0.00 0.00 0.00
March 18, 2004.................... 0.00 0.00 0.00
September 18, 2004................ 0.00 0.00 0.00
March 18, 2005.................... 0.00 0.00 0.00
September 18, 2005................ 0.00 0.00 0.00
March 18, 2006.................... 0.00 0.00 0.00
September 18, 2006................ 0.00 0.00 0.00
March 18, 2007.................... 0.00 0.00 0.00
September 18, 2007................ 0.00 0.00 0.00
March 18, 2008.................... 0.00 0.00 0.00
September 18, 2008................ 0.00 0.00 0.00
March 18, 2009.................... 0.00 0.00 0.00
September 18, 2009................ 0.00 0.00 0.00
March 18, 2010.................... 0.00 0.00 0.00
September 18, 2010................ 0.00 0.00 0.00
March 18, 2011.................... 0.00 0.00 0.00
September 18, 2011................ 5,440,444.06 5,455,751.80 5,952,524.45
</Table>
<Table>
<Caption>
REGULAR
DISTRIBUTION DATES N6715C N6716C N169DZ N171DZ N172DZ N173DZ
- ------------------ ------------- ------------- ------------- ------------- ------------- -------------
March 18, 2002.................... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
September 18, 2002................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2003.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2003................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2004.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2004................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2005.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2005................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2006.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2006................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2007.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2007................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2008.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2008................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2009.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2009................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2010.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2010................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2011.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2011................ 6,030,156.56 6,035,623.61 8,110,551.46 8,166,679.85 8,166,679.85 8,210,416.25
<Caption>
REGULAR
DISTRIBUTION DATES N1608 N1609 N1610D
- ------------------ ------------- ------------- -------------
March 18, 2002.................... $ 0.00 $ 0.00 $ 0.00
September 18, 2002................ 0.00 0.00 0.00
March 18, 2003.................... 0.00 0.00 0.00
September 18, 2003................ 0.00 0.00 0.00
March 18, 2004.................... 0.00 0.00 0.00
September 18, 2004................ 0.00 0.00 0.00
March 18, 2005.................... 0.00 0.00 0.00
September 18, 2005................ 0.00 0.00 0.00
March 18, 2006.................... 0.00 0.00 0.00
September 18, 2006................ 0.00 0.00 0.00
March 18, 2007.................... 0.00 0.00 0.00
September 18, 2007................ 0.00 0.00 0.00
March 18, 2008.................... 0.00 0.00 0.00
September 18, 2008................ 0.00 0.00 0.00
March 18, 2009.................... 0.00 0.00 0.00
September 18, 2009................ 0.00 0.00 0.00
March 18, 2010.................... 0.00 0.00 0.00
September 18, 2010................ 0.00 0.00 0.00
March 18, 2011.................... 0.00 0.00 0.00
September 18, 2011................ 8,873,022.76 8,873,022.76 8,873,022.76
</Table>
III-7
90
EQUIPMENT NOTE PRINCIPAL PAYMENTS
SERIES C EQUIPMENT NOTES
<Table>
<Caption>
REGULAR
DISTRIBUTION DATES N3731T N3732J N3733Z N3734B N3735D N3736C
- ------------------ ------------- ------------- ------------- ------------- ------------- -------------
March 18, 2002.................... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
September 18, 2002................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2003.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2003................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2004.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2004................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2005.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2005................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2006.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2006................ 3,901,334.19 3,911,494.70 3,911,494.70 3,911,494.70 3,915,977.27 3,915,977.27
<Caption>
REGULAR
DISTRIBUTION DATES N3737C N3738B N3739P
- ------------------ ------------- ------------- -------------
March 18, 2002.................... $ 0.00 $ 0.00 $ 0.00
September 18, 2002................ 0.00 0.00 0.00
March 18, 2003.................... 0.00 0.00 0.00
September 18, 2003................ 0.00 0.00 0.00
March 18, 2004.................... 0.00 0.00 0.00
September 18, 2004................ 0.00 0.00 0.00
March 18, 2005.................... 0.00 0.00 0.00
September 18, 2005................ 0.00 0.00 0.00
March 18, 2006.................... 0.00 0.00 0.00
September 18, 2006................ 3,915,977.27 3,915,977.27 3,915,977.27
</Table>
<Table>
<Caption>
REGULAR
DISTRIBUTION DATES N3740C N3741S N3742C N3743H N3744F N3745B
- ------------------ ------------- ------------- ------------- ------------- ------------- -------------
March 18, 2002.................... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
September 18, 2002................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2003.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2003................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2004.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2004................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2005.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2005................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2006.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2006................ 3,915,977.27 4,028,938.15 4,039,397.50 4,039,397.50 4,067,787.14 4,078,246.48
<Caption>
REGULAR
DISTRIBUTION DATES N3747D N685DA N686DA
- ------------------ ------------- ------------- -------------
March 18, 2002.................... $ 0.00 $ 0.00 $ 0.00
September 18, 2002................ 0.00 0.00 0.00
March 18, 2003.................... 0.00 0.00 0.00
September 18, 2003................ 0.00 0.00 0.00
March 18, 2004.................... 0.00 0.00 0.00
September 18, 2004................ 0.00 0.00 0.00
March 18, 2005.................... 0.00 0.00 0.00
September 18, 2005................ 0.00 0.00 0.00
March 18, 2006.................... 0.00 0.00 0.00
September 18, 2006................ 4,067,787.14 3,718,743.99 3,821,843.20
</Table>
III-8
91
EQUIPMENT NOTE PRINCIPAL PAYMENTS
SERIES C EQUIPMENT NOTES
<Table>
<Caption>
REGULAR
DISTRIBUTION DATES N687DL N688DL N689DL N690DL N692DL N693DL
- ------------------ ------------- ------------- ------------- ------------- ------------- -------------
March 18, 2002.................... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
September 18, 2002................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2003.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2003................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2004.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2004................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2005.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2005................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2006.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2006................ 4,393,222.06 4,393,222.06 4,403,980.24 4,403,980.24 4,437,748.97 4,448,507.15
<Caption>
REGULAR
DISTRIBUTION DATES N694DL N695DL N6714Q
- ------------------ ------------- ------------- -------------
March 18, 2002.................... $ 0.00 $ 0.00 $ 0.00
September 18, 2002................ 0.00 0.00 0.00
March 18, 2003.................... 0.00 0.00 0.00
September 18, 2003................ 0.00 0.00 0.00
March 18, 2004.................... 0.00 0.00 0.00
September 18, 2004................ 0.00 0.00 0.00
March 18, 2005.................... 0.00 0.00 0.00
September 18, 2005................ 0.00 0.00 0.00
March 18, 2006.................... 0.00 0.00 0.00
September 18, 2006................ 4,460,759.52 4,473,310.73 4,880,627.35
</Table>
<Table>
<Caption>
REGULAR
DISTRIBUTION DATES N6715C N6716C N169DZ N171DZ N172DZ N173DZ
- ------------------ ------------- ------------- ------------- ------------- ------------- -------------
March 18, 2002.................... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
September 18, 2002................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2003.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2003................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2004.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2004................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2005.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2005................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2006.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2006................ 4,944,279.92 4,948,762.49 6,650,049.02 6,696,070.11 6,696,070.11 6,731,930.71
<Caption>
REGULAR
DISTRIBUTION DATES N1608 N1609 N1610D
- ------------------ ------------- ------------- -------------
March 18, 2002.................... $ 0.00 $ 0.00 $ 0.00
September 18, 2002................ 0.00 0.00 0.00
March 18, 2003.................... 0.00 0.00 0.00
September 18, 2003................ 0.00 0.00 0.00
March 18, 2004.................... 0.00 0.00 0.00
September 18, 2004................ 0.00 0.00 0.00
March 18, 2005.................... 0.00 0.00 0.00
September 18, 2005................ 0.00 0.00 0.00
March 18, 2006.................... 0.00 0.00 0.00
September 18, 2006................ 7,275,218.77 7,275,218.77 7,275,218.77
</Table>
III-9
92
EQUIPMENT NOTE PRINCIPAL PAYMENTS
SERIES D EQUIPMENT NOTES
<Table>
<Caption>
REGULAR
DISTRIBUTION DATES N3731T N3732J N3733Z N3734B N3735D N3736C
- ------------------ ------------- ------------- ------------- ------------- ------------- -------------
March 18, 2002.................... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
September 18, 2002................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2003.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2003................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2004.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2004................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2005.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2005................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2006.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2006................ 3,446,773.66 3,455,750.34 3,455,750.34 3,455,750.34 3,459,710.64 3,459,710.64
<Caption>
REGULAR
DISTRIBUTION DATES N3737C N3738B N3739P
- ------------------ ------------- ------------- -------------
March 18, 2002.................... $ 0.00 $ 0.00 $ 0.00
September 18, 2002................ 0.00 0.00 0.00
March 18, 2003.................... 0.00 0.00 0.00
September 18, 2003................ 0.00 0.00 0.00
March 18, 2004.................... 0.00 0.00 0.00
September 18, 2004................ 0.00 0.00 0.00
March 18, 2005.................... 0.00 0.00 0.00
September 18, 2005................ 0.00 0.00 0.00
March 18, 2006.................... 0.00 0.00 0.00
September 18, 2006................ 3,459,710.64 3,459,710.64 3,459,710.64
</Table>
<Table>
<Caption>
REGULAR
DISTRIBUTION DATES N3740C N3741S N3742C N3743H N3744F N3745B
- ------------------ ------------- ------------- ------------- ------------- ------------- -------------
March 18, 2002.................... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
September 18, 2002................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2003.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2003................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2004.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2004................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2005.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2005................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2006.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2006................ 3,459,710.64 3,559,509.98 3,568,750.66 3,568,750.66 3,593,832.51 3,603,073.19
<Caption>
REGULAR
DISTRIBUTION DATES N3747D N685DA N686DA
- ------------------ ------------- ------------- -------------
March 18, 2002.................... $ 0.00 $ 0.00 $ 0.00
September 18, 2002................ 0.00 0.00 0.00
March 18, 2003.................... 0.00 0.00 0.00
September 18, 2003................ 0.00 0.00 0.00
March 18, 2004.................... 0.00 0.00 0.00
September 18, 2004................ 0.00 0.00 0.00
March 18, 2005.................... 0.00 0.00 0.00
September 18, 2005................ 0.00 0.00 0.00
March 18, 2006.................... 0.00 0.00 0.00
September 18, 2006................ 3,593,832.51 3,285,457.81 3,376,544.52
</Table>
III-10
93
EQUIPMENT NOTE PRINCIPAL PAYMENTS
SERIES D EQUIPMENT NOTES
<Table>
<Caption>
REGULAR
DISTRIBUTION DATES N687DL N688DL N689DL N690DL N692DL N693DL
- ------------------ ------------- ------------- ------------- ------------- ------------- -------------
March 18, 2002.................... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
September 18, 2002................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2003.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2003................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2004.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2004................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2005.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2005................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2006.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2006................ 3,881,349.67 3,881,349.67 3,890,854.37 3,890,854.37 3,920,688.56 3,930,193.26
<Caption>
REGULAR
DISTRIBUTION DATES N694DL N695DL N6714Q
- ------------------ ------------- ------------- -------------
March 18, 2002.................... $ 0.00 $ 0.00 $ 0.00
September 18, 2002................ 0.00 0.00 0.00
March 18, 2003.................... 0.00 0.00 0.00
September 18, 2003................ 0.00 0.00 0.00
March 18, 2004.................... 0.00 0.00 0.00
September 18, 2004................ 0.00 0.00 0.00
March 18, 2005.................... 0.00 0.00 0.00
September 18, 2005................ 0.00 0.00 0.00
March 18, 2006.................... 0.00 0.00 0.00
September 18, 2006................ 3,941,018.06 3,952,106.88 4,311,965.36
</Table>
<Table>
<Caption>
REGULAR
