Did anyone else read this staright from CNN.com
Delta shares sink on CEO comments
Grinstein says airline's restructuring plan isn't enough to save it from Ch. 11, shares nosedive.
July 27, 2005: 3:08 PM EDT
CHICAGO (Reuters) - Shares of Delta Air Lines sank more than 20 percent Wednesday after the struggling No. 3 U.S. carrier's chief executive said the airline's restructuring plan is not enough to save it.
The comments from CEO Gerald Grinstein in an internal memo dated July 26 stoked concern of a possible Chapter 11 filing, analysts said, sending the stock as low as $2.65.
By early afternoon, shares of Delta (down $0.47 to $2.92, Research) were down 15 percent on the New York Stock Exchange.
Grinstein said Delta may have to expand its transformation plan. Delta, which last week posted a second-quarter loss of $388 million, aims to win $5 billion in average annual savings from its work force as it tries to cut costs.
"In light of what we have accomplished together so far, there can be no doubt that Delta's transformation plan is delivering results," he said. "What is also clear is that it is not enough."
Among the airline's chief concerns are the high price of fuel and the interest expense on the airline's debt.
Analysts said Grinstein's comments reinforced speculation that the Atlanta-based carrier may be headed for bankruptcy.
"If it were me holding that stock, it would be bankruptcy concerns," said Morningstar equities analyst Chris Lozier of the reason for the stock decline. "You can throw more and more transformation ideas at the business model but it's still fundamentally flawed."
Further pressure on Delta's shares also came from news of the airline's new policy that allows customers to cancel tickets without penalty if they can find a cheaper fare elsewhere, analysts said. Delta extended the offer to travelers who buy tickets on delta.com, flysong.com and through other direct Delta ticket locations.
Another analyst said Delta's low share price may itself be weighing on the stock.
"What we may very well be seeing on Delta is the fact that the stock has dropped below $3, which means that it is no longer marginable. This increases even more the downward pressure on the stock," said Tim Biggam, chief options strategist at Man Securities.
The New York Stock Exchange contacted the airline and requested that the company issue a public statement indicating whether there are any corporate developments that could explain the unusual trading activity.
Delta stated that its policy is not to comment on unusual market activity or rumors.
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Is bankruptcy inevitable for Delta? Click here.
Read the full internal memo from Delta CEO Jerry Grinstein -- click here.