Delta, other airline stocks decline

Analysts call bankruptcy imminent for Ga. carrier


FORT WORTH, Texas - Investors dumped airline stocks yesterday amid spiking oil prices and grim predictions from Wall Street analysts that Delta Air Lines may file for bankruptcy within weeks.

Daniel McKenzie, airline analyst for Smith Barney in New York, said Delta is likely to file for Chapter 11 protection by the end of the month even if management wins $1 billion in concessions from pilots.

Reduced labor costs won't be enough to compensate for fuel prices and high debt-related costs, which Delta so far has been unable to restructure voluntarily, he wrote in a report to investors.

"Between historically high jet fuel prices and coaxing bondholders, we think there remains a high probability that Delta files by the end of the month, even if Delta does get $1 billion in savings from the pilots," he said.

Oil prices hit $53 per barrel yesterday before closing at $52.67 - a cost that is devastating for the airline industry. Fuel is the second-largest expense for most carriers after labor, and typically accounts for 15 percent to 30 percent of total costs.

McKenzie's comments echoed those of James Higgins, an airline analyst for Credit Suisse First Boston, who said Wednesday that a Delta bankruptcy may come soon.

Delta's shares fared the worst among airlines yesterday, its stock slipping 10 percent, or 40 cents, to close at $3.45 per share.

Atlanta-based Delta said last month that it plans to close its hub at Dallas/Fort Worth Airport, eliminating 3,600 North Texas jobs, as it restructures.

In addition to pilot concessions, the airline has announced plans to cut non-pilot employee pay by 10 percent, increase health care premiums and eliminate a subsidy for retiree health benefits for workers retiring after 2006.

Joseph C. Kolshak, the carrier's chief operating officer, said Monday that the airline could head to court within a matter of weeks if it can't sign off on a deal with pilots.

Even one of Wall Street's more optimistic airline analysts, Ray Neidl of Calyon Securities, warned yesterday that "time is running short" for Delta, and the airline will quickly burn through its cash during the slow fall season.

Neidl estimates a 50 percent chance that Delta will end up in bankruptcy by the end of the year, and he recommends investors sell the stock.

Other airline stocks suffered as well. AMR Corp., the parent company of American Airlines, dropped 6 percent, or 46 cents, closing at $7.03 per share. Northwest Airlines slipped just under 6 percent, or 50 cents, to finish at $8.04 per share, while Continental Airlines fell 4 percent, or 38 cents, to close at $8.53 per share.

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