General Lee
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Delta Is on Track to Emerge
From Bankruptcy in May
By ANN KEETON
March 27, 2007 12:36 p.m.
CHICAGO -- Delta Air Lines Inc. is on track to emerge from bankruptcy on May 1, expecting to issue new shares in the airline in the first week of May, Ed Bastian, chief financial officer, said during an investor day conference Tuesday.
As is typical in a bankruptcy reorganization, current stock in the airline will become worthless when new shares are issued. To emerge from bankruptcy, the airline's financial plan needs to get approval in April from creditors representing two-thirds of the value of all claims. Mr. Bastian said he sees no problem in getting that approval.
Delta, the third-largest U.S. airline by passenger traffic, has posted annual losses since 2001. The airline said Tuesday that it expects to turn a profit in 2007, with pretax income of $816 million, excluding special and reorganization items.
Revenue per seat mile, a standard industry measure, is expected to grow 4% this year, Delta said, better than the projected 2007 industry growth rate of 1.5%.
So far this year, revenue from international business has been stronger than expected, Mr. Bastian said, which gives Delta the opportunity to generate better-than-expected passenger revenue this year.
Jim Whitehurst, chief operating officer, said Delta's long-term strategy is to increase revenue to equal the industry average, while keeping costs below the average. The airline, which has been challenged on the revenue side, expects to achieve parity with the industry by the end of 2008. Mr. Whitehurst said Delta is planning to improve customer satisfaction, while continuing to cut costs.
As it emerges from bankruptcy, Delta expects to reduce its adjusted net debt to $7.6 billion in 2007 from $17 billion in 2005.
Mr. Bastian said the airline expects to generate $5 billion of free cash in each of the next three years. Top priorities at the airline will be to update its fleet of aircraft, improve facilities in New York -- which is its second-largest hub airport after Atlanta -- and improve operations at its Delta Connections unit, Mr. Bastian said.
In particular, Delta is looking at buying new Boeing 787 aircraft. While Boeing is sold out of that aircraft model for the first few years of production, Mr. Bastian said Delta, as a top customer of Boeing, likely has some wiggle room for acquiring aircraft.
Mr. Bastian said Delta has completed plans for a long-term strategy at JFK International airport in New York City, but the airline "needs to be looking at alternatives" to its current facilities there, as competition heats up from other airlines. Delta's goal is to generate sustained profitability in the New York market, while holding the biggest market share at JFK and LaGuardia airports combined.
Mr. Bastian said Delta is looking at selling some assets, including its Comair regional carrier. Delta is on track for cutting costs, excluding fuel, by 27% since 2003, Mr. Bastian said.
Fuel cost, which averaged $2 a gallon in 2006, is expected to average $2.06 per gallon this year, Delta said. The airline has forecast that fuel will rise 5% per year.
Later this week, the airline expects to announce a board of directors. The board will look for a new chief executive to replace Gerald Grinstein, who has said he will leave the company after it emerges from Chapter 11. (See related article.)
Speaking at the conference Tuesday, Mr. Grinstein said Delta's creditors' committee will choose the 11-member board. At least three current board members will be included in the new group.
Mr. Grinstein has said he would like an internal candidate to succeed him as CEO. Messrs. Bastian and Whitehurst are seen as top contenders for the job. Delta this year fought a hostile takeover by US Airways Group Inc. Mr. Grinstein said he doesn't see airline-industry consolidation happening for a few years. When mergers do occur, Mr. Grinstein said he expects Delta to be an acquirer.
Bye Bye--General Lee
From Bankruptcy in May
By ANN KEETON
March 27, 2007 12:36 p.m.
CHICAGO -- Delta Air Lines Inc. is on track to emerge from bankruptcy on May 1, expecting to issue new shares in the airline in the first week of May, Ed Bastian, chief financial officer, said during an investor day conference Tuesday.
As is typical in a bankruptcy reorganization, current stock in the airline will become worthless when new shares are issued. To emerge from bankruptcy, the airline's financial plan needs to get approval in April from creditors representing two-thirds of the value of all claims. Mr. Bastian said he sees no problem in getting that approval.
Delta, the third-largest U.S. airline by passenger traffic, has posted annual losses since 2001. The airline said Tuesday that it expects to turn a profit in 2007, with pretax income of $816 million, excluding special and reorganization items.
Revenue per seat mile, a standard industry measure, is expected to grow 4% this year, Delta said, better than the projected 2007 industry growth rate of 1.5%.
So far this year, revenue from international business has been stronger than expected, Mr. Bastian said, which gives Delta the opportunity to generate better-than-expected passenger revenue this year.
Jim Whitehurst, chief operating officer, said Delta's long-term strategy is to increase revenue to equal the industry average, while keeping costs below the average. The airline, which has been challenged on the revenue side, expects to achieve parity with the industry by the end of 2008. Mr. Whitehurst said Delta is planning to improve customer satisfaction, while continuing to cut costs.
As it emerges from bankruptcy, Delta expects to reduce its adjusted net debt to $7.6 billion in 2007 from $17 billion in 2005.
Mr. Bastian said the airline expects to generate $5 billion of free cash in each of the next three years. Top priorities at the airline will be to update its fleet of aircraft, improve facilities in New York -- which is its second-largest hub airport after Atlanta -- and improve operations at its Delta Connections unit, Mr. Bastian said.
In particular, Delta is looking at buying new Boeing 787 aircraft. While Boeing is sold out of that aircraft model for the first few years of production, Mr. Bastian said Delta, as a top customer of Boeing, likely has some wiggle room for acquiring aircraft.
Mr. Bastian said Delta has completed plans for a long-term strategy at JFK International airport in New York City, but the airline "needs to be looking at alternatives" to its current facilities there, as competition heats up from other airlines. Delta's goal is to generate sustained profitability in the New York market, while holding the biggest market share at JFK and LaGuardia airports combined.
Mr. Bastian said Delta is looking at selling some assets, including its Comair regional carrier. Delta is on track for cutting costs, excluding fuel, by 27% since 2003, Mr. Bastian said.
Fuel cost, which averaged $2 a gallon in 2006, is expected to average $2.06 per gallon this year, Delta said. The airline has forecast that fuel will rise 5% per year.
Later this week, the airline expects to announce a board of directors. The board will look for a new chief executive to replace Gerald Grinstein, who has said he will leave the company after it emerges from Chapter 11. (See related article.)
Speaking at the conference Tuesday, Mr. Grinstein said Delta's creditors' committee will choose the 11-member board. At least three current board members will be included in the new group.
Mr. Grinstein has said he would like an internal candidate to succeed him as CEO. Messrs. Bastian and Whitehurst are seen as top contenders for the job. Delta this year fought a hostile takeover by US Airways Group Inc. Mr. Grinstein said he doesn't see airline-industry consolidation happening for a few years. When mergers do occur, Mr. Grinstein said he expects Delta to be an acquirer.
Bye Bye--General Lee
.........
ACL...give me a call!!
