Delta Air Lines Stock Plunges Anew on Analyst Downgrade, Bankruptcy Fears

ATLANTA (AP) -- Delta Air Lines Inc.'s battered stock plunged anew Tuesday after a Wall Street analyst advised clients to sell their shares on fears the third largest U.S. carrier will file for bankruptcy within the next two months.

In pre-market trading, Delta's shares fell as much as 15 percent before rebounding a bit. The shares were down 20 cents, or 9 percent, at $2.03 shortly before the open of the New York Stock Exchange.

Prior to the dip, Delta's stock was already at a 43-year low.

The dip came on the heels of a research note by Merrill Lynch analyst Michael Linenberg, who lowered the Atlanta-based airline's rating from neutral to sell.

''We think the recent surge in fuel prices greatly increases the likelihood of a bankruptcy filing within the next two months,'' Linenberg said.

He said that while Delta, which has lost nearly $10 billion (euro8.1 billion) since January 2001, has been in talks with creditors about additional funding, he believes the surge in oil prices could keep lenders at bay for now.

He estimated that Delta's fuel bill this year could grow by more than $1 billion (euro810 million), wiping out the $1 billion of cost concessions provided by the airline's pilots last year.

''We think the probability of a Delta bankruptcy filing has grown, and we think investors should be mindful of Oct. 17, when more restrictive bankruptcy legislation becomes effective,'' Linenberg said. ''That could be a key factor in a Delta deciding whether to file for Chapter 11 bankruptcy.''

On Monday, Delta named a new treasurer after its previous treasurer left the company.

Delta's chief executive has said the company's current transformation plan, which includes cutting annual costs by $5 billion (euro4 billion) by the end of next year, is not enough to save the struggling carrier.

CEO Gerald Grinstein says Delta is still working hard to avoid a Chapter 11 filing, but he has acknowledged there are risks affecting the airline's ability to do that.

Delta, citing high fuel prices, reported late last month that it lost $388 million (euro314 million) in the second quarter.

Copyright 2005 Associated Press