Moody's cuts Delta

Moody's Investors Service downgraded Delta Air Lines, Inc., affecting $10 billion of debt including its senior unsecured debt, lowered to B3 from Ba3, and equipment trust certificates to B1 from Ba1. The outlook is negative.

Moody's said the downgrade reflects its assessment of the probable weakening of the company's financial fundamentals due to a recent severe decline in demand and resulting cash flow, and the probability that weaker than expected financial results will continue well into the second quarter of the year.

The decline in demand comes at a time in the company's business year in which it typically rebuilds financial strength in anticipation of the seasonally weak fourth and first calendars quarters.

Although near-term liquidity is not of concern, the ratings reflect an increasingly uncertain outlook for cash flow in the near term and the possibility the company could face the normally cash flow negative fourth and first calendar quarters with a weakened liquidity profile, Moody's said.

Acknowledged in the ratings is Delta's strong network, its flexible and primarily non-union work force, the probability of government assistance to the airline industry including Delta and the possibility for an increase in demand as the most active period of the war in Iraq comes to a close and the currently high level of passenger concern due to SARS is reduced.

The negative outlook reflects the challenging business and financial environment in which Delta is operating, which could continue to pressure operating performance and cash flow generation for the foreseeable future, Moody's added.

Moody's cuts ATA

Moody's Investors Service downgraded ATA Holdings, Inc. and its primary operating subsidiary ATA Airlines, Inc. including cutting ATA Holdings' senior unsecured notes to Caa3 from Caa1 and American Trans Air, Inc.'s enhanced equipment trust certificates series 1996-1A to Baa3 from Baa1, series 1996-1B to B2 from Baa3, series 1996-1C to Caa2 from B1, series 1997-1A to Baa3 from Baa1, series 1997-1B to B2 from Baa3, series 1997-1C to Caa2 from B1, series 2000-1C to B2 from B1 and series 2002-1B to B1 from Ba3. Series 2000-1G was confirmed at Aaa and series 2002-1A at Baa3. The outlook is negative.

Moody's said the downgrade reflects the weak operating environment, ATA's limited access to capital markets and modest on-balance sheet liquidity, and the challenges facing the company in addressing scheduled debt maturities through the middle of 2004.

The company lacks unencumbered assets that could support additional secured borrowings.

Acknowledged in the ratings are the company's low cost structure, the strength of its military charter segment, possible support to be made available to the industry by the U.S. Government, and the potential for an increase in demand if the war in Iraq comes to a rapid conclusion, Moody's said.

The negative outlook reflects the difficult environment facing the company in its efforts to refinance the maturing debt and the difficulty in increasing internally generated cash flow due to extremely competitive pricing in the company's primary market, Chicago, Moody's added.

ATA has approximately $230 million of debt maturing in 2003 and 2004 of which $175 million is unsecured.

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