Delta on track to emerge as planned
October 2, 2006
Delta marked the one-year anniversary of our Chapter 11 filing last month. After many changes and much progress, Ed Bastian, chief financial officer, told reporters there are still a few things that must be accomplished this year. But compared to the United Airlines bankruptcy process, Delta is doing quite well.
“United took three and a half years to get through bankruptcy,” Ed told a reporter from the Salt Lake City Tribune. “If we get out as we’ve said, in the first half of 2007, it would be roughly 18 to 21 months. I think we’re doing quite well.”
Q: In a letter to employees, Gerald Grinstein said Delta’s ahead of schedule. Where did you expect to be?
A. We were anticipating having roughly $2 billion of the $3 billion of transformation benefits in place by the end of 2006. The thing that’s working beyond expectations is the revenue environment. It’s proven to be more robust and has provided us some additional liquidity and helped the overall financial condition of the company.
Q: Can you sketch out what Delta is becoming compared to what it was?
A: Delta is becoming a much more global company. We were a heavily concentrated U.S. domestic airline. We were more heavily invested in our U.S. marketplace than our network peers and we’re becoming a much more global company as a result of that. I think you’ll see Delta becoming a much more aggressive competitor in the U.S. marketplace.
Q: What kind of revenue do you expect from international versus domestic?
A: Our goal is to try to get to more of a 60 percent domestic, 40 percent international. When we started restructuring it was 80 domestic and 20 percent international.
Q: I’m wondering how the volatility [in the industry] has changed anything as you’ve tried to restructure.
A: We’ve utilized Chapter 11 for Delta to reduce some of that volatility. When we filed for Chapter 11, we said we had to reduce our debt. We had over $20 billion in debt. By the time this process is over, I expect that debt to be down significantly.
Q: Is the hardest work behind you or is the hardest work still ahead?
A: I think it’s different work. I think we’ve moved now into a new phase of the [bankruptcy] case and that’s going to be managing the exit from bankruptcy. We have clearly, as you can see from our numbers this summer, returned the operation to a profit, and that’s a very big deal. That’s a huge accomplishment. We’re not yet to the point, though, that we can say we’ve got a sustained profit level for all months of the year.
Q: In terms of airline bankruptcies, is this one going any more smoothly than others? Are you ahead of the curve, behind the curve, or right in the middle?
A: I think we’re doing quite well. Just because it’s an airline bankruptcy doesn’t mean that there’s one template that fits all. Every airline has different issues and different aircraft. There are a lot of conflicting priorities and constituents, and it takes a tremendous amount of work to navigate the landscape while, at the same time, you’re still trying to run the business. What’s important is that you turn the business around at the same time so that you can exit bankruptcy, because it would not be prudent to exit bankruptcy until the business has been turned.
Q: Do you think you’re over the hump, so to speak?
A: No. We’ll be over the hump when we emerge from bankruptcy.
October 2, 2006
“United took three and a half years to get through bankruptcy,” Ed told a reporter from the Salt Lake City Tribune. “If we get out as we’ve said, in the first half of 2007, it would be roughly 18 to 21 months. I think we’re doing quite well.”
Q: In a letter to employees, Gerald Grinstein said Delta’s ahead of schedule. Where did you expect to be?
A. We were anticipating having roughly $2 billion of the $3 billion of transformation benefits in place by the end of 2006. The thing that’s working beyond expectations is the revenue environment. It’s proven to be more robust and has provided us some additional liquidity and helped the overall financial condition of the company.
Q: Can you sketch out what Delta is becoming compared to what it was?
A: Delta is becoming a much more global company. We were a heavily concentrated U.S. domestic airline. We were more heavily invested in our U.S. marketplace than our network peers and we’re becoming a much more global company as a result of that. I think you’ll see Delta becoming a much more aggressive competitor in the U.S. marketplace.
Q: What kind of revenue do you expect from international versus domestic?
A: Our goal is to try to get to more of a 60 percent domestic, 40 percent international. When we started restructuring it was 80 domestic and 20 percent international.
Q: I’m wondering how the volatility [in the industry] has changed anything as you’ve tried to restructure.
A: We’ve utilized Chapter 11 for Delta to reduce some of that volatility. When we filed for Chapter 11, we said we had to reduce our debt. We had over $20 billion in debt. By the time this process is over, I expect that debt to be down significantly.
Q: Is the hardest work behind you or is the hardest work still ahead?
A: I think it’s different work. I think we’ve moved now into a new phase of the [bankruptcy] case and that’s going to be managing the exit from bankruptcy. We have clearly, as you can see from our numbers this summer, returned the operation to a profit, and that’s a very big deal. That’s a huge accomplishment. We’re not yet to the point, though, that we can say we’ve got a sustained profit level for all months of the year.
Q: In terms of airline bankruptcies, is this one going any more smoothly than others? Are you ahead of the curve, behind the curve, or right in the middle?
A: I think we’re doing quite well. Just because it’s an airline bankruptcy doesn’t mean that there’s one template that fits all. Every airline has different issues and different aircraft. There are a lot of conflicting priorities and constituents, and it takes a tremendous amount of work to navigate the landscape while, at the same time, you’re still trying to run the business. What’s important is that you turn the business around at the same time so that you can exit bankruptcy, because it would not be prudent to exit bankruptcy until the business has been turned.
Q: Do you think you’re over the hump, so to speak?
A: No. We’ll be over the hump when we emerge from bankruptcy.
