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Delta Airlines: Bankruptcy
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Delta Airlines warned of possible bankruptcy filing and that it expects to record a substantial loss for the rest of the year. Bankruptcy will be necessary if Delta’s cash reserves fall too low or its lenders demand immediate payment of its debts. Delta blames high fuel and low ticket prices.
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On September 14, 2005, Delta filed for Chapter 11 bankruptcy protection for the first time in its 76-year history. The company cited high labor costs and record-breaking jet fuel prices as factors in its filing. At the time of the filing, Delta had $20.5 billion in debt, $10 billion of which accumulated since January 2001.
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Delta Airlines filed for bankruptcy protection on Sept. 15, 2005 and emerged from it after 19Delta Airlines filed for bankruptcy protection on Sept. 15, 2005 and emerged from it after 19½-months later. Here are key dates in its 76-year history.
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As much as the $425 million selling price of the regional carrier will infuse Delta with cash, the carrier still has nearly $20 billion dollars in outstanding debt and leasing costs to manage. Delta is expected to use some of the funds to reduce their debt and set aside the remaining monies as reserves. Delta must have a reserve in place totaling $750 million dollars as it negotiates with a credit card processor this fall to extend or renew its contract with the processor. Without the reserves and the extension, Delta would be certain to file for bankruptcy.
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Merger rumors have circulated around Delta for several months. The airline emerged from bankruptcy in April 2007 and was able to survive a hostile takeover attempt by US Airways Group Inc. (LCC).
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