More troubles for DAL
Jul 13, 2004, 11:52 am
#1
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More troubles for DAL
Delta Air to Take a Big Charge
By Eric Gillin
TheStreet.com Staff Reporter
7/13/2004 12:22 PM EDT
Click here for more stories by Eric Gillin
Updated from 8:21 a.m. EDT
Less than a week before it reports second-quarter earnings, Delta Air Lines (DAL:NYSE - news - research) shares fell 6.1% Tuesday after the company said it will take a $1.65 billion non-cash for the reporting period.
The beleaguered carrier, which needs to wheedle wage concessions from pilots in order to stave off a bankruptcy protection filing, said the bulk of the charges, $1.53 billion, is related to deferred income taxes. Essentially, the company has stopped recognizing income tax benefits going forward, with Delta saying it does not know when it will be able to generate sufficient taxable income to use its deferred income tax assets.
As Delta struggles, employees are leaving the company. The remaining $117 million in charges covers a settlement related to the company's defined benefit pension plan for pilots because of higher-than-average retirements. The company, which releases earnings this coming Monday, stressed that the charges will not affect its June 30, 2004, cash position.
In reaction, shares of the carrier fell 41 cents to $6.34.
The situation at Delta is growing so dire that Citigroup Smith Barney analyst Daniel McKenzie cut his price target on the carrier to $1 on Monday night, citing the government's decision to deny United Airlines, unit of UAL (UALAQ.OB:OTC:BB - news - research), a loan guarantee.
"We think the risk of Delta filing for Chapter 11 have substantially increased, particularly with fuel continuing to hover near peak levels," wrote McKenzie, in a research note. "Despite encouraging news from the Delta pilots union on concessions, we think labor uncertainty increases for Delta following the UAL loan guarantee denial." (Citigroup Smith Barney does and seeks to do business with the companies covered in its research reports.)
Link: http://www.thestreet.com/_tsclsii/ma.../10170579.html
By Eric Gillin
TheStreet.com Staff Reporter
7/13/2004 12:22 PM EDT
Click here for more stories by Eric Gillin
Updated from 8:21 a.m. EDT
Less than a week before it reports second-quarter earnings, Delta Air Lines (DAL:NYSE - news - research) shares fell 6.1% Tuesday after the company said it will take a $1.65 billion non-cash for the reporting period.
The beleaguered carrier, which needs to wheedle wage concessions from pilots in order to stave off a bankruptcy protection filing, said the bulk of the charges, $1.53 billion, is related to deferred income taxes. Essentially, the company has stopped recognizing income tax benefits going forward, with Delta saying it does not know when it will be able to generate sufficient taxable income to use its deferred income tax assets.
As Delta struggles, employees are leaving the company. The remaining $117 million in charges covers a settlement related to the company's defined benefit pension plan for pilots because of higher-than-average retirements. The company, which releases earnings this coming Monday, stressed that the charges will not affect its June 30, 2004, cash position.
In reaction, shares of the carrier fell 41 cents to $6.34.
The situation at Delta is growing so dire that Citigroup Smith Barney analyst Daniel McKenzie cut his price target on the carrier to $1 on Monday night, citing the government's decision to deny United Airlines, unit of UAL (UALAQ.OB:OTC:BB - news - research), a loan guarantee.
"We think the risk of Delta filing for Chapter 11 have substantially increased, particularly with fuel continuing to hover near peak levels," wrote McKenzie, in a research note. "Despite encouraging news from the Delta pilots union on concessions, we think labor uncertainty increases for Delta following the UAL loan guarantee denial." (Citigroup Smith Barney does and seeks to do business with the companies covered in its research reports.)
Link: http://www.thestreet.com/_tsclsii/ma.../10170579.html
Jul 13, 2004, 12:03 pm
#2
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A better topic title would be More Trouble for DAL Shareholders. Delta has a cash problem in the future. Companies go out of business because they run out of cash, not because they lose money.
Jul 13, 2004, 12:10 pm
#3
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Despite the scary headline, Delta's write-off of its deferred income tax asset is a non-cash accounting issue. For me, the bigger news today was a fall airfare war started by the smaller airlines. (http://biz.yahoo.com/rf/040713/airlines_2.html)
Jul 13, 2004, 12:12 pm
#4
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Brace for the onslaught of posts asking 'what will happen to my miles if DL files bankruptcy?' 
Jul 13, 2004, 12:14 pm
#5
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What will happen to my miles if DL files bankruptcy?
Jul 13, 2004, 12:24 pm
#6
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But, what will happen to my miles if DL files bankruptcy?
Jul 13, 2004, 12:30 pm
#7
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I've already started using my AMEX, instead of my DL AMEX, so my points stay flexible. I've cashed in enough miles for 2 RT business class seats for an upcoming trip to Spain.
I've got another 24,000 miles in my account, which I am concerned about. I worked too darn hard charging everything I buy to my mileage-bearing cards to let 24,000 miles go to waste. I might transfer some AMEX miles and take a solo trip... but I'm not yet ready to travel (alas)
Rita
I've got another 24,000 miles in my account, which I am concerned about. I worked too darn hard charging everything I buy to my mileage-bearing cards to let 24,000 miles go to waste. I might transfer some AMEX miles and take a solo trip... but I'm not yet ready to travel (alas)
Rita
Jul 13, 2004, 12:30 pm
#8
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Originally Posted by indufan
But, what will happen to my miles if DL files bankruptcy?
Jul 13, 2004, 12:35 pm
#9
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Originally Posted by DLfan
Waiting anxiously for the third stooge. Anyone? Anyone??
Jul 13, 2004, 1:06 pm
#10
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I have a question. What happens to my Sky Miles if DL files for bankruptcy? 
Jul 13, 2004, 2:02 pm
#11
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Originally Posted by indufan
Where are ya, Cholula? FT says you are online.
Having said that,
WHAT 'O WHAT IS GOING TO HAPPEN TO MY DL MILES??
Since I was late on this thread and NOLA Flyer beat me out as the third stooge, I guess I'll settle for fourth.
Jul 13, 2004, 2:10 pm
#12
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Your miles are all unimportant. It's all about what's going to happen to MY miles... 
Jul 13, 2004, 2:25 pm
#13
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Aaah, where goeth my miles?
I may have to do an unexpected hop around the world......or two....
I may have to do an unexpected hop around the world......or two....
Jul 13, 2004, 2:29 pm
#14
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Originally Posted by Cholula
Since I was late on this thread and NOLA Flyer beat me out as the third stooge, I guess I'll settle for fourth.
A day late and a dollar short, the story of your life.
Jul 13, 2004, 2:34 pm
#15
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Does anyone think they are having this much fun at the headquarters of Delta Air Lines lately?