UPDATE 1-Delta shares slide as analysts see bigger losses
January 15, 2004 14:05:23 (ET)
(Adds more analyst comments, updates stock price, adds byline)
By Meredith Grossman Dubner
CHICAGO, Jan 15 (Reuters) - Shares of Delta Air Lines (DAL,Trade) fell nearly 6 percent on Thursday as industry analysts widened their 2004 loss estimates, a day after the No. 3 U.S. airline forecast a big first-quarter loss and said it needs more cost cuts.
Delta on Wednesday reported a slightly narrower fourth-quarter net loss of $327 million. The Atlanta-based carrier also said it expects to post a net loss of $300 million to $350 million for the first quarter.
Its shares were off 75 cents, or about 6.2 percent, to $11.40 on the New York Stock Exchange on Thursday afternoon after dipping 8 percent to touch a four-week low of $11.17.
Credit Suisse First Boston analyst James Higgins widened his 2004 loss forecast to $4.00 a share from $2.50 and criticized Delta for its aggressive plans to increase capacity by 8 to 10 percent this year while the industry is still plagued by weak revenue.
Higgins said Delta is looking like American Airlines parent AMR Corp. (AMR,Trade) looked in late 2002, although its liquidity position is stronger. AMR narrowly averted bankruptcy last spring after achieving steep wage concessions from labor groups.
Delta has been negotiating for months with its pilots, among the highest-paid in the industry, to reduce costs.
"We believe that Delta's new CEO (Gerald Grinstein) effectively warned yesterday of a potential bankruptcy if pilot costs cannot be reined in," Higgins wrote in a note. "We view, moreover, management's fresh analysis of Delta's strategic outlook as due diligence that will enable them to claim, justifiably, that they did everything possible to avoid Chapter 11, if it comes to that."
A Delta spokeswoman was not immediately available to comment.
INVESTORS SPOOKED
Higgins said he believed bankruptcy would ultimately be avoided but predicted a tough few months ahead.
Blaylock & Partners analyst Ray Neidl said he did not interpret Grinstein's comments as a potential bankruptcy warning. He said Delta has a good liquidity position and is in no immediate danger of bankruptcy.
"That (talk) could be scaring a few people, but that's just not the case," Neidl said.
Under Grinstein, Delta has launched a full-scale review of how the company operates, which could give Delta greater opportunities to reverse its fortunes during 2004, Lehman Brothers analyst Gary Chase wrote in a note.
"While Grinstein certainly faces his share of challenges during 2004, we believe that many of those challenges could also represent opportunities for the company, at least relative to the rest of the sector," Chase wrote.
He now expects Delta to post a 2004 loss of $5.00 a share, wider than his previous $3.70 loss forecast.
Analysts on average expect Delta to post a 2004 loss of $3.52 per share, with loss estimates ranging from $2.00 to $5.55, according to Reuters Research, a unit of Reuters Group Plc.
"We find it exceedingly difficult to envision results as good as a $2.80 per-share loss for the full year," Chase wrote. He noted that Delta's first-quarter domestic bookings are trailing last year's and said the company's projected costs were not encouraging.
January 15, 2004 14:05:23 (ET)
(Adds more analyst comments, updates stock price, adds byline)
By Meredith Grossman Dubner
CHICAGO, Jan 15 (Reuters) - Shares of Delta Air Lines (DAL,Trade) fell nearly 6 percent on Thursday as industry analysts widened their 2004 loss estimates, a day after the No. 3 U.S. airline forecast a big first-quarter loss and said it needs more cost cuts.
Delta on Wednesday reported a slightly narrower fourth-quarter net loss of $327 million. The Atlanta-based carrier also said it expects to post a net loss of $300 million to $350 million for the first quarter.
Its shares were off 75 cents, or about 6.2 percent, to $11.40 on the New York Stock Exchange on Thursday afternoon after dipping 8 percent to touch a four-week low of $11.17.
Credit Suisse First Boston analyst James Higgins widened his 2004 loss forecast to $4.00 a share from $2.50 and criticized Delta for its aggressive plans to increase capacity by 8 to 10 percent this year while the industry is still plagued by weak revenue.
Higgins said Delta is looking like American Airlines parent AMR Corp. (AMR,Trade) looked in late 2002, although its liquidity position is stronger. AMR narrowly averted bankruptcy last spring after achieving steep wage concessions from labor groups.
Delta has been negotiating for months with its pilots, among the highest-paid in the industry, to reduce costs.
"We believe that Delta's new CEO (Gerald Grinstein) effectively warned yesterday of a potential bankruptcy if pilot costs cannot be reined in," Higgins wrote in a note. "We view, moreover, management's fresh analysis of Delta's strategic outlook as due diligence that will enable them to claim, justifiably, that they did everything possible to avoid Chapter 11, if it comes to that."
A Delta spokeswoman was not immediately available to comment.
INVESTORS SPOOKED
Higgins said he believed bankruptcy would ultimately be avoided but predicted a tough few months ahead.
Blaylock & Partners analyst Ray Neidl said he did not interpret Grinstein's comments as a potential bankruptcy warning. He said Delta has a good liquidity position and is in no immediate danger of bankruptcy.
"That (talk) could be scaring a few people, but that's just not the case," Neidl said.
Under Grinstein, Delta has launched a full-scale review of how the company operates, which could give Delta greater opportunities to reverse its fortunes during 2004, Lehman Brothers analyst Gary Chase wrote in a note.
"While Grinstein certainly faces his share of challenges during 2004, we believe that many of those challenges could also represent opportunities for the company, at least relative to the rest of the sector," Chase wrote.
He now expects Delta to post a 2004 loss of $5.00 a share, wider than his previous $3.70 loss forecast.
Analysts on average expect Delta to post a 2004 loss of $3.52 per share, with loss estimates ranging from $2.00 to $5.55, according to Reuters Research, a unit of Reuters Group Plc.
"We find it exceedingly difficult to envision results as good as a $2.80 per-share loss for the full year," Chase wrote. He noted that Delta's first-quarter domestic bookings are trailing last year's and said the company's projected costs were not encouraging.
