Can Delta Airlines Stave Off Bankruptcy?

In a move plan by some as an effort to stave off bankruptcy as well as to create cash, Delta Airlines made the move on August 16, 2005, to sell one of its regional carriers, Atlantic Southeast Airlines, to Skywest, Inc. The sale comes in the face of rising fuel prices and a high debt burden that many U.S. Airlines in expanding to Delta are carrying.

As much as the 5 million selling price of the regional carrier will infuse Delta with cash, the carrier still has nearly billion dollars in superior debt and leasing costs to manage. Delta is staggering to use some of the funds to sacrifice their debt and set aside the remaining monies as reserves. Delta must have a withhold in place totaling 0 million dollars as it negotiates with a credit card processor this fall to expand or renew its covenant with the processor. Without the reserves and the extension, Delta would be definite to file for bankruptcy.

Northwestern Airlines

While Atlantic Southeast Airlines is no longer part of the Delta portfolio, two other divisions remain and may also be sold.

Delta AirElite, the business jet sector of the company, is the most profitable part of the company. A sale of this business would probably signal to the industry that Delta cannot recover from its current financial plight. Cash rich Gulfstream Aerospace business or Tag Aviation may serve as viable suitors for this company.

Comair, an additional one regional carrier owned by Delta, could also be put on the auction block. Selling this regional carrier would leave Delta without a regional aid provider, however.

Ultimately, these are bleak times for the venerable carrier. Odds strongly propose that the business will seek bankruptcy safety this fall, particularly before changes in the U.S. Bankruptcy law take place in October. High fuel prices and poor administration decisions have contributed to Delta's current state of affairs; unfortunately employees and passengers will likely suffer the most should Delta go bankrupt.

Can Delta Airlines Stave Off Bankruptcy?