DISTRIBUTION DATES N6715C N6716C N169DZ N171DZ N172DZ N173DZ
- ------------------ ------------- ------------- ------------- ------------- ------------- -------------
March 18, 2002.................... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
September 18, 2002................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2003.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2003................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2004.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2004................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2005.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2005................ 0.00 0.00 0.00 0.00 0.00 0.00
March 18, 2006.................... 0.00 0.00 0.00 0.00 0.00 0.00
September 18, 2006................ 4,368,201.50 4,372,161.79 5,875,224.41 5,915,883.41 5,915,883.41 5,947,565.74
<Caption>
REGULAR
DISTRIBUTION DATES N1608 N1609 N1610D
- ------------------ ------------- ------------- -------------
March 18, 2002.................... $ 0.00 $ 0.00 $ 0.00
September 18, 2002................ 0.00 0.00 0.00
March 18, 2003.................... 0.00 0.00 0.00
September 18, 2003................ 0.00 0.00 0.00
March 18, 2004.................... 0.00 0.00 0.00
September 18, 2004................ 0.00 0.00 0.00
March 18, 2005.................... 0.00 0.00 0.00
September 18, 2005................ 0.00 0.00 0.00
March 18, 2006.................... 0.00 0.00 0.00
September 18, 2006................ 6,427,553.06 6,427,553.06 6,427,553.06
</Table>
III-11
94
APPENDIX IV
LOAN TO VALUE RATIOS OF EQUIPMENT NOTES
IV-1
95
APPENDIX IV
LOAN TO VALUE RATIOS OF EQUIPMENT NOTES
<Table>
<Caption>
N3731T N3732J
-------------------------------------------- --------------------------------------------
EQUIPMENT NOTE ASSUMED EQUIPMENT NOTE ASSUMED
OUTSTANDING AIRCRAFT LOAN TO OUTSTANDING AIRCRAFT LOAN TO
BALANCE VALUE AIRCRAFT BALANCE VALUE AIRCRAFT
DATE (IN MILLIONS) (IN MILLIONS) VALUE RATIO (IN MILLIONS) (IN MILLIONS) VALUE RATIO
- ---- -------------- ------------- ----------- -------------- ------------- -----------
September 17, 2001................ $32.12 $43.52 73.8% $32.21 $43.63 73.8%
September 18, 2002................ 31.26 42.21 74.1% 31.34 42.32 74.1%
September 18, 2003................ 30.40 40.90 74.3% 30.48 41.01 74.3%
September 18, 2004................ 29.54 39.59 74.6% 29.61 39.69 74.6%
September 18, 2005................ 28.67 38.28 74.9% 28.75 38.38 74.9%
September 18, 2006................ 21.33 36.97 57.7% 21.38 37.07 57.7%
September 18, 2007................ 21.16 35.66 59.3% 21.22 35.76 59.3%
September 18, 2008................ 20.44 34.35 59.5% 20.49 34.44 59.5%
September 18, 2009................ 19.66 33.04 59.5% 19.71 33.13 59.5%
September 18, 2010................ 18.88 31.74 59.5% 18.93 31.82 59.5%
September 18, 2011................ 0.00 -- NA 0.00 -- NA
</Table>
<Table>
<Caption>
N3733Z N3734B
-------------------------------------------- --------------------------------------------
EQUIPMENT NOTE ASSUMED EQUIPMENT NOTE ASSUMED
OUTSTANDING AIRCRAFT LOAN TO OUTSTANDING AIRCRAFT LOAN TO
BALANCE VALUE AIRCRAFT BALANCE VALUE AIRCRAFT
DATE (IN MILLIONS) (IN MILLIONS) VALUE RATIO (IN MILLIONS) (IN MILLIONS) VALUE RATIO
- ---- -------------- ------------- ----------- -------------- ------------- -----------
September 17, 2001................ $32.21 $43.63 73.8% $32.21 $43.63 73.8%
September 18, 2002................ 31.34 42.32 74.1% 31.34 42.32 74.1%
September 18, 2003................ 30.48 41.01 74.3% 30.48 41.01 74.3%
September 18, 2004................ 29.61 39.69 74.6% 29.61 39.69 74.6%
September 18, 2005................ 28.75 38.38 74.9% 28.75 38.38 74.9%
September 18, 2006................ 21.38 37.07 57.7% 21.38 37.07 57.7%
September 18, 2007................ 21.22 35.76 59.3% 21.22 35.76 59.3%
September 18, 2008................ 20.49 34.44 59.5% 20.49 34.44 59.5%
September 18, 2009................ 19.71 33.13 59.5% 19.71 33.13 59.5%
September 18, 2010................ 18.93 31.82 59.5% 18.93 31.82 59.5%
September 18, 2011................ 0.00 -- NA 0.00 -- NA
</Table>
<Table>
<Caption>
N3735D N3736C
-------------------------------------------- --------------------------------------------
EQUIPMENT NOTE ASSUMED EQUIPMENT NOTE ASSUMED
OUTSTANDING AIRCRAFT LOAN TO OUTSTANDING AIRCRAFT LOAN TO
BALANCE VALUE AIRCRAFT BALANCE VALUE AIRCRAFT
DATE (IN MILLIONS) (IN MILLIONS) VALUE RATIO (IN MILLIONS) (IN MILLIONS) VALUE RATIO
- ---- -------------- ------------- ----------- -------------- ------------- -----------
September 17, 2001................ $32.24 $43.68 73.8% $32.24 $43.68 73.8%
September 18, 2002................ 31.38 42.37 74.1% 31.38 42.37 74.1%
September 18, 2003................ 30.51 41.05 74.3% 30.51 41.05 74.3%
September 18, 2004................ 29.65 39.74 74.6% 29.65 39.74 74.6%
September 18, 2005................ 28.78 38.42 74.9% 28.78 38.42 74.9%
September 18, 2006................ 21.41 37.11 57.7% 21.41 37.11 57.7%
September 18, 2007................ 21.24 35.80 59.3% 21.24 35.80 59.3%
September 18, 2008................ 20.52 34.48 59.5% 20.52 34.48 59.5%
September 18, 2009................ 19.74 33.17 59.5% 19.74 33.17 59.5%
September 18, 2010................ 18.95 31.85 59.5% 18.95 31.85 59.5%
September 18, 2011................ 0.00 -- NA 0.00 -- NA
</Table>
<Table>
<Caption>
N3737C N3738B
-------------------------------------------- --------------------------------------------
EQUIPMENT NOTE ASSUMED EQUIPMENT NOTE ASSUMED
OUTSTANDING AIRCRAFT LOAN TO OUTSTANDING AIRCRAFT LOAN TO
BALANCE VALUE AIRCRAFT BALANCE VALUE AIRCRAFT
DATE (IN MILLIONS) (IN MILLIONS) VALUE RATIO (IN MILLIONS) (IN MILLIONS) VALUE RATIO
- ---- -------------- ------------- ----------- -------------- ------------- -----------
September 17, 2001................ $32.24 $43.68 73.8% $32.24 $43.68 73.8%
September 18, 2002................ 31.38 42.37 74.1% 31.38 42.37 74.1%
September 18, 2003................ 30.51 41.05 74.3% 30.51 41.05 74.3%
September 18, 2004................ 29.65 39.74 74.6% 29.65 39.74 74.6%
September 18, 2005................ 28.78 38.42 74.9% 28.78 38.42 74.9%
September 18, 2006................ 21.41 37.11 57.7% 21.41 37.11 57.7%
September 18, 2007................ 21.24 35.80 59.3% 21.24 35.80 59.3%
September 18, 2008................ 20.52 34.48 59.5% 20.52 34.48 59.5%
September 18, 2009................ 19.74 33.17 59.5% 19.74 33.17 59.5%
September 18, 2010................ 18.95 31.85 59.5% 18.95 31.85 59.5%
September 18, 2011................ 0.00 -- NA 0.00 -- NA
</Table>
IV-2
96
APPENDIX IV
LOAN TO VALUE RATIOS OF EQUIPMENT NOTES
<Table>
<Caption>
N3739P N3740C
-------------------------------------------- --------------------------------------------
EQUIPMENT NOTE ASSUMED EQUIPMENT NOTE ASSUMED
OUTSTANDING AIRCRAFT LOAN TO OUTSTANDING AIRCRAFT LOAN TO
BALANCE VALUE AIRCRAFT BALANCE VALUE AIRCRAFT
DATE (IN MILLIONS) (IN MILLIONS) VALUE RATIO (IN MILLIONS) (IN MILLIONS) VALUE RATIO
---- -------------- ------------- ----------- -------------- ------------- -----------
September 17, 2001................ $32.24 $43.68 73.8% $32.24 $43.68 73.8%
September 18, 2002................ 31.38 42.37 74.1% 31.38 42.37 74.1%
September 18, 2003................ 30.51 41.05 74.3% 30.51 41.05 74.3%
September 18, 2004................ 29.65 39.74 74.6% 29.65 39.74 74.6%
September 18, 2005................ 28.78 38.42 74.9% 28.78 38.42 74.9%
September 18, 2006................ 21.41 37.11 57.7% 20.54 37.11 55.3%
September 18, 2007................ 21.24 35.80 59.3% 20.54 35.80 57.4%
September 18, 2008................ 20.52 34.48 59.5% 20.52 34.48 59.5%
September 18, 2009................ 19.74 33.17 59.5% 19.74 33.17 59.5%
September 18, 2010................ 18.95 31.85 59.5% 18.95 31.85 59.5%
September 18, 2011................ 0.00 -- NA 0.00 -- NA
</Table>
<Table>
<Caption>
N3741S N3742C
-------------------------------------------- --------------------------------------------
EQUIPMENT NOTE ASSUMED EQUIPMENT NOTE ASSUMED
OUTSTANDING AIRCRAFT LOAN TO OUTSTANDING AIRCRAFT LOAN TO
BALANCE VALUE AIRCRAFT BALANCE VALUE AIRCRAFT
DATE (IN MILLIONS) (IN MILLIONS) VALUE RATIO (IN MILLIONS) (IN MILLIONS) VALUE RATIO
---- -------------- ------------- ----------- -------------- ------------- -----------
September 17, 2001................ $33.17 $44.94 73.8% $33.26 $45.06 73.8%
September 18, 2002................ 32.29 43.59 74.1% 32.37 43.70 74.1%
September 18, 2003................ 31.40 42.24 74.3% 31.48 42.35 74.3%
September 18, 2004................ 30.51 40.90 74.6% 30.59 41.00 74.6%
September 18, 2005................ 29.62 39.55 74.9% 29.70 39.65 74.9%
September 18, 2006................ 21.14 38.20 55.4% 21.20 38.30 55.4%
September 18, 2007................ 21.14 36.85 57.4% 21.20 36.95 57.4%
September 18, 2008................ 21.12 35.50 59.5% 21.18 35.59 59.5%
September 18, 2009................ 20.32 34.15 59.5% 20.37 34.24 59.5%
September 18, 2010................ 19.52 32.81 59.5% 19.57 32.89 59.5%
September 18, 2011................ 0.00 -- NA 0.00 -- NA
</Table>
<Table>
<Caption>
N3743H N3744F
-------------------------------------------- --------------------------------------------
EQUIPMENT NOTE ASSUMED EQUIPMENT NOTE ASSUMED
OUTSTANDING AIRCRAFT LOAN TO OUTSTANDING AIRCRAFT LOAN TO
BALANCE VALUE AIRCRAFT BALANCE VALUE AIRCRAFT
DATE (IN MILLIONS) (IN MILLIONS) VALUE RATIO (IN MILLIONS) (IN MILLIONS) VALUE RATIO
---- -------------- ------------- ----------- -------------- ------------- -----------
September 17, 2001................ $33.26 $45.06 73.8% $33.49 $45.37 73.8%
September 18, 2002................ 32.37 43.70 74.1% 32.60 44.01 74.1%
September 18, 2003................ 31.48 42.35 74.3% 31.70 42.65 74.3%
September 18, 2004................ 30.59 41.00 74.6% 30.80 41.29 74.6%
September 18, 2005................ 29.70 39.65 74.9% 29.91 39.93 74.9%
September 18, 2006................ 21.20 38.30 55.4% 21.35 38.57 55.4%
September 18, 2007................ 21.20 36.95 57.4% 21.35 37.21 57.4%
September 18, 2008................ 21.18 35.59 59.5% 21.33 35.84 59.5%
September 18, 2009................ 20.37 34.24 59.5% 20.52 34.48 59.5%
September 18, 2010................ 19.57 32.89 59.5% 19.71 33.12 59.5%
September 18, 2011................ 0.00 -- NA 0.00 -- NA
</Table>
<Table>
<Caption>
N3745B N3747D
-------------------------------------------- --------------------------------------------
EQUIPMENT NOTE ASSUMED EQUIPMENT NOTE ASSUMED
OUTSTANDING AIRCRAFT LOAN TO OUTSTANDING AIRCRAFT LOAN TO
BALANCE VALUE AIRCRAFT BALANCE VALUE AIRCRAFT
DATE (IN MILLIONS) (IN MILLIONS) VALUE RATIO (IN MILLIONS) (IN MILLIONS) VALUE RATIO
---- -------------- ------------- ----------- -------------- ------------- -----------
September 17, 2001................ $33.58 $45.49 73.8% $33.49 $45.37 73.8%
September 18, 2002................ 32.68 44.13 74.1% 32.60 44.01 74.1%
September 18, 2003................ 31.78 42.76 74.3% 31.70 42.65 74.3%
September 18, 2004................ 30.88 41.40 74.6% 30.80 41.29 74.6%
September 18, 2005................ 29.98 40.03 74.9% 29.91 39.93 74.9%
September 18, 2006................ 21.40 38.67 55.4% 21.35 38.57 55.4%
September 18, 2007................ 21.40 37.30 57.4% 21.35 37.21 57.4%
September 18, 2008................ 21.38 35.94 59.5% 21.33 35.84 59.5%
September 18, 2009................ 20.57 34.57 59.5% 20.52 34.48 59.5%
September 18, 2010................ 19.76 33.21 59.5% 19.71 33.12 59.5%
September 18, 2011................ 0.00 -- NA 0.00 -- NA
</Table>
IV-3
97
APPENDIX IV
LOAN TO VALUE RATIOS OF EQUIPMENT NOTES
<Table>
<Caption>
N685DA N686DA
-------------------------------------------- --------------------------------------------
EQUIPMENT NOTE ASSUMED EQUIPMENT NOTE ASSUMED
OUTSTANDING AIRCRAFT LOAN TO OUTSTANDING AIRCRAFT LOAN TO
BALANCE VALUE AIRCRAFT BALANCE VALUE AIRCRAFT
DATE (IN MILLIONS) (IN MILLIONS) VALUE RATIO (IN MILLIONS) (IN MILLIONS) VALUE RATIO
- ---- -------------- ------------- ----------- -------------- ------------- -----------
September 17, 2001................ $30.62 $41.48 73.8% $31.47 $42.63 73.8%
September 18, 2002................ 29.79 40.22 74.1% 30.61 41.33 74.1%
September 18, 2003................ 28.95 38.95 74.3% 29.76 40.03 74.3%
September 18, 2004................ 28.12 37.69 74.6% 28.90 38.73 74.6%
September 18, 2005................ 27.29 36.42 74.9% 28.04 37.43 74.9%
September 18, 2006................ 19.45 35.16 55.3% 20.84 36.13 57.7%
September 18, 2007................ 19.45 33.89 57.4% 20.68 34.83 59.4%
September 18, 2008................ 19.41 32.63 59.5% 19.95 33.53 59.5%
September 18, 2009................ 18.66 31.36 59.5% 19.18 32.23 59.5%
September 18, 2010................ 17.91 30.10 59.5% 18.40 30.93 59.5%
September 18, 2011................ 0.00 -- NA 0.00 -- NA
</Table>
<Table>
<Caption>
N687DL N688DL
-------------------------------------------- --------------------------------------------
EQUIPMENT NOTE ASSUMED EQUIPMENT NOTE ASSUMED
OUTSTANDING AIRCRAFT LOAN TO OUTSTANDING AIRCRAFT LOAN TO
BALANCE VALUE AIRCRAFT BALANCE VALUE AIRCRAFT
DATE (IN MILLIONS) (IN MILLIONS) VALUE RATIO (IN MILLIONS) (IN MILLIONS) VALUE RATIO
- ---- -------------- ------------- ----------- -------------- ------------- -----------
September 17, 2001................ $36.17 $49.00 73.8% $36.17 $49.00 73.8%
September 18, 2002................ 35.20 47.52 74.1% 35.20 47.52 74.1%
September 18, 2003................ 34.22 46.04 74.3% 34.22 46.04 74.3%
September 18, 2004................ 33.24 44.56 74.6% 33.24 44.56 74.6%
September 18, 2005................ 32.27 43.07 74.9% 32.27 43.07 74.9%
September 18, 2006................ 23.02 41.59 55.3% 23.02 41.59 55.3%
September 18, 2007................ 23.02 40.11 57.4% 23.02 40.11 57.4%
September 18, 2008................ 22.98 38.63 59.5% 22.98 38.63 59.5%
September 18, 2009................ 22.10 37.15 59.5% 22.10 37.15 59.5%
September 18, 2010................ 21.22 35.66 59.5% 21.22 35.66 59.5%
September 18, 2011................ 0.00 -- NA 0.00 -- NA
</Table>
<Table>
<Caption>
N689DL N690DL
-------------------------------------------- --------------------------------------------
EQUIPMENT NOTE ASSUMED EQUIPMENT NOTE ASSUMED
OUTSTANDING AIRCRAFT LOAN TO OUTSTANDING AIRCRAFT LOAN TO
BALANCE VALUE AIRCRAFT BALANCE VALUE AIRCRAFT
DATE (IN MILLIONS) (IN MILLIONS) VALUE RATIO (IN MILLIONS) (IN MILLIONS) VALUE RATIO
- ---- -------------- ------------- ----------- -------------- ------------- -----------
September 17, 2001................ $36.26 $49.12 73.8% $36.26 $49.12 73.8%
September 18, 2002................ 35.28 47.64 74.1% 35.28 47.64 74.1%
September 18, 2003................ 34.30 46.15 74.3% 34.30 46.15 74.3%
September 18, 2004................ 33.33 44.67 74.6% 33.33 44.67 74.6%
September 18, 2005................ 32.35 43.18 74.9% 32.35 43.18 74.9%
September 18, 2006................ 23.07 41.69 55.3% 24.05 41.69 57.7%
