SAP Agrees To A 27% Reduction In Software Fees Charged To Bankrupt Delta Air Lines 2

Documents filed in bankruptcy court reveal that SAP has agreed to lower annual maintenance fees charged to Delta from $3,740,000 to $2,732,000 through the year 2009.

Paul McDougall, Editor At Large, InformationWeek

December 13, 2006

2 Min Read

Shareholders aren't the only ones who suffer when a company goes belly up. Often it's suppliers that take the biggest hit, and IT vendors aren't immune. Business software provider SAP has agreed to reduce fees charged to bankrupt carrier Delta Air Lines by $1 million per year, or 27%, according to court records.

Documents filed Tuesday in the United States Bankruptcy Court reveal that SAP has agreed to lower annual maintenance fees charged to Delta from $3,740,000 to $2,732,000 through the year 2009. The fees remain subject to annual increases of 2% in 2007 and 4% in 2008.

SAP has also agreed to drop all existing financial claims against the airline, "excluding claims for unauthorized use or disclosure of SAP proprietary information." According to the court records, Delta owed SAP $1,925 in consulting fees prior to filing for bankruptcy.

Delta uses SAP's ERP software for work relating to its "supply network, for business to business supply procurement and for spare parts management," according to the court records. Delta originally signed the licensing deal with SAP in 1999.

The court records indicate that Delta will resume paying to SAP maintenance fees "that conform to prevailing market rates" after 2009. The agreement needs final approval from the bankruptcy court. SAP officials weren't immediately available for comment.

SAP isn't the only tech vendor that could take a hit as a result of Delta's 2005 Chapter 11 bankruptcy filing.

Should US Airways' hostile takeover bid for Delta Air Lines succeed, it could result in the end of a major IT outsourcing deal Delta signed recently with IBM, according to a document obtained last month by InformationWeek.

In a letter to Delta CEO Gerald Grinstein dated Sept. 29, US Airways CEO Douglas Parker said that if Delta proceeds with IT outsourcing deals and other contracts, a merger with US Airways could be significantly devalued.

"If we defer a joint investigation of a potential merger, only to find many of the synergies are no longer achievable because of actions taken in support of a standalone plan, your stakeholders could lose significant potential value," Parker wrote.

In August, IBM said it had secured a seven-year IT infrastructure outsourcing deal from Delta. The value of that deal wasn't disclosed, but it's likely to be worth at least tens of millions of dollars.

About the Author(s)

Paul McDougall

Editor At Large, InformationWeek

Paul McDougall is a former editor for InformationWeek.

Never Miss a Beat: Get a snapshot of the issues affecting the IT industry straight to your inbox.

You May Also Like

More Insights