Sponsor Message:
Civil Aviation Forum
My Starred Topics | Profile | New Topic | Forum Index | Help | Search 
Delta Air Seen Filing Bankruptcy Before Oct. 17  
User currently offlineKarlB737 From United States of America, joined Mar 2004, 3123 posts, RR: 10
Posted (9 years 1 month 2 weeks 3 days 11 hours ago) and read 3915 times:

Courtesy: Forbes

http://www.forbes.com/markets/2005/0...907markets06.html?partner=yahootix

25 replies: All unread, showing first 25:
 
User currently offlineJunction From United States of America, joined Mar 2005, 769 posts, RR: 0
Reply 1, posted (9 years 1 month 2 weeks 3 days 11 hours ago) and read 3842 times:

It surprises me that even Forbes is calling it "bankruptcy", when it would actually be protection from bankruptcy (Chapter 11).

User currently offlineBucky707 From United States of America, joined Aug 2000, 1028 posts, RR: 3
Reply 2, posted (9 years 1 month 2 weeks 3 days 11 hours ago) and read 3823 times:

wow Forbes, tell us something we don't know.

User currently offlineCVGramper From United States of America, joined Aug 2005, 18 posts, RR: 0
Reply 3, posted (9 years 1 month 2 weeks 3 days 11 hours ago) and read 3786 times:

yes, its going to happen

User currently offlineJunction From United States of America, joined Mar 2005, 769 posts, RR: 0
Reply 4, posted (9 years 1 month 2 weeks 3 days 10 hours ago) and read 3740 times:

Quoting CVGramper (Reply 3):
yes, its going to happen

This will be something new for DL shareholders (unlike shareholders of CO,HP,US,UA, etc.) Should be interesting.


User currently offlinePlaneboy From India, joined May 2005, 199 posts, RR: 0
Reply 5, posted (9 years 1 month 2 weeks 3 days 10 hours ago) and read 3709 times:

OMG, I am booked on a long haul DL flight for first week of OCT. Hopefully there will not be any cancellations of operations due to this.

User currently offlineCommavia From United States of America, joined Apr 2005, 11752 posts, RR: 62
Reply 6, posted (9 years 1 month 2 weeks 3 days 10 hours ago) and read 3692 times:

Quoting Planeboy (Reply 5):
Hopefully there will not be any cancellations of operations due to this.

There won't be. If DL files -- which I think is looking increasingly inevitable -- it will likely be a reorganization, and thus won't cause any immediate impact on DL's schedule or service.


User currently offlineBucky707 From United States of America, joined Aug 2000, 1028 posts, RR: 3
Reply 7, posted (9 years 1 month 2 weeks 3 days 10 hours ago) and read 3652 times:

Quoting Commavia (Reply 6):
it will likely be a reorganization, and thus won't cause any immediate impact on DL's schedule or service.

I agree. I believe Delta management has known they will go into CH11 for a while now. This is all part of the plan. I would not expect any drastic changes once they file.


User currently offlineMcdu From United States of America, joined Apr 2005, 1474 posts, RR: 17
Reply 8, posted (9 years 1 month 2 weeks 3 days 9 hours ago) and read 3545 times:

commavia,

No worries on your flight if DL files. They will continue to operate and continue to provide good service. They just need to alleviate some debt and restructure the airline, this does not happen overnight. I can speak from experience here at UAL.


User currently offlineAirWillie6475 From United States of America, joined Jan 2005, 2448 posts, RR: 1
Reply 9, posted (9 years 1 month 2 weeks 3 days 9 hours ago) and read 3496 times:

What about Deltas subsidiaries will delta disown them?

User currently offlineDeltaMIA From United States of America, joined Feb 2004, 1672 posts, RR: 17
Reply 10, posted (9 years 1 month 2 weeks 3 days 9 hours ago) and read 3468 times:

Quoting AirWillie6475 (Reply 9):
What about Deltas subsidiaries will delta disown them?

No. For the most part they are profitable (DGS, Song, DT).



