Newspaper Page Text
6A
August 26, 2004
Business
Delta trying to restructure debt as
secrecy surrounds key meetings
% HARRY R. WEBER
Business Writer
ATLANTA (AP) -Delta
Air Lines Inc. said Wednes
day it is considering
exchanging some of its debt,
possibly for equity in the
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company, as part of a larger
effort to avoid bankruptcy.
The Atlanta-based com
pany’s proposal involves cer
tain certificates that were
issued by trusts that lease
aircraft to the airline to
assist in financing the cost
of the planes. It is asking the
holders of those certificates
to remove any restrictions
that would prevent Delta
from buying or holding the
securities.
The nation’s third-largest
airline said that if it is suc
cessful, it will have more
flexibility in restructuring
its debt, and therefore a
greater likelihood of avoid
ing a Chapter 11 filing.
One of the options Delta
is considering is a debt-for
equity exchange, according
to a summary of the pro
posal provided to The
Associated Press. The air
line currently has more
than S2O billion in debt.
Meanwhile, the first of
two key meetings this
week involving the fate of
Delta was held under
enormous secrecy Wednes
day when leaders of the
struggling carrier present
ed a highly anticipated
turnaround plan to the
board of directors.
Management and the
pilots union were to meet
Thursday, also behind
closed doors, as the com
pany continues its effort to
get deep concessions.
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AUGUSTA FOCUS
soared on speculation about
what it would do next.
Shares of Delta rose 48
cents, or 13.4 percent, to
close at $4.07 Wednesday
on the New York Stock
Exchange.
Delta officials would not
say where the board meet
ing was held, how long
executives and directors met
or what issues were dis
cussed.
Delta spokeswoman
Meghan Glynn said that “at
this point, it’s not appropri
ate to talk.” She said the
board “will take some time
to review” chief executive
Gerald Grinstein’s proposals
to save the airline.
Among the proposals
Grinstein was expected to
outline: developing a sim
pler fare structure or a loyal
ty program and higher per
formance standards and
better training for employ
ees.
Grinstein told employees
last month that Delta plans
to seek new markets,
domestically and interna
tionally, and new customers
either alone or in a partner
ship. In addition, the airline
will look to leverage assets
and to deploy them in more
profitable ways, he said.
Delta is seeking $1 billion
in concessions from its
pilots as part of its effort to
avoid bankruptcy. The
pilots have offered up to
$705 million in cuts.
Some analysts believe
Delta’s turnaround plan
could include other drastic
changes, including shed
ding money-losing leisure
routes and smaller hubs,
like Salt Lake City, and con
centrating operations on its
large hubs, longer distance
business markets and inter
national routes where it
may be able to maintain a
revenue premium.
On Thursday, Delta offi
cials were to meet with the
pilots union to present the
union with a complete pro
posal that addresses equity
issues, union spokeswoman
Karen Miller said.
The union has asked for
pilots to get a stake in the
company either through
profit sharing or stock
options in order for the
union to consider the com
pany’s concessions proposal.
Pilots also want a union
member to have a voting
seat on Deltas board of
directors.
Miller said the company
has not indicated what pro
posals regarding equity
issues it is considering. She
said she doesnt have any
idea what proposals will be
presented to the union.
In a letter to pilots last
month, Grinstein said Delta
is “working on a combina
tion of equity, profit sharing
and some type of incentives
tied to productivity as we
move forward.”He did not
elaborate.
Delta has lost more than
$5 billion and laid off
16,000 employees in the
last three years. It has
repeatedly warned about the
possibility of bankruptcy if
it doesn't get deep conces
sions from pilots.
Ray Neidl, an analyst with
Blaylock & Partners in New
York, said he is not sur
prised by the level of secrecy
behind this week’s meetings
at Delta.
“I think it’s going to be
big,” Neidl said of Grin
stein’s turnaround plan. “I
think he wants to get a final
plan to save the airline.”
Neidl said he doesnt
expect the process to be
quick.
“You probably won't hear
any details discussed for
quite some
time,” he said.