Comair was to be sold, what next

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NEW YORK, Nov 30 (Reuters) - Delta Air Lines Inc. (DALRQ.PK: Quote, Profile, Research) faced a cash shortfall of more than $2.5 billion in its business plan as fuel prices soared and it realized it could not sell regional carrier Comair in early 2006, a financial adviser to the airline testified on Wednesday.
The company was hoping to sell Comair, the wholly owned airline, for $550 million, but then it realized an overhaul would be needed first, said the adviser, Timothy Coleman, of Blackstone Group. He was testifying on the fifth day of a U.S. bankruptcy court hearing, where Delta is seeking to void its pilots' contract as part of $3 billion in cost cuts and revenue hikes the company says it needs to survive.

 

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The rest of the Press Release

]Coleman also said that the company's credit card holdbacks, or the amount of collateral the company had to provide to credit-card companies, rose to $650 million this year from a previously projected $100 million.

The pilots, who had agreed to almost $1 billion in givebacks under a 2004 plan, are arguing that the company needs much less than the $325 million in additional cuts it is asking of them.

Coleman testified that the projections in that plan included several factors that were not under the company's control. "It was the cutting-edge of risk," he said.

High fuel prices this year added another $1.4 billion to its unexpected shortfall, he said. Coleman said that under the plan the company was also expecting an equity sale to raise $250 million in 2006, but then realized that investors did not have the appetite for such an offer.

"That made their business plan and their attempts to stay out of Chapter 11 unsustainable," he said.