General Lee
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UPDATE 1-Delta, Continenal eye asset sales to boost cash
Fri May 13, 2005 02:57 PM ET
(Adds Continental CFO comments, updates share prices)
By Christian Plumb
NEW YORK, May 13 (Reuters) - Delta Air Lines Inc. (DAL.N: Quote, Profile, Research) and Continental Airlines Inc. (CAL.N: Quote, Profile, Research) are eyeing asset sales to bolster cash positions depleted by high fuel costs and tough competition, their finance chiefs said on Friday.
"Delta is not failing to plan, and we are certainly not planning to fail," the airline's Chief Financial Officer Michael Palumbo told an analyst conference. "We're looking at non-core assets and the overall efficiency of the leveraging of the collateral we have in place."
Assets of the No. 3 U.S. carrier, trying to avoid becoming the next to file for bankruptcy in an industry hurt by high fuel prices and competition from low-cost airlines, include regional carriers Comair and Atlantic Southeast Airlines.
Continental, another of the hardest-hit airlines, is still looking for buyers for assets including its 8.5 percent stake in regional feeder ExpressJet Airlines Inc. (XJT.N: Quote, Profile, Research) and its Continental Micronesia Inc. and Panamanian Copa Airlines units, its CFO said at the same conference.
"We're looking at that all the time," Jeffrey Misner said, referring to a sale of the units. "If we see an opportunity, we'll latch onto that relatively quick."
Delta's shares were up 1 cent at $2.78 in afternoon trading on the New York Stock Exchange, from all-time lows touched earlier this week. On Tuesday, the airline said it would not generate enough cash to meet its needs this year.
Continental shares were off 12 cents, or 1 percent, at $12.23. The Amex Airlines index was down 0.38 percent.
'TIPPING POINT'
Brokerage Raymond James Friday cut its rating on shares in Delta regional partner Skywest Inc. (SWYW.O: Quote, Profile, Research) citing increased risk of a Delta bankruptcy filing before the end of the year.
CFO Palumbo said Delta was striving to avoid bankruptcy by cutting costs and raising revenue by a combined $5 billion by the end of next year, but did not rule out following rivals United Airlines Inc. (UALAQ.OB: Quote, Profile, Research) and US Airways Group Inc. (UAIRQ.OB: Quote, Profile, Research) into Chapter 11.
"We have a plan that is designed to be executed outside of the statutory process," he said, referring to bankruptcy.
Palumbo added that he believes there is a "tipping point" for oil prices at about $45 a barrel beyond which no airline including Delta could make money.
Delta's business plan would allow it to eventually turn a profit at $40 to $45 a barrel, he said. U.S. crude oil futures on Friday fell to $48.50 a barrel, off three-month lows.
Delta is not counting on lower fuel prices, though, and is "implementing plans to dig deeper" to find additional cost cuts, Palumbo said.
Continental's Misner reiterated that the Houston-based carrier would like to maintain its unrestricted cash at around $1.5 billion, slightly above the $1.38 billion it had at the end of the first quarter. Delta had $1.8 billion in unrestricted cash at the end of the quarter.
"The problem is we've learned you can have some pretty big shocks in this industry...and you can go through the cash pretty quick," Misner said.
Bye Bye--General Lee
Fri May 13, 2005 02:57 PM ET
(Adds Continental CFO comments, updates share prices)
By Christian Plumb
NEW YORK, May 13 (Reuters) - Delta Air Lines Inc. (DAL.N: Quote, Profile, Research) and Continental Airlines Inc. (CAL.N: Quote, Profile, Research) are eyeing asset sales to bolster cash positions depleted by high fuel costs and tough competition, their finance chiefs said on Friday.
"Delta is not failing to plan, and we are certainly not planning to fail," the airline's Chief Financial Officer Michael Palumbo told an analyst conference. "We're looking at non-core assets and the overall efficiency of the leveraging of the collateral we have in place."
Assets of the No. 3 U.S. carrier, trying to avoid becoming the next to file for bankruptcy in an industry hurt by high fuel prices and competition from low-cost airlines, include regional carriers Comair and Atlantic Southeast Airlines.
Continental, another of the hardest-hit airlines, is still looking for buyers for assets including its 8.5 percent stake in regional feeder ExpressJet Airlines Inc. (XJT.N: Quote, Profile, Research) and its Continental Micronesia Inc. and Panamanian Copa Airlines units, its CFO said at the same conference.
"We're looking at that all the time," Jeffrey Misner said, referring to a sale of the units. "If we see an opportunity, we'll latch onto that relatively quick."
Delta's shares were up 1 cent at $2.78 in afternoon trading on the New York Stock Exchange, from all-time lows touched earlier this week. On Tuesday, the airline said it would not generate enough cash to meet its needs this year.
Continental shares were off 12 cents, or 1 percent, at $12.23. The Amex Airlines index was down 0.38 percent.
'TIPPING POINT'
Brokerage Raymond James Friday cut its rating on shares in Delta regional partner Skywest Inc. (SWYW.O: Quote, Profile, Research) citing increased risk of a Delta bankruptcy filing before the end of the year.
CFO Palumbo said Delta was striving to avoid bankruptcy by cutting costs and raising revenue by a combined $5 billion by the end of next year, but did not rule out following rivals United Airlines Inc. (UALAQ.OB: Quote, Profile, Research) and US Airways Group Inc. (UAIRQ.OB: Quote, Profile, Research) into Chapter 11.
"We have a plan that is designed to be executed outside of the statutory process," he said, referring to bankruptcy.
Palumbo added that he believes there is a "tipping point" for oil prices at about $45 a barrel beyond which no airline including Delta could make money.
Delta's business plan would allow it to eventually turn a profit at $40 to $45 a barrel, he said. U.S. crude oil futures on Friday fell to $48.50 a barrel, off three-month lows.
Delta is not counting on lower fuel prices, though, and is "implementing plans to dig deeper" to find additional cost cuts, Palumbo said.
Continental's Misner reiterated that the Houston-based carrier would like to maintain its unrestricted cash at around $1.5 billion, slightly above the $1.38 billion it had at the end of the first quarter. Delta had $1.8 billion in unrestricted cash at the end of the quarter.
"The problem is we've learned you can have some pretty big shocks in this industry...and you can go through the cash pretty quick," Misner said.
Bye Bye--General Lee
