- The Washington Times - Sunday, April 29, 2007


Delta Air Lines Inc. has undergone a major facelift during more than a year and a half in bankruptcy, and other changes are on the way as the nation’s No. 3 carrier exits Chapter 11 today.

Among other things, Delta has set aside $10 million for a rebranding effort, the company’s chief bankruptcy attorney, Marshall Huebner, said in court recently. Executives at Delta also have said that after the company exits bankruptcy, the airline will consider shedding Comair, a Delta subsidiary that provides regional service.

Delta’s outgoing chief executive, Gerald Grinstein, said last week that he did not expect any “immediate action” on Erlanger, Ky.-based Comair because Delta has a new board of directors.

But Doug Abbey, a partner in the Velocity Group, an aviation consulting firm, said he expects Delta to make a decision on Comair quickly.

“I suspect that’s one of the first orders of business coming out of bankruptcy,” Mr. Abbey said. “I can’t even predict how that’s going to go.”

Delta’s board also will be looking for a chief executive officer to replace Mr. Grinstein, 74, who has said he plans to step down once his successor is appointed.

Meanwhile, a Delta spokeswoman, Betsy Talton, said “additional investments in Delta’s image will be unveiled” at a press conference at the company’s Atlanta headquarters a few hours after the airline exits bankruptcy protection. Miss Talton declined to give details before the announcement.

Repainting its planes could help Delta with its brand image but would take time to complete for a fleet of several hundred aircraft, Mr. Abbey said.

A new advertising campaign also could be in Delta’s future, Mr. Abbey said.

The initiatives would be on top of major changes that Delta put into place while in bankruptcy, including restructuring its fleet, expanding international service, improving aircraft cabins, cutting costs and eliminating more jobs.

On the financial side, existing shares of Delta’s stock will be canceled at the time the airline exits bankruptcy. Shares of new stock will be issued to creditors and begin trading on the New York Stock Exchange on Thursday, when Delta executives will ring the closing bell.

The company says 400 million shares will be issued, putting the target initial public offering at $23.50 a share to $30 a share based on Delta’s projected valuation of $9.4 billion to $12 billion.

Delta’s reorganization plan will give unsecured creditors between 62 percent and 78 percent of the value of their allowed claims as shares of new Delta stock. Delta employees will get a lump-sum cash payment from the airline based on a percentage of their salary and will receive an equity stake in the reorganized company. Checks to employees are to be issued tomorrow.

More than 95 percent of creditors voted to endorse the plan for Delta to leave bankruptcy, and a federal bankruptcy judge in New York last week gave the airline the green light to exit Chapter 11 today.

Delta entered Chapter 11 on Sept. 14, 2005, as fuel prices were rising and high labor and pension expenses were creating a burden. Delta significantly reduced its labor and pension costs while under court protection. As of March 31, the company had 52,260 full-time employees, according to a regulatory filing Friday. That figure includes Comair.

The bankruptcy process has been expensive for Delta, which has run up more than $127.9 million in bills for fees and expenses for its attorneys, consultants and advisers through the end of January. It could spend tens of millions more once the final fee and expense requests are addressed.

As Delta looks to its future outside of bankruptcy, and it seeks to return to profitability after billions of dollars in losses the past six years, competition will continue to be an issue.

Mr. Abbey said that means there won’t been any room for failure on Delta’s business plan.

“It’s important that operationally speaking, there aren’t any disasters,” he said.

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