http://online.wsj.com/article/0,,SB112671083630940483,00.html?mod=home_whats_news_us
ATLANTA -- Delta Air Lines filed for bankruptcy-court protection today, capping a slow, nearly four-year long financial dive brought on by the crushing weight of high fuel prices, a heavy debt load and a restructuring plan that began too late to save the carrier.
The Atlanta carrier filed for protection in U.S. Bankruptcy Court in New York's Southern District. Delta joins rivals UAL Corp.'s United Airlines, which has operated in bankruptcy for nearly three years, and US Airways Group Inc., which is on its second trip into Chapter 11. Another troubled carrier, Northwest Airlines, which suffered a strike by its mechanics in August, is expected to seek bankruptcy protection as soon as today.
The bankruptcy filing by Delta sets into motion what is likely to be at least months of negotiations with bond holders and other creditors over how to restructure the airline. Delta executives believe that because Delta has already spent the past year implementing a turnaround plan, it could avoid a prolonged fight with its creditors over the company's fate.
Still up in the air is what happens to Delta's employee pensions, which are underfunded by $5.3 billion. Delta and Northwest have lobbied for proposed pension legislation now working its way through Congress. The proposed legislation would give the companies more time -- 14 years under the current version of the U.S. Senate bill -- to catch up with their required payments. However, in bankruptcy, the company's creditors could push for the company to terminate its obligations and dump them onto the federal Pension Benefit Guaranty Corp., following in the footsteps of United and U.S. Airways. Delta executives previously have said that if they win passage of the pension bill the company can continue to honor its pension obligations, even in bankruptcy.
With Delta, United and US Airways in bankruptcy, nearly half of the industry's seats are operating under Chapter 11, which in some ways adds to the pressure facing carriers still trying to compete outside of court protection. With bankruptcy, carriers can drastically cut costs, potentially putting rivals at a disadvantage.
The threat of a Delta bankruptcy filing had grown more dire as Katrina disrupted flights to the Gulf Coast and crippled oil refineries, sending jet-fuel prices soaring.