Delta Air Lines Gets OK to Exit Bankruptcy
A U.S. bankruptcy court on Wednesday gave Delta Air Lines the go-ahead to exit Chapter 11 on April 30, ending a year and a half in bankruptcy.
"I will sign the confirmation order," Judge Adlai Hardin said at a hearing in U.S. bankruptcy court in New York.
Delta, the No. 3 U.S. carrier and one of the largest bankruptcies in U.S. history, was relieved to finally be exiting Chapter 11.
"We're free at last," said Chief Executive Gerald Grinstein. "I feel elated."
Delta is emerging from Chapter 11 as the fledgling recovery in the U.S. airline industry is threatened by softening demand.
A number of U.S. airlines, including Southwest Airlines and JetBlue Airways , have recently complained of sluggish bookings ahead of the busy summer travel season.
But Delta believes its expansion into lucrative international markets and lower costs will help it weather a downturn. It had forecast a pretax profit, before special items, of $816 million this year, after a loss of $452 million in 2006.
Since filing for Chapter 11 in September 2005, Delta has slashed about $1 billion from labor costs, reduced capacity in the hard-fought domestic U.S. market, and boosted service to markets in Latin America and the Middle East, as part of $3 billion turnaround plan.
The company was pushed into bankruptcy after racking up nearly $19 billion in debt and accumulating $7.5 billion in losses between 2001 and 2005 amid high costs and low-fare competition.
As part of its emergence from bankruptcy, Delta plans to issue new shares to its creditors. It plans to list those shares on the New York Stock Exchange on May 3 under the symbol 'DAL'. Old Delta shares will consequently be canceled and therefore worthless.
Delta expects to have a market value of about $10 billion, which would make it the second-largest U.S. airline by market value after Southwest.
One of the first major decisions that Delta will have to make after exiting bankruptcy is to pick a new chief executive.
Grinstein, 74, plans to retire after a successor is chosen. Grinstein has said he strongly prefers an internal candidate.
Analysts see the front runners as Chief Financial Officer Edward Bastian and Chief Operating Officer Jim Whitehurst.
Grinstein declined to speculate on the timing for a decision, saying the company's new board needs to first become acquainted with the company and the industry.