Credit Card Deal May Ease Financial Burden for Delta
Delta Air Lines said it expects a credit card processor to hold back less revenue than previously projected while it works on finding another vendor to provide the vital service.
In a filing with the Securities and Exchange Commission Thursday, Delta estimated that $625 million of its Visa and MasterCard bookings may be withheld under a two-month extension of its contract with its credit card processor. In first announcing the extension last week, Delta had estimated the so-called holdback might total up to $750 million.
The lower estimate may mean that Delta, which is struggling to reorganize outside of bankruptcy court, faces a bit smaller strain on its cash reserves over the next two months. However, Delta did not indicate Thursday whether it is any closer to finding another long-term vendor to process its Visa and MasterCard bookings, which account for a big share of revenue.
Delta said it will be able to use the cash holdback it builds up under the current contract extension toward any deposits required under another agreement. The airline also said last week that it is in talks with another firm to finance part of the collateral requirement.
Some industry analysts believe Delta is likely to file for Chapter 11 within weeks because of record high fuel costs and other daunting obstacles to its recovery efforts.
Chapter 11 "has become a preferable option" for Delta at this point, Tejas Securities Group analyst Robert Halder said Thursday in a report, because it could allow the airline to shed high debt and pension costs expected to total $1.3 billion over the next year, and seek concessions from employees and aircraft lessors.
But Delta executives to date have said they want to avoid Chapter 11 if possible to avoid the expense and loss of control that often come with a filing.
The Amex Airline Index rose 0.5 percent to 48.75 points. Crude oil futures ended up 17 cents to $67.49 a barrel.
As the most active stock in the sector on volume of 10.9 million shares, Delta Air Lines rose 1.5 percent to $1.35.
On volume of more than 3 million shares, Southwest Airlines rose 1 percent to $13.59.
Northwest Airlines gained 0.8 percent to $5.20. The company's mechanics represented by the Aircraft Mechanics Fraternal Association remain on strike, and contract workers and other employees are filling in.
Northwest said Tuesday's travel saw 99.5 percent of passengers confirmed to fly on the carrier made it to their final destination. The airline hasn't detailed how its on-time performance has been affected by the strike. The airline is operating its fall schedule, which went into effect Aug. 20 --- the day the strike began.
Striking members of the Aircraft Mechanics Fraternal Association were off the job for a sixth day. The union is raising money to support the picket lines.
AMR Corp., parent of American Airlines, rose 0.4 percent to $13.61. The company's cargo division said it was raising its fuel surcharge to 50 cents a kilogram, up 5 cents, for international shipments from the United States and to 20 cents a kilogram, up 2 cents, for domestic shipments.
JetBlue Airways rose 1 percent to $19.20.
United Airlines parent UAL Corp. said its lenders providing exit financing have offered up to $3 billion to the bankrupt carrier, an increase from $2.5 billion. UAL also detailed its July operating results, posting a net loss of $274 million, which includes $350 million in non-cash reorganization expenses.
The Federal Aviation Administration had considered making safety seats mandatory on planes for small children. That would require parents to buy extra plane tickets, which they don't now have to do for children under 2.
The FAA concluded that requiring the safety seats would prompt cost-conscious travelers to drive, which is statistically more dangerous than flying.
Last year, nearly 43,000 people died in highway accidents. Thirteen died on commercial airline flights.
--- Russell Grantham and news services
Petition filed against Mirant
Washington's District of Columbia Public Service Commission has filed an emergency petition asking the U.S. Energy Department and Federal Energy Regulatory Commission to order Mirant to reopen a coal-fired power plant shut Wednesday.
Mirant, a bankrupt power producer based in Atlanta, shut the Potomac River Generating Station at midnight Wednesday after a computer model submitted to Virginia regulators on Aug. 19 showed "significant violations" of air quality standards.
"We are more concerned about the reliability of energy in the District of Columbia," said Sebrina Greene, deputy general counsel for the District of Columbia Public Service Commission, in an interview. "There needs to be a middle ground short of shutting the plant down."
The Virginia Department of Environmental Quality on Aug. 19 directed Mirant to take immediate steps to cut emissions from the plant in Alexandria, Va., based on the computer model analysis submitted by the company. The analysis showed "significant violations of air quality standards near the plant," the department said in a statement Aug. 22.
Emissions exceeded National Ambient Air Quality Standards for sulfur dioxide, nitrogen dioxide and particulates, Mirant said in a statement the same day.
The company said it would temporarily shut the plant until a solution is found to reduce emissions. Measures could include use of lower-sulfur coal or injections of minerals in the boiler, said Lisa Johnson, president of Mirant's Northeast and Mid-Atlantic business, in an interview Aug. 22.
While the shutdown of the plant alone may not cause power disruptions, "the combination of other events, such as a severe weather situation, the loss of key transmission capability or other major outages, could endanger electric service to the District," the agency's petition said.
The plant is needed to maintain grid reliability in the Washington area, according to PJM Interconnection LLC, the power network operator for the Mid-Atlantic states.
"We're confident that by closely monitoring the situation that we'll be well prepared for any contingency," Terry Williamson, a spokesman for Valley Forge, Pa.-based PJM, said in an interview Aug. 22.
The plant, which was built in 1949, can generate 482 megawatts, enough power for about 385,000 typical U.S. homes, based on U.S. Energy Department estimates.
--- Bloomberg News
