Delta OKs Using Exception to NYSE Policy

Wednesday, November 10th 2004, 2:42 pm

By: News On 6

ATLANTA (AP) _ Delta Air Lines Inc.'s board has approved using an exception to the New York Stock Exchange's shareowner approval policy in order for the carrier to give stock to employees and creditors in exchange for concessions meant to avoid a bankruptcy filing.

Atlanta-based Delta said its audit committee determined the delay necessary to obtain shareowner approval of the issue would ``seriously jeopardize the financial viability of the company.''

The NYSE has accepted Delta's use of the exception.

The 75-million share issuance _ which the company has said could dilute current shareholders' equity stake by about a third _ is part of Delta's restructuring plan that aims to provide $5 billion in annual benefits by 2006.

Delta, the world's third-largest airline, said it believes it is on track to achieve $2.3 billion of the targeted annual benefits by the end of this year through previously implemented initiatives under its profit improvement plan launched in 2002.

Also part of Delta's restructuring plan are 6,000 to 6,900 job cuts over the next 18 months, a 10 percent across-the-board pay cut and reductions in employee benefits, as well as a tentative agreement with the pilots' union for $1 billion in long-term annual cost concessions.

Delta will grant non-qualified stock options to about 57,000 employees, with about 63 million common shares subject to the stock options.

The options will become exercisable in three equal installments on the first, second and third anniversaries of the grant date. Unexercised options will expire at the sixth anniversary of the grant date. Delta board members and officers won't participate in the programs.

The company also plans to issue up to 12 million common shares to certain debt holders who agree to defer debt maturing in the near term, and to aircraft lessors who participate in the company's aircraft-financing concession program.

These shares will be issued on or after Nov. 23.

The stock options for as many as 63 million shares that Delta has pledged to its 57,000 employees include 30 million options promised to the pilots in exchange for their negotiated concessions.

The company's restructuring plans originally called for the 7,000 pilots to get just under 13 million shares, while 50,000 nonunion employees were to receive roughly 25 million shares. But the pilots successfully bargained for nonunion workers to get more stock options.

The Wall Street Journal reported Tuesday that with the new stock, holders of Delta's 125.6 million shares outstanding could be left holding just a 63 percent stake in the company.

On Tuesday, Delta, which trails only UAL Corp.'s United Airlines and AMR Corp.'s American Airlines in size, said its third-quarter report to the Securities and Exchange Commission would be late because of its ongoing restructuring efforts.

Delta, which narrowly averted a bankruptcy filing two weeks ago when it negotiated the tentative deal with its pilots' union, plans to file the delayed quarterly report within 15 days.