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Delta bankruptcy looms

Airline may file for Chapter 11 as soon as Wednesday

ATLANTA — Delta Air Lines Inc., the nation's third-largest carrier, plans to file for bankruptcy protection in New York as early as Wednesday, according to an industry consultant who has been informed of the company's plans.

Delta's stock tumbled 25 cents, or 22.7 percent, to close at 85 cents in heavy trading Monday on the New York Stock Exchange.

The consultant, who was not authorized to disclose the information and thus spoke on condition of anonymity, said Delta is working with GE Commercial Finance and other creditors to arrange roughly $2 billion in debtor-in-possession financing. The money would allow the airline to operate in bankruptcy.

Delta, which operates a hub at Salt Lake City International Airport, likely will pledge the few remaining assets not already pledged as collateral for loans as part of the bankruptcy financing agreement, the consultant said. "There is nothing unencumbered after this," according to this consultant.

The consultant said the filing was expected to come Wednesday afternoon but could be pushed to Thursday depending on when the bankruptcy financing is completed.

A spokeswoman for Delta, which has lost nearly $10 billion since January 2001, declined to comment, saying no decision about bankruptcy has been made. Two spokesmen for GE Commercial Finance also declined to immediately comment.

Reached at his Connecticut home Monday, Delta director Edward H. Budd said, "Anything that's going to be talked about at Delta is going to come from Delta." Calls to the homes of four other company directors were not answered.

The bankruptcy filing would come as Atlanta-based Delta has been unable to right itself amid persistently high fuel costs and heavy debt and pension obligations.

The filing would make Delta the third major U.S. carrier to enter Chapter 11 since the 2001 terrorist attacks, joining UAL Corp., the parent of United Airlines that is based in Elk Grove Village, Ill., and US Airways Group Inc., based in Arlington, Va., which has filed twice in the last three years.

Some smaller carriers, including Honolulu-based Hawaiian Airlines and Indianapolis-based ATA Airlines Inc., also have filed for bankruptcy in recent years.

If it follows the pattern of most big airline bankruptcies, Delta's existing shares would eventually become worthless and portions of the airline's existing debt would be exchanged for equity in a reorganized Delta. One major question is whether Delta would go the route of UAL and US Airways and seek to turn over its pilot and other employee pension plans to the federal government.

Delta's total debt is roughly $20.5 billion, and it listed $21.6 billion in assets as of June 30. The asset figure would make Delta's bankruptcy the ninth-largest in U.S. history, according to bankruptcy tracker New Generation Research Inc.

Delta has announced up to 24,000 job cuts over the last four years. In September 2004, it also said it would shed its Dallas hub as part of a sweeping turnaround plan aimed at saving the airline. The plan was hampered, however, by soaring fuel costs.

Fort Worth, Texas-based AMR Corp., the parent of American Airlines, the nation's biggest carrier, teetered on the verge of bankruptcy before winning deep concessions from its employees.

The other legacy carriers — those with a large presence in multiple regions prior to deregulation in 1978 — are Northwest Airlines Corp., based in Eagan, Minn., and Houston-based Continental Airlines Inc.

Northwest has also been said to be close to bankruptcy.