News
 Printer Friendly
 Email this article | |||||
Delta’s Flying Close to the Edge | |||||
| Turbulent Skies Ahead? Shares in troubled US carrier Delta Air Lines plunged by 20% as investors feared that the airline might declare bankruptcy as soon as this week. It would seem that higher fuel prices caused by Hurricane Katrina are likely to prove the final blow to the third largest airline in the US. Delta has lost $10bn since 2001, and recently warned investors that its financial liquidity would "decline substantially" in 2005. Press reports indicate that the Delta board met in New York on Friday, weeks ahead of its next scheduled meeting, to discuss the mounting fuel bill and growing debt problems. Other reports suggested the company had lined up $2bn in so-called "debtor-in-possession" financing from GE Financial Services, which would allow it to function while it reorganised its operations. "Delta´s problem is not labour, it´s debt," said Michael Boyd, an aviation industry consultant. "Until they can restructure their debt, they are in big trouble." The airline needs $2.4bn to pay for debt, pensions and aircraft leases, and only has $1.7bn cash-in-hand. Delta is also saddled with $14 billion in debt. The carrier has been hurt by falling passenger numbers, increased competition from budget rivals as well as higher fuel costs. Last month, there was renewed speculation that Delta could file for Chapter 11 protection after it postponed its quarterly results. Chapter 11 gives a US company time in which to rearrange its finances while continuing to trade. Analysts believe that legal changes to bankruptcy protection in the US which come into force in October make it imperative for Delta to move quickly. "It could be as early as this week, but it will definitely be before mid-October," said Fitch Ratings analyst William Warlick. Under bankruptcy law, Delta´s stock would be "completely worthless" if it did file for Chapter 11 protection. Europe has long argued that Chapter 11 gives US firms an unfair advantage. The European Commission says Chapter 11 - which does not apply in Europe - is too lenient, and unfairly allows too many struggling US firms to avoid bankruptcy. For this and other news items please visit www.debtscotland.com . By registering on the site you will find a host of debt recovery and credit control tools in the ?free credit resources? section. Stephen Cowan Yuill & Kyle, debt recovery & credit control lawyers, Scotland 79 West Regent Street, Glasgow G2 2AR scowan@yuill-kyle.co.uk Direct Dial: 0141-572-4251 www.debtscotland.com www.ykcreditcheck.co.uk | |||||
| Printer Friendly
Email this article | |||||
| Back | |||||
