Delta Air Lines Inc. Friday forecast a much wider third-quarter loss than Wall Street had estimated because of weak domestic fares and a spike in fuel costs, driven by record-high oil prices.
The No. 3 U.S. airline, which again warned that it may have to seek bankruptcy protection unless it can restructure its debt load, said it expects a loss of $625 million to $675 million, or $4.99 to $5.39 per share, compared with a loss of $164 million, or $1.36 per share, a year earlier.
The loss estimate includes charges of about $40 million for selling eight planes and $14 million for its pilot pension plan.
Analysts, on average, had expected a loss of $3.78 per share, excluding one-time items, according to Reuters Estimates.
Delta's unrestricted cash balance dropped to $1.45 billion on Sept. 30, 2004 from $2 billion on June 30.
The Atlanta-based carrier said it was on track to achieve by the end of 2004 about $2.3 billion of its targeted $5 billion in annual cost cuts through initiatives it has previously implemented. But it said it would need full participation of its lenders, lessors, vendors and employees.
Even so, Delta said, it will have substantial liquidity needs even if it does achieve all the $5 billion in cost cuts. The airline would still need to raise about $800 million of new financing in 2005 and defer about $325 million of debt maturing in that year.
"There is substantial uncertainty as to whether we will be able to obtain the necessary financing or deferrals on acceptable terms or at all," the airline said in a statement.
"If we are unable to obtain the necessary financing or deferrals to meet our liquidity needs, we would need to seek to restructure under Chapter 11 of the Bankruptcy Code," it said.
Skyrocketing fuel prices would compound the airline's cash crunch, it said. If oil prices stay at current levels of about $50 a barrel, Delta's liquidity needs would increase by an additional $600 million in 2005 and an additional $900 million in 2006, it said.