Delta Air Lines Inc., the third-largest U.S. carrier, said it has drawn on a $1 billion revolving credit line to boost its cash holdings as it prepares to acquire Northwest Airlines Corp. by year’s end.
Delta borrowed the full amount of its $1 billion revolver, Chief Financial Officer Ed Bastian said in a memo to employees. The carrier had $3.7 billion in liquidity at the end of July.
The cash will help smooth the Northwest merger, Bastian said later. The combination with Northwest, the sixth-biggest U.S. airline, will surpass AMR Corp.’s American Airlines as the world’s largest carrier by traffic.
”This is to provide the maximum financial flexibility in our upcoming merger, not just the merger costs but also the need to align the credit agreements” of both airlines, Bastian said.
Delta had long planned to tap the revolver in the second half of 2008, Bastian said. The airline is ”not doing this as a defensive measure” to raise cash for operations.
Record jet-fuel prices helped send Delta to net losses in each of the past three quarters, spurring the search for a partner in hopes that a merged carrier would be able to weather those expenses.
The combined Delta-Northwest airline will keep Delta’s name and Atlanta headquarters, with a western hub at Salt Lake City International Airport.