It's a big building with patients, but that's not important right now.
User currently offlineTu154m From United States of America, joined Oct 2001, 683 posts, RR: 5
Reply 11, posted (9 years 1 month 2 weeks 3 days 6 hours ago) and read 3280 times:

The only changes will be the reduction in employees, pay and benefits. Hopefully the Courts will see how Leo, Fred Reid, and Michele Burns RAPED a once great company. I hope they burn in hell. T-minus 7, 6, 5.......


CEOs should swim with cement flippers!
User currently offlineComorin From United States of America, joined May 2005, 4900 posts, RR: 16
Reply 12, posted (9 years 1 month 2 weeks 3 days 3 hours ago) and read 3153 times:

Looking at Delta's numbers, I'm surprised that they did not file this weekend. There is no good economic reason to continue operations without seeking protection of the US Bankruptcy courts - at some point us armchair CEOs will find out why they held out for so long.

Note: The term 'Bankruptcy' applies to corporations seeking relief from creditors under Ch 11 of the US Bankruptcy code; Ch 7 is considered a 'Liquidation'.

As for the word bankrupt, it describes a situation where your Assets are less than your Liabilities. By that measure, Delta is already bankrupt. The only way to change this is to get in an equity infusion, restructure debt at discount, or have a future stream of income that closes the gap. An equity infusion is unlikely now given the assumption of large, future liabilities. The scenario of Delta generating sufficient cash flow to service its debt also is unlikely, given today's pessimistic domestic fare and fuel cost scenario. Unfortunately, that leaves Delta with the sole alternative of seeking debt relief.

Once Delta hits the courts, it becomes an Estate. Lenders, not shareholders, will determine what happens next. Given Delta's huge liabilities, lenders will assess if future earnings provide sufficient debt coverage. If not, Delta will be either broken up as separate assets (Song, etc) or shut down. Essentially, creditors (lenders) will determine whether closure or reorganization prevails.

There seems to be a sense on A.Net that DL will go through Ch 11 like UA did, as a going concern, eventually emerging under a new Plan. This, however, is really up to the creditors. There have been some opinions raised in the press that Ch 7 may be a real option for DL.

I do hope for the sake of DL's many loyal employees that the airline keeps flying for many years to come.

Sources - DAL SEC Filings for Balance Sheet and Five Year Liability projections , Wikipedia and Lawdog for Bankruptcy terms and definitions.


User currently offlineJoFMO From Germany, joined Jul 2004, 2211 posts, RR: 0
Reply 13, posted (9 years 1 month 2 weeks 3 days 3 hours ago) and read 3117 times:

DL is trying a lot to prevent Ch 11. Can't remember that UA tried as hard to prevent it. I even had the impression that they saw a good opportunity to restructure under Ch 11.

But that also shows that UA was not as afraid as DL now is to be liquidated while in Ch 11. I can understand that the press rises the thread of Ch 7 following Ch 11.


User currently offlinePadcrasher From , joined Dec 1969, posts, RR:
Reply 14, posted (9 years 1 month 2 weeks 3 days 1 hour ago) and read 3014 times:

Quoting Comorin (Reply 12):
As for the word bankrupt, it describes a situation where your Assets are less than your Liabilities.

No it doesn't. That's not even close to describing bankruptcy.

Quoting Comorin (Reply 12):
There have been some opinions raised in the press that Ch 7 may be a real option for DL.

I would think that you would only find that opinion here among the clueless. You sure didn't get that from the media, from analysts, for anyone competent to comment on the airline industry.


User currently offlineGSPITNL From United States of America, joined Oct 2003, 374 posts, RR: 3
Reply 15, posted (9 years 1 month 2 weeks 2 days 22 hours ago) and read 2931 times:

Quoting Planeboy (Reply 5):
OMG, I am booked on a long haul DL flight for first week of OCT. Hopefully there will not be any cancellations of operations due to this.

Planeboy, that has to be the most idioc statement of the year! DL is not going to affect there long haul if any routes.

