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$600 million for Delta?

Financing from American Express hinges on pilot deal

ATLANTA — A unit of American Express Co. agreed Monday to provide Delta Air Lines Inc. with up to $600 million in financing — if the cash-strapped airline persuades its reluctant pilots to accept $1 billion in concessions. Delta shares soared 17 percent.

The deal with American Express Travel Related Services Company Inc. calls for up to $100 million of the financing to be in loans. The remaining $500 million will be in the form of a prepayment of SkyMiles, which is Delta's frequent flier miles program. American Express credit card users can already earn SkyMiles with their purchases.

The agreement provides no time line for when Delta will get the $100 million loan. The remaining $500 million will be split into two payments; the first payable when Delta meets the conditions, the rest payable at least 90 days later.

A Delta spokeswoman declined to elaborate further.

Delta, the nation's third-largest airline and operator of a hub at Salt Lake City International Airport, has warned it will have to file for bankruptcy without the $1 billion in cuts from its pilots union. It has also said it may still have to file for bankruptcy even with the cuts because of its $20.6 billion in debt.

In the regulatory filing Monday announcing the financing, Delta said it also has agreed that — should it seek Chapter 11 protection — it will ask the bankruptcy court to put American Express at the top of the list of those owed money.

In trading Monday, Delta shares closed up 54 cents, or 17 percent, at $3.78 on the New York Stock Exchange. American Express shares finished down 58 cents, or 1.1 percent, at $51.15.

Delta, which had only $1.45 billion left at the end of the third quarter, desperately needs cash for its survival.

Late Monday, Delta reached an agreement with some of its creditors allowing the airline to defer $135 million in debt due in 2005 for two years, to 2007.

Negotiations continued Monday with its pilots over the concessions the airline says it needs.

"As our September quarter 2004 losses demonstrate, time is now very critical for Delta," said Gerald Grinstein, Delta's chief executive officer. "American Express' role in Delta's transformation process demonstrates the commitment and determination of one of our key stakeholders in helping to restructure the company."

In a memo to pilots late Monday, union spokesman Chris Renkel said the union and company negotiators were meeting in Washington and would continue throughout the evening. Renkel did not elaborate, and another spokeswoman, Karen Miller, declined to comment.

The pilots have publicly offered up to $705 million in savings. On Oct. 8, the pilots union made a new proposal to management. It has not said if the offer includes a higher amount of concessions.

However, in a regulatory filing a week later, Delta said that to date the union's "counterproposals have been for substantially less than $1 billion." The company also said in the filing that the union was requesting for pilots a stock option program that involves "substantially more equity" than management's proposal.