lowecur
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As the stock price continues to climb, DL officials warned yesterday that BK is still a possibility. High fuel prices are the main culprit, but any glitches in the two loans from American Express or GE could also trigger a Chapt 11.
Although not discussed here, it should be noted that the PBGC increased it's fiscal year deficit on 9/30/04 to $23.3B. Most of this is due to the projected $8.5B bailout of UAL and UAIR, that must be included in the $23.3B. Trying to determine what will cause less distress to the taxpayers is difficult: Bailing out the airlines with the PBGC will certainly include DL and AMR as they will definitely file Chapt 11 in order to get rid of their pensions, which in turn will help their ability to compete. This precident will then allow other companies in other industrys to also file Chapt 11, thus ballooning the PBGC to a catastrophic record deficit. The other alternative is to just refuse UAL and UAIR the right to jettison their pensions. This move would probably lead to liquidation of UAL, and put 70,000 employees on the street in 2005. UAIR may survive, and AMR and DL would probably get a short term infusion of badly needed profits as capacity shrinks. The ability of these remaining legacys to continue to morph toward the LCC's will eventually determine their fate.
Bankruptcy still possible at Delta [font=arial,helvetica]
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By Alexander Coolidge
Post staff reporter
Even after squeezing $1 billion in annual savings from its pilots union, Delta Air Lines said Monday it can't rule out bankruptcy if fuel prices don't drop or if recent loan deals fall through.
Management at Cincinnati's dominant carrier said their turnaround plan counts on oil prices falling to $40 a barrel in 2005 and $35 in 2006. However, if prices remain at their current level -- about $50 per barrel -- the company will need to raise another $600 million next year and $900 million in 2006 to keep operating.
The company said it might not be able to raise the additional money, which would force a bankruptcy filing.
Delta also warned in a government filing Monday that even if it meets its goal of saving $5 billion a year by 2006, it could still be forced into bankruptcy.
"Even if we achieve all of the approximately $5 billion in annual benefits we are targeting, since our industry has been subject to progressively increasing competitive pressure, we may need even greater cost savings," the company said. "We cannot assure you that these anticipated benefits will be achieved or that if they are achieved that they will be adequate for us to maintain financial viability."
Delta, which employs 8,000 in Greater Cincinnati, has lost almost $6.3 billion since the end of 2000.
While business partners American Express and General Electric have offered Delta more than $1 billion in loans in the coming months, the Atlanta-based airline said any potential snag with the financing could also prompt it to file Chapter 11.
"The foregoing initiatives are part of our intensive effort to effect a successful out-of-court restructuring, but there can be no assurance this effort will succeed," the company said.
Delta officials identified high fuel prices and a relentlessly competitive environment as the major stumbling blocks that could still trip up the company. With expenditures at more than $2 billion, the airline spent more on fuel in the first three quarters of 2004 than it did in all of 2003.
Last week, Delta won a major battle when its pilots union ratified a five-year contract that cut their annual pay by almost a third and slashed other benefits. The pilot cuts were part of a plan Delta executives outlined this fall to slash $5 billion worth of annual costs by 2006. Among other cuts: up to 7,000 jobs the next 18 months; the elimination of Dallas/Fort Worth as a hub by Jan. 31; and a 10-percent pay cut and benefit reductions for employees starting Jan. 1.
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Although not discussed here, it should be noted that the PBGC increased it's fiscal year deficit on 9/30/04 to $23.3B. Most of this is due to the projected $8.5B bailout of UAL and UAIR, that must be included in the $23.3B. Trying to determine what will cause less distress to the taxpayers is difficult: Bailing out the airlines with the PBGC will certainly include DL and AMR as they will definitely file Chapt 11 in order to get rid of their pensions, which in turn will help their ability to compete. This precident will then allow other companies in other industrys to also file Chapt 11, thus ballooning the PBGC to a catastrophic record deficit. The other alternative is to just refuse UAL and UAIR the right to jettison their pensions. This move would probably lead to liquidation of UAL, and put 70,000 employees on the street in 2005. UAIR may survive, and AMR and DL would probably get a short term infusion of badly needed profits as capacity shrinks. The ability of these remaining legacys to continue to morph toward the LCC's will eventually determine their fate.
Bankruptcy still possible at Delta [font=arial,helvetica]
[font=ARIAL,HELVETICA][font=arial,helvetica]
By Alexander Coolidge
Post staff reporter
Even after squeezing $1 billion in annual savings from its pilots union, Delta Air Lines said Monday it can't rule out bankruptcy if fuel prices don't drop or if recent loan deals fall through.
Management at Cincinnati's dominant carrier said their turnaround plan counts on oil prices falling to $40 a barrel in 2005 and $35 in 2006. However, if prices remain at their current level -- about $50 per barrel -- the company will need to raise another $600 million next year and $900 million in 2006 to keep operating.
The company said it might not be able to raise the additional money, which would force a bankruptcy filing.
Delta also warned in a government filing Monday that even if it meets its goal of saving $5 billion a year by 2006, it could still be forced into bankruptcy.
"Even if we achieve all of the approximately $5 billion in annual benefits we are targeting, since our industry has been subject to progressively increasing competitive pressure, we may need even greater cost savings," the company said. "We cannot assure you that these anticipated benefits will be achieved or that if they are achieved that they will be adequate for us to maintain financial viability."
Delta, which employs 8,000 in Greater Cincinnati, has lost almost $6.3 billion since the end of 2000.
While business partners American Express and General Electric have offered Delta more than $1 billion in loans in the coming months, the Atlanta-based airline said any potential snag with the financing could also prompt it to file Chapter 11.
"The foregoing initiatives are part of our intensive effort to effect a successful out-of-court restructuring, but there can be no assurance this effort will succeed," the company said.
Delta officials identified high fuel prices and a relentlessly competitive environment as the major stumbling blocks that could still trip up the company. With expenditures at more than $2 billion, the airline spent more on fuel in the first three quarters of 2004 than it did in all of 2003.
Last week, Delta won a major battle when its pilots union ratified a five-year contract that cut their annual pay by almost a third and slashed other benefits. The pilot cuts were part of a plan Delta executives outlined this fall to slash $5 billion worth of annual costs by 2006. Among other cuts: up to 7,000 jobs the next 18 months; the elimination of Dallas/Fort Worth as a hub by Jan. 31; and a 10-percent pay cut and benefit reductions for employees starting Jan. 1.
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