And people, Get off your high horse with Delta and find some other airline that is actually bad to screw with.

There has been more Delta bashing on this forum over the last 2 years than I have seen in my life. If and when DL does file, you can rest assured that things will be business as normal and won't take 3-4 years to get out of BK like UA or re-enter like US and scramble to find some sucker to merge with them.

My 2 cents



Fly Delta - The Only Way To Fly! Silver Medallion Baby :)
User currently offlineStevenUhl777 From , joined Dec 1969, posts, RR:
Reply 16, posted (9 years 1 month 2 weeks 2 days 22 hours ago) and read 2905 times:

Quoting Comorin (Reply 12):
As for the word bankrupt, it describes a situation where your Assets are less than your Liabilities

Well...following the basic equation: assets=stockholder's equity - liabilities.
If there were no stockholders equity for example, then your statement is false. If there IS stockholder's equity, your statement is STILL false!

There are current assets and current liabilities. Similarly, there are long-term assets and long-term liabilities. If you have very few current assets, but most of your current liabilites are due in the current accounting cycle (typically 1 year or less) then your firm is deep trouble. Check DL's balance sheet. The comparison of current assets to current liabilities is referred to as the "quick ratio", and there are several other balance sheet ratios such as debt-equity, liquidity, acid-test, return on assets, etc. etc. that help measure the health of a firm.

Current Assets: available to the firm in "liquid" form, i.e. non-restricted cash, investment securites, accounts receivable, etc. that will mature in 1 year or less.

Long-term assets: equipment, property, tax deferrals, long term notes receivable, etc. Can't be converted to non-restricted cash in the short term.

Current liabilites: wages payable, accounts payable, interest and principal on fixed and variable rate debt payable within 1 year, short-term pension liability, taxes payable, etc.

Long-term liabilities: interest/principal on long-term debt, post-retirement benefits, etc.

Here's the key for DL, and why they want to hold off on filing until the last available day: they have very few assets that are unencumbered that can be put up for collateral for DIP (debtor in possession) financing. Lenders willing to put up this sort of high-risk financing need enough collateral before they put up that sort of money. By comparison, UA had $3B in December 2002. If DL can raise a quick $1B in asset sales that are not business critical between now and 10/16, then that raises their chances of securing DIP financing and the ability to operate in Ch. 11 for however long is necessary.

I don't think DL is anywhere close to Ch. 7. A LOT would have to happen before they got to that point, but even if it did, a merger would be more likely than outright liquidation.

[Edited 2005-09-08 08:05:57]

User currently offlineUadc8contrail From United States of America, joined Sep 2003, 1782 posts, RR: 9
Reply 17, posted (9 years 1 month 2 weeks 2 days 21 hours ago) and read 2885 times:

There has been more Delta bashing on this forum over the last 2 years than I have seen in my life. If and when DL does file, you can rest assured that things will be business as normal and won't take 3-4 years to get out of BK like UA or re-enter like US and scramble to find some sucker to merge with them.

My 2 cents------GSPITNL


GSPITNL,
where have you been????ua has taken more of a direct hit on the bashing than dl ever did....btw....dont go saying that delta will not be in bk for 3-4 yrs...sit back and if they do i will remind you that you were speaking out of the other hole........enjoy the ride...it could be worse....



bus driver.......move that bus:)
User currently offlineComorin From United States of America, joined May 2005, 4900 posts, RR: 16
Reply 18, posted (9 years 1 month 2 weeks 2 days 4 hours ago) and read 2457 times:

Quoting Padcrasher (Reply 14):

The opinion on Ch 7 isn't mine, its by a respected analyst called Mann, quoted on CNN and Forbes. You can google on 'Delta Ch 7'...

The explanation of bankrupt comes from www.princeton.edu, and defines bankrupt as someone who has insufficient assets to cover their debts.

