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Wed, Jul 11, 2012

Delta To Lease Or Sublease AirTran 717s

Southwest Airlines, Delta Air Lines, and Boeing Capital Reach Agreement On The Airplanes

Southwest confirmed Monday that it, together with its subsidiary, AirTran Airways, has reached an agreement with Delta Air Lines and Boeing Capital to lease or sublease all 88 of AirTran's Boeing 717 aircraft to Delta. The Company will transition approximately three 717 aircraft per month beginning August 2013.

"We are pleased to have reached an agreement to transition AirTran's 717 fleet to Delta," said Gary Kelly, Chairman of the Board, President, and Chief Executive Officer. "Replacing 717 flying with 737s is expected to significantly benefit our financial results once the transition is complete, and better supports our strategic and financial goals. Obviously, having an all-Boeing 737 fleet improves our scheduling and operating efficiency. This was the best opportunity, far and away, to sublease the Boeing 717 aircraft."

By reaching this agreement, the Company will avoid converting the AirTran 717 fleet into Southwest as part of the AirTran integration. The Company's aircraft rent expense associated with Boeing 717s will be eliminated as each aircraft is transitioned to Delta. The Company's total estimated AirTran acquisition and integration costs are expected to increase by approximately $50 million as a result of the aircraft transition costs assumed by the Company as part of this 717 agreement. The Company's annual pre-tax results are expected to benefit by approximately $200 million, after all Boeing 717s are transitioned to Delta and replaced with Boeing 737 flying. Accounting for this third quarter transaction will be discussed during the Company's second quarter financial results conference call.

FMI: www.southwest.com, www.delta.com

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