Say Carrier Shouldn't Be Allowed To Reject Leases
It turns out US Airways isn't the
only party with issues regarding a plan put forth by Delta Air
Lines to emerge from Chapter 11 bankruptcy. Several entities,
including the city of Los Angeles, have filed complaints in US
bankruptcy court, saying the plan should not be approved due to the
authority it gives Delta to reject certain leases.
Thursday was the last day creditors could object to the plan,
which Delta hopes will be approved following a February 7 hearing.
The Associated Press reports officials in Denver, CO; West Palm
Beach, FL; and Puerto Rico also lodged protests with the court, as
did a loose committee of Delta's unsecured creditors.
The City of Angels says Delta's disclosure
statement is accompanied by a reorganization plan that is "not
confirmable as a matter of law and, thus, should not be approved
because proceeding with a solicitation of the plan in its present
form would waste valuable judicial and estate resources."
So, what's the problem? According to officials in LA, Delta's
plan gives the carrier too much leeway to reject leases at airports
Delta currently flies out of... including LAX and Ontario
International, both owned by the city.
The city of Los Angeles also says Delta's disclosure statement,
which accompanied the reorganization plan, does not specify how it
plans to handle such leases, and gives the Atlanta-based carrier
too much discretion in deciding which leases it will honor
throughout the original terms.
Delta spokesman Michael Freitag told the AP the objection is a
"classic issue that comes up in every Chapter 11 case."
"We believe the disclosure statement meets the appropriate
standards for adequacy under the bankruptcy code, and we're
confident any objections to the disclosure statement will be
resolved in a manner that allows Delta to remain on schedule to
emerge from Chapter 11 in spring 2007," Freitag said.
A separate filing by the city of Denver adds statements made in
the disclosure agreement violate the bankruptcy code... making the
reorg plan "unconfirmable." That sentiment was echoed by other
claimants, as well.
As Aero-News reported, Delta
filed the reorganization plan December 19. The carrier amended it
one month later.
US Airways Group -- which is attempting a hostile takeover of
Delta, has asked Delta's official creditor committee to support
postponing the February 7 bankruptcy hearing. If that condition,
along with others, is not met by February 1, USAG says it will
withdraw its bid for the carrier.