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The Cincinnati Enquirer 10-27-04
Delta Air Lines is prepared to file for bankruptcy as soon as this eveningor Thursday morning if it doesn't reach a deal with its pilots union today, company sources said.
A bankruptcy would be one of the 10 largest in U.S. history.
Any filing would include Delta's Erlanger-based regional subsidiary Comair, the sources said Tuesday.
But a bankruptcy would raise the specter of more labor strife at both companies and would render Delta's stock essentially worthless - though it probably would have little impact on travelers.
Based on Delta's $26.4 billion in assets at the end of 2003, a filing would be the largest ever for an airline.
Delta, the third-largest U.S. carrier, has been talking with pilots at a fever pitch for the past week, trying to win $1 billion of annual concessions.
The union has publicly offered a deal it says is worth $705 million annually, but management has said that's not enough. Talks are expected to resume this morning outside Washington, D.C.
The company, which has lost $6.2 billion in the past three years, has said the pilot concessions - along with a restructuring of its debt - are needed to keep it off the Chapter 11 path already taken by United Airlines, US Airways and - as of Tuesday - discount carrier ATA.
Delta's talks gained urgency last week with announcement of a third-quarter loss of $646 million and a loss of $550 million in cash reserves.
Delta operates its second-largest hub at Cincinnati/Northern Kentucky International Airport. Together, Delta and Comair employs more than 8,000 workers here.
A Chapter 11 filing would not mean any disruption in service or immediate job cuts, the Atlanta-based company has promised, although Delta plans to eliminate 6,000 to 7,000 workers early next year as part of a previously announced restructuring. Many of those jobs will be cut when Delta closes its hub in Dallas/Fort Worth.
Bankruptcy would give control of the company to a judge and executor, and any major changes or restructuring plans would need their approval.
A Chapter 11 filing would destroy the value of Delta stock, because other creditors and debt holders would be first in line to get paid - moving shareholders to the rear and hurting Delta workers whose 401(k) retirement plans include the airline's stock.
The company has 125 million shares outstanding with a market value of about $581 million, down at least $4 billion since just before the 9/11 attacks. If Delta files bankruptcy, the stock would be delisted from the New York Stock Exchange. The company would issue new stock when and if it emerges from protection.
A bankruptcy also might give management at both Delta and Comair leverage to renegotiate labor contracts, since they could ask a judge to void the contracts altogether.
A 'logical' showdown
Neither Delta nor pilot union officials would discuss Tuesday's negotiations.
The union said talks went through the night Monday and continued until about 6 p.m. Tuesday, but it would not discuss specifics.
An infusion of cash, thanks to a $600 million loan from American Express Monday and the possibility of a pilot deal, prompted many analysts Tuesday to lowered the chances of Delta going to bankruptcy court. In response, Delta's shares rose 22.5 percent, closing at $4.63.
In addition, the company said it had won concessions from its 185-member flight dispatchers union, its only other unionized work force. No details were released.
Today's possible showdown "is logical to me, and it's already run on too long," said Calyon Securities analyst Ray Neidl.
"They could meet on the courthouse steps," he added, referring to a scenario that played out at American Airlines last year. American actually pulled up a truck full of bankruptcy papers to a court when its pilots union agreed to final concessions, avoiding a filing.
Comair preparing
The court's control would extend to Comair, which Delta bought for $1.91 billion in 2000, if Delta included it in the bankruptcy.
Comair officials would not comment on the chance of the company being included under Chapter 11. "As any prudent business would do, we are preparing for any contingency," spokesman Nick Miller said.
Union officials did not return phone calls seeking comment.
Late last year, Comair management asked its pilots and flight attendants, both the highest paid in the regional airline industry, for concessions. In return, Delta would guarantee that Comair would get new planes and new routes.
But the pilots union, which went on strike for 89 days in the spring of 2001, said no. As a result, Comair is not scheduled to expand its fleet next year.
Comair, the nation's third-largest regional airline, made a $23.1 million operating profit in the second quarter of 2004, Transportation Department statistics show.
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(Additional coverage at document.write("<a hr" + "ef='http://www.ajc.com/news/content/business/delta/1004/27delta.html' target=_top>"); http://www.ajc.com/news/content/business/delta/1004/27delta
Delta Air Lines is prepared to file for bankruptcy as soon as this eveningor Thursday morning if it doesn't reach a deal with its pilots union today, company sources said.
