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Saturday, May 29, 2004
Delta takes another step toward bankruptcy
Delta Air Lines Inc. seemed another step closer to its threat of bankruptcy yesterday as the company hired investment bank Blackstone Group, while bondholders and vendors allied themselves in preparation for a possible Chapter 11 filing by the airline.
Delta, the third-largest U.S. airline, is working with Blackstone among other advisers to help "with all aspects of our business reassessment and planning efforts," said spokeswoman Peggy Estes.
Saybrook Capital, which is advising United Airlines' creditors, was contacted by dozens of Delta debtors for guidance on the airline's finances, partner Jonathan Rosenthal said.
The Atlanta-based carrier is an important Boeing Co. customer and still has a number of Boeing jets on order. Since the Sept. 11, 2001, terrorist attacks, Delta has worked with Boeing to defer some of those orders until later. But a bankruptcy filing could result in cancellations.
Delta still has 61 Boeing 737s and five 777s on order, according to Boeing's Web site.
Delta also is buying 48 aircraft from Montreal-based Bombardier Inc., representing 18 percent of the manufacturer's backlog of 262 commercial aircraft as of last month. The planes are regional jets, which have 70 or fewer seats, that Delta uses at its commuter carrier affiliates.
Delta said May 10 that it may be forced to seek bankruptcy protection if it can't reduce costs, stem losses and raise capital. The company asked pilots, its only unionized work group, to take a 30 percent pay cut to help reduce labor costs. Delta had $3.26 billion in losses the past three years.
"While it's uncertain whether the company will file or not, these creditors have felt that it's prudent to organize in advance to stay on top of the issues," Rosenthal said from Santa Monica, Calif.
"The entire U.S. airline industry, including Delta is under substantial pressure as a result of high costs including fuel," said Moody's analyst Richard Bittenbender. "Both debtors and creditors logically need to consider a variety of possible outcomes."
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