Delta Air Lines today announced a new deal with GE Commercial Finance that would provide the carrier another $500 million in financing as it works fervently to avoid a court-supervised restructuring. The deal, currently covered by a letter of commitment, is contingent on various conditions and was made public as Delta's pilots began voting on a crucial agreement that would save the airline $1 billion annually.
The package from GE Commercial Finance includes $300 million as a senior secured revolving credit facility and $200 million as a senior secured term loan. Delta said up to $100 million of the financing is covered by an earlier deal with American Express Travel Related Services
(BTNonline, Oct 26). "While there is a significant amount of work yet to be accomplished, these developments will make a meaningful contribution to the massive company-wide effort underway to transform our airline," said Delta CFO Michael Palumbo.
Delta's efforts to avoid Chapter 11 largely would be rendered moot if a new five-year agreement with the Air Line Pilots Association is not approved by union membership. The deal, struck last week, staved off an immediate bankruptcy filing and included various concessions, notably a 32.5 percent cut in pilot wages. In exchange, pilots have the option to purchase roughly 30 million shares of Delta common stock, representing a 15 percent equity stake.
"Your union and our economic experts were convinced that immediate relief was necessary to prevent a bankruptcy filing in light of the company's economic condition," said Delta ALPA Master Executive Council chairman John Malone, in a message to union membership. "While there are no guarantees that a bankruptcy filing will not occur at some point, this tentative agreement will hopefully buy Delta additional time to continue its out of court restructuring efforts."
Pilots were scheduled to begin voting today on the new contract, which requires a simple majority for ratification. The voting period ends Nov. 11.
"Delta's last minute bankruptcy sidestep is best viewed as a stay of execution, affording Delta at least six months more time to put its house in order or pray for US Airways' house to burn to the ground," said J.P. Morgan Securities analysts in a research note late last week.