Wed, Aug 11, 2004
Looking For Concessions
Delta Airlines Monday
raised the volume on its warnings that, unless it gets major
concessions from its unions, it will file for bankruptcy
protection.
"If we cannot make substantial progress in the near term toward
achieving a competitive cost structure that will permit us to
regain sustained profitability and access to capital markets on
acceptable terms," Delta said in a statement, "we will need to seek
to restructure our costs under Chapter 11 of the US Bankruptcy
Code."
The warning came on the tail of news that Delta had depleted
about a third of its cash reserves in just the first six months of
2004. Reserves dropped from $2.7 billion to $2 billion. Analysts
say anything below $1.5 billion would almost guaranteed Delta's
bankruptcy.
Still, at least one
airline expert quoted by the Atlanta Journal-Constitution believes
Delta's holdout pilots will eventually come to the rescue. The
pilots have repeatedly withstood Delta's appeals for cuts. They're
now the highest-paid pilots in the pilot business.
Ray Neidl, an airline analyst at Blaylock & Partners, told
the Atlanta paper, "At the end of the day, I think the pilots will
do what they have to do to help Delta survive. They have too much
to lose in Chapter 11."
Aviation consultant Mike Boyd told the Journal-Constitution he
agrees with that assessment. "Delta managers know what they have to
do regarding their route system, their fleet and their costs," he
said. "I think they're going to get their employees and creditors
on board. But this report makes clear that they don't have a lot of
time."
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