By James Pilcher
Enquirer staff writer

Wall Street weighed in Tuesday on Delta Air Lines' record earnings report; and if Delta's drama were a Broadway play, the critics would not have been pleased.

Analyst Jamie Baker of JP Morgan Chase downgraded his rating on Delta stock and raised the chances the Atlanta-based airline will file for bankruptcy protection to 50 percent.

Meanwhile, analyst Ray Neidl of Blaylock & Partners, said that while the possibility of Chapter 11 is not that grave, he expects "the talk of bankruptcy to linger well into the fall."

Neidl pegged the likelihood of a bankruptcy filing at 25 percent, but said the airline's survival hinges on its ability to cut its annual expenses by $2.1 billion.

Delta on Monday reported a loss for its second quarter of nearly $2 billion.

The airline - the biggest tenant at Cincinnati/Northern Kentucky International Airport - has run up losses of about $5 billion since the Sept. 11 terrorist attacks. It is awaiting a proposal on concessions from its pilots union and is considering a major restructuring. The pilots' proposal is expected this week, the restructuring plan by the end of August.

Investors, who on Monday pushed up Delta's stock, retreated Tuesday. Delta shares lost 9 percent to close at $5.40, wiping out Monday's gains. Investors initially had been cheered that the airline had lowered costs and that the pilots would be presenting a proposal on wage concessions.

About $1.6 billion of the second-quarter loss was in special, noncash charges, but the airline still lost $312 million on operations when costs were down and revenue and passenger traffic were higher.

"We no longer have full confidence that Delta will be able to achieve its post-pilot cost targets," Baker wrote in a research report, referring to the airline's ability to survive even with major concessions from its 8,000-member pilots union. Nearly 900 of those pilots are based at the Cincinnati/Northern Kentucky International Airport, Delta's second-largest hub and home to more than 9,000 employees who work for Delta and its subsidiary, Comair.

Delta is to begin discussions with pilots this month about possible concessions - the airline is reportedly seeking $1 billion annually in cost cuts and productivity improvements. In addition, Delta management is preparing a plan to revamp the company that it plans to present to its board next month.

"It is absolutely imperative that we get our cost structure in line with our own revenue generating capabilities," Delta executive vice president and chief financial officer Mike Palumbo wrote in a memo to Delta employees Monday.

E-mail jpilcher@enquirer.com