Delta Air Lines Outsources Technology Operations To IBM

Delta Air Lines will turn over the bulk of its back-office computer operations to IBM under a seven-year outsourcing agreement that Delta hopes will contribute to the savings it needs to successfully emerge from Chapter 11 bankruptcy. Financial terms of the deal, disclosed Monday by IBM, weren't released.

Delta originally asked the U.S. bankruptcy court for permission to strike the outsourcing deal on Aug. 8. According to court records, the airline wants IBM to assume operation of the computers and software that support Delta's customer reservations, business record-keeping, flight management, and maintenance tracking systems. Delta chose IBM after a "lengthy evaluation" of competing outsourcers, according to court documents.

Delta is looking to reduce annual operating costs by $3 billion by the first half of 2007, when it plans to emerge from bankruptcy. The company filed for Chapter 11 in September 2005.

In its court filing, Delta said it expects the outsourcing agreement with IBM to yield "significant cost savings," but it didn't provide specific figures. The deal will also let Delta concentrate more fully on its main line of business. "Delta can focus its restructuring efforts on air transportation," the company said in the court filing.

About 200 Delta IT workers are expected to transfer to IBM as part of the deal, according to an IBM spokesman. Delta officials weren't immediately available for comment.

Delta's agreement with IBM is the second major technology outsourcing deal this year involving a major U.S. airline. In January, United Airlines inked a 10-year desktop and infrastructure management deal with Electronic Data Systems.