Delta executive says restructuring outside of bankruptcy was right move
HARRY R. WEBER
Associated Press
ATLANTA - A Delta Air Lines Inc. executive said Thursday the struggling carrier's decision to restructure outside of bankruptcy was the right move and will enable it to focus precious time on its transformation plan.
During an investor conference in New York, chief financial officer Michael Palumbo said a Chapter 11 filing, avoided when pilots agreed to concessions in November, would have caused "wear and tear on employees, business partners, customers and ultimately the capital markets."
Palumbo acknowledged that losses at the nation's third-largest carrier have continued to mount in the months since pilots agreed to $1 billion in annual cost savings. But he said that if the company were to file for bankruptcy, it would have to spend much of its time on the court process and would not be able to follow through on its strategic goals.
"This is the better course to execute our plan," Palumbo said.
He added, "If consolidation occurs in this industry, you're not likely to be an acquirer in bankruptcy, you're likely to be a target during that time."
Palumbo did say that Delta needs to continue to cut its costs in the face of persistently high fuel prices.
"We must execute this plan with precision and we must continually look for ways to implement efficiency and cost control," Palumbo said.
He said Delta will try to get back into buying fuel hedges to lessen its financial burden. Delta's assumptions about its long-term financial viability are based in part on fuel prices dropping to less than $40 a barrel. Light, sweet crude for March delivery fell 79 cents to settle at $47.54 a barrel Thursday on the New York Mercantile Exchange.
"It is unlikely we can hedge the entirety of our requirements, but it is our objective to be competitively hedged," Palumbo said.
The Atlanta-based company, which lost more than $5 billion last year alone, still has many challenges, Palumbo said, adding that the first quarter will likely be rough.
Palumbo said "2005 is and will be a transition year."
Delta shares fell 23 cents, or 4.1 percent, to close at $5.40 in trading Thursday on the New York Stock Exchange.
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