Delta Air Lines, Inc.

Order 04-01-7
OST-03-15944 - Exemption Permitting Use of Letter of Credit in Lieu of Surety Bond

Issued and Served January 12, 2004

Order Amending Exemption | Word

By Order 2003-11-16, issued November 19, 2003, we granted Delta Air Lines, Inc., a U.S. direct air carrier holding a certificate issued under 49 U.S.C. 41102, a one-year exemption from the requirements of 14 CFR 212.8(c), subject to a variety of stated conditions, to permit Delta's use of a standby letter of credit in lieu of a bond to protect charter customer payments and to guarantee the performance of charter flights it undertakes.

After consulting with the Department on December 4, 2003, Delta submitted a revised letter of credit and revised drawing certificate for our consideration. See OST-2003-15944-04. We are persuaded that, together with the exemption conditions being imposed, Delta's revised letter of credit (coupled with the revised drawing certificate) offers at least as much protection as provided by a bond under section 212.8(c), and, accordingly, we amend Order 2003-11-16 in three respects, none of which substantively affects our analysis provided therein.

First, we amend ordering paragraph lb. of Order 2003‑11‑16 to eliminate the requirement that the letter of credit itself include a statement that, in the event that the agreement does not otherwise provide protection comparable to that provided under a bond, the bank shall assume for the benefit of customers and participants all liabilities it would have if it entered into such a bond. Instead, we substitute a simpler explicit requirement that the letter of credit used by Delta must provide protections comparable to the protections provided by a bond.

Second, we amend ordering paragraph id. of Order 2003-11-16 to eliminate as unnecessary the requirement that a copy of the letter of credit be provided to customers upon request. We believe that providing notice to each charter customer that a letter of credit is being used in lieu of a bond to provide financial protection is sufficient to inform charter customers of the nature and consequences of Delta's substitution. We therefore retain the notice requirement.

Third, we amend Order 2003‑11‑16 to eliminate ordering paragraph i.e. in view of the inherent protections afforded by a letter of credit and the language of new ordering paragraph i.b. herein.

As stated in Order 2003‑ii‑i6, the exemption granted by this order does not relieve Delta of its regulatory duty, under 14 CFR 212.3(f), to return to his or her point of origin any roundtrip charter passenger who received the outbound portion of such transportation under this exemption.

By: Karan Bhatia