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Delta Expects To Turn A Profit In 2007

Delta Air Lines, which plans to emerge from bankruptcy in late April, said on Tuesday that it expected to swing to a profit this year on cost reductions and higher revenue.

The No. 3 U.S. carrier expects to earn $816 million in pretax income, excluding special items, in 2007, it said in a filing with the Securities and Exchange Commission. That compares with a 2006 pretax loss of $452 million.

Delta, which plans to relist on the stock market in early May, said it expected to reduce net debt to $7.6 billion in 2007, compared with $16.9 billion as of June 30, 2005. The company expects to have a market value of about $10 billion.

Speaking on a Webcast toinvestors, Delta Chief Executive Gerald Grinstein said he hopes the carrier chooses an internal candidate to replace him when he steps down after the company exits bankruptcy.

Delta filed for bankruptcy protection in September 2005, battered by low-cost competition and high costs. The carrier expects to emerge from Chapter 11 around April 30, Grinstein said.

The company's filing suggested Delta slightly moved up the date of its planned emergence from Chapter 11. It had said in a statement March 20 it expected to emerge from bankruptcy in early May. It sought protection from creditors in September 2005.

In documents prepared for the investor confidence and filed with the SEC, Delta said it may sell more assets, but didn't specify which ones it is considering.

Grinstein told investors at the conference that he hopes the new 11-member board is announced by Friday. He said the official committee of unsecured creditors in Delta's bankruptcy case will choose the board. At least three board members will be current board members. Grinstein said he would stay on the board until his successor as CEO is named.

Chief Financial Officer Ed Bastian and Chief Operating Officer James Whitehurst are considered by many to be leading internal candidates for the top job.

"My persuasive powers will be brought to bear to see if we can make an internal selection and do it quickly," Grinstein said. "At that point, my role has ended."

Grinstein also addressed questions about industry consolidation and where Delta factors in.

Grinstein said he doesn't think it is the right time for major airlines to merge.

"I do think that is going to be deferred for several years, three or four years," said Grinstein, whose company earlier this year successfully fought off a hostile bid by Tempe, Ariz.-based US Airways Group Inc. to buy Delta. "Do I think six network carriers are too many? No, I don't."

As for Delta and its role in possible consolidation, Grinstein said, "Frankly, I see its future more as an acquirer rather than being acquired."

Grinstein said it's not out of the question that a major carrier could buy a low-cost carrier.

Grinstein said his opinion about consolidation among major carriers could change if another carrier makes a move.

"If another merger were to take place, it would have a significant forcing impact on Delta, and Delta would have to look at its options," Grinstein said.

But he said putting big airlines together is easier said than done -- especially blending the cultures of different companies.

"You have to really look at whether you want to take that on, and I have a high degree of skepticism," Grinstein said.

Delta said its objectives for this year, in addition to exiting bankruptcy, include achieving the financial commitments in its transformation plan, boosting margins and building cash for long-term strength.

It will continue to expand its international service, with a special focus on its service from New York City's John F. Kennedy International Airport.

Delta said in the investor documents it also wants to improve baggage handling, streamline and enhance customer service and improve the operational performance of the feeder carriers that service its Delta Connection flights.

Good morale among employees will be key to the customer service initiatives, Grinstein said.

"Delta has traditionally had that. It wavered for a bit, but for a variety of reasons I think it is coming on strong," Grinstein said.

The company's plan to "unlock shareholder value" includes building on its maintenance repair and overhaul business and "further monetization of assets," a phrase that refers to the sale of assets.

Delta has not said what its future plans are for subsidiary Comair, the Erlanger, Ky.-based regional carrier that provides connecting service for the airline.

Delta has spent the last two years cutting costs, restructuring its business and working to increase revenue.

"This company is not going to look the same coming out of bankruptcy as it did going in," Grinstein told investors.

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