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Delta Air execs aim to keep bankruptcy at bay
AFX
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SAN FRANCISCO (AFX) -- Delta Air Lines' new chief financial officer, named to the post a day before the carrier reported second-quarter financial results, said Thursday that management isn't giving up on its fight to keep the carrier out of bankruptcy.
'We are absolutely continuing to evaluate potential opportunities to raise additional liquidity,' said CFO Edward Bastian during a conference call with analysts following the quarterly report showing a narrower loss. 'My arrival is not going to change that.'
Delta closed the second quarter with $2 billion in cash and investments, and the airline has about $20.5 billion in debt.
Analysts are counting on the company shoring up its financial position through new finance deals or asset sales to avoid turning to the bankruptcy courts for what would certainly be a dramatic restructuring.
'Delta's ability to avoid a [fourth-quarter 2005/first-quarter 2006] Chapter 11 fate rests entirely on both meaningful liquidity enhancements and airline-specific pension reform,' wrote J.P. Morgan airline analyst Jamie Baker in a Thursday research note.
'We admit our skepticism has increased markedly in the apparent absence of progress,' Baker added.
Bastian had been a Delta executive but was last in the top finance post at Acuity Brands , a lighting and chemicals company in Atlanta. His surprise return, along with a broader executive shuffle, comes as Delta's navigating a course through record fuel prices that have forced it to relent on aggressive ticket pricing.
In response to an analyst question during the conference call, Chief Executive Gerald Grinstein said that the appointment of the new CFO to replace Michael Palumbo, who had joined Delta in April 2003, didn't mark a change in strategy for avoiding having to file for Chapter 11 protection from creditors.
'I wouldn't read anything into Michael's departure on that score or Ed's arrival,' said Grinstein. 'We continue to believe that an out-of-court restructuring is the better course for all of our constituencies and stakeholders.'
Delta's stock fell 5.4% to trade lately at $3.70 following the second-quarter results.
The Atlanta-based airline pared its net losses dramatically despite higher fuel expenses. If escalating fuel costs are factored out, Delta's cost per available seat mile was lower than last year's levels.
So far this year, Delta's shares have fallen 48%.
Meanwhile, rivals like Continental Airlines and AMR Corp. , which operates American Airlines, have reported stronger-than-expected results as cost cutting and firmer pricing help offset the damaging effects of record jet-fuel prices.
This story was supplied by MarketWatch. For further information see www.marketwatch.com.
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