ATLANTA -- Delta Air Lines and its pilots union appear headed for a showdown over wage concessions after the nation's third-largest carrier reported another huge quarterly loss, warned of mounting debt and said radical changes might be needed to turn things around. þþThe Atlanta-based company has not been able to reach a deal with pilots to cut their pay during on-again, off-again talks over the past year, and both sides remained steadfast in their positions Wednesday as Delta posted a $387 million first-quarter loss. þþThe situation puts Delta on a dangerous course. At its current rate of burning cash -- $500 million in the January-March period -- the airline only has enough cash on hand to last until summer 2005. The carrier also has $20.6 billion in debt and a falling credit rating, making it more expensive to borrow. þþAirline industry analyst Ray Neidl of Blaylock & Partners in New York said Delta is in no immediate threat of bankruptcy. But he said if the airline doesn't get an agreement on deep pilot wage cuts in the next nine to 12 months, there may not be any other alternative. þþÿThere's no furniture left to sell,ÿ Neidl said. þþDelta chief executive Gerald Grinstein told analysts during a conference call Wednesday after releasing the airline's latest loss figures that ÿcontinued losses of this magnitude are unsustainable.ÿ þþHighlighting Delta's heavy debt load, Grinstein added that ÿour balance sheet has been severely damaged, to the point of exhaustion.ÿ þþAt the end of March, Delta had $2.18 billion in cash, down from $2.71 billion at the end of December. þþGrinstein said ÿdramatic and radical changesÿ might be needed to return the airline to profitability. He refused to elaborate, saying a review of potential options could last until late summer. þþHe has said previously the carrier would fight to avoid bankruptcy. þþThe company is seeking a 30 percent pay cut from pilots, who are offering only 9 percent and to forego a 4.5 percent raise they are due in May, the pilots union has previously said. þþPilots union spokesman Chris Renkel said he was disappointed by the company's firm stance on wage cuts. þþÿWe have expressed our willingness to negotiate from the very start and have not shut the door on any kind of interim talks,ÿ Renkel said. ÿBut their tenacity in sticking to their opening position does not provide a framework for moving forward.ÿ þþDelta is under assault from low-cost carriers such as JetBlue Airways and AirTran Airways, which are expanding rapidly by wooing customers with inexpensive fares. Delta has responded by selling cheap tickets, although it cannot fly profitably at such levels because of its high operating costs -- a problem that has been exacerbated lately by the high cost of jet fuel. þþÿEven an increase in traffic isn't the answer to our company's problems,ÿ Grinstein said. þþSeveral analysts asked Grinstein Wednesday if he would consider raising cash through an initial public offering of stock in Delta's regional subsidiaries. While suggesting that wasn't likely, Grinstein repeated that the airline hasn't ruled out any options. þþDelta's first-quarter loss is equivalent to $3.12 a share for the three months ending March 31. That compares with a loss of $3.81 a share, or $470 million, in the same period a year ago. The latest loss included $4 million paid out in dividends to preferred shareholders. þþAnalysts surveyed by Thomson First Call were expecting a loss of $3.02 a share. þþRevenue in the January-March quarter was $3.29 billion, a 4.3 percent increase from the $3.15 billion recorded in the same period a year ago. þþWhile Delta reported $12.5 billion in debt in its earnings release, off-balance sheet debts bring the total to $20.6 billion, reflecting a 104 percent debt-to-equity ratio. þþShares of Delta were unchanged to close at $7.70 on the New York Stock Exchange. þþIts shares are down more than 30 percent since Jan. 1. þþDelta has lost more than $3 billion and laid off 16,000 employees since the 2001 terrorist attacks. þþIn recent months, Delta has taken several steps to try and improve the airline's bottom line. It started a food-for-sale program on some flights and launched a redesign of its uniforms for flight attendants, airport agents and other workers. þþ
Source: Chicago Tribune
