Delta Air Lines: Full statement

Delta Air Lines Wednesday filed for Chapter 11 bankruptcy protection. The following is the full statement from the airline:

"Delta Air Lines today announced that to address its financial challenges and support its ongoing efforts to become a simpler, more efficient and cost-effective airline, the company and its subsidiaries have filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code.

Delta’s Board of Directors, in a unanimous decision, directed the company to take this action after determining that a Chapter 11 reorganization is in the best long-term interest of the company, its employees, customers, creditors, business partners and other stakeholders.

Delta expects to continue normal business operations today and throughout the reorganization process. Specifically, it expects to continue to:

Operate its full schedule of flights worldwide; Honor tickets and reservations and provide refunds and exchanges as usual; Maintain the SkyMiles program and other customer service programs; Provide amenities like Crown Room Clubs and international lounges in select cities; Provide employee wages, healthcare coverage, vacation, sick leave and similar benefits without interruption; and, Pay suppliers for goods and services received during the reorganization process.

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“The action we have taken is a necessary and responsible step to preserve Delta’s value for our creditors, customers, employees, business partners and other stakeholders as we address our financial challenges and work to secure our future,” said Delta CEO Gerald Grinstein. “Delta is open for business as usual and will continue normal operations throughout the reorganization process. Our customers can be confident that they remain our number one priority and that their travel plans and SkyMiles are secure.”

To help support its business during the Chapter 11 proceedings, Delta has obtained a commitment for $1.7 billion in debtor-in-possession (DIP) financing from GE Commercial Finance and Morgan Stanley as Co-Lead Arrangers. The commitment includes up to $1.4 billion of financing on an interim basis pending final approval of the full DIP financing at a later date.

In addition to the commitment for the new $1.7 billion DIP financing, which replaces approximately $980 million in secured pre-petition financing from GE Commercial Finance and American Express, Delta has an agreement in principle with American Express to provide the airline with an additional $350 million of secured financing. Altogether, Delta’s post-petition financing arrangements now total up to $2.05 billion, an increase of approximately $1.07 billion from the company's pre-petition secured credit facilities. 

During the last year, Delta has developed and implemented a transformation plan aimed at achieving approximately $5 billion in annual financial benefits by the end of 2006 as compared to 2002. As of June 30, 2005, Delta had implemented initiatives intended to achieve approximately 85 percent of these benefits and was ahead of schedule to meet its target. However, persistent record-high fuel costs at unpredicted and unprecedented levels and the continued downward pressure on revenues within the airline industry substantially outpaced and masked these benefits. Despite doing everything it could to preserve its liquidity, Delta has determined that it has no alternative but to utilize the protections and flexibilities provided by the U.S. bankruptcy laws. Delta intends to use the additional time and flexibility provided by the Chapter 11 process to expand its transformation plan and move the company toward a more secure future.

“Delta’s financial problems are severe, but by no means insurmountable,” Mr. Grinstein said. “We are optimistic about our future because we have been working for months on a business plan that builds on the substantial improvements we’ve already made and demonstrates that Delta can return to profitability once the company is able to restructure appropriately.”

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