S&P Moves Delta Stance to 'Developing'

NEW YORK (AP) -- The surging price of fuel has injected a note of uncertainty in Standard & Poor's review of struggling Delta Air Lines Inc.'s credit quality.

The rating agency Friday changed the implications of its review to ''developing'' from ''positive.'' A review with a positive stance indicates that the airline's debt ratings could be upgraded, while a ''developing'' stance indicates greater uncertainty as to the future direction of the ratings.

Delta's current corporate credit rating is double-C, the lowest possible rating for a company that is not in default.

''The CreditWatch revision to developing reflects renewed pressure on Delta's liquidity from sharply higher fuel prices, which could add up to $1 billion in costs during 2005,'' said S&P credit analyst Philip Baggaley.

Earlier this week, Atlanta-based Delta Air Lines chief executive Gerald Grinstein said that fuel costs - recently approaching $1.60 a gallon on the back of rising crude oil prices - are likely to delay Delta's return to positive cash flow until 2007. The company is pushing to eliminate $5 billion in annual expenses by the end of next year.

Delta, the third largest airline in the United States, narrowly averted a bankruptcy filing last fall.

Delta had unrestricted cash of $1.8 billion at end-2004, but will have to repay at least $630 million in maturing debt this year, make pension payments of $450 million and spend $1 billion on capital investments, of which about half is earmarked for regional jets that have financing commitments in place, S&P said.