Delta now in negative equity numbers

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NEW YORK (Reuters) - Delta Air Lines Inc. (NYSEAL - News) on Wednesday said its fourth-quarter loss would be at least 50 percent larger than previously forecast because of pension plan charges caused by a large jump in pilot retirements.

The No. 3 U.S. airline, which has been in tense negotiations with its pilots over proposed contract changes, said the $140 million non-cash charge would increase its expected loss to a range of $365 million to $415 million from its previous estimate of $225 million to $275 million.

The Atlanta-based airline also said it would book an after-tax charge to shareholders equity of $700 million connected to pension plan obligations.

Additionally, it will suspend dividends on a series of convertible stock in its employee stock option plan. Going forward, it will also redeem shares of the series B ESOP convertible preferred stock with Delta common shares rather than cash.

As a result of the expected loss and the charge to shareholders equity, Delta said it expects to finish the year with negative equity of $600 million.

Delta said about 620 pilots retired during the 12 months ended Sept. 30, more than twice the average rate of pilot retirements during the three previous years.

Shares of Delta closed at $12.42 on Tuesday on the New York Stock Exchange

Delta expects to end the year worth 1/2 Bn in negative equity. Any Comair, or ASA, cost concessions are like bailing out the Titanic with a teaspoon. The eight million of requested Comair Concessions over the life of the contract is just 1% of the company's additional pension obligations this year.

Although there are no official rumors of ASA and Comair being sold, Delta is going to have to begin selling off profitable portions of the Company, or declare bankruptcy. Anyone know how large the remaining stake on Orbitz is?

An ASA / Comair sale makes sense for Delta, but makes little sense for shareholders. After all, what are ASA and Comair without Delta? Neither company has the ability to operate separate from Delta and yet even more infastructure is being consolidated (according to Mr. Barnetts comments regarding new technology at the State of the Company meetings). Also, would the sale of ASA and Comair net more than Delta paid, even though the operations have doubled by a measure of RSM's? The fleet has not grown that much and the RJ's produce less of a marginal profit than the turboprops did.

I'm curious what other thoughts are out there. Negative equity is a milestone and something has to be done much differently that the way the operation is run now.

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[lowecur]

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It looks like the handwriting is on the wall. LM will use the bankruptcy threat as leverage against DALPA if a renegotiated contract is not signed. I don't see them selling anymore assets, particularly DCI. As cantankerous as the Comair situation is, it is still profitable. LM will just continue to slowly shrink Comair, hoping their pilots give in.

DALPA still has hard nosed leadership, and will try and get LM and his gang to relinquish the retirement deal. It's a real Mexican standoff, and one that will get resolved by the year end with both parties giving a little.

 

[General Lee]

Give me a break Fins. We still have over $2.9 billion in unrestricted cash on hand. And, I just read on the Dalpa.net that DCI just asked for a proposals for 45 more 50 seat RJs---to be delivered in 2005. Where did they get the money for that? (How about selling orders for 10 737-800s) It's obviously all the pilots fault---even though we are the only union on the property. ( I guess they can't squeeze any more money out of anyone else--like managment) The economy is getting better, and the loads will increase for the holidays and Spring/Summer. Dalpa is still negotiating with them right now---and there probably will be some sort of deal---but to blame too many pilots for leaving---what do you expect when your retirment is based off of the Gatt rate and it was the lowest ever (meaning higher lump sums) on Sept 1st???? I guess they all should have stayed for the team?

Bye Bye--General Lee

 

[Heavy Set]

Leo is a financial wizzard - he could refinance anything if required given his banking connections. The General is right - DAL has a lot of cash on hand. No question that the DAL pilots will probably need to take a slight pay cut, but the management and other labor groups will need to take a hit as well.... The economy is improving, Song is growing, more lucrative international travel is improving - there are positive signs out there if you are looking... It's not all doom and gloom.

Just my $0.02

 

[~~~^~~~]

Give me a break Fins. We still have over $2.9 billion in unrestricted cash on hand. And, I just read on the Dalpa.net that DCI just asked for a proposals for 45 more 50 seat RJs---to be delivered in 2005. Where did they get the money for that? (How about selling orders for 10 737-800s) Bye Bye--General Lee

You sold the 737-800 deliveries at a loss of 11 million if memory serves me correctly. The RJ's have to come with their own financing, or they don't come. This might be another factor in their going to an non-owned, similar to the situation at US Air.

All early indications are that they will go to CHQ, or MESA. The E145 is marginally less expensive to operate.

 

[FLB717]

DAL Folks,
If your managment wants you to believe that they are smart let them prove it by taking a larger cut than you. They earned it. Tie all of your concessions to Mgt cuts also. So you all benifit in a rebound together. Thats what we did at AAI. keeps them honest.

 

[General Lee]

FLB,

Dalpa is trying to do that, but I didn't see that type of statement in the last MEC letter. I hope they don't cave in, but right now I don't know what will happen. Things are getting better in the economy, Song is growing, and the INTL traffic and higher fares will be coming back for the upcoming Summer (Olympics in Greece will help too). SO, I hope Dalpa can see the positives and not only the negatives.....

Bye Bye--General Lee

 

[Bill Mostellar]

We will only show a profit when Leo wants us to show a profit. He can move the money around as he sees fit among the 'airlines' within the portfolio and accelerate or delay payments as needed.

This is nothing more than 'spin' for concessions.

 

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Bill :

Your response is so typical of your bargaining unit. I guess Eastern is still spinning those numbers, huh?

Even your own union has told you this is not spin. I heard Mike Pinho say ALPA's Economic Analysis team CONFIRMED the Delta numbers on August 1st and your representatives have had another look since then. He then went on to elaborate that his membership did not believe management was being honest and that he had a duty to represent his membership.

Denial is not a river in Egypt.

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[General Lee]

Fins,

So, everything will continue to get worse, right? The economy will not help. Fuel prices will continue to go up? Song will not do better, even though it growing and getting more popular? The talk of adding back 8-10% capacity next year to meet projected demand is probably wrong? Things will only decline from now on, right Fins? Come on! Things are getting better on the economic front---and people are returning to airplanes. The extra loss this quarter was a fluke, because 281 Capts will probably not retire on one day again. I think you need a colonic and to relax. (this is all coming from your friend--General Lee )

Bye Bye--General Lee

 

[Heavy Set]

How can you relax with a colonic? Not me... I wouldn't be surprised if Leo and Orenstein shared their notes on "creative" negotiations...

 

[ATR-DRIVR]

THAT woud not suprise me.

 

[General Lee]

Heavy set,

You can't relax with a colonic? It Feels SOOOOO Good. My wife gives me one every Tues night.........not. (or maybe so...?)

Bye Bye--General Lee