September 18, 2007................ 23.07 40.21 57.4% 23.87 40.21 59.4%
September 18, 2008................ 23.04 38.72 59.5% 23.04 38.72 59.5%
September 18, 2009................ 22.16 37.24 59.5% 22.16 37.24 59.5%
September 18, 2010................ 21.27 35.75 59.5% 21.27 35.75 59.5%
September 18, 2011................ 0.00 -- NA 0.00 -- NA
</Table>
<Table>
<Caption>
N692DL N693DL
-------------------------------------------- --------------------------------------------
EQUIPMENT NOTE ASSUMED EQUIPMENT NOTE ASSUMED
OUTSTANDING AIRCRAFT LOAN TO OUTSTANDING AIRCRAFT LOAN TO
BALANCE VALUE AIRCRAFT BALANCE VALUE AIRCRAFT
DATE (IN MILLIONS) (IN MILLIONS) VALUE RATIO (IN MILLIONS) (IN MILLIONS) VALUE RATIO
- ---- -------------- ------------- ----------- -------------- ------------- -----------
September 17, 2001................ $36.54 $49.50 73.8% $36.63 $49.62 73.8%
September 18, 2002................ 35.55 48.00 74.1% 35.64 48.12 74.1%
September 18, 2003................ 34.57 46.51 74.3% 34.65 46.62 74.3%
September 18, 2004................ 33.58 45.01 74.6% 33.66 45.12 74.6%
September 18, 2005................ 32.59 43.51 74.9% 32.67 43.62 74.9%
September 18, 2006................ 24.24 42.01 57.7% 24.30 42.12 57.7%
September 18, 2007................ 24.05 40.52 59.4% 24.11 40.62 59.4%
September 18, 2008................ 23.22 39.02 59.5% 23.27 39.11 59.5%
September 18, 2009................ 22.33 37.52 59.5% 22.38 37.61 59.5%
September 18, 2010................ 21.44 36.03 59.5% 21.49 36.11 59.5%
September 18, 2011................ 0.00 -- NA 0.00 -- NA
</Table>
IV-4
98
APPENDIX IV
LOAN TO VALUE RATIOS OF EQUIPMENT NOTES
<Table>
<Caption>
N694DL N695DL
-------------------------------------------- --------------------------------------------
EQUIPMENT NOTE ASSUMED EQUIPMENT NOTE ASSUMED
OUTSTANDING AIRCRAFT LOAN TO OUTSTANDING AIRCRAFT LOAN TO
BALANCE VALUE AIRCRAFT BALANCE VALUE AIRCRAFT
DATE (IN MILLIONS) (IN MILLIONS) VALUE RATIO (IN MILLIONS) (IN MILLIONS) VALUE RATIO
- ---- -------------- ------------- ----------- -------------- ------------- -----------
September 17, 2001................ $36.73 $49.76 73.8% $36.83 $49.90 73.8%
September 18, 2002................ 35.74 48.25 74.1% 35.84 48.39 74.1%
September 18, 2003................ 34.75 46.75 74.3% 34.84 46.88 74.3%
September 18, 2004................ 33.76 45.24 74.6% 33.85 45.37 74.6%
September 18, 2005................ 32.76 43.74 74.9% 32.86 43.86 74.9%
September 18, 2006................ 24.36 42.23 57.7% 24.43 42.35 57.7%
September 18, 2007................ 24.18 40.73 59.4% 24.24 40.84 59.4%
September 18, 2008................ 23.34 39.22 59.5% 23.40 39.33 59.5%
September 18, 2009................ 22.44 37.72 59.5% 22.51 37.82 59.5%
September 18, 2010................ 21.55 36.21 59.5% 21.61 36.31 59.5%
September 18, 2011................ 0.00 -- NA 0.00 -- NA
</Table>
<Table>
<Caption>
N6714Q N6715C
-------------------------------------------- --------------------------------------------
EQUIPMENT NOTE ASSUMED EQUIPMENT NOTE ASSUMED
OUTSTANDING AIRCRAFT LOAN TO OUTSTANDING AIRCRAFT LOAN TO
BALANCE VALUE AIRCRAFT BALANCE VALUE AIRCRAFT
DATE (IN MILLIONS) (IN MILLIONS) VALUE RATIO (IN MILLIONS) (IN MILLIONS) VALUE RATIO
- ---- -------------- ------------- ----------- -------------- ------------- -----------
September 17, 2001................ $40.19 $54.44 73.8% $40.71 $55.15 73.8%
September 18, 2002................ 39.11 52.80 74.1% 39.62 53.50 74.1%
September 18, 2003................ 38.03 51.16 74.3% 38.53 51.84 74.3%
September 18, 2004................ 36.95 49.53 74.6% 37.44 50.19 74.6%
September 18, 2005................ 35.87 47.89 74.9% 36.35 48.53 74.9%
September 18, 2006................ 25.60 46.25 55.3% 25.95 46.88 55.4%
September 18, 2007................ 25.60 44.61 57.4% 25.95 45.22 57.4%
September 18, 2008................ 25.57 42.98 59.5% 25.92 43.57 59.5%
September 18, 2009................ 24.60 41.34 59.5% 24.94 41.91 59.5%
September 18, 2010................ 23.62 39.70 59.5% 23.95 40.26 59.5%
September 18, 2011................ 0.00 -- NA 0.00 -- NA
</Table>
<Table>
<Caption>
N6716C N169DZ
-------------------------------------------- --------------------------------------------
EQUIPMENT NOTE ASSUMED EQUIPMENT NOTE ASSUMED
OUTSTANDING AIRCRAFT LOAN TO OUTSTANDING AIRCRAFT LOAN TO
BALANCE VALUE AIRCRAFT BALANCE VALUE AIRCRAFT
DATE (IN MILLIONS) (IN MILLIONS) VALUE RATIO (IN MILLIONS) (IN MILLIONS) VALUE RATIO
- ---- -------------- ------------- ----------- -------------- ------------- -----------
September 17, 2001................ $40.75 $55.20 73.8% $54.76 $74.18 73.8%
September 18, 2002................ 39.66 53.54 74.1% 53.28 71.93 74.1%
September 18, 2003................ 38.57 51.89 74.3% 51.80 69.69 74.3%
September 18, 2004................ 37.48 50.23 74.6% 50.32 67.45 74.6%
September 18, 2005................ 36.38 48.58 74.9% 48.84 65.20 74.9%
September 18, 2006................ 25.97 46.92 55.4% 34.84 62.96 55.3%
September 18, 2007................ 25.97 45.26 57.4% 34.84 60.72 57.4%
September 18, 2008................ 25.95 43.61 59.5% 34.79 58.47 59.5%
September 18, 2009................ 24.96 41.95 59.5% 33.46 56.23 59.5%
September 18, 2010................ 23.98 40.30 59.5% 32.12 53.99 59.5%
September 18, 2011................ 0.00 -- NA 0.00 -- NA
</Table>
<Table>
<Caption>
N171DZ N172DZ
-------------------------------------------- --------------------------------------------
EQUIPMENT NOTE ASSUMED EQUIPMENT NOTE ASSUMED
OUTSTANDING AIRCRAFT LOAN TO OUTSTANDING AIRCRAFT LOAN TO
BALANCE VALUE AIRCRAFT BALANCE VALUE AIRCRAFT
DATE (IN MILLIONS) (IN MILLIONS) VALUE RATIO (IN MILLIONS) (IN MILLIONS) VALUE RATIO
- ---- -------------- ------------- ----------- -------------- ------------- -----------
September 17, 2001................ $55.14 $74.69 73.8% $55.14 $74.69 73.8%
September 18, 2002................ 53.65 72.43 74.1% 53.65 72.43 74.1%
September 18, 2003................ 52.16 70.17 74.3% 52.16 70.17 74.3%
September 18, 2004................ 50.67 67.91 74.6% 50.67 67.91 74.6%
September 18, 2005................ 49.18 65.65 74.9% 49.18 65.65 74.9%
September 18, 2006................ 36.57 63.40 57.7% 36.57 63.40 57.7%
September 18, 2007................ 36.29 61.14 59.4% 36.29 61.14 59.4%
September 18, 2008................ 35.03 58.88 59.5% 35.03 58.88 59.5%
September 18, 2009................ 33.69 56.62 59.5% 33.69 56.62 59.5%
September 18, 2010................ 32.34 54.36 59.5% 32.34 54.36 59.5%
September 18, 2011................ 0.00 -- NA 0.00 -- NA
</Table>
IV-5
99
APPENDIX IV
LOAN TO VALUE RATIOS OF EQUIPMENT NOTES
<Table>
<Caption>
N173DZ N1608
-------------------------------------------- --------------------------------------------
EQUIPMENT NOTE ASSUMED EQUIPMENT NOTE ASSUMED
OUTSTANDING AIRCRAFT LOAN TO OUTSTANDING AIRCRAFT LOAN TO
BALANCE VALUE AIRCRAFT BALANCE VALUE AIRCRAFT
DATE (IN MILLIONS) (IN MILLIONS) VALUE RATIO (IN MILLIONS) (IN MILLIONS) VALUE RATIO
---- -------------- ------------- ----------- -------------- ------------- -----------
September 17, 2001................ $55.43 $75.09 73.8% $59.90 $81.15 73.8%
September 18, 2002................ 53.94 72.82 74.1% 58.30 78.71 74.1%
September 18, 2003................ 52.44 70.55 74.3% 56.69 76.27 74.3%
September 18, 2004................ 50.94 68.28 74.6% 55.08 73.83 74.6%
September 18, 2005................ 49.45 66.01 74.9% 53.47 71.39 74.9%
September 18, 2006................ 36.77 63.73 57.7% 38.16 68.94 55.3%
September 18, 2007................ 36.48 61.46 59.4% 38.16 66.50 57.4%
September 18, 2008................ 35.22 59.19 59.5% 38.12 64.06 59.5%
September 18, 2009................ 33.87 56.92 59.5% 36.66 61.62 59.5%
September 18, 2010................ 32.52 54.65 59.5% 35.21 59.18 59.5%
September 18, 2011................ 0.00 -- NA 0.00 -- NA
</Table>
<Table>
<Caption>
N1609 N1610D
-------------------------------------------- --------------------------------------------
EQUIPMENT NOTE ASSUMED EQUIPMENT NOTE ASSUMED
OUTSTANDING AIRCRAFT LOAN TO OUTSTANDING AIRCRAFT LOAN TO
BALANCE VALUE AIRCRAFT BALANCE VALUE AIRCRAFT
DATE (IN MILLIONS) (IN MILLIONS) VALUE RATIO (IN MILLIONS) (IN MILLIONS) VALUE RATIO
---- -------------- ------------- ----------- -------------- ------------- -----------
September 17, 2001................ $59.90 $81.15 73.8% $59.90 $81.15 73.8%
September 18, 2002................ 58.30 78.71 74.1% 58.30 78.71 74.1%
September 18, 2003................ 56.69 76.27 74.3% 56.69 76.27 74.3%
September 18, 2004................ 55.08 73.83 74.6% 55.08 73.83 74.6%
September 18, 2005................ 53.47 71.39 74.9% 53.47 71.39 74.9%
September 18, 2006................ 38.16 68.94 55.3% 38.16 68.94 55.3%
September 18, 2007................ 38.16 66.50 57.4% 38.16 66.50 57.4%
September 18, 2008................ 38.12 64.06 59.5% 38.12 64.06 59.5%
September 18, 2009................ 36.66 61.62 59.5% 36.66 61.62 59.5%
September 18, 2010................ 35.21 59.18 59.5% 35.21 59.18 59.5%
September 18, 2011................ 0.00 -- NA 0.00 -- NA
</Table>
IV-6
100
PROSPECTUS
DELTA AIR LINES, INC.
PASS THROUGH CERTIFICATES
-------------------------
This prospectus relates to the issuance of Pass Through Certificates by one
or more Pass Through Trusts to be formed by Delta Air Lines, Inc.
THE CERTIFICATES:
- Will be issued in one or more series with distribution rates and
distribution dates specified in the prospectus supplement;
- Will represent interests in the relevant Pass Through Trust only and will
be repaid only from the assets of that Trust, and will not represent
obligations of, or be guaranteed by, Delta;
- May have one or more forms of liquidity enhancement; and
- Will be issued in registered form and may be issued in accordance with a
book-entry system.
The aggregate public offering price of the Certificates will not exceed
$2,546,381,000.
EACH PASS THROUGH TRUST:
- Will issue one or more series of Certificates;
- Will use the proceeds of each series of Certificates to purchase
Equipment Notes of one or more series, each with an interest rate equal
to the rate on that series of Certificates and with a maturity date on or
prior to the final distribution date for that series of Certificates; and
- Will pass through principal and interest paid on the Equipment Notes that
it owns, subject to any applicable subordination provisions.
THE EQUIPMENT NOTES:
- Will be issued in series;
- Will be issued either in connection with sale/leaseback transactions
relating to aircraft leased to us ("Leased Aircraft"), or to finance or
refinance all or a portion of the cost of aircraft owned by us ("Owned
Aircraft") or to raise funds for general corporate purposes;
- If issued in connection with Leased Aircraft, will not be our obligations
and will not be guaranteed by us, but amounts due from us under the
relevant lease will be sufficient to make all payments required under
those Equipment Notes; and
- Will be secured by the aircraft specified in the prospectus supplement
and, in the case of any Leased Aircraft, by the interest of the lessor in
that lease.
This prospectus is accompanied by a prospectus supplement which includes
additional information as to the particular series of Certificates being sold
and the underlying Equipment Notes. Sales of Certificates may not be consummated
without both this prospectus and a prospectus supplement.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED THAT
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY SECURITIES IN ANY
STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
The date of this prospectus is July 23, 2001
101
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
----
PROSPECTUS
About This Prospectus....................................... 1
Delta Air Lines, Inc........................................ 1
General Outline............................................. 1
Use of Proceeds............................................. 2
Consolidated Ratios of Earnings to Fixed Charges............ 3
Description of the Certificates............................. 3
Description of the Equipment Notes.......................... 18
Certain United States Federal Income Tax Consequences....... 26
ERISA Considerations........................................ 29
Plan of Distribution........................................ 30
Validity of the Certificates................................ 31
Experts..................................................... 31
Where You Can Find More Information......................... 31
</Table>
-------------------------
You should rely only on the information contained in this prospectus or any
prospectus supplement or information contained in documents which you are
referred to in this prospectus or any prospectus supplement. Delta has not
authorized anyone to provide you with information different from that contained
in this prospectus or any prospectus supplement. Delta is offering to sell the
pass through certificates only in jurisdictions where offers and sales are
permitted. The information contained in this prospectus or any prospectus
supplement is accurate only as of the date on the front of those documents,
regardless of the time of delivery of the documents or any sale of the pass
through certificates.
102
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that Delta filed with
the Securities and Exchange Commission utilizing a shelf registration process.
Under this shelf process, the Certificates described in this prospectus may be
sold in one or more offerings up to a total dollar amount of $2,546,381,000.
This prospectus provides you with a general description of the Certificates that
may be offered.
Each time Certificates are sold, Delta will provide a prospectus supplement
that will contain specific information about the terms of that offering. The
prospectus supplement may also add, update or change information contained in
this prospectus. You should read both this prospectus and any prospectus
supplement together with additional information described in the section
entitled "Where You Can Find More Information" on pages 31-32.
For more detail, you should read our registration statement and the
exhibits filed with our registration statement.
DELTA AIR LINES, INC.
Delta is a major airline engaged in domestic and foreign air
transportation. We provide scheduled air transportation over a network of routes
throughout the United States and between the United States and various foreign
countries. We operate through our principal domestic hubs in Atlanta,
Cincinnati, Dallas/Fort Worth and Salt Lake City. We also operate our principal
international gateways in Atlanta and New York -- John F. Kennedy International
Airport.
Our principal executive offices are located at Hartsfield Atlanta
International Airport, Atlanta, Georgia 30320, and our telephone number is (404)
715-2600. Delta is incorporated under the laws of the State of Delaware.
