Delta looking at financing for bankruptcy, sources say

Airline reported to be talking to GE Commercial as jet fuel rises

By MICHELINE MAYNARD

New York Times

Delta Air Lines has begun arranging the financing it will need if it seeks bankruptcy protection, something Wall Street analysts, industry executives and finance experts say could happen within weeks, people with direct knowledge of Delta`s actions said Friday.

Delta, based in Atlanta, is holding discussions with lenders like GE Commercial Finance, which provided it restructuring money last year and could do so again, in or out of bankruptcy, people at the airline and within the financial community said.

A spokesman for GE Commercial declined to comment.

The airline is also exploring the sale or refinancing of its two commuter lines, Comair and Atlantic Southeast Airlines. And it is looking for more savings from employees, who have already taken $1.4 billion a year in wage and benefit cuts, although it does not plan to reduce wages.

Delta has lost nearly $10 billion since 2001, with its losses accelerating over the last year. Its chief executive, Gerald Grinstein, had emphasized a desire to avoid Chapter 11 bankruptcy, which it barely averted last October by obtaining $1 billion in cuts from its pilots. But in July, Grinstein said that circumstances beyond Delta`s control — namely, higher oil prices and industry competition — could force its hand.

And with the airline`s obligations mounting, officials acknowledged Friday that it needed to be financially prepared for a filing, which legal experts say it would probably do in New York. They said a final decision was not imminent, however.

The federal bankruptcy code will undergo significant changes on Oct. 17, limiting the amount of time companies can take to draft restructuring plans. Grinstein said in July that the date did not factor into Delta`s thinking, however.

It is not clear how much financing Delta would need to enter bankruptcy. United Airlines, which has been in bankruptcy protection since 2002, originally arranged $1.5 billion in debtor-in-possession financing from five lenders, and has since obtained more.

Delta is in the midst of cutting $5 billion from its costs through 2006. But the rising cost of jet fuel has already made its assumptions obsolete