Aug. 21--SALT LAKE CITY -- Travelers moving through Salt Lake City International Airport probably won't notice much change if Delta Air Lines files for bankruptcy, although the struggling carrier's presence at its third-largest hub could increase or decline as a result.
Some airline industry experts are predicting that Delta, which has lost nearly $10 billion since early 2001, will file for Chapter 11 bankruptcy protection by the end of this year or sooner.
In a quarterly report filed with the Securities and Exchange Commission last week, Delta doubted its ability to stay in business without implementing some drastic changes to its cost structure.
Delta spokesman Anthony Black acknowledged bankruptcy is a real possibility for the company, but declined to comment on the impact a Chapter 11 filing might have on its operations in Utah or elsewhere.
"I cannot speculate on anything related to a court-ordered restructuring or its impact to any specific area of our operations," Black said.
He said Delta currently has more than 3,900 employees at the Salt Lake City International. The 398 daily flights from the airport between Delta, partner carrier SkyWest Airlines and subsidiary Atlantic Southeast Airlines, which Delta last week agreed to sell to SkyWest for $425 million, account for 9 percent of all flights in the Delta system, he said.
"Salt Lake City serves to support Delta's east-west passenger traffic flow, and is very valuable in providing access to almost 100 destinations from a single location," Black said.
Salt Lake City International Airport spokeswoman Barbara Gann said even if Delta were to enter into bankruptcy, airport officials believe the company would likely maintain a strong presence in Utah.
"We are confident that they would remain in business here," Gann said. "We anticipate they would stay operating as they do now, for quite awhile."
Delta has cut back service at some airports across the country recently as it tries to improve its financial situation, but the company has consolidated some routes and increased its activity in Utah.
More than 2.4 million passengers boarded Delta flights at Salt Lake City International in the first half of 2005, an increase of more than 27 percent over the same period in 2004.
Delta flights accounted for 44.4 percent of passenger traffic at the airport for the six months ended June 30, up from 42.8 percent a year earlier.
Filing under Chapter 11 likely would result in new revenue and cost savings for Delta, including government subsidies and the option of defaulting on its multi-billion dollar pension plans.
The company's repeated warnings over the past year that the need for bankruptcy protection is looming have not yet resulted in action, but upcoming changes to federal bankruptcy law that restrict debtor's options could prompt Delta to file before Oct. 17.
After that date, several changes take effect regarding business reorganization under Chapter 11, including tighter restrictions on executive compensation and required deposits for utility services.
Other changes to the law give company creditors such as landlords and suppliers more say in various aspects of the bankruptcy process. For example, creditors will be allowed to submit their own reorganization plan if a debtor (the legal term used to describe a business in bankruptcy) does not produce one within 18 months after filing.
"There would probably be significant advantages to filing before October 17," said airline analyst Helane Becker of The Benchmark Co. in New York. "Just about any company that is sure about bankruptcy would be well advised to file before then, because after the deadline, creditors will have more control over the process."
Delta Chief Executive Gerald Grinstein has said repeatedly the October deadline has no effect on the company's corporate decisions, Black said.
Standard & Poor's Ratings Services has placed Delta Air Lines Inc.'s ratings on credit watch with negative implications, saying the move reflected "a very high risk of near-term bankruptcy."
Delta had $1.34 billion in unrestricted cash as of June 30, according to its quarterly filing with the SEC submitted Aug. 15. The company saw a net loss of $382 million in the quarter -- well below its first quarter loss of more than $1 billion, but still an unsustainable result, the company said.
While it says it has initiatives in place to save $5 billion by the end of 2006, it said additional savings are needed in the form of pay cuts for pilots and other measures.
"There is significant uncertainty, however, that we will be able to implement these changes soon enough to enable us to maintain adequate liquidity or that these changes will be sufficient to enable us to achieve long-term viability," Delta stated in the SEC filing.
"This is the most aggressive language they've used to describe what's going on," Becker, of The Benchmark Co., said. "This definitely shows they are now one step closer to bankruptcy. My guess is that they will have to file for Chapter 11 in the third quarter of this year."
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