Ailing Delta Aims to Sublease Space in New Terminal at Logan

Aug. 3--Facing a possible bankruptcy filing, Delta Air Lines Inc. is in talks with other carriers about subleasing space in its new terminal at Logan International Airport, only five months after the structure opened.

Delta is fielding offers from other airlines interested in using vacant gates and ticket counters, some of which have remained empty since the terminal opened March 16, said Delta spokeswoman Chris Kelly.

"Terminal A is the crown jewel at Logan," Kelly said.

Delta built more space than it needed, with the idea that it could expand. The terminal features state-of-the-art security, wireless Internet access, and new restaurants and shops, among other amenities.

Kelly said she did not know how many gates or ticket counters are available.

She declined to name any interested airlines or provide lease rates, but Continental Airlines and Northwest Airlines said they have held discussions with Delta.

"We've looked at the feasibility of moving to Terminal A, but so far we haven't found a way to make it work from a financial standpoint, taking into account the rent expense and the relocation expense," said Continental spokesman Dave Messing. The airline is currently located in Logan's Terminal C.

Northwest spokesman Kurt Ebenhoch said that airline looked at space in the Delta terminal six months ago, but "determined that it would not be a good fit for our schedule and our fleet and the nature of our operation in Boston."

Delta's subleasing talks come amid continuing financial troubles for the airline. Delta's chief executive, Gerald Grinstein, has said in recent months that the carrier faces a potential Chapter 11 bankruptcy-protection filing if it can't improve its financial performance and cut costs.

On July 21, Delta reported a second-quarter loss of $382 million, or $2.64 per share, considerably slimmer than the $2 billion loss it posted in the same quarter in 2004.

Yesterday, Delta's stock fell to a 43-year low. The shares fell 44 cents, or 14.8 percent, to $2.53 -- Delta's lowest close since the University of Chicago's Center for Research in Security Prices began tracking such data in 1962, Alan Myers, the center's director of database research, told the Associated Press. Delta's previous low was set May 11, at $2.74.

The bond rating agency Standard & Poor's warned last week that the debt on Delta's Logan terminal was under review for a potential downgrade.

The $400 million facility was financed with bonds issued by the Massachusetts Port Authority. Standard & Poor's issues bond ratings based on a company's likelihood to default on its debt payments and currently has a BBB- rating on the terminal, which signifies that Delta is likely to be able to make all its payments. By comparison, Massport itself has a higher AA- rating.

A Standard & Poor's analyst, Kurt Forsgren, said that rating could fall if Delta files for bankruptcy protection. If that happens, Massport, which runs Logan, could take over the terminal from Delta and find other tenants, he said, but "the potential tenant list is pretty limited."

Delta competitors like US Airways and American Airlines are probably comfortable in their existing terminals and are unlikely to be able to afford a move. And a carrier like JetBlue Airways, a small but growing airline, would not be able to fill the space by itself, Forsgren said.

Massport's director of aviation, Thomas Kinton, said that he was aware of Delta's talks but that the authority had no role in them.