Delta Air Lines and the possibility of Ch. 11

[srbmod]

Article from today's AJC (4/4/04):

http://www.ajc.com/business/content/business/delta/0404/04delta.html

Altman's Double Prime Z-score (mentioned in the article only available in the print edtion):

Altman's Double Prime Z-score, created by a finance professor @ NYU, assesses the risk of a service industry business failure within 2 years. It's based on changes in assets, debt, market value, working capital, earnings, and other factors. A score above 2.6 indicates little risk of bankruptcy; scores below 1.1 indictae higher risk.

Company/Double Prime Z-Score
AirTran 3.45
Southwest 3.14
Continental -0.19
American -0.90
Northwest -1.13
Delta -1.18
United -2.88*

*Filed Chapter 11 in 2002
Source: Bloomberg

[assghanistan]

Bear in mind, that if conditions remain the same (high fuel prices, low ticket prices) to where DL would file for bankruptcy, there is also a good chance that US Airways might go under. If US does go under, that would more than likely bring DL (and other airlines) closer to the black.

By the way, where does US Airways fit in the Z-score?

[Jbrewster1012]

How often do these numbers change and how easy is it for them to change? Right now Northwest doesn't look very far away from Delta.

[srbmod]

By the way, where does US Airways fit in the Z-score?

US Airways wasn't on the chart from Bloomberg that was in the print edition of the article, I guess either they either had incomplete data on which to compile a Z-score on US Airways, or they basically think US Airways is toast no matter what (I'm going for the former).

[FlyingPhotog]

From the article:


Chief Executive Gerald Grinstein tells workers he will "fight like hell" to avoid the "B-word," as he called it at a recent meeting with pilots. But at the same time he bluntly says the Atlanta airline must bring down pilot wages and other costs or it cannot survive.

Airline industry analysts have issued a flurry of reports handicapping Delta's Chapter 11 odds. Its stock has plunged to lows not seen since last year, when American Airlines rattled the industry by nearly landing in Chapter 11 over similar labor cost issues.

No one is predicting a Chapter 11 filing in the next few months. But, barring signs of a turnaround, the issue could come to a boil by early 2005, analysts believe.

They say a wide range of indicators, including ongoing losses, depressed stock and bond prices, lowered debt ratings and other factors point to a higher risk that Delta will default on its bonds. That event often coincides with a Chapter 11 reorganization.

[DAL767-400ER]

Delta Air Lines and the possibility of Ch. 11

Here are the March results for the pessimists out there:

http://money.iwon.com/jsp/nw/nwdt_ge.jsp?news_id=cmt-096p1766&feed=cmt&date=20040405

Traffic is up 9.5% compared to 2003, and the load factor has also increased to 75.5%, resulting in a passenger increase of 1.7% for the year-to-date.

-Colin