Delta, US Air Slump As Bankruptcies Eyed
September 10, 2004 2:16 PM ET
NEW YORK (AP) - Investors pulled back from shares of major air carriers Friday as concerns loomed that US Airways Group Inc. and Delta Air Lines Inc. might soon declare bankruptcy, in what would mark yet another major setback to the embattled industry.
Leaders of US Airways' pilots' union have rebuffed a plan to slash $295 million of wages and benefits from their labor contract. The seventh-largest U.S. airline said it needs those concessions to avoid bankruptcy, and a Sept. 15 deadline for a $110 million pension contribution and a Sept. 30 default on $1 billion loan are days away. US Airways shares plummeted 11.4 percent, or 20 cents, to $1.55 on the Nasdaq.
Rival Delta said bondholders rejected a plan to buy back debt the airline wants to restructure as part of its plan to avoid bankruptcy. Delta, the third-largest U.S. airline, has already announced plans to slash 7,000 jobs during the next 18 months. The company was seeking permission to repurchase equipment trust and pass-through certificates, which are secured bonds used to buy airplanes or other assets.
The airline has said repeatedly it wants to restructure some $20 billion of outstanding debt outside of bankruptcy court. Shares of Delta fell 17 cents, or 4.3 percent, to $3.75 on the New York Stock Exchange.
"Delta must restructure an enormous amount of debt from unwilling bondholders and early retirements by pilots," said Smith Barney analyst Daniel McKenzie in a report. "There remains a material risk that Delta may have to file for Chapter 11, even before October."
McKenzie also pointed out the scope of stock swings within the sector. During the past six years, Delta has traded as high as $71.56 and as low as $3.41.
More news affecting shares of major carriers came from Alaska Air Group Inc., which late Thursday said it would cut 900 jobs as part of a plan to save $35 million annually. The company said it plans to shift more work to outside contractors and trim its staff of 11,000 workers.
Alaska Air chief executive Bill Ayer said, "The goal is first to make sure that we survive, and then to emerge from the most difficult period in the history of commercial aviation as one of the highest-performing airlines." The company said in a statement it will close its Oakland maintenance base. Shares of Alaska Air edged up 31 cents, or 1.3 percent, to $24.02 on the NYSE.
