Tuesday, October 26, 2004

No deal reported with pilots

By James Pilcher
Enquirer staff writer

There was little news from the bargaining table Monday as talks continued into the night between Delta Air Lines and its pilot union on $1 billion in annual concessions. The apparent lack of a deal increased the possibility of a bankruptcy filing later this week.

The company did secure $600 million in financing and was able to defer a small amount of debt.

The Atlanta-based carrier, which operates its second-largest hub at the Cincinnati/Northern Kentucky International Airport, has repeatedly said that without the cuts, the company is headed to Chapter 11.

Delta has lost $6.2 billion in three years. The losses include $646 million in the third quarter, a period that also saw the company burn through $550 million of its cash reserves.

Experts have said that a bankruptcy filing could come as soon as this week without a deal and without some kind of agreement with holders of the airline's $20.6 billion worth of debt.

The nearly 8,000-member pilots union, which includes more than 800 based locally, has publicly offered cuts worth up to $705 million.

Negotiations continued in Washington, near the headquarters of the Air Line Pilots Association, to allow union experts to help hammer out a possible agreement.

Neither side would say what the sticking points were. The possibility that the two sides were close to a deal, plus the news of new financing, sent Delta's stock up 16.7 percent to close Monday at $3.78.

Today, the airline receives word on the early deadline for an offer to exchange about $2.5 billion worth of debt for about 35 cents on the dollar. The final deadline is Nov. 18, but those responding by today get a better deal, and the results could give Delta an indication whether its offer ultimately will be successful.

Meanwhile, Delta said Monday it had reached an agreement with American Express for $600 million worth of financing.

Of that, $100 million is a straight loan, with the other $500 million to consist of frequent-flier miles paid back to Delta $250 million at a time. American Express holds SkyMiles in reserve as part of its credit card program that awards the miles with purchases.

Airline analyst Ray Neidl of Calyon Securities said Monday that the new financing wouldn't help Delta stave off bankruptcy.

"It's not really part of the big picture or of the decision-making process when it regards Chapter 11," he said.

Delta also announced that it had been able to reach a deal to defer payment on $135 million worth of debt from next year to 2007, but the airline will pay a slightly higher interest rate to do so.

E-mail jpilcher@enquirer.com

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