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Delta Sees 'Substantial Loss' in 2005

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ATLANTA (AP) _ Delta Air Lines Inc., the nation's third-largest airline, said Thursday it expects to report a ``substantial'' loss this year and warned it may have to seek bankruptcy protection if its financial situation worsens. Its shares tumbled 9 percent.

The Atlanta-based company said in its annual report filed with the Securities and Exchange Commission that it doesn't believe the company's cash flows from operations will be sufficient to meet all of Delta's liquidity needs. It said it would have to tap available cash and the final $250 million it borrowed late last year from American Express Co. to meet those needs.

But the company, which has $3.4 billion in obligations in 2005 related to leases, interest on debt, debt maturities and funding of employee pensions, said its fate is uncertain.

``A restructuring under Chapter 11 of the U.S. Bankruptcy Code may be particularly difficult because we pledged substantially all of our remaining unencumbered collateral in connection with transactions we completed in the December 2004 quarter as part of our out-of-court restructuring,'' Delta said in the filing.

Delta was able to avoid bankruptcy late last year after its pilots agreed to $1 billion in concessions, including deep wage cuts. But its financial condition has continued to be under pressure in recent months as fuel prices have increased and it has faced challenges due to low passenger mile yields.

Delta reported a loss of $5.2 billion for 2004, the highest ever by a U.S. airline in a single year. It didn't say in Thursday's filing exactly how much it expects to lose in 2005.

Delta said it expects its cash and short-term investments will be much lower at Dec. 31, 2005, than at the end of 2004, unless the airline is able to sell assets or issue stock or convertible debt.

Delta is trying to eliminate more than $5 billion in costs by the end of 2006, but said in Thursday's filing it doesn't expect to achieve the full targeted benefits of that until the end of 2006.

Delta said that even it meets that cost reduction target, it ``may need even greater cost savings because our industry has been subject to progressively increasing competitive pressure.''

The company said last September it would cut up to 7,000 jobs over 18 months. That was on top of another 16,000 jobs that were cut since 2001. The company has not said whether even further job cuts will be needed to turn things around.
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