A bankruptcy would be one of the 10 largest in U.S. history.
Any filing would include Delta's Erlanger-based regional subsidiary Comair, the sources said Tuesday.
But a bankruptcy would raise the specter of more labor strife at both companies and would render Delta's stock essentially worthless - though it probably would have little impact on travelers.
Based on Delta's $26.4 billion in assets at the end of 2003, a filing would be the largest ever for an airline.
Delta, the third-largest U.S. carrier, has been talking with pilots at a fever pitch for the past week, trying to win $1 billion of annual concessions.
The union has publicly offered a deal it says is worth $705 million annually, but management has said that's not enough. Talks are expected to resume this morning outside Washington, D.C.
The company, which has lost $6.2 billion in the past three years, has said the pilot concessions - along with a restructuring of its debt - are needed to keep it off the Chapter 11 path already taken by United Airlines, US Airways and - as of Tuesday - discount carrier ATA.
Delta's talks gained urgency last week with announcement of a third-quarter loss of $646 million and a loss of $550 million in cash reserves.
Delta operates its second-largest hub at Cincinnati/Northern Kentucky International Airport. Together, Delta and Comair employs more than 8,000 workers here.
A Chapter 11 filing would not mean any disruption in service or immediate job cuts, the Atlanta-based company has promised, although Delta plans to eliminate 6,000 to 7,000 workers early next year as part of a previously announced restructuring. Many of those jobs will be cut when Delta closes its hub in Dallas/Fort Worth.
Bankruptcy would give control of the company to a judge and executor, and any major changes or restructuring plans would need their approval.
A Chapter 11 filing would destroy the value of Delta stock, because other creditors and debt holders would be first in line to get paid - moving shareholders to the rear and hurting Delta workers whose 401(k) retirement plans include the airline's stock.
The company has 125 million shares outstanding with a market value of about $581 million, down at least $4 billion since just before the 9/11 attacks. If Delta files bankruptcy, the stock would be delisted from the New York Stock Exchange. The company would issue new stock when and if it emerges from protection.
A bankruptcy also might give management at both Delta and Comair leverage to renegotiate labor contracts, since they could ask a judge to void the contracts altogether.
A 'logical' showdown
Neither Delta nor pilot union officials would discuss Tuesday's negotiations.
The union said talks went through the night Monday and continued until about 6 p.m. Tuesday, but it would not discuss specifics.
An infusion of cash, thanks to a $600 million loan from American Express Monday and the possibility of a pilot deal, prompted many analysts Tuesday to lowered the chances of Delta going to bankruptcy court. In response, Delta's shares rose 22.5 percent, closing at $4.63.
In addition, the company said it had won concessions from its 185-member flight dispatchers union, its only other unionized work force. No details were released.
Today's possible showdown "is logical to me, and it's already run on too long," said Calyon Securities analyst Ray Neidl.
"They could meet on the courthouse steps," he added, referring to a scenario that played out at American Airlines last year. American actually pulled up a truck full of bankruptcy papers to a court when its pilots union agreed to final concessions, avoiding a filing.
Comair preparing
The court's control would extend to Comair, which Delta bought for $1.91 billion in 2000, if Delta included it in the bankruptcy.
Comair officials would not comment on the chance of the company being included under Chapter 11. "As any prudent business would do, we are preparing for any contingency," spokesman Nick Miller said.
Union officials did not return phone calls seeking comment.
Late last year, Comair management asked its pilots and flight attendants, both the highest paid in the regional airline industry, for concessions. In return, Delta would guarantee that Comair would get new planes and new routes.
But the pilots union, which went on strike for 89 days in the spring of 2001, said no. As a result, Comair is not scheduled to expand its fleet next year.
Comair, the nation's third-largest regional airline, made a $23.1 million operating profit in the second quarter of 2004, Transportation Department statistics show.
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(Additional coverage at document.write("<a hr" + "ef='http://www.ajc.com/news/content/business/delta/1004/27delta.html' target=_top>"); http://www.ajc.com/news/content/business/delta/1004/27delta
