19 1/2 Months Later, Day for Delta to Exit Bankruptcy Arrives

Delta employees will get a lump-sum cash payment from the airline based on a percentage of their salary and will receive an equity stake in the reorganized company.


ATLANTA_Delta Air Lines Inc. has undergone a major facelift during the 19 1/2 months it has been in bankruptcy, but more changes are on the way as America's No. 3 carrier exits bankruptcy protection on Monday.

Among other things, it has set aside $10 million (€7.33 million) for a rebranding effort, the company's chief bankruptcy lawyer, Marshall Huebner, said in court recently.

A Delta spokeswoman, Betsy Talton, said "additional investments in Delta's image will be unveiled" at a news conference at the company's Atlanta headquarters a few hours after the airline exits bankruptcy protection. Talton declined to give details ahead of the announcement.

Repainting its aircraft is something that could help Delta with its brand image, but would take time to complete for a fleet consisting of several hundred aircraft, said Doug Abbey, a partner in the aviation consulting firm The Velocity Group.

"I think it's appropriate because this is clearly a new Delta, but in and of themselves, these things tend to be a very long-term project," Abbey said.

A new advertising campaign also could be in Delta's future, Abbey said.

The initiatives would be on top of major changes that Delta put in place while in bankruptcy, including restructuring its fleet, expanding international service, improving aircraft cabins, cutting costs and eliminating more jobs.

On the financial side, existing shares of Delta's stock will be canceled at the time the airline exits bankruptcy. Shares of new stock will be issued and begin trading publicly on the New York Stock Exchange on Thursday. That day, Delta executives will ring the closing bell from the floor of the NYSE.

The company says 400 million shares will be issued, putting the target initial public offering at $23.50 a share to $30 a share based on Delta's projected valuation of $9.4 billion (€6.89 billion) to $12 billion (€8.8 billion).

Delta's reorganization plan will give unsecured creditors between 62 percent and 78 percent of the value of their allowed claims as shares of new Delta stock. Delta employees also will get a lump-sum cash payment from the airline based on a percentage of their salary and will receive an equity stake in the reorganized company. Checks to employees were to be issued Tuesday.

More than 95 percent of creditors voted to endorse the plan for Delta to leave bankruptcy as a stand alone carrier, and a federal bankruptcy judge in New York on April 25 gave Delta the green light to exit bankruptcy protection on Monday. Closing conditions were required for it to formally exit bankruptcy. In particular, Delta needed to close on the company's $2.5 billion (€1.83 billion) in exit financing.

Executives at Delta have said that after the company exits bankruptcy, it will consider shedding Comair, a Delta subsidiary that provides regional service for the airline.

Delta's outgoing chief executive, Gerald Grinstein, said last week he did not expect any "immediate action" on Erlanger, Kentucky-based Comair since Delta has a new board of directors.

Abbey said he expects Delta to make a decision on Comair fairly quickly.

"I suspect that's one of the first orders of business coming out of bankruptcy," Abbey said. "I can't even predict how that's going to go."

Delta's board also will be looking for a new CEO to replace Grinstein, 74, who has said he plans to step down once his successor is appointed.

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