GENERAL OUTLINE
The Certificates are securities that evidence an ownership interest in a
pass through trust (a "Trust"). The holders of the Certificates issued by a
Trust will be the beneficiaries of that Trust. The beneficial interest in a
Trust represented by a Certificate will be a percentage interest in the property
of that Trust. The beneficial interest will be equal to the original face amount
of that Certificate divided by the original face amount of all the Certificates
issued by that Trust. Each Certificate will represent a beneficial interest only
in the property of the Trust that issued that Certificate. Multiple series of
Certificates may be issued. If more than one series of Certificates is issued,
each series of Certificates will be issued by a separate Trust.
The property that will be held by each Trust will include equipment notes
("Equipment Notes") secured by either Leased Aircraft or Owned Aircraft.
Payments on principal and interest on the Equipment Notes owned by a Trust will
be passed through to holders of the Certificates issued by that Trust in
accordance with the terms of the Basic Agreement (as defined below) for that
Trust.
We will enter into a Pass Through Trust Agreement (the "Basic Agreement")
in anticipation of offerings of Certificates. In connection with issuance of a
particular series of Certificates, we will enter into a separate Trust
Supplement (a "Trust Supplement"). The Trust Supplement with respect to a
particular series of Certificates will form a separate Trust for that series,
and will name the trustee for that Trust (the "Trustee"). Action taken by the
Trustee with respect to any series of Certificates will be taken on behalf of
the Trust it represents.
1
103
The Trustee will enter into one or more purchase or refunding agreements
(each, a "Note Purchase Agreement") in connection with each series of
Certificates. Under a Note Purchase Agreement, the Trustee will agree to
purchase one or more Equipment Notes to be issued under a trust indenture (an
"Indenture"). Each Equipment Note will relate to one or more Aircraft, as
described in the applicable prospectus supplement.
The Equipment Notes in each Trust will have identical interest rates, which
in each case will be equal to the rate applicable to the Certificates issued by
that Trust. Also, the Equipment Notes in each Trust will have identical priority
of payment (in each case, relative to any other Equipment Notes issued under the
same Indenture). The maturity dates of the Equipment Notes in each Trust will
occur on or before the final distribution date applicable to the Certificates
that will be issued by that Trust.
The Trustee will distribute the amount of payments of principal, premium,
if any, and interest received by it as holder of the Equipment Notes to the
registered holders of Certificates of the Trust (the "Certificateholders") in
which the Equipment Notes are held. These distributions may be subject to the
effect of any cross-subordination provisions described in the prospectus
supplement for a series of Certificates (which could, if applicable, limit or
delay your receipt of distributions).
LEASED AIRCRAFT
Each series of Equipment Notes issued in connection with a Leased Aircraft
(the "Leased Aircraft Notes") will be issued by a trustee (an "Owner Trustee")
under an Indenture (a "Leased Aircraft Indenture") between an Owner Trustee and
a loan trustee (a "Loan Trustee"). The Owner Trustee and the Loan Trustee with
respect to each series of Leased Aircraft Notes will be specified in the related
prospectus supplement.
The Owner Trustee will not be acting in its individual capacity, but solely
as owner trustee of a separate trust for the benefit of one or more
institutional investors (each, an "Owner Participant"). With respect to each
Leased Aircraft, the related Owner Participant(s) will have provided or will
provide, from sources other than the Leased Aircraft Notes, a portion of the
equipment cost of the related Leased Aircraft. No Owner Participant will be
personally liable for any amount payable under the related Leased Aircraft
Indenture or the related Leased Aircraft Notes.
Each Leased Aircraft will be leased by the related Owner Trustee to us
pursuant to a separate lease agreement (a "Lease").
OWNED AIRCRAFT
Equipment Notes that are not Leased Aircraft Notes are "Owned Aircraft
Notes". Each series of Owned Aircraft Notes will be issued under an Indenture
(an "Owned Aircraft Indenture") between a Loan Trustee and us.
USE OF PROCEEDS
The Trustee will use the proceeds of the Certificates for the purchase of
one or more Equipment Notes. The Equipment Notes will be issued:
- To finance or refinance the debt portion and, in certain cases, to
refinance some of the equity portion of one or more separate leveraged
lease transactions entered into by us, as lessee of Leased Aircraft;
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- To finance the purchase of Owned Aircraft by us, or to refinance any debt
previously issued by us in connection with our purchase of Owned
Aircraft; and
- To provide us with proceeds available for general corporate purposes.
General corporate purposes of Delta may include, among other possible uses, the
repayment of short-term or long-term indebtedness, capital expenditures and
repurchases of common stock.
To the extent that the proceeds of any offering of Certificates are not
used to purchase Equipment Notes on the date of issuance of those Certificates,
the relevant proceeds will be held for the benefit of those Certificateholders.
If those proceeds are not used to purchase Equipment Notes by the date specified
in the applicable prospectus supplement, they will be returned to the applicable
Certificateholders. See "Description of Certificates -- Delayed Purchase of
Equipment Notes" on page 17 for a description of the procedure for delayed
purchase of Equipment Notes.
The prospectus supplement with respect to any series of Certificates will
provide additional details with respect to the use of proceeds of those
Certificates, and with respect to the use of proceeds of any Equipment Notes to
be purchased by the Trust.
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the historical ratios of earnings to fixed
charges of Delta and its consolidated subsidiaries for the periods indicated:
<Table>
<Caption>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
- -------------------------------- ------------------
1996 1997 1998 1999 2000 2000 2001
- ---- ---- ---- ---- ---- ------- --------
1.58 3.23 3.55 3.56 2.42 2.34 .19
</Table>
Earnings represent:
- Income before income taxes, excluding the cumulative effect of accounting
changes; plus
- Fixed charges, excluding capitalized interest.
Fixed charges include:
- Interest, whether expensed or capitalized; and
- One-half of rental expense. Management of Delta believes this is
representative of the interest factor in those periods.
DESCRIPTION OF THE CERTIFICATES
In connection with each offering under this prospectus and accompanying
prospectus supplement, one or more separate Trusts will be formed and one or
more series of Certificates will be issued. Each series of Certificates will be
issued pursuant to the Basic Agreement and a Trust Supplement
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between the Trustee and us. The statements made under this caption are summaries
of detailed provisions of the Basic Agreement.
We have filed a form of the Basic Agreement with the Securities and
Exchange Commission ("SEC") as an exhibit to the registration statement. In
addition, we will file with the SEC forms of each of the applicable agreements
listed below and discussed in this prospectus or the accompanying prospectus
supplement:
- Trust Supplement
- Note Purchase Agreement
- Indenture
- Lease
- Trust Agreement
- Participation Agreement, and
- Liquidity Facility Agreement
You should refer to those agreements for more information regarding the terms
discussed in this prospectus and accompanying prospectus supplement. See "Where
You Can Find More Information" on pages 31-32 for information on documents we
file with the SEC. The summaries contained in this prospectus and the
accompanying prospectus supplement are qualified in their entirety by reference
to those filed agreements.
The Certificates offered pursuant to this prospectus will be limited to
$2,546,381,000 aggregate public offering price.
The prospectus supplement accompanying this prospectus contains an index of
terms. You should refer to the index for the location of definitions of the
material terms used with respect to the series of Certificates being offered. To
the extent that any provision in the accompanying prospectus supplement is
inconsistent with this summary, the prospectus supplement will control.
GENERAL
WHAT THE CERTIFICATES REPRESENT
Each Certificate will represent a fractional undivided interest in the
Trust created by the Basic Agreement and the related Trust Supplement. All
payments and distributions will be made only from the property of the related
Trust (the "Trust Property"). The Trust Property will include:
- The Equipment Notes held in that Trust;
- All monies at any time paid, due and to become due on those Equipment
Notes (subject to the effect of any cross-subordination provisions
described in the prospectus supplement for a series of Certificates);
- Funds from time to time deposited with the Trustee in accounts of the
Trust; and
- If specified in the prospectus supplement related to a series of
Certificates, rights under intercreditor agreements relating to
cross-subordination arrangements and monies receivable under a liquidity
facility.
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The Certificates will be issued in minimum denominations of $1,000 or an
integral multiple of that amount. One Certificate of each series, however, may
be issued in a different denomination.
WHAT THE CERTIFICATES DO NOT REPRESENT
The Certificates do not represent an interest in or an obligation of us,
the Trustee, any of the Loan Trustees or Owner Trustees in their individual
capacities, any Owner Participant or any of their affiliates. By accepting a
Certificate, you agree to look solely to the income and proceeds from the Trust
Property as provided in the Basic Agreement and the applicable Trust Supplement.
ISSUANCE OF EQUIPMENT NOTES
The Equipment Notes issued under a single Indenture may be held in more
than one Trust. One Trust may hold Equipment Notes issued under more than one
Indenture. Unless otherwise provided in a prospectus supplement, only Equipment
Notes having the same priority of payment (which will constitute a "Class" of
Equipment Notes) may be held in the same Trust.
PASS THROUGH OF INTEREST PAID ON EQUIPMENT NOTES
Interest paid on the Equipment Notes will be passed through to
Certificateholders of each Trust. The rate of payment to Certificateholders will
be the same rate per annum payable on the Equipment Notes held by that Trust.
This rate will be set forth for each Trust on the cover page of the applicable
prospectus supplement, and may be affected by any cross-subordination provisions
described in the prospectus supplement for a series of Certificates.
DESCRIPTION OF INFORMATION CONTAINED IN PROSPECTUS SUPPLEMENTS
You should consult the related prospectus supplement for a description of
the specific series of Certificates. The information in the related prospectus
supplement will include the following:
- Specific designation and title of the Certificates;
- Aggregate principal amount of each series of Certificates;
- Regular Distribution Dates and Special Distribution Dates applicable to
those Certificates;
- Distribution rates on those Certificates;
- Ranking of the Certificates in terms of priority of payment;
- Subordination provisions among the holders of Certificates, including any
cross-subordination provisions among the holders of Certificates in
separate Trusts;
- Currency or currencies (including currency units) in which the
Certificates may be denominated;
- Specific form of the Certificates, including whether or not the
Certificates are to be issued in accordance with a book-entry system;
- Any related lease or financing arrangements;
- Any listing on a national securities exchange;
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- Description of the Equipment Notes to be purchased by the Trust,
including:
-- the period or periods within which, the price or prices at which, and
the terms and conditions upon which the Equipment Notes may or must be
redeemed or defeased in whole or in part, by us or, with respect to
Leased Aircraft Notes, the Owner Trustee,
-- the interest rate and payment dates of the Equipment Notes,
-- the payment priority of the Equipment Notes in relation to any other
Equipment Notes issued in relation to the same Aircraft,
-- any additional related security or liquidity enhancements, and
-- any intercreditor or other rights or limitations between the holders
of Equipment Notes which have different priorities but relate to the
same Aircraft;
- Description of the related Aircraft;
- Description of the related Note Purchase Agreement and related
Indentures, including:
-- a description of the events of default under the related Indentures,
-- the remedies exercisable upon the occurrence of events of default, and
-- any limitations on the exercise of those remedies with respect to the
related Equipment Notes;
- If the Certificates relate to Leased Aircraft, a description of the
related Leases, Trust Agreements and Participation Agreements, including:
-- the names of the related Owner Trustees,
-- a description of the events of default under the Leases, the remedies
exercisable upon the occurrence of the described events of default and
any limitations on the exercise of those remedies with respect to the
Leased Aircraft Notes,
-- a description of the events of loss with respect to the related Leased
Aircraft and any right we may have to replace Leased Aircraft, and
-- any rights of the Owner Trustee or Owner Participant to cure our
failures to pay rent under the related Lease;
- Description of the terms of any underwriting arrangement, including:
-- the names of any underwriters or agents,
-- the amounts to be purchased by underwriters or agents, and
-- the compensation of underwriters or agents;
- The extent, if any, to which the provisions of the operative documents
applicable to the Equipment Notes may be amended by the parties to those
Equipment Notes and whether the consent of the holders or the consent of
the holders of a specified percentage of aggregate principal amount of
the Equipment Notes is necessary for amendment; and
- Any other special terms pertaining to the relevant Certificates.
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BOOK-ENTRY REGISTRATION
GENERAL
The applicable prospectus supplement for each series of Certificates will
state whether those Certificates will be subject to the following provisions and
the provisions under the caption "Definitive Certificates" on page 9.
Upon issuance, each series of Certificates will be represented by one or
more fully registered global certificates. Unless otherwise provided in a
prospectus supplement, each global certificate will be deposited with, or on
behalf of, The Depository Trust Company ("DTC") and registered in the name of
DTC's nominee, CEDE & Co. ("Cede"). No person acquiring an interest in
Certificates (a "Certificate Owner") will be entitled to receive a certificate
representing their interest in those Certificates until, if ever, a Definitive
Certificate, as described under "Definitive Certificates" on page 9 is issued.
Unless and until Definitive Certificates are issued, all references to
actions by Certificateholders will refer to actions taken by DTC upon
instructions from DTC Participants. All references to distributions, notices,
reports and statements to Certificateholders will refer, as the case may be, to
distributions, notices, reports and statements to DTC or Cede, as the registered
holder of those Certificates, or to DTC Participants for distribution to
Certificate Owners in accordance with DTC procedures.
DTC AND DTC PARTICIPANTS
DTC is:
- A limited purpose trust company organized under the laws of the State of
New York;
- A member of the Federal Reserve System;
- A "clearing corporation" within the meaning of the New York Uniform
Commercial Code; and
- A "clearing agency" registered pursuant to section 17A of the Exchange
Act.
DTC was created to hold securities for its participants ("DTC
Participants") and to facilitate the clearance and settlement of securities
transactions between DTC Participants through electronic book-entries, thereby
eliminating the need for physical transfer of certificates. DTC Participants
include:
- Securities brokers and dealers
- Banks
- Trust companies
- Clearing corporations
Indirect access to the DTC system also is available to Indirect
Participants that clear through or maintain a custodial relationship with a DTC
Participant either directly or indirectly. Indirect Participants may include:
- Banks
- Brokers
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- Dealers
- Trust companies
PROCEDURE FOR TRANSFERS AND PAYMENTS
Certificate Owners that are not DTC Participants or Indirect Participants
but desire to purchase, sell or otherwise transfer ownership of, or other
interests in, the Certificates may do so only through DTC Participants and
Indirect Participants. In addition, Certificate Owners will receive all
distributions of principal and interest from the Trustee through DTC, DTC
Participants or Indirect Participants, as the case may be.
Under a book-entry format, Certificate Owners may experience some delay in
their receipt of payments, because the payments will be forwarded by the Trustee
to Cede, as nominee for DTC. DTC will forward those payments in same-day funds
to DTC Participants who are credited with ownership of the Certificates. The
amounts forwarded to DTC Participants will be proportionate to the principal
amount of each DTC Participant's respective holdings of beneficial interests in
the Certificates. Subsequently, DTC Participants will forward payments to
Indirect Participants or Certificate Owners, as the case may be, in accordance
with customary industry practices. The forwarding of these distributions to the
Certificate Owners will be the responsibility of the appropriate DTC
Participants.
Unless and until, if ever, the Definitive Certificates are issued, the only
"Certificateholder" will be Cede. Certificate Owners will not be recognized by
the Trustee as Certificateholders, as the term is used in the Basic Agreement,
and Certificate Owners will be permitted to exercise the rights of
Certificateholders only indirectly through DTC and DTC Participants.
