Delta Air Lines emerged from bankruptcy protection Monday as an independent carrier after surviving a hostile takeover bid during a 19 1/2-month reorganization that saw it eliminate jobs, cut costs, restructure its fleet and focus more on international flying.
A U.S. Bankruptcy Court judge in New York had set 9 am as the time the Atlanta-based airline could exit from Chapter 11 by closing on a $2.5 billion loan that would allow it to pay back lenders who gave Delta money to help it operate while in bankruptcy.
Delta's chief bankruptcy lawyer, Marshall Huebner, said in a 10:21 am e-mail to The Associated Press that the wire transfers for the loan were completed.
Delta, the nation's third-largest carrier, was to announce later Monday details of a rebranding that was to include a new paint job for its planes. Senior executives were expected to speak to employees during celebratory events at the company's headquarters.
Refocus on Customer
“Let’s be upfront,” Jim Whitehurst, Delta’s chief operating officer, told CNBC’s Phil LeBeau. “We went bankrupt because we stopped focusing on the customer and our prescription is to refocus on the customer.”
"This is an amazing day for an extraordinary company, which has reclaimed its heritage and has emerged from Chapter 11 as a fierce, determined and well-capitalized competitor," Huebner told the AP.
Delta has set aside $10 million for its rebranding effort, which could also include a new advertising campaign.
Now that Delta is out of bankruptcy, executives at Delta will consider shedding Comair, a Delta subsidiary that provides regional service for the airline.
Delta's outgoing chief executive, Gerald Grinstein, said last week he did not expect any "immediate action" on Erlanger, Ky.-based Comair since Delta has a new board of directors. Even so, some analysts expect Delta to make a quick decision.
"Let’s remember that the name of the game not just cost, but revenue," Michael Boyd, president of The Boyd Group, told CNBC Monday. "Revenue stream is where the future is and Delta in the right position for that. International revenue streams plus domestic revenue driven by growth areas like Montgomery, Ala., Shreveport, La., and Erie, Pa.”
Seeking New CEO
Delta's board also will be looking for a new CEO to replace Grinstein, 74, who has said he plans to step down once his successor is appointed.
Delta entered Chapter 11 on Sept. 14, 2005, amid high fuel prices and the burdens of high labor and pension expenses. 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. The figure includes subsidiary 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 lawyers, consultants and advisers through the end of January. It could spend tens of millions more once the final fee and expense requests are dealt with.
Delta underwent a lot of changes while in bankruptcy, which, along with cost cuts, included improving aircraft cabins and expanding international service.
The carrier also defeated a hostile takeover bid by Tempe, Ariz.-based US Airways Group Inc. US Airways withdrew its $9.8 billion bid after Delta's unsecured creditors committee in January endorsed Delta's reorganization plan.
New Stock Planned
Delta's existing stock was canceled Monday. Shares of new stock will be issued to creditors and begin trading publicly on the New York Stock Exchange on Thursday. That day, Delta executives will ring the closing bell from the floor of the NYSE.
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 gives unsecured creditors between 62 percent and 78 percent of the value of their allowed claims as shares of new Delta stock. Delta employees also 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 Tuesday.
More than 95 percent of creditors voted to endorse the plan for Delta to leave bankruptcy, and a federal bankruptcy judge in New York on April 25 gave the airline the green light to exit Chapter 11 on Monday. Conditions included closing on the $2.5 billion loan that was used to repay another loan that helped fund the airline's operations while in bankruptcy.