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

CHICAGO--(BUSINESS WIRE)-- Fitch Ratings has affirmed the ratings for Delta Air Lines' pass-through trusts series 2007-1 class A certificates at 'BBB+'. Fitch currently rates Delta (DAL) with an Issuer Default Rating (IDR) of 'BB+'/Positive Outlook.

KEY RATING DRIVERS

Since Fitch's previous review of this transaction the value of the underlying collateral has declined beyond our original expectations (aircraft values are provided by an independent appraiser). As a result, the transaction no longer passes our 'BBB' level stress test. As such, Fitch applies its subordinated tranche methodology to this transaction (i.e. a bottoms up approach based on the underlying IDR). The 'BBB+' rating reflects a three-notch uplift from Delta's IDR of 'BB+'. The three-notch uplift is based on a high affirmation factor (+2 notches) and the presence of a liquidity facility (+1 notch). The affirmation factor is supported by the proportion of Delta's widebody fleet (17%) represented by this pool of aircraft, and by the desirability of the 737-800s contained in this collateral pool compared to some of the older narrow-bodies (MD-88s and MD-90s) that Delta operates. Also, seven of Delta's eight 777-200ERs are included in this transaction, making affirmation in a bankruptcy scenario likely. The high affirmation factor is partially offset by the cross-default provision in this transaction which is only effective upon final maturity whereas most recent transactions include an immediate cross-default provision.

KEY ASSUMPTIONS

Fitch's key assumptions within the rating case for Delta 2007-1 include:

--A high affirmation factor for the collateral aircraft in this pool, as discussed above

--Current aircraft values consistent with those provided by an independent appraiser

--Continued depreciation of aircraft values in line with those outlined in Fitch's EETC criteria.

RATING SENSITIVITIES

Fitch rates this transaction using a 'bottom-up' approach based on the underlying airline IDR. The transaction ratings would be expected to move along with the IDR. Therefore, if Delta were to be downgraded to 'BB' the rating would likely be downgraded to 'BBB'. However, if DAL were upgraded to 'BBB-' Fitch may affirm the senior tranche at 'BBB+' as the notching between ratings tends to compress as they move up the scale.

FULL LIST OF RATING ACTIONS

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. (DAL)

--IDR; 'BB+'';

--$450 million senior secured revolving credit facility due 2018; 'BBB-/RR1';

--$1.1 billion senior secured term loan B-1 due 2018; 'BBB-/RR1';

--$400 million senior secured term loan B-2 due 2016; 'BBB-/RR1'.

--$1.5 billion senior secured revolving credit facility due 2020; 'BBB-/RR1';

--$500 million secured term loan B due 2022; 'BBB-/RR1'.

Additional information is available on www.fitchratings.com

Applicable Criteria

Corporate Rating Methodology - Including Short-Term Ratings and Parent and Subsidiary Linkage (pub. 17 Aug 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=869362

Rating Aircraft Enhanced Equipment Trust Certificates (pub. 12 Sep 2013)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=717763

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=991279

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=991279

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

View source version on businesswire.com: http://www.businesswire.com/news/home/20150924006123/en/

Fitch Ratings
Primary Analyst
Joe Rohlena, CFA, +1-312-368-3112
Director
Fitch Ratings, Inc.
70 W. Madison Street
Chicago, IL 60602
or
Secondary Analyst
Craig Fraser, +1-212-908-0310
Managing Director
or
Committee Chairperson
Stephen Brown, +1-312-368-3139
Senior Director
or
Media Relations
Alyssa Castelli, New York, +1-212-908-0540
[email protected]

Source: Fitch Ratings

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