Quoting StevenUhl777 (Reply 16):

Thank you for clarifying the Accounting Equation, but your opening statement was not clear to me. The equation is, as I consult my old Shillinglaw text, Assets = Liabilities + Owner's Equity.

Here's how it works for me:
Net Worth (S/H Equity) = Assets - Liabilities.

So I'm saying if Net Worth is negative, the firm is considered bankrupt. I think this is the core concept under question.

Looking at Delta's latest Balance Sheet:

Assets: $21.8 B
Liabilities: $ 27.6B
Net Worth : -$5.8B
Market Cap: $180M (based on PV of future cash flows after servicing debt obligations)
Contractual Obligations about $4B/year 2005-2009


I do agree with your point about Quick Ratios, as they are a better indicator of the ability to service short-term debt, and also a good predictor of credit default (missing a payment).

Thank you also for clarifying the reason that Delta is selling assets (to enter Bankruptcy with $1B in extra cash), delaying filing until transactions are done.


User currently offlineB4real From United States of America, joined Aug 2003, 2646 posts, RR: 5
Reply 19, posted (9 years 1 month 2 weeks 2 days 3 hours ago) and read 2399 times:

Quoting Commavia (Reply 6):
There won't be. If DL files -- which I think is looking increasingly inevitable -- it will likely be a reorganization, and thus won't cause any immediate impact on DL's schedule or service.

Don't worry about the flights, UA has set the precedent that Ch. 11 for an airline is not quick.

Quoting JoFMO (Reply 13):
Sources - DAL SEC Filings for Balance Sheet and Five Year Liability projections , Wikipedia and Lawdog for Bankruptcy terms and definitions.

Oh, Wikipedia, the most respected authority on knowledge. I'll paraphrase Britannica in saying that this is like a public toliet seat. Though, I'll admit I've updated entries there as well.



B4REAL, spelled like it sounds
User currently offlineMilesrich From United States of America, joined Jul 2003, 2006 posts, RR: 6
Reply 20, posted (9 years 1 month 2 weeks 2 days 3 hours ago) and read 2356 times:

Unfortunately, they current Delta management is still trying to avoid filing Chapter 11, and if they delay much longer, there will be no hope of saving the company when they are forced to file. Delta has no fuel hedges. They sold them all. As someone pointed out above in another post, WN has fuel hedged in some form or some percentage through 2009.

Today, it was announced that the sale of ASA to Skywest was completed. They also announced they are shrinking the CVG hub, because, they claim, they don't have enough traffic, even though wholly owned Comair dominates the market.

As Gomer Pyle used to say, SURPRISE! SURPRISE! SURPRISE!

Rather than acquire equipment based on the cost of operating it, Delta, with ASA and Comair, became a carrier that relied on 50 seat aircraft with operating costs so high, they they never could have made a profit in this environment. Instead they played this triangulation game pitting one employee group against another. If they gave away Comair, they probably could improve their operating profit. Two years ago, Delta with an average PPM cost of 9.80 cents was losing billions of dollars, yet claiming operating RJ's with an average PPM of 10.5 cents or more was profitable. That defies logic. It is just too bad they, management, destroyed the airline through a series of terrible blunders.

And if they are still under the impression that staying out of Chapter 11 is the smart thing to do, when they wake up and figure out it was not, there will be nothing left to do but shut down and liquidate ala Pan Am and Eastern.


User currently offlineIslipWN From , joined Dec 1969, posts, RR:
Reply 21, posted (9 years 1 month 2 weeks 2 days 2 hours ago) and read 2341 times:

I really hope they don't go under by December. I have 4 flights with them!

