Delta Auditor Issues Doubt About Future
Thursday, September 16th 2004, 10:38 am
By: News On 6
ATLANTA (AP) _ Delta Air Lines' independent auditor has raised doubts about the carrier's financial viability as the nation's third-largest airline revised its annual report to include the possibility of a Chapter 11 bankruptcy petition ``in the near term.''
Delta said Wednesday that since filing its annual report with the Securities and Exchange Commission for the year that ended Dec. 31, ``significant events have occurred which have materially adversely affected Delta's financial condition and results of operations.''
``These events, which have been reported in Delta's subsequent SEC filings, include a further decrease in domestic passenger mile yield and near historically high levels of aircraft fuel prices,'' the statement said.
Delta said its independent auditor, Deloitte & Touche, has reissued its report ``to raise substantial doubt about the company's ability to continue as a going concern.''
In a separate announcement, Delta said it had offered to exchange $680 million of its debt with new notes secured by $1.3 billion worth of debt-free aircraft, flight simulators and flight training equipment. The offer was made to holders of $2.6 billion in various forms of Delta debt.
The Atlanta-based airline has warned it would be forced into bankruptcy court to seek reorganization and protection from creditors unless it could win $1 billion in concessions from its pilots or restructure parts of its $20 billion in debt.
Wednesday's announcements came after chief executive Gerald Grinstein backed off his earlier hope that an agreement with pilots on stemming early retirements could be worked out by week's end.
At a Commerce Club speech to Georgia business leaders earlier Wednesday, Grinstein was asked if his timeline still stood for reaching a deal with pilots on the early retirements.
``Probably not,'' Grinstein responded.
Asked why, Grinstein said, ``We're in the middle of a discussion and I think they're going to be responsive, but it's now Wednesday and the pilots are scattered and it has to be reviewed by a lot of people inside the organization and you've got a weather condition coming into this airport, so all of those things tell me that it will be delayed probably beyond this week.''
Grinstein did not take further questions from reporters.
Earlier in his speech, Grinstein said that regarding the company's larger request for $1 billion in concessions from pilots he is optimistic an agreement can be worked out. He gave no timeline, but was blunt in his assessment of what's at stake.
``What we've asked of the pilots is a significant concession,'' Grinstein said, adding, ``They've developed a lifestyle and an expectation about what is going to happen and they're wrestling with it. My conviction is that we will get that resolved and I hope it will not be too far into the future, because these are really difficult times.''
Asked for a response, union spokeswoman Karen Miller said, ``We can only be part of the solution, but are committed to helping Delta in its recovery. We believe that we should focus on our efforts at the bargaining table and do not want to negotiate in the press.''
Delta fears that its pilots could jump ship en masse because they are worried about their pensions. United Airlines' threat to terminate its employee retirement plans has roiled workers at that airline, and prompted concern among many in Washington.
Several hundred Delta pilots have retired early in recent months, and more have threatened to do so.