Delta May Leave Bankruptcy in '07

Delta Air Lines has largely stopped a financial hemorrhage that was costing the company roughly $2 billion annually in lost revenues, but the carrier still is burdened by uncompetitive labor costs and is fighting to regain the public's trust, according to Ed Bastian, chief financial officer.

Bastian, who spoke Monday to airline industry representatives at the Aviation Forecast Conference in Deer Valley, recounted Delta's battle since September 2005, when it filed for Chapter 11 bankruptcy protection, and its current efforts in expanding its global reach.

The Atlanta-based company, which is the nation's third-largest airline and has a hub in Salt Lake City, is on track to leave Chapter 11 bankruptcy in the first half of 2007, Bastian said.

"Our next task is to achieve sustained profitability," Bastian said. "We still anticipate some losing periods ahead but certainly not on the scale of magnitude of the past."

Delta's most recent monthly operating report, in August, showed an $11 million net loss, a $147 million improvement compared to the net loss of $158 million in August 2005, according to a filing with the U.S. Securities and Exchange Commission.

Bastian said the airline is still fighting to fix its revenue problems. Currently, the airline's revenues represent about 93 percent of the industry's average, up from 85 percent a year earlier.

"The day we filed, we had over $20 billion in debt, much of it accumulated over the last five to six years as we were trying to stave off a court filing," Bastian said. He added that despite "significant head-count reductions, concessions" and other cuts to Delta's benefit structure, its employee costs and labor costs "are still uncom- petitive."

But the airline's financial problems led to an even bigger issue, Bastian said, as Delta's service took a back seat to other carriers in the market.

"Our product looked tired. Our service was showing a strain from our heavy debt load," Bastian said. "We were in the unfortunate position of not only being bankrupt, but we actually looked bankrupt. We were clearly in the throes of a vicious downward spiral."

Bastian recounted a recent speech by the former head of the Chilean Civil Air Aeronautics Board, who said flying had become like a visit to the dentist -- "something (where) you just want it to be over."

"At Delta, we want to turn this around, to make flying about time found," Bastian said.

To that end, Bastian said the airline is introducing enhanced cabin interiors with all-leather seating and greater leg room, new employee uniforms and live TV on long-haul domestic flights.

"We've stated a goal to return to the top of the industry in customer satisfaction by 2008," Bastian said. "We were there for a generation. There's no reason we can't get back there again."

Since its bankruptcy filing, the airline has expanded its service, adding more than 50 daily flights to 20 cities and 17 countries. Bastian said Delta is hoping to serve China by 2008 but acknowledged that Asia remains the company's "biggest hole." No decision, Bastian said, has been made concerning a proposal over direct flights between Salt Lake City and Paris.

In 2007, Bastian said the airline would be a much more global competitor, having a cost structure that will make it competitive with any U.S. airline.

"It will be a company that won't be burdened by the large amount of debt the company had run up," Bastian said. "Our expectation is that we will be profitable in 2007." E-mail:

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