Delta CEO: Transformation Plan Not Enough

[HenryTo]

DAL tanking quite a bit as I am typing this...
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Delta CEO: Transformation Plan Not Enough
Wednesday July 27, 11:24 am ET
By Harry R. Weber, AP Business Writer
Delta CEO Says Transformation Plan Is Not Enough to Save the Struggling Airline


ATLANTA (AP) -- Delta Air Lines Inc.'s transformation plan, which includes cutting annual costs by $5 billion by the end of next year, is not enough to save the struggling carrier, its chief executive said in a memo to employees that addressed renewed concerns about bankruptcy.

CEO Gerald Grinstein said in Tuesday's memo, which was obtained Wednesday by The Associated Press, that the nation's third-largest airline is still working hard to avoid a Chapter 11 filing, but he reiterated there are risks affecting Delta's ability to do that.

"In light of what we have accomplished together so far, there can be no doubt that Delta's transformation plan is delivering results," Grinstein said. "What is also clear is that is not enough."

Grinstein, citing the impact of high fuel prices and the interest expense on the company's massive debt, said Delta plans to expand its initiatives to cut costs, improve efficiencies and raise cash.

"Given our financial situation, there is renewed speculation about bankruptcy," Grinstein told employees. "We have been candid about the risk that a number of factors, some of which are beyond our control, will affect our ability to avoid a Chapter 11 filing. However, we are still working to pursue an out-of-court solution, even as we face increasing financial pressure."

Last week, Atlanta-based Delta reported a $388 million second-quarter loss, pushing its red ink to nearly $10 billion since early 2001.

Some analysts have speculated that if Congress doesn't pass meaningful pension funding reform by the fall, Delta will be forced into bankruptcy. But Grinstein has noted that the airline has other equally pressing concerns, including hefty fuel costs.

In the memo, Grinstein acknowledged that it may be puzzling to Delta employees that, despite high fuel prices, several other legacy carriers who face the same problem as Delta were able to post modest profits in the second quarter.

"What's going on?" Grinstein said. "Simply put, it is in large part a matter of timing and competitive market challenges unique to Delta."

Also Wednesday, Delta said it is now offering customers who buy their tickets on the airline's Web site the ability to cancel certain tickets within 24 hours of purchase without penalty if they find lower fares on another carrier or if their travel plans change.

Many airlines charge fees for ticket changes.

Delta shares fell 40 cents, or 11.8 percent, to $2.99 in morning trading Wednesday on the New York Stock Exchange.

[HenryTo]

Looks like the end is near for Delta - at least for the shareholders anyway...
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Delta exploring bankruptcy financing -NYT
Saturday August 13, 1:34 am ET

NEW YORK (Reuters) - Delta Air Lines (NYSE:DAL - News) has begun arranging the financing it would need should it seek bankruptcy protection, The New York Times reported on Saturday.

Citing "people with direct knowledge of Delta's actions," the Times reported that Wall Street analysts, industry executives and finance experts said the troubled airline could seek the protection within weeks.

The Atlanta-based airline is holding the discussions with lenders including GE Commercial Finance, which provided restructuring money in 2004, the Times said, citing both airline employees and members of the financial community. It said GE Commercial declined to comment.

The No. 3 domestic airline is also exploring selling or refinancing its commuter lines, Comair and Atlantic Southeast Airlines, and is seeking more savings from employees, according to the report.

The Times also said that Delta officials had acknowledged that it needed to be financially prepared for a filing, which legal experts expected would occur in New York, although a final decision was not imminent.

Delta, like the rest of the industry, has been battered by skyrocketing oil prices.

On Aug. 29 the airline's credit card processing agreement, which covers critical MasterCard and Visa transactions, will expire. Delta said on Tuesday it was trying to lower the amount of money it needs to pay up front to secure a new credit card processor.

People close to the talks say Delta is being asked to set aside $300 million to $800 million, but the airline did not comment on the figures, the Times said.

[HenryTo]

How much further can this play out? Given that DAL loses $25 million in liquidity on an annual basis for every 36-cent rise in the price of crude oil - probably not long.
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Delta Stock Falls to 43-Year Low
Tuesday August 2, 6:34 pm ET
Delta Stock Falls to 43-Year Low As Air Carrier Tries to Right Itself Amid Bankruptcy Fears

ATLANTA (AP) -- Delta Air Lines Inc.'s stock fell to a 43-year low Tuesday as the nation's third-largest carrier tries to right itself amid persistent fears about bankruptcy.
Company shares fell 44 cents, or 14.8 percent, to close at $2.53 in heavy trading on the New York Stock Exchange.

That's Delta's lowest close since the University of Chicago business school's Center for Research in Security Prices began tracking such data in 1962, said Alan Myers, the center's director of database research.

Delta's previous low was set May 11, when its stock closed at $2.74.

Last month, Atlanta-based Delta reported a $388 million loss for the second quarter, and has lost nearly $10 billion and announced 23,000 job cuts since January 2001. Chief Executive Gerald Grinstein said in a memo to employees last week that the company's current transformation plan, which includes cutting annual costs by $5 billion by the end of next year, isn't enough to save the struggling carrier.

Grinstein said Delta is still working hard to avoid a Chapter 11 filing, but he reiterated there are risks affecting the airline's ability to do that.

"The window of opportunity is closing," airline analyst Ray Neidl of Calyon Securities said Tuesday.

Bear Stearns analyst David Strine said in a research note Friday that based on an analysis of the rate at which Delta is burning cash, there is a high probability of a Chapter 11 filing by Delta by the fourth quarter of this year.