Judge OKs Delta Air Lines Chapter 11 Exit

NEW YORK -- Delta Air Lines is exiting bankruptcy and re-entering an increasingly competitive market in which its success depends on operating with a lean labor force and expanding its international flights.

The newly restructured airline was under Chapter 11 protection for almost two years and cut 6,000 jobs and $3 billion in annual costs. On Wednesday, it received approval from U.S. Bankruptcy Judge Adlai Hardin to emerge from bankruptcy as an independent company.

Delta, the nation's third-largest airline, estimates it will be worth $9.4 billion to $12 billion.

More than 95 percent of creditors voted to endorse the plan for Delta to leave bankruptcy as a stand alone carrier. That plan had been put in jeopardy by a $9.8 billion hostile takeover bid launched last fall by Tempe, Ariz.-based US Airways Group Inc. Delta successfully persuaded creditors to back its blueprint to emerge from bankruptcy and reject the buyout offer.

Airline industry analyst Robert Mann said Delta was not likely to try to combine with another carrier in the near term. Industry watchers have speculated that Delta might join with Northwest Airlines Corp., which filed for bankruptcy the same day Delta did.

Mann said an acquisition was less likely outside of bankruptcy.

"That sense of urgency has passed, not because it really has, but because the perception is that we've dodged that bullet," Mann said. "I think it's a decidedly positive event for Delta."

He said Delta's success depends on its ability to grow its international routes, and its expansion was by no means guaranteed. The international air travel marketplace is increasingly competitive, especially given the possibility of more competition on routes across the Atlantic and to China.

Now that it is leaving court protection, Delta may sell off its regional carrier subsidiary, Erlanger, Ky.-based Comair, which has received poor marks for lost baggage and flight delays.

Chief Executive Gerald Grinstein said Wednesday not to expect any "immediate action" on Comair since the company has a new board of directors.

Delta's board will also choose a successor to Grinstein, who plans to retire. Grinstein, who is 74, has said the two leading internal candidates are Chief Financial Officer Ed Bastian and Chief Operating Officer James Whitehurst.

Delta will celebrate its emergence Monday in Atlanta. Shares in the reorganized Delta, with the ticker symbol DAL, are scheduled to begin trading again Wednesday on the New York Stock Exchange.

"I feel elated," Grinstein said. "For the 47,000 (employees) ... they're the ones who went through all the angst and made the sacrifices. It's for them I feel extreme relief."

Delta's reorganization plan will give unsecured creditors between 62 percent and 78 percent of the value of their allowed claims as shares of new Delta stock.

The company's existing stock, which will be worthless, continued to trade until the court's approval of the plan. The shares fell 3.5 cents, or 21.2 percent, Wednesday to 13 cents on the Pink Sheets, an over-the-counter electronic trading platform.

Since January 2001, the company has lost a total of more than $18 billion. In recent months, though, Delta's financial situation has improved, with the company projecting a 2007 pretax profit of $816 million, excluding special charges and reorganization costs.

Delta filed for bankruptcy on Sept. 14, 2005, amid high fuel prices and the burdens of soaring labor and retirement benefits expenses.

Since then, passengers on all airlines have experienced growing flight delays as staffs are trimmed and fares go up, driven by rising fuel costs. While in bankruptcy, Delta had expanded its international flights and will continue growing that part of the business, focusing on John F. Kennedy International Airport in New York.

Delta now flies to 307 destinations in 52 countries, with flights going to 31 trans-Atlantic stops. It added more than 60 new international routes last year alone.