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Delta Waves Goodbye to Bankruptcy

By HARRY R. WEBER
The Associated Press
Monday, April 30, 2007; 7:30 PM

ATLANTA -- Delta Air Lines Inc. waved farewell to bankruptcy protection Monday and put down a welcome mat for a redesigned logo after surviving a hostile takeover bid during a 19 1/2-month reorganization that saw it shed billions in costs.

The board of directors of the Atlanta-based company will now turn its attention to picking a new leader to replace outgoing Chief Executive Gerald Grinstein and deciding whether to sell or spin off regional feeder carrier Comair.

Grinstein, 74, said in an interview during a bankruptcy exit celebration at Delta's headquarters that he expects choosing a successor for him to be the first priority for the board. He said he believes the board, which consists of seven new members, will spend May getting acquainted with the candidates and make a decision sometime after that.

"That's the most important decision the board can make," said Grinstein, who will step down once his replacement is appointed.

The top internal candidates for CEO are Chief Financial Officer Ed Bastian and Chief Operating Officer James Whitehurst. Bastian said he will stay on with Delta even if he isn't picked as the new CEO. Whitehurst said he has chatted informally with some of the board members, but hasn't had an interview.

"The important thing is it be an internal person," Bastian said.

No external candidates have been mentioned.

As for Comair, which also emerged from bankruptcy Monday, senior Delta executives said there has been no timetable set on making a decision whether to shed it. Some analysts have suggested Delta will definitely sell Comair, and sell it quickly.

Whitehurst said "it's not a foregone conclusion" that Comair will be sold.

Delta, the nation's third-largest carrier, also unveiled Monday plans for a new paint job for its planes, featuring the company's three-dimensional red logo flying across a blue background on the tail of aircraft. The new logo will appear on more than 900 Delta and Delta Connection planes, at airports and on Delta advertising. The primary color of the new logo is a solid red instead of the familiar red-and-blue color scheme.

It will take four years to put the new livery on all Delta and Delta Connection planes, spokeswoman Chris Kelly said. Planes will get the new design as they come in for scheduled maintenance.

"It's a new airline, it's a new day, so you might as well have a new color," said Ray Neidl, an airline analyst with Calyon Securities in New York.

Neidl gave Delta credit for getting its cost structure down while in bankruptcy and for laying out a business plan for the future, after having suffered billions in losses the last six years.

Delta entered Chapter 11 on Sept. 14, 2005, amid high fuel prices and the burdens of high labor and pension expenses. Delta significantly reduced its labor and pension costs while under court protection. As of March 31, the company had 52,260 full-time employees, according to a regulatory filing Friday. The figure includes subsidiary Comair.

The bankruptcy process has been expensive for Delta, which has run up more than $127.9 million in bills for fees and expenses for its lawyers, consultants and advisers through the end of January. It could spend tens of millions more once the final fee and expense requests are dealt with.

Delta underwent a lot of changes while in bankruptcy, which included cost and job cuts, restructuring its fleet and focusing more on international service. The airline terminated its pilots' defined benefit pension plan.

The carrier also defeated a hostile takeover bid by Tempe, Ariz.-based US Airways Group Inc. US Airways withdrew its $9.8 billion bid after Delta's unsecured creditors committee in January endorsed Delta's reorganization plan.

Delta's existing stock was canceled Monday. Shares of new stock will be issued to creditors and begin trading publicly on the New York Stock Exchange on Thursday under the ticker symbol DAL. That day, Delta executives will ring the closing bell from the floor of the NYSE.

The company says 400 million shares will be issued, putting the target initial public offering at $23.50 a share to $30 a share based on Delta's projected valuation of $9.4 billion to $12 billion.

Delta's reorganization plan gives unsecured creditors between 62 percent and 78 percent of the value of their allowed claims as shares of new Delta stock. Delta employees also will get a lump-sum cash payment from the airline based on a percentage of their salary and will receive an equity stake in the reorganized company. Checks to employees are to be issued Tuesday.

More than 95 percent of creditors voted to endorse the plan for Delta to leave bankruptcy, and a federal bankruptcy judge in New York on April 25 gave the airline the green light to exit Chapter 11 on Monday. Conditions included closing on a $2.5 billion loan that was used to repay another loan that helped fund the airline's operations while in bankruptcy. The wire transfers were completed at midmorning Monday, allowing Delta to emerge from Chapter 11.

"This is an amazing day for an extraordinary company, which has reclaimed its heritage and has emerged from Chapter 11 as a fierce, determined and well-capitalized competitor," said Marshall Huebner, Delta's chief bankruptcy lawyer.

Michael Lloyd, an Atlanta-based customer service agent, was among the throng of Delta employees at the company celebration Monday.

"We were all ground down to the point where we were trying to figure out how we would feed our family, but we stuck with it," he said. "This is something that no airline in the world has ever done."

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Associated Press Writer Jason Bronis contributed to this report from Atlanta.

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On the Net:

Delta Air Lines Inc.: http://www.delta.com

© 2007 The Associated Press