"Delta warns of bankruptcy threat"

Tuesday, May 11, 2004

Delta warns of bankruptcy threat 
Agence France Presse


ATLANTA, United States - Delta Airlines warned it may file for
bankruptcy unless it can cut costs, turn a profit and borrow money on
the financial markets.

The warning, contained in a quarterly update to the Securities and
Exchange Commission, was issued just three days after US Airways said it
would consider returning to the bankruptcy court unless it could pare
costs.

Delta, the number-three carrier in the United States, reported a net
loss of 773 million dollars last year, and another net loss of 383
million dollars in the first quarter of 2004.

"Continued losses of the magnitude experienced in 2003 and the March
2004 quarter are unsustainable over the long term, and we have
significant obligations due in 2005 and thereafter," Delta said.

"If we cannot achieve a competitive cost structure, regain sustained
profitability and access the capital markets on acceptable terms, we
will need to pursue alternative courses of action intended to make us
viable for the long-term, including the possibility of seeking to
restructure our costs under Chapter 11 of the US Bankruptcy Code."

Under a Chapter 11 bankruptcy, a company may continue operating under
court supervision while reorganizing the business and trying to repay
creditors over time.

Delta said it had made "substantial" net losses for three straight
years.

"We do not expect significant improvement in the revenue environment in
2004 and expect significant cost pressures related to aircraft fuel,
pension and interest expenses to continue," it said.

"Although we are pursuing profit improvement initiatives which have a
goal of lowering our costs and enhancing our revenues, these initiatives
may not be sufficient," the carrier said. 

"Furthermore, our pilot cost structure is substantially higher than that
of our competitors. Although we are currently in discussions with the
Air Line Pilots Association, International in an attempt to reduce our
pilot cost structure, we cannot predict the outcome of those
discussions."

Delta said its unit costs went from being among the major carriers to
the highest for 2003.

The carrier said it had made progress towards a goal of cutting unit
costs 15 percent compared to 2002 but "we now believe that we may need
greater reductions in unit costs in order to achieve a competitive cost
structure."

The airline said it would present recommendations to the board at a
"late summer" meeting.

In a document sent Friday to the Securities and Exchange Commission, US
Airways said it was seeking to cut costs in negotiations with its unions
to stem operating losses.

"While the company's preference is to complete its transformation on a
consensual basis, failure to achieve the above-described competitive
cost structure will force the company to reexamine its strategic
options, including but not limited to asset sales or a judicial
restructuring," US Airways said.

US Airways was placed under Chapter 11 bankruptcy protection from its
creditors in August 2002, and underwent a massive reorganization, which
allowed it to emerge from bankruptcy seven months later. Its plan seeks
to cut costs by more than 1.8 billion dollars a year, including
salaries.


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