User currently offlineSrbmod From , joined Dec 1969, posts, RR:
Reply 22, posted (9 years 1 month 2 weeks 2 days 2 hours ago) and read 2356 times:

With the sale of EV to OO now completed, the announcement of the major cutback @ CVG, the sale of 11 762s to ABX Air, all of these are moves being made prior to a filing to better set the company up for reorganization so that they don't pull a US Airways (Two Chapter 11 filings in as many years) or a United (2+ years of operating under Chapter 11 and just now filing a reorganization plan.). Not all of the monies from the EV sale and the 762 sales are immediate payments, which may be helpful in the reorganization of the company. The cutback of operations @ CVG could be a sign that DL may cut back on the amount of DL Connection flights operated by other airlines and replacing those flights with OH flights. But for all we know, the cutbacks @ CVG could be a precursor to DL shuttering CVG as a hub as part of reorganizing the company. Or could be the precursor to them selling OH as well.

I think that DL may become a two hub airline down the road. ATL and SLC will be the hubs, with CVG, BOS, MCO, LAX, and maybe LGA or DCA becoming focus cities. CVG is close enough to CLE so that DL could do additional codesharing opportunities on CO out of CLE. Song will probably be folded back into the airline, but some of the routes will stay.


User currently offlineB4real From United States of America, joined Aug 2003, 2646 posts, RR: 5
Reply 23, posted (9 years 1 month 2 weeks 2 days 2 hours ago) and read 2321 times:

Quoting Srbmod (Reply 22):
I think that DL may become a two hub airline down the road. ATL and SLC will be the hubs

I agree 100%, which is why I've changed away from DL. That hurt after so many years, though AA has been good to me thus far. I just can't do ATL  Sad



B4REAL, spelled like it sounds
User currently offlineJoFMO From Germany, joined Jul 2004, 2211 posts, RR: 0
Reply 24, posted (9 years 1 month 2 weeks 2 days 1 hour ago) and read 2253 times:

@B4real:

In reply 19 you are quoting me with something I have never said. It lokks like a software failure, so no blame to you. I just want to clarify that this statement is not from me.


User currently offlineStevenUhl777 From , joined Dec 1969, posts, RR:
Reply 25, posted (9 years 1 month 2 weeks 2 days 1 hour ago) and read 2216 times:

Quoting Comorin (Reply 18):
Thank you for clarifying the Accounting Equation, but your opening statement was not clear to me. The equation is, as I consult my old Shillinglaw text, Assets = Liabilities + Owner's Equity.

 checkmark  I must have written that later in the evening... Wink

Quoting Comorin (Reply 18):
Looking at Delta's latest Balance Sheet:

Assets: $21.8 B
Liabilities: $ 27.6B

I'd be curious to see the current assets vs. current liabilities breakdown.

Have fun with ratios:

* Current/Working captial ratio: current assets/current liabilities
ex. 3:1 means $3 current assets to $1 in current liabilities. I'll bet Delta is the opposite of that... Yeah sure

* Acid-test ratio: cash + temp. investments + net receivables/curr. liabilities
- measures immediate short-term liquidity

* Debt to total assets: total debt/total assets
- measures of total assets provided by creditors. Probably high in DL's case.


Top Of Page
Forum Index

This topic is archived and can not be replied to any more.

Printer friendly format

Similar topics:More similar topics...
Air Canada Filing For $200M Stock Offering posted Mon Oct 16 2006 18:15:13 by YVRtoYYZ
Delta Air Lines Memories posted Wed Aug 16 2006 04:01:51 by MSYtristar
Air Midwest Takes Over COU Oct. 5 posted Sun Aug 13 2006 03:50:54 by Bluejackets
Delta Air Lines 1987 posted Tue May 16 2006 04:09:02 by DL4EVR
Delta Air Lines Planes With Power Ports? posted Fri May 5 2006 19:59:43 by Jumbojet
Air Wales Drop Routes Before They Start posted Mon Feb 20 2006 22:19:49 by Humberside
Delta Air Lines Bangkok History posted Thu Feb 9 2006 18:41:23 by Malaysia
Delta Air Lines Chicago History posted Wed Feb 8 2006 02:10:08 by TheFlyGuy2
Aloha Air To Exit Bankruptcy posted Fri Feb 3 2006 06:47:48 by Petmbro
In The End Is Delta Air Screwed? posted Thu Dec 8 2005 21:14:20 by NYC777