Under the rules, regulations and procedures creating and affecting DTC and
its operations (the "Rules"), DTC is required to make book-entry transfers of
the Certificates among the DTC Participants for whom it is acting with respect
to the Certificates. DTC also is required to receive and transmit distributions
of principal, premium, if any, and interest with respect to the Certificates.
Similarly, the DTC Participants and Indirect Participants, with which
Certificate Owners have accounts for their Certificates, are required to make
book-entry transfers and receive and transmit applicable payments on behalf of
their respective customers. Accordingly, although Certificate Owners will not
possess the Certificates, the Rules provide a mechanism by which Certificate
Owners will receive payments and will be able to transfer their interests.
Because DTC can only act on behalf of DTC Participants, who in turn act on
behalf of Indirect Participants, the ability of a Certificate Owner to pledge
its Certificates to persons or entities that do not participate in the DTC
system, or to otherwise act with respect to its Certificates, may be limited due
to the lack of a physical certificate for those Certificates.
DTC has advised Delta that it will take any action permitted to be taken by
a Certificateholder under the Basic Agreement only at the direction of one or
more of the DTC Participants to whose accounts the Certificates are credited.
Additionally, in the event any action requires approval by Certificateholders of
a particular percentage of beneficial interest in each Trust, DTC will take such
action only at the direction of and on behalf of DTC Participants whose holdings
include undivided interests that satisfy that percentage. DTC may take
conflicting actions with respect to the undivided interests of DTC Participants
who hold those undivided interests.
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Neither Delta nor the Trustee will have any liability for:
- Any aspect of the records relating to or payments made on account of
beneficial ownership interests in the Certificates held by Cede, as
nominee for DTC; or
- For maintaining, supervising or reviewing any records relating to those
beneficial ownership interests.
DEFINITIVE CERTIFICATES
Certificates will be issued in certificated form ("Definitive
Certificates") to Certificate Owners or their nominees, rather than to DTC or
its nominee, only if:
- Delta advises the Trustee in writing that DTC is no longer willing or
able to discharge properly its responsibilities as depository with
respect to the Certificates and Delta is unable to locate a qualified
successor;
- Delta, at its option, elects to terminate the book-entry system through
DTC; or
- After the occurrence of particular events specified in the related
Prospectus Supplement, Certificate Owners with fractional undivided
interests aggregating at least a majority in interest in the applicable
Trust advise the Trustee, Delta and DTC through DTC Participants in
writing that the continuation of a book-entry system through DTC, or its
successor, is no longer in the Certificate Owners' best interest.
Upon the occurrence of any of these events, the Trustee will be required to
notify all Certificate Owners through DTC Participants of the availability of
Definitive Certificates. Upon surrender by DTC of the global certificates
representing the Certificates and receipt of instructions for re-registration,
the Trustee will reissue the Certificates as Definitive Certificates to
Certificate Owners.
If and when Definitive Certificates are issued to owners, distributions of
principal, premium, if any, and interest with respect to Certificates will be
made in accordance with the procedures set forth in the Basic Agreement and the
applicable Trust Supplements. The Trustee will make these distributions directly
to holders in whose names the Definitive Certificates were registered at the
close of business on the applicable record date. The distributions will be made
by check mailed to the address of each applicable holder as it appears on the
register maintained by the Trustee. The final payment on any Certificate,
however, will be made only upon presentation and surrender of the Certificate at
the office or agency specified in the notice of final distribution to
Certificateholders.
Definitive Certificates will be freely transferable and exchangeable at the
office of the Trustee upon compliance with the requirements set forth in the
Basic Agreement and the applicable Trust Supplements. No service charge will be
imposed for any registration of transfer or exchange, but payment of a sum
sufficient to cover any tax or other governmental charge will be required.
PAYMENTS AND DISTRIBUTIONS
GENERAL
Payments of principal, premium, if any, and interest on the Equipment Notes
held in each Trust will be distributed by the Trustee, upon receipt, to the
Certificateholders of the applicable Trust on the dates specified in the
applicable prospectus supplement, except in certain cases. Any cross-
subordination provisions set forth in the prospectus supplement for a series of
Certificates may affect these payments. Also, payments may be affected when some
or all of the relevant Equipment Notes are in default as described in the
applicable prospectus supplement.
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SCHEDULED PAYMENTS
Scheduled payments of principal of, and interest on, the unpaid principal
amount of the Equipment Notes held in each Trust will be scheduled to be
received by the Trustee on the Regular Distribution Dates specified in the
applicable prospectus supplement ("Scheduled Payments"). Each Certificateholder
of each Trust will be entitled to receive a proportional share of any
distribution of Scheduled Payments of principal and interest made on the
Equipment Notes held in that Trust, subject to any cross-subordination
provisions set forth in the prospectus supplement for that series of
Certificates.
SPECIAL PAYMENTS
Special payments ("Special Payments") include all payments, other than
Scheduled Payments received on a Regular Distribution Date or within five days
thereafter. Special Payments would include payments of principal, premium, if
any, and interest received by the Trustee on account of the early redemption or
purchase, if any, of the Equipment Notes relating to one or more Aircraft held
in a Trust.
Special Payments received by the Trustee relating to one or more Aircraft
will be distributed on the "Special Distribution Date" determined by the method
described in the applicable prospectus supplement. The applicable prospectus
supplement may, however, specify that payments received by the Trustee following
default in relation to the Equipment Notes on a Regular Distribution Date as a
result of a drawing under any Liquidity Facility provided for the benefit of the
specified Certificateholders will be distributed on the Regular Distribution
Date to those Certificateholders. The Trustee will mail notice of any
anticipated Special Distribution Date to the Certificateholders of record of the
applicable Trust.
POOL FACTORS
Certificateholders will receive periodic statements of the Pool Balance and
Pool Factor with respect to the relevant Trust. Those statements will provide
information with respect to the remaining principal portion of the Certificates
issued by that Trust. The "Pool Balance" indicates, as of any given date, the
original aggregate face amount of the Certificates of a Trust less the aggregate
amount of all payments made in relation to those Certificates. The aggregate
amount of all payments will not include, however, payments of interest or
premium or reimbursements of any costs and expenses connected to payments of
interest or premium.
The "Pool Factor" for each Trust as of any date is the Pool Balance for
that Trust divided by the aggregate original face amount of Certificates of that
Trust (rounded to the seventh decimal place).
The Pool Factor for a Trust will initially be 1.0000000 and will decline as
a result of reductions in the Pool Balance of that Trust. The amount of a
Certificateholder's proportional share of the Pool Balance of a Trust will be
the original denomination of the holder's Certificate of that Trust multiplied
by the Pool Factor for that Trust.
The Pool Factor and the Pool Balance for each Trust will be computed and
mailed to the Certificateholders on a Regular Distribution Date or Special
Distribution Date. Each computation will give effect to (1) the payment of
principal, if any, on the Equipment Notes or other Trust Property held in the
Trust and (2) the distribution of principal to be made on that date.
In the event of an early redemption, a purchase of an issue of Equipment
Notes by the related Owner Trustee after an Indenture Default (as defined below)
or a default in the payment of principal
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in respect of one or more issues of the Equipment Notes held in a Trust (if the
applicable payment is not made within five days of the Regular Distribution
Date), the Pool Factor and the Pool Balance of each Trust affected will be
recomputed, after giving appropriate effect to that event. Notice of the
recomputation will be mailed to the Certificateholders of that Trust.
REPORTS TO CERTIFICATEHOLDERS
Together with each distribution of a Scheduled Payment or a Special
Payment, the Trustee will send to the Certificateholders a statement giving
effect to that distribution and setting forth the following information:
- The amount of distribution allocable to principal and the amount
allocable to premium per $1,000 aggregate principal amount of Certificate
for that Trust, if any;
- The amount of distribution allocable to interest, per $1,000 aggregate
principal amount of Certificate for that Trust; and
- The Pool Balance and the Pool Factor for that Trust.
If the Certificates are registered in the name of DTC or its nominee, on
the record date prior to each Regular Distribution Date and Special Distribution
Date, the Trustee will request from DTC a securities position listing setting
forth the names of all DTC Participants reflected on DTC's books as holding
interests in the Certificates on that date. On each Regular Distribution Date
and Special Distribution Date, the applicable Trustee will mail to each of these
DTC Participants the described statement and will make available additional
copies as requested by them for forwarding to Certificate Owners.
In addition, after the end of each calendar year, the Trustee will prepare
a report for each Certificateholder of each Trust at any time during the
preceding calendar year. Each report will contain the sum of the distributions
allocable to principal, premium, if any, and interest with respect to the Trust
for that calendar year. In the event a person was a Certificateholder during
only a portion of that calendar year, the report will contain the sum for the
applicable portion of that calendar year. The report will also contain other
items readily available to the Trustee and which a Certificateholder reasonably
requests as necessary for the purpose of that Certificateholder's preparation of
its federal income tax return. The report and other items will be prepared on
the basis of information supplied to the Trustee by the DTC Participants and
will be delivered by the Trustee to those DTC Participants. The report will then
be available for forwarding by DTC Participants to Certificate Owners.
At the time, if any, Certificates are issued in the form of Definitive
Certificates, the Trustee will prepare and deliver the information described
above to each Certificateholder of record of each Trust as the name and period
of ownership of that Certificateholder appears on the records of the registrar
of the Certificates.
VOTING OF EQUIPMENT NOTES
The Trustee, as holder of the Equipment Notes held in each Trust, has the
right to vote, give consents or waivers or otherwise exercise rights as the
holder of those Equipment Notes. The Basic Agreement and Trust Supplement
relating to each Trust will set forth:
- The circumstances under which the Trustee may direct any action or cast
any vote as the holder of the Equipment Notes held in the applicable
Trust at its own discretion;
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- The circumstances in which the Trustee will seek instructions from the
Certificateholders of the Trust before taking action as the holder of
Equipment Notes; and
- If applicable, the percentage of Certificateholders required to direct
the Trustee to take any action.
The Trustee's rights will be subject to the effect of any
cross-subordination provisions set forth in the related prospectus supplement.
If specified in the related prospectus supplement, the right of a Trustee to
vote and give consents and waivers with respect to the Equipment Notes held in
the related Trust may, in the circumstances set forth in an intercreditor
agreement to be executed by that Trustee and specified in that prospectus
supplement, be exercisable by another person specified in that prospectus
supplement.
EVENTS OF DEFAULT AND CERTAIN RIGHTS UPON AN EVENT OF DEFAULT
You will have special rights if an event of default occurs and is not
cured, as described later in this subsection. The prospectus supplement will
specify the events of default under the Basic Agreement ("Events of Default")
and under the related Indentures ("Indenture Defaults"). The Indenture Defaults
in the case of Leased Aircraft Indentures will include events of default under
the related Leases (a "Lease Event of Default"). With respect to any Equipment
Notes that are supported by a Liquidity Facility, the Indenture Defaults or
Events of Default also may include events of default under that Liquidity
Facility.
Unless otherwise provided in a prospectus supplement, all of the Equipment
Notes issued under the same Indenture will relate to a specific Aircraft and
there will be no cross-collateralization or cross-default provisions in the
Indentures. Accordingly, events resulting in an Indenture Default under any
particular Indenture would not necessarily result in an Indenture Default
occurring under any other Indenture.
As described below under "Cross-Subordination Issues" on pages 16-17, a
prospectus supplement may provide the terms of any cross-subordination
provisions among Certificateholders of separate Trusts. If cross-subordination
provisions are provided, payments made pursuant to an Indenture under which an
Indenture Default has not occurred may be distributed first to the holders of
the Certificates issued under the Trust holding the most senior Equipment Notes
issued under other Indentures.
The ability of the applicable Owner Trustee or Owner Participant under a
Leased Aircraft Indenture to cure Indenture Defaults, including an Indenture
Default that results from the occurrence of a Lease Event of Default under the
related Lease, will be described in the prospectus supplement. Some Certificates
or Equipment Notes may be entitled to the benefits of a Liquidity Facility. A
drawing under a Liquidity Facility for the purpose of making a payment of
interest because Delta failed to make a corresponding payment will not cure an
Indenture Default or any Lease Default related to that failure by Delta.
The prospectus supplement related to a series of Certificates will describe
the circumstances under which the Trustee of a Trust may vote some or all of the
Equipment Notes held in that Trust. The prospectus supplement also will set
forth the percentage of Certificateholders of the Trust entitled to direct the
Trustee to take any action with respect to the Equipment Notes of that Trust. If
the Equipment Notes outstanding under an Indenture are held by more than one
Trust, then the ability of the Certificateholders of any one Trust to cause the
Loan Trustee with respect to any Equipment Notes held in that Trust to
accelerate those Equipment Notes or to direct the exercise of remedies by the
Loan Trustee under the applicable Indenture will depend upon the proportion of
the aggregate principal amount of the Equipment Notes outstanding under the
applicable Indenture and
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Trust to the aggregate principal amount of all Equipment Notes outstanding under
that Indenture. In addition, if cross-subordination provisions are applicable to
any series of Certificates, those provisions may affect the ability of the
Certificateholders of any one Trust to accelerate the Equipment Notes or to
direct the exercise of remedies by the Loan Trustee depending, in part, upon the
Class of Equipment Notes held in that Trust.
If the Equipment Notes outstanding under an Indenture are held by more than
one Trust, then each Trust will hold Equipment Notes with different terms from
the Equipment Notes held in the other Trusts. The Certificateholders of each
Trust may, therefore, have divergent or conflicting interests from those of the
Certificateholders of the other Trusts holding Equipment Notes issued under the
same Indenture. In addition, so long as the same institution acts as Trustee of
each Trust, in the absence of instructions from the Certificateholders of any
Trust, the Trustee for that Trust might, for the same reason, be faced with a
potential conflict of interest upon an Indenture Default. In the event this sort
of conflict of interest occurs, it is anticipated that the Trustee would resign
as Trustee of one or all of the related Trusts, and a successor trustee would be
appointed in accordance with the terms of the Basic Agreement.
The prospectus supplement for a series of Certificates will specify whether
and under what circumstances the Trustee may sell all or part of the Equipment
Notes held in the related Trust. A "Special Payments Account" will be
established by the Trustee for the benefit of the Certificateholders of the
applicable Trust, and any proceeds received by the Trustee upon any such sale
will be deposited into that Special Payments Account and distributed to the
Certificateholders of the applicable Trust on a Special Distribution Date.
The market for Equipment Notes in default may be very limited, and the
Trustee may not be able to sell such Equipment Notes for a reasonable price.
Furthermore, if the same institution acts as Trustee of multiple Trusts, it may
be faced with a conflict in deciding from which Trust to sell Equipment Notes to
available buyers. If the Trustee sells any Equipment Notes in default for less
than their outstanding principal amount, the Certificateholders of that Trust
will receive a smaller amount of principal distributions than anticipated and
will not have any claim for the shortfall against Delta, any Owner Trustee, any
Owner Participant or the Trustee. Furthermore, unless otherwise specified in the
applicable prospectus supplement, neither the Trustee nor the Certificateholders
of that Trust could take any action with respect to any remaining Equipment
Notes held in that Trust, so long as no related Indenture Defaults exist.
The Trustee will deposit in the Special Payments Account for a Trust, and
will distribute to the Certificateholders of that Trust on a Special
Distribution Date, any amount, other than Scheduled Payments received on a
Regular Distribution Date or within five days of a Regular Distribution Date,
distributed to the Trustee of that Trust under any Indenture on account of the
Equipment Notes held in that Trust. In addition, a prospectus supplement may
provide that the applicable Owner Trustee may, under specified circumstances,
redeem or purchase the outstanding Equipment Notes issued under the applicable
Indenture. If any Equipment Notes are so redeemed or purchased, the price paid
by the Owner Trustee to the Trustee of any Trust for those Equipment Notes will
be deposited in the Special Payments Account for that Trust and will be
distributed to the Certificateholders of that Trust on a Special Distribution
Date.
