Atlanta – Delta Air Lines Inc. shares plunged 10 percent Tuesday after the nation’s third-largest carrier warned it will record a substantial loss for the rest of the year and will need to file for bankruptcy if its cash reserves fall too low or lenders seek immediate payment of its debts.
Delta said in a Securities and Exchange Commission filing that it continues to face significant challenges due to historically high fuel prices and low ticket fares.
“Accordingly, we believe that we will record a substantial net loss for the nine months ending Dec. 31 and that our cash flows from operations will not be sufficient to meet all of our liquidity needs for that period,” the filing said.
Delta said that it is considering several moves to keep itself afloat, including more cost cuts and potential asset sales.
But even that may not be enough.
“There can be no assurance that we will be able to implement any of these strategies or that these strategies, if implemented, will be sufficient to enable us to maintain adequate liquidity,” the filing said.
Delta, which reported a nearly $1.1 billion loss in the first quarter, had $1.8 billion in unrestricted cash at the end of March.
But the airline said in the filing that it expects that its cash level will be substantially lower by the end of the year if it can’t increase revenue, cut more costs, sell assets or restructure debt.
Delta said the financing agreements that it signed last fall to help avoid a bankruptcy filing at that time require that it maintain at least $1 billion in unrestricted cash through Oct. 31 and $750 million at all times thereafter.
The airline said failure to comply with the agreement terms could result in the lenders demanding immediate payment.
“If this were to occur, or if our level of cash and cash equivalents and short-term investments otherwise decline to an unacceptably low level, we would need to seek to restructure under Chapter 11,” Delta said.
Delta spent $884 million on aircraft fuel in the first quarter, up 54 percent from $574 million a year earlier.
Delta has significant financial obligations for the rest of the year. Among those are $450 million in pension funding requirements.
