A Delta Air Lines Inc. lawyer told a bankruptcy judge on Monday that it's "a safe assumption" the company won't be able to fully repay creditors owed almost $28.3 billion.
Delta, the No. 3 U.S. air carrier, is asking U.S. Bankruptcy Judge Prudence Carter Beatty to authorize pay cuts for its pilots to save $325 million a year as part of a plan to reduce expenses by $3 billion. The pilots union opposes the request. As hearings on the matter entered their seventh day, Beatty said Delta hasn't given her a clear indication of what it needs to reorganize.
"I have not heard anything that I will say remotely impressed me that you have the money, the talent or the thought that you could successfully reorganize in this case," she said.
The Atlanta-based airline hasn't filed a proposed plan explaining how it intends to exit bankruptcy and repay creditors. Companies who file under Chapter 11 of the U.S. bankruptcy code typically don't repay all their debt. Unsecured creditors, for example, usually get about 40 cents on the dollar. UAL Corp.'s United Air Lines, is proposing to pay its unsecured creditors 4 to 8 cents on the dollar.
Beatty told Delta lawyer Marshall Huebner in New York Monday that the airline hasn't given her enough information, including what kind of financing it will need.
"It seems to me that no matter how I look at the numbers in this case, I can't get to 100 cents on the dollar for creditors," she said. In response, Huebner said, "I think that's a fair assumption, Your Honor."
Huebner said Delta will provide the information through testimony from company officials and advisers.
Earlier Monday, Beatty said MacKay Shields LLC might want to give up its place on the airline's unsecured creditors' committee so it can keep trading Delta shares for its clients.
MacKay Shields is a New York-based investment adviser, and some of its clients trade Delta securities. The firm is one of nine members of the airline's committee of unsecured creditors, and as such, has access to nonpublic information on Delta's business and bankruptcy case. Committee members are barred from trading Delta securities.
Beatty didn't rule on the matter, saying she'll consider it at a later date. If MacKay gives up its seat on the panel, the U.S. Trustee's Office would likely appoint a replacement.
Delta filed for bankruptcy protection in September, the same day as Northwest Airlines Corp., seeking to cut expenses so it could compete with low-cost carriers.
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Delta says it's in the 'earliest stages' of negotiations on a plan to exit bankruptcy and repay creditors.
Delta Air Lines Inc. filed a reorganization plan Tuesday that calls for it to emerge from bankruptcy next spring as a standalone company worth as much as $12 billion.
The agreement between Delta and the pension agency is effective retroactive to Sept. 2 and affects about 13,000 current and former pilots and their beneficiaries.
The bankruptcy court judge also approved the rejection of a lease for a hangar at Dallas-Fort Worth International Airport.