General:
There is no doubt that there is a lot of negotiating going on behind the scenes. Unfortunately, Delta would need to get VERY favorable aggreements with aircraft leaseholders, lenders, bankers and the pilots to really have a chance to make it without a filing. Don't get me wrong, I hope they pull it off but I think it's a long-shot at this point. I hope I'm wrong. I think that management views Ch.11 as their only chance to eliminate things they feel need to go including DB pension plans, scope clauses and work rules they may view as overly restrictive. Also, aircraft lease holders may be willing to reduce lease rates outside of BK, but BK allows wholesale rejection of leases and elimination of unwanted airplanes. Depending on how things pan out with ACA the 328 fleet would be an example of this. Also, if you look at UAL and USAir the BK judges will agree to pretty much anything the management teams ask of them. This is very attractive to a management team......the ability to "get their own way" without any resistance. USAir got an emergency 21% pay cut for the unionized workers (this is AFTER the employees gave back a lot in the first reorganization) and now UAL is looking at eliminating the DB plans as well as rejecting the union labor agreements (also after the unions have agreed to previous concessions). It's getting to the point that all the management teams need to do is point to SWA, JetBlue or AirTran's CASM's and tell the judge what they think they need to be competitive and the judge signs off on it.
I think that odds of DAL remaining out of bankruptcy would be a lot better if fuel prices were declining and we were entering the historically strong quarters of the year, but this is not the case. Look at the DAL 3Q numbers and try to imagine how 4Q and 1Q will look without drastic cost reductions. A USAirways liquidation would also help DAL but I think that US will be able to limp along for a few months yet. Like it or not, the airline industry is caught in "the perfect storm" right now. All the ingredients for troubled times are upon us: sky-high fuel prices that continue to escalate coupled with overcapacity which prevents the fuel costs from being passed on to the consumers. For the majors you can add relentless, aggressive competition from discounters with much lower costs. I hope Delta manages to avoid a BK filing but I will be amazed if they do. I'm convinced that it will come sooner rather than later. At some point the cash will get to a point that the company can't AFFORD bankruptcy anymore and the risk of liquidation becomes much more real. I would think that for a company the size of DAL the cash balance must be getting near that point.