FORT WORTH, Texas – Struggling Delta Air Lines could be just weeks away from becoming the third major airline in bankruptcy, executives warned Friday, as they disclosed that the carrier’s financial situation is deteriorating faster than expected.

Atlanta-based Delta, which is the world’s third-largest airline, told the Securities and Exchange Commission that it lost between $625 million and $675 million during the third quarter – far worse than the predictions of Wall Street analysts.

The airline also reported that it burned through $550 million of its reserves during the third quarter, and had just $1.45 billion in cash on hand Sept. 30. Some analysts have predicted that Delta will be forced to file for bankruptcy if its cash reserves fall below $1.5 billion.

“We view Chapter 11 as virtually inevitable,” said Jamie Baker, an airline analyst with J.P. Morgan Securities in New York, in a report to investors. “The lights are about to go out in Georgia.”

Delta announced last month that it is closing its longstanding hub at Dallas/Fort Worth Airport in a cost-saving move. The airline said Friday that the closure, which will eliminate 3,600 jobs here, will save $175 million over the next two years. About 800 jobs will remain.

Philip Baggaley, a credit analyst for Standard & Poor’s, said Delta has been slammed by high fuel prices and intense competition that has driven down airfares.

“The scale of the loss in what is typically a seasonally strong quarter indicates the extent of the damage,” he said.

If Delta files for bankruptcy protection, it would put half the nation’s six major hub airlines under Chapter 11. United Airlines has been mired in bankruptcy for more than two years, and US Airways recently filed its second bankruptcy since 2002.

A bankruptcy could make life difficult for Fort Worth-based American Airlines if Delta is able to make deep cuts in costs with the help of the court, analysts say.

Under that scenario, American, which avoided bankruptcy last year when its unions approved $1.6 billion in concessions, would have to face a leaner, more efficient competitor.

But American could benefit if Delta becomes entangled in court battles and is unable to pare expenses. That’s what happened at United Airlines, which still has higher costs than American despite two years in bankruptcy.

At US Airways, a judge Friday imposed a temporary 21 percent wage cut to keep that airline in business through the winter.

It was unclear Friday whether a Delta bankruptcy filing would hasten the D/FW hub closure.

Airline spokeswoman Benet Wilson did not return calls.

But in their filing with the SEC, airline executives confirmed that they still plan to have the hub eliminated by Jan. 31.

Delta’s shares plunged on Friday’s news. The stock dropped 79 cents, or about 19 percent, to close at $3.42 per share in trading on the New York Stock Exchange.

Delta executives say they may avoid bankruptcy if they can hammer out a concessions deal with pilots within a few weeks. The airline wants $1 billion in savings, which would have to include cuts to the pilots’ pension plan.

The concessions are part of a larger cost-cutting plan that Delta hopes will slash $5 billion in expenses by 2006.

But the financial condition of the world’s third-largest airline has worsened significantly in recent months, executives said in their filing.

“Our financial performance continued to deteriorate,” they wrote, because of intense competition, which has dampened revenues, and “historically high fuel prices.”

Airline officials said they “cannot predict the outcome” of discussions with pilots. But officials with the Air Lines Pilots Association said this week that talks have yielded some results.

“The committees have met several times during the last week and are discussing a wide range of topics,” Chris Renkel, chairman of the union’s communications committee, told pilots in a recorded message. “While there are major issues to be resolved, we are making progress.”

More ominously, however, airline executives said a bankruptcy filing might be necessary, even if pilots agree to concessions, if Delta is unable to borrow an additional $800 million and defer a $325 million debt that comes due next year.

“There is substantial uncertainty as to whether we will be able to obtain the necessary financing or deferrals,” executives told the SEC. If not, they said, “we would need to seek to restructure under Chapter 11.”

Some analysts said Friday they were disappointed that Delta isn’t asking more in savings from its lenders, leaseholders and vendors. In their SEC filing, airline executives said they were hoping for $125 million in savings.

“Delta is not really addressing the debt burden,” said bond analyst Mark Streeter of J.P. Morgan in an investment report.

Delta is scheduled to release its final earnings report for the third quarter on Wednesday. The airline said Friday it has cancelled a planned conference call with analysts to discuss the results.


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