The Trustee will invest and reinvest, to the extent practicable, any funds
held by the Trustee in the Special Payments Account for the related Trust,
pending the distribution of those funds on a Special Distribution Date. Those
investments would be made in "Permitted Investments" specified in the related
prospectus supplement.
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The Basic Agreement provides that the Trustee of each Trust will, within 90
days after the occurrence of a default (as defined below in this paragraph) in
respect of that Trust, give to the Certificateholders of that Trust notice,
transmitted by mail, of all uncured or unwaived defaults with respect to that
Trust known to it. The Trustee may withhold that notice, however, except in the
case of default in the payment of principal, premium, if any, or interest on any
of the Equipment Notes held in that Trust, if the Trustee in good faith
determines that the withholding of notice is in the interests of those
Certificateholders. The term "default" as used in this paragraph only means the
occurrence of an Indenture Default with respect to Equipment Notes held in a
Trust, except that in determining whether any Indenture Default has occurred,
any related grace period or notice will be disregarded.
The Basic Agreement contains a provision entitling the Trustee of each
Trust, subject to the duty of the Trustee during a default to act with the
required standard of care, to demand reasonable security or indemnity by the
Certificateholders of that Trust before proceeding to exercise any right or
power under the Basic Agreement at the request of those Certificateholders.
The prospectus supplement for a series of Certificates will specify the
percentage of Certificateholders entitled to waive, or to instruct the Trustee
to waive, any past Event of Default related to that Trust and its consequences.
The prospectus supplement for a series of Certificates also will specify the
percentage of Certificateholders, and whether that percentage includes
Certificateholders of any other Trust holding Equipment Notes issued under
related Indentures, entitled to waive, or to instruct the Trustee or the Loan
Trustee to waive, any past Indenture Default. A waiver by the relevant
Certificateholders of, or instruction by the relevant Certificateholders to the
Trustee to waive, any past Indenture Default will annul any direction previously
given.
MERGERS AND SIMILAR EVENTS
We are generally permitted to consolidate or merge with another person. We
are also permitted to sell or lease substantially all of our assets to another
person or to buy or lease substantially all of the assets of another person.
However, we may not take any of these actions unless all of the following
conditions are met:
- The surviving, successor or transferee person will:
-- be organized and validly existing under the laws of the United States
or any of its states or the District of Columbia,
-- be a "citizen of the United States", as defined in Title 49 of the
United States Code relating to aviation (the "Transportation Code")
(see "Equipment Notes -- Security -- Special Rights of Lessors,
Conditional Vendors and Holders of Security Interests Under the
Bankruptcy Code" on pages 21-22 for the definition of "citizen of the
United States") holding an air carrier operating certificate issued by
the Secretary of Transportation pursuant to Chapter 447 of Title 49,
United States Code, if, and so long as, such status is a condition of
entitlement to the benefits of Section 1110 of the Bankruptcy Code,
and
-- expressly assume all of our obligations contained in the Basic
Agreement and any Trust Supplement, the Note Purchase Agreements, any
Owned Aircraft Indentures and, in relation to the Leased Aircraft, the
applicable Participation Agreements and Leases, and any other
operative documents; and
- Delta will have delivered a certificate and an opinion or opinions of
counsel indicating that the relevant transaction, in effect, complies
with these conditions.
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MODIFICATIONS OF THE BASIC AGREEMENT
SUPPLEMENTAL AGREEMENTS ENTERED WITHOUT CONSENT
The Basic Agreement contains provisions permitting us, together with the
Trustee of each Trust, to enter into a supplemental trust agreement without the
consent of the Certificateholders of that Trust to, among other things:
- Provide for the formation of that Trust and the issuance of a series of
Certificates;
- Evidence the succession of another corporation to Delta and the
assumption by that corporation of our obligations under the Basic
Agreement and the applicable Trust Supplement;
- Add to our covenants for the benefit of the Certificateholders, or to
surrender any of our rights or powers under the Basic Agreement;
- Cure any ambiguity or correct or supplement any defective or inconsistent
provision of the Basic Agreement or the applicable Trust Supplement or to
make any other provisions necessary to address related matters or
questions that arise, provided that doing so does not materially
adversely affect the interests of the Certificateholders;
- Cure any ambiguity or correct any mistake or to give effect or provide
for replacement liquidity facilities, if applicable to the relevant
Certificates;
- Comply with any requirement of the SEC, applicable law, rules or
regulations of any exchange or quotation system on which any Certificates
may be listed or of any regulatory body;
- Modify, eliminate or add to the provisions of the Basic Agreement to the
extent necessary to continue the qualification of the Basic Agreement,
including any supplemental agreement under the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act") and to add to the Basic
Agreement any other provisions expressly permitted by the Trust Indenture
Act, with some certain exceptions;
- Provide for a successor Trustee or to add to or change any provision of
the Basic Agreement as necessary to facilitate the administration of the
related Trusts by more than one Trustee; and
- Make any other amendments or modifications to the Basic Agreement,
provided the amendments or modifications will only apply to Certificates
issued after the relevant amendment.
No supplemental trust agreement entered into under any of these provisions,
however, will be permitted if it adversely affects the status of any Trust as a
grantor trust for U.S. federal income tax purposes.
SUPPLEMENTAL AGREEMENTS ENTERED WITH CONSENT
The Basic Agreement also contains provisions permitting us, together with
the Trustee of each Trust, and with the consent of the Certificateholders of
that Trust evidencing fractional undivided interests aggregating not less than a
majority in interest of that Trust, to execute a supplemental trust agreement
that adds any provisions to or changes or eliminates any of the provisions of
the Basic Agreement (to the extent relating to that Trust) or the applicable
Trust Supplement, or modifies the
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rights of the Certificateholders. No such supplemental trust agreement may,
however, without the consent of each Certificateholder to be affected:
- Reduce in any manner the amount of, or delay the timing of, any receipt
by the Trustee of payments on the Equipment Notes held in the applicable
Trust or distributions related to any Certificate, or change the date or
place of any payment related to any Certificate, or make distributions
payable in coin or currency other than that provided for in the
Certificates, or impair the right of any Certificateholder of the Trust
to institute suit for the enforcement of any applicable payment when due;
- Permit the disposition of any Equipment Note held in the Trust, except as
provided in the Basic Agreement or the applicable Trust Supplement, or
otherwise deprive any Certificateholder of the benefit of the ownership
of the applicable Equipment Notes;
- Reduce the percentage of the aggregate fractional undivided interests of
the Trust provided for in the Basic Agreement or the applicable Trust
Supplement that is required for any related supplemental trust agreement
or for any waiver provided for in the Basic Agreement or applicable Trust
Supplement;
- Modify any of the provisions relating to the rights of the relevant
Certificateholders with regards to the waiver of events of default or
supplemental agreements, with some limited exceptions;
- Alter the priority of distributions specified in any applicable
intercreditor agreement in a manner materially adverse to the interests
of the Certificateholders of that Trust; or
- Adversely affect the status of any Trust as a grantor trust for U.S.
federal income tax purposes.
MODIFICATION OF INDENTURE AND RELATED AGREEMENTS
The prospectus supplement will specify the Trustee's obligations in the
event that the Trustee, as the holder of any Equipment Notes held in a Trust,
receives a request for its consent to any amendment, modification or waiver
under the Indenture or other documents relating to those Equipment Notes,
including any Lease related to Leased Aircraft Notes, or any Liquidity Facility.
CROSS-SUBORDINATION ISSUES
The Equipment Notes issued under a single Indenture may be held in more
than one Trust, and one Trust may hold Equipment Notes issued under several
Indentures. Unless otherwise provided in a prospectus supplement, only Equipment
Notes of the same Class may be held in a Trust. If Equipment Notes of different
Classes are held in the same Trust, payments made on account of a subordinate
class of Certificates issued under a prospectus supplement may, under
circumstances described in that prospectus supplement, be subordinated to the
prior payment of all amounts owing to Certificateholders of a Trust holding
senior Equipment Notes issued under a Related Indenture. The prospectus
supplement relating to an issuance of Certificates will describe any applicable
"cross-subordination" provisions and any related terms, including the percentage
of Certificateholders under any Trust which are permitted to:
- Grant waivers of defaults under any related Indenture;
- Consent to the amendment or modification of any related Indenture; or
- Direct the exercise of remedial actions under any related Indenture.
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Payments made on account of Certificates may also be subordinated to the
rights of the provider of any related Liquidity Facility, as described below
under "Liquidity Facility."
TERMINATION OF THE TRUSTS
Our obligations and the obligations of the Trustee with respect to a Trust
will terminate upon the distribution to Certificateholders of that Trust of:
- All amounts required to be distributed to them pursuant to the Basic
Agreement and the applicable Trust Supplement; and
- The disposition of all property held in that Trust.
Before termination, the Trustee will send notice of the termination of that
Trust to each Certificateholder of record. That notice will specify the amount
of the proposed final payment and the proposed date for the distribution of the
final payment for that Trust.
The final distribution to any Certificateholder of a terminating Trust will
be made only upon surrender of that Certificateholder's Certificates at the
office or agency of the Trustee specified in the applicable notice of
termination.
DELAYED PURCHASE OF EQUIPMENT NOTES
In the event that, on the issuance date of any Certificates, all of the
proceeds from the sale of those Certificates are not used to purchase the
Equipment Notes contemplated to be held in the related Trust, the Equipment
Notes may be purchased by the Trustee at any time on or prior to the date
specified in the applicable prospectus supplement. If such a delay occurs, any
proceeds from the sale of Certificates which are not used to purchase Equipment
Notes will be held under an arrangement described in the applicable prospectus
supplement pending the purchase of those Equipment Notes. The arrangements with
respect to the payment of interest on funds being held will be described in the
applicable prospectus supplement. If the proceeds are not used to purchase the
Equipment Notes by the relevant date specified in the applicable prospectus
supplement, they will be returned to the holders of the applicable Certificates.
LIQUIDITY FACILITY
The related prospectus supplement may provide that distributions made by
the Trustee with respect to the related Certificates will be supported by a
Liquidity Facility issued by an institution identified in the related prospectus
supplement.
A Liquidity Facility is a revolving credit agreement, letter of credit,
bank guarantee, insurance policy or other instrument or agreement that will
increase the likelihood that the Certificateholders will receive timely payments
of interest on the Certificates. While a Liquidity Facility is designed to
increase the likelihood of timely payments of interest, it is not a guarantee of
the timely or ultimate payment of principal. Unless otherwise provided in the
related prospectus supplement, the provider of the relevant Liquidity Facility
will have a senior claim upon the assets of the related Trust. See "Description
of the Equipment Notes -- Liquidity Facility" on page 25 for a description of
how the Equipment Notes may be similarly supported by a Liquidity Facility.
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THE TRUSTEE
REPRESENTATIONS, LIABILITIES, OBLIGATIONS AND POWERS
The Trustee for each series of Certificates will be named in the applicable
prospectus supplement. The Trustee makes no representations as to the validity
or sufficiency of the Basic Agreement, any Trust Supplement, any Equipment Notes
or any other operative document.
The Trustee will not be liable with respect to any series of Certificates
for any action taken or omitted to be taken by it in good faith under the
direction of the holders of a majority in principal amount of outstanding
Certificates of that series. If provided by the prospectus supplement, the
Trustee will not have any obligation to exercise any of its rights or powers
under the Basic Agreement at the request of any Certificateholders, unless they
have offered to the Trustee indemnity satisfactory to it.
The Basic Agreement provides that the Trustee (in its individual or
fiduciary capacity) may acquire and hold Certificates and, subject to some
conditions, may otherwise deal with us and with any Owner Trustee with the same
rights it would have if it were not the Trustee.
RESIGNATION AND REMOVAL
The Trustee may resign from its position as Trustee of any or all of the
Trusts at any time. If the Trustee resigns, we will appoint a successor trustee.
If the Trustee ceases to be eligible to continue as Trustee for any Trust or
becomes incapable of acting as Trustee or becomes insolvent, we may remove that
Trustee. Also, any Certificateholder holding Certificates of that Trust for at
least six months may, on behalf of himself and all others similarly situated,
petition any court of competent jurisdiction for the removal of an ineligible,
incapable, or insolvent Trustee and the appointment of a successor trustee. Any
resignation or removal of the Trustee and appointment of a successor does not
become effective until acceptance of the appointment by the successor trustee.
Pursuant to the resignation and successor trustee provisions, it is possible
that different trustees could be appointed to act as successor trustees for each
Trust. All references in this prospectus to the Trustee should be read to take
into account the possibility that the Trusts could have different successor
trustees in the event of a resignation or removal.
FEE, EXPENSES AND INDEMNIFICATION
The Basic Agreement provides that we will pay the Trustee's fees and
expenses and indemnify the Trustee against certain liabilities.
DESCRIPTION OF THE EQUIPMENT NOTES
The statements made under this caption are summaries of detailed provisions
of the Indentures and Equipment Notes. For more complete and detailed
information, you should consult the entire prospectus and the applicable
prospectus supplement. Statements that do not distinguish between the Leased
Aircraft Notes and the Owned Aircraft Notes or between their respective
Indentures refer to any Equipment Notes and any Indenture. Additionally, we will
file with the SEC forms of the Indenture and Equipment Notes. You should refer
to those agreements for more information regarding the terms discussed in this
prospectus and accompanying prospectus supplement. See "Where You Can Find More
Information" on page 31 for more information on documents we file with the SEC.
The summaries contained in this prospectus and the accompanying prospectus
supplement are qualified in their entirety by reference to those filed
agreements.
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To the extent that any provision in the accompanying prospectus supplement
is inconsistent with any provision in this summary, the prospectus supplement
will control.
GENERAL
Equipment Notes will be issued under a Leased Aircraft Indenture or an
Owned Aircraft Indenture.
- A Leased Aircraft Indenture will be between an Owner Trustee and a Loan
Trustee, and will be entered into in connection with a leveraged lease
arrangement relating to Leased Aircraft. The Owner Trust administered by
the Owner Trustee will be the owner of the Leased Aircraft. An Owner
Participant will be the beneficiary of the Owner Trust. Leased Aircraft
Notes issued under a Leased Aircraft will be nonrecourse obligations of
the Owner Trust. Leased Aircraft Notes will not be our obligations or the
obligations of the applicable Owner Participant, and will not be
enforceable against us or such Owner Participant. Leased Aircraft Notes
will be secured by the Leased Aircraft described in the applicable
prospectus supplement and by certain rights of the applicable Owner Trust
under the related Lease.
- An Owned Aircraft Indenture will be between us and a Loan Trustee. Owned
Aircraft Notes issued under an Owned Aircraft Indenture will be our
direct obligations. Owned Aircraft Notes will be secured by Aircraft
owned by us and described in the applicable prospectus supplement.
PRINCIPAL AND INTEREST PAYMENTS
Interest received by the Trustee on the Equipment Notes held in each Trust
will be passed through to the Certificateholders of that Trust on the dates and
at the rate per annum set forth in the applicable prospectus supplement until
the final distribution for that Trust. Likewise, principal payments received by
the Trustee on the Equipment Notes held in each Trust will be passed through to
the Certificateholders of that Trust in scheduled amounts on the dates set forth
in the applicable prospectus supplement until the final distribution date for
that Trust.
