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."

FMI: www.delta.com