Delta warns that it may face bankruptcy

ATLANTA – Delta Air Lines Inc. said Monday it burned through $744 million in cash in the first six months of the year and again warned that it could be forced into bankruptcy without deep concessions from pilots.

The carrier said in a filing with the Securities and Exchange Commission that it had begun dipping into cash reserves due to high fuel prices and lower than expected passenger revenues, but that such spending was “unsustainable.”

“If we cannot make substantial progress in the near term toward achieving a competitive cost structure that will permit us to regain sustained profitability and access the capital markets on acceptable terms, we will need to restructure our costs under Chapter 11,” the filing said.

Delta reiterated the need to get $1 billion in concessions from pilots, who have offered up to $705 million.

At the current burn rate, the carrier would be left with slightly more than $1.2 billion in unrestricted cash by the end of the year.

“That’s a bigger cash bleed than I was estimating,” said Ray Neidl, an analyst at Blaylock & Partners in New York.

The Atlanta-based carrier also revealed that it is giving its former finance chief free flights for life in exchange for her consulting services over five years.

The agreement calls for former chief financial officer Michele Burns to provide consulting services to Delta until 2009 on issues related to her time at the airline.

In exchange, Burns, who left Delta in May to become CFO at bankrupt energy supplier Mirant Corp., will get unlimited free air travel anywhere Delta flies during her lifetime. The filing also said that Burns’ spouse or domestic partner and any children — until they reach age 19, or 23 if a full-time student — would also get the free airfare. The company would not comment about Burns’ family.

Burns will not receive any other compensation besides the free flights, which will continue after her consulting services are completed, spokeswoman Peggy Estes said. The agreement bars Burns during her service term from soliciting any Delta officer or director to go work somewhere else.

Delta chief executive Gerald Grinstein cited Burns’ “exceptional expertise” in matters developed during “the most turbulent time in commercial aviation history” in a letter asking for her consulting assistance.