ITEM 1.02 TERMINATION OF A MATERIAL DEFINITIVE AGREEMENT
On September 17, 2004, FLYi, Inc. (formerly known as Atlantic Coast Airlines Holdings, Inc.) (the "Company"), the Company's wholly-owned subsidiary Atlantic Coast Airlines ("ACA") and Delta Air Lines, Inc. ("Delta") entered into the Delta Connection Agreement Amendment Number Six (the "Amendment and Termination Agreement"). The Amendment and Termination Agreement amends and provides for the termination of the parties' fee-per-departure agreement whereby ACA operates as a Delta Connection carrier (the "Delta Connection Agreement"). The Company previously announced in a Form 8-K filed on April 7, 2004 that it had received formal notification from Delta that Delta would end its relationship with ACA by invoking its right under the Delta Connection Agreement to terminate without cause upon 180 days notice.
The Amendment and Termination Agreement provides for a transition and exit plan for all of ACA's Delta aircraft, which shall be completed on or before November 1, 2004. The Amendment and Termination Agreement provides that the last date of service for the ACA aircraft in the Delta Connection schedule is as follows:
Date - 328s Last Day of Operation
August 1, 2004 - 3
September 1, 2004 - 4
October 1, 2004 - 3
November 1, 2004 - 20
As previously disclosed, under the terms of the Delta Connection Agreement, upon Delta's termination without cause, ACA and the Company have the right to require Delta to assume the leases on up to 30 of the 33 328JET aircraft used in ACA's Delta Connection operation. ACA and the Company have exercised their right to require Delta to assume all 30 of these leases. The Amendment and Termination Agreement provides that the parties shall use their good faith efforts to consummate the assignment and assumption of these 30 leases at the termination of the Delta Connection Agreement. However, the Amendment and Termination Agreement provides that any delay will not relieve Delta of its obligations with respect to these lease assumptions. The Amendment and Termination Agreement also provides that the Delta Connection Agreement will terminate on the date that Delta notifies ACA that the conditions precedent to its obligations under these assignment agreements have been satisfied or waived.
Because Delta is expected to not be able to meet certain financial condition standards at the time Delta becomes obligated to assume the leases, unless such conditions are waived by lenders, the Company expects to remain obligated under the lease agreements should Delta default at any time prior to the lease expirations. If Delta files for bankruptcy, it could seek to reject its obligation to assume the leases under the Delta Connection Agreement or, depending on the timing of any such filing, to reject its obligation under any aircraft leases assumed by it. In connection with the Amendment and Termination Agreement, the parties established rates to be paid for ACA's participation in the Delta Connection program between January 1, 2004 and November 1, 2004. The Amendment and Termination Agreement also provides for the termination as of November 1, 2004 of ancillary agreements to the Delta Connection Agreement, including ground handling services, deicing, emergency services, information technology and other airport-related services and leases associated with the Delta Connection Agreement.