REDEMPTION
The applicable prospectus supplement will describe the circumstances,
whether voluntary or involuntary, under which the Equipment Notes may be
redeemed or purchased prior to their stated maturity date, in whole or in part.
If the Equipment Notes can be redeemed or purchased prior to their stated
maturity, the prospectus supplement will describe the premium, if any,
applicable upon redemption or purchase, and any other terms applying to the
redemption or purchase of the Equipment Notes.
SECURITY
LEASED AIRCRAFT NOTES
The Leased Aircraft Notes will be secured by:
- An assignment by the related Owner Trustee to the related Loan Trustee of
that Owner Trustee's rights under the Lease or Leases relating to the
Leased Aircraft, including the right to receive payments of rent under
the related Lease; and
- A mortgage granted to the Loan Trustee in the applicable Leased Aircraft,
subject to our rights under the applicable Lease.
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Under the terms of each Lease, our obligations with respect to the Leased
Aircraft will be those of a lessee under a "net lease". Accordingly, we will be
obligated, among other things (and at our own expense), to cause the Leased
Aircraft to be duly registered, to pay all costs of operating that Aircraft and
to maintain, service, repair and overhaul (or cause to be maintained, serviced,
repaired and overhauled) that Aircraft.
With respect to the Leased Aircraft, the assignment by the related Owner
Trustee to the related Loan Trustee of its rights under the related Lease will
exclude, among other things:
- Rights of that Owner Trustee and the related Owner Participant relating
to indemnification from us for certain matters;
- Insurance proceeds payable to that Owner Trustee in its individual
capacity and to the related Owner Participant under liability insurance
maintained by us as directed by that Lease or by that Owner Trustee or
related Owner Participant;
- Insurance proceeds payable to that Owner Trustee in its individual
capacity or to the related Owner Participant under certain casualty
insurance maintained by that Owner Trustee or related Owner Participant
pursuant to that Lease; and
- Any rights of the related Owner Participant or that Owner Trustee to
enforce payment of these amounts and their respective rights to the
related proceeds of the foregoing.
OWNED AIRCRAFT NOTES
The Owned Aircraft Notes will be secured by a mortgage granted to the
related Loan Trustee of all of our right, title and interest in and to the Owned
Aircraft specified in the related Owned Aircraft Indenture. Under the terms of
each Owned Aircraft Indenture, we will be obligated, among other things (and at
our own expense), to cause the Owned Aircraft to be duly registered, to pay all
costs of operating that Aircraft and to maintain, service, repair and overhaul
(or cause to be maintained, serviced, repaired and overhauled) that Aircraft.
INSURANCE COVERAGE
The prospectus supplement will describe the insurance coverage required for
the relevant Aircraft.
RECOGNITION OF THE LOAN TRUSTEE'S SECURITY INTEREST
We will be required, except under certain circumstances, to keep each
Aircraft registered under the Transportation Code, and to record the Indenture
and the Lease, if applicable, among other documents, relating to each Aircraft
under the Transportation Code. The recording of the Indenture, the Lease, if
applicable, and other documents with respect to each Aircraft will give the
related Loan Trustee a perfected security interest in the related Aircraft
whenever it is located in the United States or any of its territories and
possessions. The Convention on the International Recognition of Rights in
Aircraft (the "Convention") provides that the security interest will also be
recognized, with some exceptions, in those jurisdictions that have ratified or
adhere to the Convention. We will have the right, with some conditions and at
our own expense, to register each Aircraft in countries other than the United
States. Each Aircraft may also be operated by us or under lease, sublease or
interchange arrangements in countries that are not parties to the Convention.
The extent to which the related Loan Trustee's security interest would be
recognized in an Aircraft located in a country that is not a party to the
Convention, and the extent to which that
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security interest would be recognized in a jurisdiction adhering to the
Convention if the Aircraft is registered in a jurisdiction not a party to the
Convention, is uncertain. Moreover, in the case of an Indenture Default, the
ability of the related Loan Trustee to realize upon its security interest in an
Aircraft could be adversely affected as a legal or practical matter if that
Aircraft were registered or located outside the United States.
Unless otherwise specified in the applicable prospectus supplement, the
Equipment Notes will not be cross-collateralized. Consequently, the Equipment
Notes issued in relation to any one Aircraft will not be secured by any other
Aircraft or, in the case of Leased Aircraft Notes, any other Lease. Unless and
until an Indenture Default relating to a Leased Aircraft occurs and is
continuing, the related Loan Trustee may exercise only limited rights of the
related Owner Trustee under the related Lease.
INVESTMENT AND REINVESTMENT OF RELATED FUNDS
The Loan Trustee will invest and reinvest funds, if any, relating to any
Aircraft and held by that Loan Trustee, pending distribution of those funds.
Investments will be described in the applicable Indenture. We will direct the
investment and reinvestment of those funds. We will not, however, direct
investment and reinvestment:
- In the case of a Leased Aircraft Indenture, if a Lease Event of Default
exists under the applicable Lease; or
- In the case of an Owned Aircraft Indenture, if an Indenture Default
exists or a payment default or bankruptcy default exists under that
Indenture.
The net amount of any loss resulting from any of the investments made at
our direction will be paid by us.
SPECIAL RIGHTS OF LESSORS, CONDITIONAL VENDORS AND HOLDERS OF SECURITY
INTERESTS UNDER THE BANKRUPTCY CODE
Section 1110 of the U.S. Bankruptcy Code provides in relevant part that the
right of lessors, conditional vendors and holders of security interests in
"equipment" (as defined in Section 1110 of the U.S. Bankruptcy Code) to take
possession of that equipment in compliance with the provisions of a lease,
conditional sale contract or security agreement, as the case may be, is not
affected by:
- The automatic stay provision of the U.S. Bankruptcy Code, which enjoins
repossessions by creditors for the duration of the reorganization period;
- The provision of the U.S. Bankruptcy Code allowing the trustee in
reorganization to use property of the debtor during the reorganization
period;
- Section 1129 of the U.S. Bankruptcy Code, which governs the confirmation
of plans of reorganization in Chapter 11 cases; or
- Any power of the bankruptcy court to enjoin a repossession.
Section 1110 relief would not be available, however, if the following two
conditions are satisfied: (1) within 60 days after the date of the order for
relief under the U.S. Bankruptcy Code, or such longer period consented to by the
lessor, conditional vendor or holder of a security interest, the trustee in
reorganization agrees to perform the debtor's obligations that become due on or
after that date; and (2) all defaults, other than defaults resulting solely from
the financial condition, bankruptcy, insolvency or reorganization of the debtor,
or from any failure of the debtor to pay
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penalty rates based on a failure to perform non-monetary obligations are cured
before the later of the expiration of that 60-day period and the date that is 30
days after the date of default.
Accordingly, the right of a lessor, conditional vendor or holder of a
security interest to take possession of an aircraft in the event of default
would not be exercisable for 60 days following the date of the order for relief
(unless specifically permitted by the bankruptcy court). Furthermore, if the
conditions specified above are satisfied within the applicable period, it is
unclear whether Section 1110 affords any relief at all with respect to the
exercise of any right to take possession based on an event of default occurring
after that period.
"Equipment" is defined in Section 1110 of the U.S. Bankruptcy Code, in
part, as an aircraft, aircraft engine, propeller, appliance, or spare part that
is subject to a security interest granted by, leased to, or conditionally sold
to a debtor that is a citizen of the United States holding an "air carrier
operating certificate" issued by the Secretary of Transportation pursuant to
chapter 447 of Title 49 of the U.S. Code for aircraft capable of carrying 10 or
more individuals or 6,000 pounds of more of cargo.
A "spare part" is defined in Section 40102 of Title 49 of the U.S. Code as
an accessory, appurtenance, or part of an aircraft (except an aircraft engine or
propeller), aircraft engine (except a propeller), propeller, or appliance, that
is to be installed at a later time in an aircraft, aircraft engine, propeller,
or appliance.
A "citizen of the United States" is defined in Section 40102 of Title 49 of
the U.S. Code as:
- An individual who is a citizen of the United States;
- A partnership each of whose partners is an individual who is a citizen of
the United States; or
- A corporation or association organized under the laws of the United
States or a State, the District of Columbia, or a territory or possession
of the United States, of which the president and at least two-thirds of
the board of directors and other managing officers are citizens of the
United States, and in which at least 75 percent of the voting interest is
owned or controlled by persons that are citizens of the United States.
In connection with any issuance of Certificates under this prospectus and
the applicable prospectus supplement, unless otherwise described in the
applicable prospectus supplement, it is a condition to the Trustee's obligation
to purchase Equipment Notes with respect to each Aircraft that outside counsel
designated by us provide its opinion to that Trustee that:
- If that Aircraft is a Leased Aircraft, the Owner Trustee, as lessor under
the Lease for that Aircraft, and the Loan Trustee, as assignee of that
Owner Trustee's rights under the applicable Lease pursuant to the
applicable Indenture, will be entitled to the benefits of Section 1110 of
the U.S. Bankruptcy Code with respect to the airframe and engines
comprising that Aircraft; or
- If that Aircraft is an Owned Aircraft, the Loan Trustee will be entitled
to the benefits of Section 1110 with respect to the airframe and engines
comprising that Owned Aircraft, in each case so long as we continue to be
a "citizen of the United States" holding an "air carrier operating
certificate" for aircraft capable of carrying 10 or more individuals or
6,000 pounds or more of cargo.
The opinion of outside counsel will not address the possible replacement of an
Aircraft after an event of loss in the future. Events of loss and any right we
have to replace Aircraft will be described in the applicable prospectus
supplement.
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OTHER RANKING OF EQUIPMENT NOTES
Some of the Equipment Notes for one or more Aircraft, as described in the
applicable prospectus supplement, may be subordinated and junior in right of
payment to other Equipment Notes for the same Aircraft. The terms of any
subordination will be described in that prospectus supplement.
PAYMENTS AND LIMITATION OF LIABILITY
PAYMENTS
The Owner Trustee will lease each Leased Aircraft to us for a term
commencing on the date that Aircraft is delivered to the Owner Trustee. The term
will expire on a date after the latest maturity date of the related Leased
Aircraft Notes, unless previously terminated as permitted by the terms of the
related Lease. Some payments, such as basic rent, under each related Lease will
be payable by us. Also, the related Owner Trustee under the applicable Indenture
will assign our payments to the related Loan Trustee to provide the funds
necessary to pay principal of, premium, if any, and interest due from the Owner
Trustee on the Leased Aircraft Notes issued under the related Indenture.
In certain cases, the basic rent payments under a Lease may be adjusted,
but each Lease will provide that under no circumstances will our rent payments
be less than the scheduled payments on the related Leased Aircraft Notes. The
balance of any basic rent payment under each Lease, after payment of amounts due
on the Leased Aircraft Notes issued under the Indenture corresponding to the
applicable Lease, will be paid over to the applicable Owner Trustee. Our
obligation to pay rent and to cause other payments to be made under each Lease
will be our general obligations.
LIMITATION OF LIABILITY
The Leased Aircraft Notes will not be our obligations and will not be
guaranteed by us, except in some specified circumstances involving our purchase
of a Leased Aircraft and our assumption of some specified obligations, including
the obligation to make payments on the related Leased Aircraft Notes. None of
the Owner Trustees, the Owner Participants or the Loan Trustees will be
personally liable to any holder of the Leased Aircraft Notes for amounts payable
under those Leased Aircraft Notes, or, except as provided in the related
Indentures in the case of the Owner Trustees and the Loan Trustees, for any
liability under those Indentures.
Except in the circumstances mentioned, all amounts payable under any Leased
Aircraft Notes, other than payments made in connection with an optional
redemption or purchase by the related Owner Trustee or the related Owner
Participant, will be made only from:
- The assets subject to the lien of the applicable Indenture with respect
to the related Aircraft or the income and proceeds received by the
related Loan Trustee from the applicable Indenture, including rent
payable by us under the related Lease; and
- If provided in the related prospectus supplement, the applicable
Liquidity Facility.
Except as otherwise provided in the applicable Indenture, no Owner Trustee
will be personally liable for any amount payable or for any statements,
representations, warranties, agreements or obligations under any Indenture or
Leased Aircraft Notes except for its own willful misconduct or gross negligence.
None of the Owner Participants will have any duty or responsibility under the
Leased Aircraft Indentures or under the related Leased Aircraft Notes to the
related Loan Trustee or to any holder of those Leased Aircraft Notes.
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Our obligations under each Owned Aircraft Indenture and under the Owned
Aircraft Notes will be our general obligations.
DEFEASANCE OF THE INDENTURES AND THE EQUIPMENT NOTES IN CERTAIN CIRCUMSTANCES
Unless otherwise specified in the applicable prospectus supplement, each
Indenture provides that the obligations under the applicable Indenture of the
related Loan Trustee and the related Owner Trustee, in relation to any Leased
Aircraft Notes, or our obligations, with respect to any Owned Aircraft Notes,
will be deemed to have been discharged and paid in full on the 91st day after
the date of irrevocable deposit with the related Loan Trustee.
The deposit must consist of:
- Money; or
- Obligations of the United States or any agency or instrumentality of the
United States the payment of which is backed by the full faith and credit
of the United States which, through the payment of principal and interest
on those obligations and complying with their terms, will provide money
in an aggregate amount sufficient to pay when due, including as a
consequence of redemption in respect of which notice is given on or prior
to the date of irrevocable deposit, the:
-- principal of,
-- premium, if any, and
-- interest on all Equipment Notes issued under and in compliance with
the terms of the applicable Indenture.
Discharge may occur only if, among other things:
- No event of default or event which with the giving of notice or lapse of
time, or both, would become an event of default under the Indenture has
occurred and is continuing on the date of irrevocable deposit; and
- We have delivered an opinion of counsel to the effect that holders of the
Equipment Notes will not recognize income, gain or loss for federal
income tax purposes as a result of the deposit, defeasance and discharge
and will be subject to federal income tax on the same amount and in the
same manner and at the same time as would have been the case if the
deposit, defeasance and discharge had not occurred.
Deposit as described will not be deemed to discharge certain obligations,
including the obligations:
- To register the transfer or exchange of Equipment Notes;
- To replace stolen, lost, destroyed or mutilated Equipment Notes; and
- To maintain paying agencies and hold money for payment in Trust.
Upon defeasance, or upon payment in full of the principal of, premium, if
any, and interest on all Equipment Notes issued under any Indenture on its
maturity date or deposit with the applicable Loan Trustee of money sufficient to
satisfy those amounts no earlier than one year prior to the related Indenture's
maturity, the holders of the related Equipment Notes will have no beneficial
interest in or other rights related to the Aircraft or other assets subject to
the lien of the Indenture. Consequently, the lien will terminate.
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OUR ASSUMPTION OF OBLIGATIONS
In relation to Leased Aircraft and unless otherwise specified in the
applicable prospectus supplement, upon our exercise of any purchase options we
may have under the related Lease prior to the end of the term of that Lease, we
may assume on a full recourse basis all of the obligations of the Owner Trustee,
other than its obligations in its individual capacity under the Indenture with
respect to that Aircraft, including the obligations to make payments on the
related Leased Aircraft Notes.
