Delta CEO
John Bazemore  /  AP Photo
Delta Air Lines chief executive Gerald Grinstein speaks during a meeting in Atlanta last week. Grinstein backpedaled Wednesday on his earlier suggestion that he was hopeful an agreement with pilots could be worked out by week's end.
updated 9/16/2004 8:11:48 AM ET 2004-09-16T12:11:48

Delta Air Lines Inc. revised its annual report on Wednesday to reflect its growing financial difficulties and the possibility of seeking bankruptcy protection "in the near term."

The airline said that due to recurring losses and the increased risk of a Chapter 11 filing, its independent auditor, Deloitte & Touche, has reissued its report "to raise substantial doubt about the company's ability to continue as a going concern."

The announcement came as chief executive Gerald Grinstein backpedaled from his earlier hope that an agreement with pilots on stemming early retirements could be worked out by week's end.

In a news release, Delta said that since filing its annual report with the Securities and Exchange Commission for the year that ended Dec. 31, "significant events have occurred which have materially adversely affected Delta's financial condition and results of operations."

"These events, which have been reported in Delta's subsequent SEC filings, include a further decrease in domestic passenger mile yield and near historically high levels of aircraft fuel prices," the statement said.

In a separate announcement, Delta said it had offered to exchange $680 million of its debt with new notes secured by $1.3 billion worth of debt-free aircraft, flight simulators and flight training equipment. The offer was made to holders of $2.6 billion in various forms of Delta debt.

Earlier Wednesday, at a Commerce Club speech to Georgia business leaders, Grinstein was asked if his timeline still stood for reaching a deal with pilots on the early retirements.

"Probably not," Grinstein responded.

Asked why, Grinstein said, "We're in the middle of a discussion and I think they're going to be responsive, but it's now Wednesday and the pilots are scattered and it has to be reviewed by a lot of people inside the organization and you've got a weather condition coming into this airport, so all of those things tell me that it will be delayed probably beyond this week."

Grinstein then immediately left the building and did not take further questions from reporters.

Earlier in his speech, Grinstein said that regarding the company's larger request for $1 billion in concessions from pilots he is optimistic an agreement can be worked out. He gave no timeline, but was blunt in his assessment of what's at stake.

"What we've asked of the pilots is a significant concession," Grinstein said, adding, "They've developed a lifestyle and an expectation about what is going to happen and they're wrestling with it. My conviction is that we will get that resolved and I hope it will not be too far into the future, because these are really difficult times."

Asked for a response, union spokeswoman Karen Miller said, "We can only be part of the solution, but are committed to helping Delta in its recovery. We believe that we should focus on our efforts at the bargaining table and do not want to negotiate in the press."

Delta fears that its pilots could jump ship en masse because they are worried about their pensions amid United Airlines' threat to terminate its employee retirement plans. Several hundred Delta pilots have retired early in recent months, and more have threatened to, Grinstein has said.

Delta pilots who retire can elect to receive 50 percent of their pension benefit in a lump sum and the other 50 percent as an annuity later, regulatory filings show.

On Monday, Grinstein told reporters at an airline conference in New York that he was hopeful an agreement on that specific issue could be worked out by the end of the week.

The pilots union had balked at that timeline. Although it has said as recently as Tuesday that it is willing to negotiate with the airline, the union said an agreement on the pilot retirement issue would be contingent on further assurances from the company of protection for the pilots retirement plan.

Atlanta-based Delta said in a statement that the company's contract proposal to the pilots union "would preserve the pilots accrued pension benefits, including the pilots ability to receive money in a lump sum, and is designed to create a sustainable retirement plan going forward."

The union has consistently disputed that assertion.

"Delta has not guaranteed to protect the pilots' accrued benefits," said union spokeswoman Karen Miller.

Grinstein has said previously that the nation's third-largest airline would be forced to file for bankruptcy if it didn't get its pilot retirement issue under control by the end of September.

In his speech Wednesday, Grinstein seemed to suggest that he feels an agreement on the retirement issue can be worked out before the end of September deadline, though he cut his thought short in mid-sentence before being definitive.

"I have high hopes, even expectations, that will be solved and that that threat that was very imminent by the end of this month is probably _ I'm not sure I'm allowed to say that, but I expect that it is going to be resolved."

Delta has warned that without pilot concessions it might have to file for bankruptcy.

In trading Wednesday, Delta shares closed up 1 cent at $4.10 on the New York Stock Exchange.

Copyright 2004 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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