Delta Air Lines, struggling to avoid bankruptcy protection, was hit by a fresh crisis yesterday when it delayed a regulatory filing so it could conclude critical talks to reach a deal with a new credit card processing company.þþWithout a deal, Delta would not be able to accept Visa or MasterCard as payment for tickets, which could cost it business. The disclosure by Delta, the third-largest domestic airline behind American and United, came after its shares sank amid new fears that it would have to seek Chapter 11 bankruptcy protection. þþShares of Delta closed at $1.95, down 28 cents, or 12.6 percent, a new low for the stock, which has lost more than half its value in the last month.þþA Merrill Lynch analyst, Michael Linenberg, cut his rating on Delta yesterday to sell from neutral, saying the chances of a bankruptcy filing within two months had greatly increased. A number of crucial executives have left in recent weeks, including its treasurer, chief financial officer and Washington lobbyist.þþThe gloomy developments caused speculation in the industry and by Wall Street analysts that the airline would need to seek more concessions from its employees, including its pilots, who granted Delta $1 billion in wage and benefit cuts last year, allowing it to avoid a bankruptcy filing.þþBut Delta and the Air Line Pilots Association said yesterday that the airline had not asked for more cuts. Still, any savings could not come fast enough to offset the potential cash crisis in which the airline finds itself. þþDelta said yesterday that a new credit card processing company, which it did not name, wanted ÿa substantial cash reserveÿ up front to handle Visa and MasterCard transactions. The deal would take effect on Aug. 29; Delta would have to put the money in reserve by then. þþDelta said it was looking for alternatives to offset some of the requested reserve. But it said it could not guarantee it would find them. þþBecause of the discussions, Delta requested a five-day delay for submitting its second-quarter results to the Securities and Exchange Commission. It had planned to file the results yesterday. Delta now must file the results by Monday.þþA Delta spokeswoman, Chris E. Kelly, said last night that the airline planned to meet the Monday deadline, meaning it would wrap up its deal with the processor by then.þþDelta has held talks for months with lenders including General Electric and American Express, which could help it by agreeing to more flexible terms or by providing additional financing. Delta could also seek help from aircraft companies.þþThe latest terms of its agreement with American Express require it to have $1 billion in cash on hand. Delta ended the second quarter with $1.8 billion, theoretically giving it an $800 million cushion. But the second quarter is usually the best in terms of cash for the major airlines, because passengers pay in advance for summer vacation trips. In his research report, Mr. Linenberg said record prices for jet fuel could cost the airline $1 billion more this year, essentially offsetting the concessions it won from its pilots last year. He estimated that Delta's fuel costs had already risen $400 million this quarter.þþMr. Linenberg said Delta would have to seek bankruptcy protection if its cash fell below $1.3 million. þþJamie Baker, an analyst at J. P. Morgan, predicted that the airline would seek more concessions from its employees, whose wages and benefits have declined $1.3 billion. þþMr. Baker predicted that the airline would need $400 million - $275 million from pilots, $125 million from other employees - to bring its labor costs into line with its competitors'. Delta said it made no such request.þþBut the chairman of Delta's pilots' union, John Malone, reminded the airline yesterday that its chief executive had promised pilots they would not have to grant another set of cuts beyond the original $1 billion a year. þþÿAs Delta C.E.O. Gerald Grinstein said, 'Do it once and do it right,' ÿ Mr. Malone said in a statement.þþMeanwhile, Northwest Airlines said yesterday that it would resume talks next week with the Aircraft Mechanics Fraternal Association, heading toward an Aug. 20 deadline. þþThe two sides are in a 30-day cooling-off period after failing to reach agreement on Northwest's request for $176 million in wage and benefit cuts, part of $1.1 billion in cuts it is seeking from its employees. Without the cuts, Northwest says, it, too, could seek bankruptcy protection.þþIf the cooling-off period ends without a deal, the union may strike. Northwest has vowed to keep flying with replacement mechanics. þþ
Source: NY Times
