Sachin
January 20th, 2004, 08:22 AM
Wall Street analyst sees possibility of Delta Chapter 11 filing (http://www.atwonline.com/indexfull.cfm?newsid=3797)
Dateline: Friday January 16, 2004
Delta Air Lines' new CEO Gerald Grinstein may be laying the groundwork for a possible Chapter 11 filing, Credit Suisse First Boston analyst James Higgins speculated in a report released Thursday, a day after Delta discussed its fourth-quarter and full-year 2003 financial results in a webcast (ATWOnline, Feb. 15).
While stressing that "this is purely our opinion," Higgins stated, "We believe [Grinstein] effectively warned yesterday of a potential bankruptcy if pilot costs cannot be reined in." During the webcast, Grinstein stressed the need for a new agreement with pilots while Executive VP and CFO Michele Burns said that if the pilot cost structure was equal to restructured peers or low-cost carriers, Delta would have achieved near-breakeven results in the December quarter. It reported a net loss of $327 million for the period, or $207 million excluding special items.
Higgins also suggested that Grinstein's announcement that the carrier has begun a "full strategic assessment" of its business plan could be interpreted as "due diligence that will enable [Delta] to claim, justifiably, that they did everything possible to avoid Chapter 11, if it comes to that."
Higgins likened the airline's situation to that which faced American Airlines "in late 2002," approximately 3.5 months before American came within hours of a Chapter 11 filing, "although [Delta's] liquidity position is stronger"--it ended the quarter with $2.7 billion in unrestricted cash. The analyst also questioned the carrier's plan to grow capacity 8%-10% this year given softening revenue trends and "more than usual incremental low-fare competition."--Perry Flint
Dateline: Friday January 16, 2004
Delta Air Lines' new CEO Gerald Grinstein may be laying the groundwork for a possible Chapter 11 filing, Credit Suisse First Boston analyst James Higgins speculated in a report released Thursday, a day after Delta discussed its fourth-quarter and full-year 2003 financial results in a webcast (ATWOnline, Feb. 15).
While stressing that "this is purely our opinion," Higgins stated, "We believe [Grinstein] effectively warned yesterday of a potential bankruptcy if pilot costs cannot be reined in." During the webcast, Grinstein stressed the need for a new agreement with pilots while Executive VP and CFO Michele Burns said that if the pilot cost structure was equal to restructured peers or low-cost carriers, Delta would have achieved near-breakeven results in the December quarter. It reported a net loss of $327 million for the period, or $207 million excluding special items.
Higgins also suggested that Grinstein's announcement that the carrier has begun a "full strategic assessment" of its business plan could be interpreted as "due diligence that will enable [Delta] to claim, justifiably, that they did everything possible to avoid Chapter 11, if it comes to that."
Higgins likened the airline's situation to that which faced American Airlines "in late 2002," approximately 3.5 months before American came within hours of a Chapter 11 filing, "although [Delta's] liquidity position is stronger"--it ended the quarter with $2.7 billion in unrestricted cash. The analyst also questioned the carrier's plan to grow capacity 8%-10% this year given softening revenue trends and "more than usual incremental low-fare competition."--Perry Flint