If we assume the obligations of the Owner Trustee relevant provisions of
the related Lease, including provisions relating to maintenance, possession and
use of the related Aircraft, liens, insurance and events of default, will be
incorporated into the Indenture. Also, the Leased Aircraft Notes issued under
that Indenture will not be redeemed and will continue to be secured by the
Aircraft. It is a condition to our assumption that, if the related Aircraft is
registered under the laws of the United States, an opinion of counsel be
delivered at the time of assumption. The opinion should substantially state that
the related Loan Trustee under the Indenture would, immediately following
assumption, be entitled to the benefits of Section 1110 of the Bankruptcy Code
with respect to the related Aircraft and its engines. The opinion need not be
delivered if the benefits of Section 1110 are not available to the Loan Trustee
with respect to that Aircraft or any engine immediately prior to assumption.
LIQUIDITY FACILITY
The related prospectus supplement may provide that one or more payments of
interest on the related Equipment Notes of one or more series will be supported
by a Liquidity Facility issued by an institution identified in the related
prospectus supplement. Unless otherwise provided in the related prospectus
supplement, the provider of the Liquidity Facility will have a senior claim upon
the assets securing the Equipment Notes.
INTERCREDITOR ISSUES
Equipment Notes may be issued in different Classes, which means that the
Equipment Notes may have different payment priorities even though they are
issued by the same borrower and relate to the same Aircraft. If different
Classes of Equipment Notes are issued, the related prospectus supplement will
describe:
- The priority of distributions among those Equipment Notes, and any
Liquidity Facilities for those Equipment Notes;
- The ability of any Class to exercise and/or enforce any or all remedies
with respect to the related Aircraft, and if the Equipment Notes are
Leased Aircraft Notes, the related Lease; and
- Other intercreditor terms and provisions.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
GENERAL
Unless otherwise indicated in the applicable prospectus supplement, this
summary describes the principal United States federal income tax consequences of
owning the Certificates. This summary is the opinion of Cadwalader, Wickersham &
Taft, special tax counsel to Delta. It applies to you only if you acquire
Certificates in the initial offering at the initial offering price and you own
your Certificates as capital assets for tax purposes. This summary does not
apply to you if you are a member of a class of holders subject to special rules,
such as:
- A dealer in securities or currencies;
- A trader in securities that elects to use a mark-to-market method of
accounting;
- A bank;
- A life insurance company;
- A tax-exempt organization;
- A person that owns Certificates that are a hedge or that are hedged
against interest rate risks;
- A person that owns Certificates as part of a straddle or conversion
transaction for tax purposes; or
- A person whose functional currency for tax purposes is not the U.S.
dollar.
This summary is based on the Internal Revenue Code of 1986, as amended (the
"Code"), its legislative history, existing and proposed regulations under the
Internal Revenue Code, published rulings and court decisions, all as currently
in effect. These laws are subject to change, possibly on a retroactive basis.
PLEASE CONSULT YOUR OWN TAX ADVISOR CONCERNING THE CONSEQUENCES OF OWNING THESE
CERTIFICATES IN YOUR PARTICULAR CIRCUMSTANCES UNDER THE CODE AND LAWS OF ANY
OTHER TAXING JURISDICTION
U.S. CERTIFICATEHOLDERS
This section describes the tax consequences to a U.S. Certificateholder.
You are a U.S. Certificateholder if you are a beneficial owner of a Certificate
and you are:
- A citizen or resident of the United States;
- A domestic corporation or partnership;
- An estate whose income is subject to United States federal income tax
regardless of its source; or
- A trust if a United States court can exercise primary supervision over
the trust's administration and one or more U.S. persons are authorized to
control all substantial decisions of the trust.
If you are not a U.S. Certificateholder, this section does not apply to you and
you should refer to "U.S. Alien Certificateholders" on page 28.
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TAX STATUS OF THE TRUSTS
Except as otherwise specified in the applicable prospectus supplement, each
Trust will be classified as a grantor trust for United States federal income tax
purposes. The following discussion assumes that the related trust will be
treated as a grantor trust.
TAXATION OF CERTIFICATEHOLDERS GENERALLY
If you are a U.S. Certificateholder, you will be treated as owning your
proportional undivided interest in each of the Equipment Notes and any other
property held by the related Trust. Accordingly, your share of interest paid on
the Equipment Notes will be taxable as ordinary income, as it is paid or
accrued, in accordance with your method of accounting for United States federal
income tax purposes. In the event that a Trust is supported by a Liquidity
Facility, any amounts received by the Trust under the Liquidity Facility
attributable to unpaid interest will be treated for United States federal income
tax purposes as having the same characteristics as the payments they replace. If
we were to assume an Owner Trust's obligations under Leased Aircraft Notes, that
assumption would be treated for United States federal income tax purposes as a
taxable exchange of those Leased Aircraft Notes, resulting in recognition of
gain or loss by you.
You will be entitled to deduct, consistent with your method of accounting,
your proportional share of fees and expenses paid or incurred by the
corresponding Trust as provided in Section 162 or 212 of the Code. Some fees and
expenses, including fees paid to the Trustee and the provider of the Liquidity
Facility, if applicable, will be borne by parties other than the
Certificateholders. Certain of these fees and expenses will be treated as
constructively received by the Trust, in which case a U.S. Certificateholder
will be required to include in income and will be entitled to deduct its
proportional share of those fees and expenses. If a U.S. Certificateholder is an
individual, estate or trust, the deduction for the relevant holder's share of
fees or expenses will be allowed only to the extent that all of that holder's
miscellaneous itemized deductions, including that holder's share of such fees
and expenses, exceed 2% of that holder's adjusted gross income. In addition, in
the case of U.S. Certificateholders who are individuals, certain otherwise
allowable itemized deductions will be subject generally to additional
limitations on itemized deductions under applicable provisions in the Code.
ORIGINAL ISSUE DISCOUNT
The Equipment Notes may be issued with original issue discount ("OID"). The
applicable Prospectus Supplement will state whether any Equipment Notes to be
held by the related Trust will be issued with OID and, if applicable, will
describe the special United States federal income tax rules governing debt
instruments issued with OID. Generally, a holder of a debt instrument issued
with OID that is not de minimis must include that OID in income for United
States federal income tax purposes as it accrues, in advance of the receipt of
the cash attributable to that income, under a method that takes into account the
compounding of interest.
SALE OR OTHER DISPOSITION OF THE CERTIFICATES
Upon the sale, exchange or other disposition of a Certificate, you will
generally recognize capital gain or loss equal to the difference between the
amount realized on the disposition (other than any amount attributable to
accrued interest which will be taxable as ordinary income) and your adjusted tax
basis in the related Equipment Notes any other property held by the
corresponding Trust. Any gain or loss will be long-term capital gain or loss to
the extent that gain or loss is attributable to property held by the Trust for
more than one year. Long-term capital gain of a noncorporate U.S.
Certificateholder is generally taxed at a maximum rate of 20%.
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U.S. ALIEN CERTIFICATEHOLDERS
This section describes the tax consequences to a "U.S. Alien
Certificateholder". You are a U.S. Alien Certificateholder if you are the
beneficial owner of a Certificate and are, for United States federal income tax
purposes:
- A nonresident alien individual;
- A foreign corporation;
- A foreign partnership; or
- An estate or trust that is not subject to United States federal income
tax on a net income basis on income or gain from a Certificate.
Under present United States federal income and estate tax law, and subject
to the discussion of backup withholding below, if you are a U.S. Alien
Certificateholder of a Certificate:
- Payments of interest on the Equipment Notes to, or on behalf of, a U.S.
Alien Certificateholder will not be subject to United States federal
withholding tax if,
- - you do not actually or constructively own 10% or more of the total
combined voting power of all classes of stock of Delta or an Owner
Participant entitled to vote,
- - you are not a controlled foreign corporation that is related to Delta
or an Owner Participant through stock ownership, and
- - you certify, to the Trustee or a U.S. payor, under penalties of
perjury, that you are not a United States Certificateholder and
provide your name and address or, under certain circumstances, a
partnership or other pass-through entity in which you hold an
interest furnishes a statement and attaches your certification, or
- - a securities clearing organization, bank or other financial
institution that holds customers' securities in the ordinary course
of its trade or business and holds the Certificate certifies to the
Trustee or a U.S. payor under penalties of perjury that a similar
statement has been received from you by it or by a similar financial
institution between it and you and, under certain circumstances,
furnishes the payor with a copy thereof; and
- No deduction for any United States federal withholding tax will be made
from any gain that you realize on the sale or exchange of your
Certificate.
Further, a Certificate held by an individual, who at death is not a citizen or
resident of the United States will not be includible in the individual's gross
estate for United States federal estate tax purposes if:
- The decedent did not actually or constructively own 10% or more of the
total combined voting power of all classes of stock of Delta or an Owner
Participant entitled to vote at the time of death; and
- The income on the Equipment Note would not have been effectively
connected with a United States trade or business of the decedent at the
same time.
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BACKUP WITHHOLDING AND INFORMATION REPORTING
U.S. CERTIFICATEHOLDERS
In general, if you are a noncorporate U.S. Certificateholder, all payments
on an Equipment Note will be reported to the Internal Revenue Service. In
addition, the proceeds of the sale of your Certificate before maturity within
the United States will be reported to the Internal Revenue Service.
Additionally, backup withholding at a rate of 30.5% (phasing down to 28% by
2006) will apply to any payments if you fail to provide an accurate taxpayer
identification number, or you are notified by the Internal Revenue Service that
you have failed to report all interest and dividends required to be shown on
your federal income tax returns.
U.S. ALIEN CERTIFICATEHOLDERS
You are generally exempt from backup withholding and information reporting
with respect to any payments on an Equipment Note provided that you provide the
certification described under "U.S. Alien Certificateholders", and provided
further that payor does not have actual knowledge that you are a U.S. person.
In general, payment of the proceeds from the sale of Certificates to or
through a United States office of a broker is subject to both United States
backup withholding and information reporting, unless you are a U.S. Alien
Certificateholder and you certify as to your non-United States status under
penalties of perjury or otherwise establish an exemption. Payments of the
proceeds from the sale by a U.S. Alien Certificateholder of a Certificate made
to or through a foreign office of a broker will not be subject to information
reporting or backup withholding. Information reporting, but not backup
withholding, however, may apply to a payment made outside of the United States
of the proceeds of a sale of Certificate through an office outside the United
States if the broker is:
- A U.S. person;
- A controlled foreign corporation for United States tax purposes;
- A foreign person 50% or more of whose gross income is effectively
connected with a United States trade or business for a specified
three-year period; or
- A foreign partnership, if at any time during the tax year: (1) one or
more of its partners are "U.S. persons" (as defined in the U.S. Treasury
regulations) who in the aggregate own more than 50% of the income or
capital interest in the partnership, or (2) such foreign partnership is
engaged in a United States trade or business unless the broker has
documentary evidence in its records that you are a non-U.S. person and
does not have actual knowledge that you are a U.S. person, or you
otherwise establish an exemption.
ERISA CONSIDERATIONS
Unless otherwise indicated in the applicable prospectus supplement, the
Certificates may not be purchased by:
- An employee benefit plan subject to Title I of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"); or
- An individual retirement account or an employee benefit plan subject to
section 4975 of the Code.
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Certain governmental plans and non-electing church plans, however, are not
subject to Title I of ERISA or Section 4975 of the Code and, therefore, may
purchase the Certificates.
PLAN OF DISTRIBUTION
The Certificates may be sold to or through underwriters, directly to other
purchasers or through agents. The distribution of the Certificates may be
effected from time to time in one or more transactions at:
- A fixed price or prices, which may be changed;
- Market prices prevailing at the time of sale;
- Prices related to the prevailing market prices at the time of sale; or
- Negotiated prices.
In connection with the sale of Certificates, underwriters or agents may
receive compensation from us or from purchasers of Certificates for whom they
may act as agents in the form of discounts, concessions or commissions.
Underwriters may sell Certificates to or through dealers, and those dealers may
receive compensation in the form of discounts, concessions or commissions from
the underwriters or commissions from the purchasers for whom they may act as
agents. Underwriters, dealers and agents that participate in the distribution of
Certificates may be deemed to be underwriters, and any discounts or commissions
received by them from us, and any profit on the resale of Certificates by them,
may be deemed to be underwriting discounts and commissions under the Securities
Act. Any outright or deemed underwriter or agent will be identified, and any
related compensation received from us will be described, in the applicable
prospectus supplement.
Under agreements which we may enter into, underwriters and agents who
participate in the distribution of Certificates may be entitled to
indemnification by us against some liabilities, including liabilities under the
Securities Act.
If indicated in the applicable Prospectus Supplement, we will authorize
underwriters or other persons acting as our agents to solicit offers by specific
institutions to purchase Certificates from us pursuant to contracts providing
for payment and delivery on a future date. Institutions with which these
contracts may be made include, among others:
- Commercial and savings banks
- Insurance companies
- Pension funds
- Investment companies
- Educational and charitable institutions
In all cases, we must approve the contracting institutions. The obligations
of any purchaser under any payment and delivery contract will be subject to the
condition that the purchase of the Certificates is not, at the time of delivery,
prohibited under the laws of the jurisdiction to which that purchaser is
subject. The underwriters relevant or other agents will not have any
responsibility in respect of the validity or performance of such contracts.
Unless otherwise indicated in the applicable prospectus supplement, we do
not intend to apply for the listing of any series of Certificates on a national
securities exchange. If the Certificates of any
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series are sold to or through underwriters, the underwriters may make a market
in those Certificates, as permitted by applicable laws and regulations. No
underwriter would be obligated, however, to make a market in those Certificates,
and any market-making that is done could be discontinued at any time at the sole
discretion of the underwriters. Accordingly, no assurance can be given as to the
liquidity of, or trading markets for, the Certificates of any series.
Some of the underwriters or agents and their associates may be customers
of, engage in transactions with and perform services for us in the ordinary
course of business.
VALIDITY OF THE CERTIFICATES
Unless otherwise indicated in the applicable prospectus supplement, the
validity of the offered Certificates will be passed upon for us by Robert S.
Harkey, Senior Vice President --
General Counsel.
EXPERTS
The consolidated financial statements and schedule included or incorporated
by reference in our Transition Report on Form 10-K for the fiscal year ended
December 31, 2000 and incorporated by reference in this prospectus have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their reports with respect thereto, and are incorporated herein by reference in
this prospectus in reliance upon the authority of said firm as experts in
accounting and auditing in giving said reports.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any documents we file at the
SEC's public reference room 450 Fifth Street, N.W., Washington, D.C. 20549.
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference room. Our SEC filings are also available to the public on the SEC's
web site at http://www.sec.gov and through the New York Stock Exchange, 20 Broad
Street, New York, New York 10005, on which our common stock is listed.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and later information that we file
with the SEC will automatically update and supersede this information as well as
the information included in this prospectus. We incorporate by reference the
documents listed below and any future filings made with the SEC under Sections
13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934 ("Exchange
Act") until we sell all the Certificates. This prospectus is part of a
registration statement we filed with the SEC.
- Transition Report on Form 10-K for the fiscal year ended December 31,
2000;
- Quarterly Report on Form 10-Q for the quarter ended March 31, 2001; and
- Current Report on Form 8-K dated June 15, 2001.
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Any party to whom this prospectus is delivered, including a holder in
street name, may request a copy of these filings (other than any exhibits unless
specifically incorporated by reference into this prospectus), at no cost, by
writing or telephoning us at the following address:
Delta Air Lines, Inc.
Investor Relations
Dept. No. 829
P.O. Box 20706
Atlanta, Georgia 30320
(404) 715-2600
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