"New Federal Bankruptcy Law Fails to Curb Attorney Fee Abuses!"

ATLANTA - Delta Air Lines Inc. dodged a bankruptcy filing last fall, thanks to deep concessions from pilots and fresh financing from creditors.

Six months later, the nearly $1.1 billion in loans have been spent and high fuel prices have overshadowed cost-cutting successes. And that's put Delta again at risk of having to seek Chapter 11 bankruptcy protection, according to Calyon Securities analyst Ray Neidl.

Neidl estimated in a research note Tuesday that the nation's No. 3 carrier is burning through $4 million in cash a day. Without an improvement, that could drop Delta's unrestricted cash reserves to $1.47 billion by the end of June and $466 million by year's end, dangerous levels for a company with heavy debt and pension obligations.

"In our opinion, Delta appears to be the most likely candidate for a bankruptcy filing this year based on its liquidity position," said Neidl, who added that the crunch time could be this fall.

Delta spokeswoman Benet Wilson said she couldn't comment on the possibility of a Chapter 11 filing nor elaborate on the airline's earnings results issued last week, when Delta said it lost nearly $1.1 billion in the first quarter, the highest in the industry for the January-March period.

"We really don't have anything to add on top of that," Wilson said.

Delta shares have lost more than 90 percent of their value in the last four years, reducing the market value of the company's stock to only about $500 million. By comparison, discount carrier Southwest Airlines Inc.'s market capitalization of $11.5 billion is 23 times larger.

In trading Wednesday, shares of Delta fell 12 cents, or 3.4 percent, to $3.43.

Delta did not mention the bankruptcy issue in its earnings release, but Delta has not ruled out bankruptcy as an option.

Delta had $1.8 billion in unrestricted cash reserves at the end of the first quarter, the same level as at the end of the fourth quarter of 2004.

But Delta also said it borrowed during the quarter the remaining $250 million under a financing agreement with American Express. That was on top of another $830 million that it had borrowed in the fourth quarter of last year from American Express and General Electric to fund its daily operations, repay debt and increase cash reserves.

Looking ahead, Delta has significant financial obligations this year, according to regulatory filings. These include $1.1 billion in operating lease payments, $1 billion in interest payments, $835 million in maturing debt that must be repaid and $450 million in pension funding requirements.

J.P. Morgan airline analyst Jamie Baker said in a research note after Delta released its earnings last week that the airline needs at least $500 million in additional cash reserves to "merely limp into 2006."

William Rochelle, an airline bankruptcy lawyer in New York, said that because of high fuel prices, bankruptcy remains a possibility for several major carriers, including Delta.

It's just a question of who goes first, Rochelle said. "Industry conditions are nothing short of brutal."

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