Fitch Affirms Delta 2007-1 Class A Certificates at 'BBB+'

CHICAGO—(BUSINESS WIRE)—Fitch Ratings has affirmed the ratings for Delta Air Lines’ (DAL: Issuer Default Rating ‘B+’ with a Positive Outlook) pass-through trusts series 2007-1 class A certificates at ‘BBB+’. A full rating list is shown below.

KEY RATING DRIVERS:

The A tranche ratings are primarily supported by the high degree of overcollateralization in the transaction with the affirmation factor (i.e. the likelihood that Delta would affirm the aircraft in the event of a bankruptcy), and Delta’s credit quality considered as secondary factors. The A-tranche rating also benefits from the legal protection offered by Section 1110 of the U.S. Bankruptcy Code and an 18 month liquidity facility provided by Hessen-Thueringen Girozentrale (rated ‘A+’/‘F1+’ with a Stable Outlook by Fitch). The ratings are limited by the average age of the underlying collateral pool (roughly 13 years) and the lack of an immediate cross-default provision.

Fitch estimates the current LTV at 54.2%, suggesting a significant amount of overcollateralization. The maximum LTV calculated in a stress scenario (primary rating driver) is estimated to remain below 100% for the next several years using Fitch’s ‘BBB’ level stresses.

The collateral is well diversified by aircraft type, but has a heavy concentration of widebody aircraft (81% of the collateral pool as calculated by value). The widebodies in this deal include seven 777-200ERs (32%), four 767-300ERs (9%), and 14 767-400ERs (40%). Generally speaking, widebody aircraft values have been more volatile in prior downturns, as they tend to be less liquid than narrowbodies. Fitch categorizes all these widebodies as Tier 2. The 777-200ER and 767-300ER are considered higher quality Tier 2 aircraft due to their wide user base and market penetration. The 767-400ER is considered a lower quality Tier 2 aircraft given the plane’s limited user base and small number in service.

The collateral pool also includes 11 737-800s, which Fitch considers to be high quality Tier 1 aircraft. The 737-800 is one of the most prolific commercial aircraft in operation, with a fleet of more than 2,700 currently in service worldwide. The popularity of this aircraft limits the remarketing risk that would arise if the plane had to be repossessed and re-sold.

Fitch considers the affirmation factor for this transaction to be high. The wide-bodies in this pool form the backbone of DAL’s international operations. The 737-800s are core domestic aircraft which feature better operating economics than some of Delta’s older generation narrow bodies. Accordingly, Fitch believes that Delta would mostly likely affirm these aircraft in a default scenario.

RATING SENSITIVITITES:

Unlike most recently issued EETCs which have been used to finance the delivery of new aircraft, DAL 2007-1 is secured primarily by older, Tier 2 collateral. As these aircraft age and their market values become more sensitive to future aviation downturns, stress level LTVs could rise to a point where a negative rating action is warranted.

Fitch does not anticipate upgrading the ratings above ‘BBB+’. The Tier 2 collateral and the lack of an immediate cross-default feature (indentures are only cross defaulted at final maturity) are limiting factors to the ratings.

Fitch has affirmed the following ratings:

Delta Air Lines 2007-1 Pass Through Trust:

—DAL 2007-1 class A certificates at ‘BBB+’.

Fitch currently rates Delta as follows:

Delta Air Lines, Inc.

—Issuer Default Rating at ‘B+’;

—$1.2 billion senior secured revolving credit facility due 2016 at ‘BB+/RR1’;

—$1.4 billion senior secured term loan due 2017 at ‘BB+/RR1’.

Additional information is available at ‘www.fitchratings.com’.

Applicable Criteria and Related Research:

—‘Rating Aircraft Enhanced Equipment Trust Certificates’ (Sept. 14, 2012).

—‘Corporate Rating Methodology’ (Aug. 8, 2012).

Applicable Criteria and Related Research:

Rating Aircraft Enhanced Equipment Trust Certificates

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=688711

Corporate Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=684460

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=794421