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Delta stock dives on downgrade

ATLANTA -- Delta Air Lines Inc.'s battered stock plunged to a new low yesterday after a Wall Street analyst advised clients to sell their shares on fears the nation's third-largest carrier will file for bankruptcy within the next two months.

Also yesterday, Delta's pilots union postponed plans to elect new officers to its executive committee and to fill a position on its negotiating committee.

In a memo to pilots, the union said it has received information indicating that Delta may have accelerated the planned closing date of its Dallas hub to interfere with the election process.

The memo did not elaborate. In September 2004, Delta said it would close its Dallas hub by Jan. 31 of this year, and that move was completed then.

The union also said in the memo there is no truth to media reports that the airline is seeking $275 million in additional cuts from its pilots. The pilots union agreed to $1 billion in concessions last year to help Delta avoid a brush with bankruptcy.

The vote on the new union officers was postponed from yesterday until no later than Aug. 31. A Delta spokeswoman did not immediately return a phone call and several e-mails seeking comments on developments at the airline yesterday.

Delta's shares fell 28 cents to close at $1.95 on the New York Stock Exchange.

The company's market capitalization -- the total value of the company's outstanding shares -- fell to $280 million, less than a third the amount of discount carrier AirTran Airways though Delta is 15 times larger in annual revenue.

Prior to the dip, Delta's stock was already at a 43-year low.

The decline came after a research note by Merrill Lynch analyst Michael Linenberg, who lowered the Atlanta-based airline's rating from neutral to sell. ''We think the recent surge in fuel prices greatly increases the likelihood of a bankruptcy filing within the next two months," Linenberg said.

He said that while Delta, which has lost nearly $10 billion since January 2001, has been in talks with creditors about additional funding, he believes the surge in oil prices could keep lenders at bay for now.

He estimated that Delta's fuel bill this year could grow by more than $1 billion, wiping out the $1 billion of cost concessions provided by the airline's pilots last year.

''We think the probability of a Delta bankruptcy filing has grown, and we think investors should be mindful of Oct. 17, when more restrictive bankruptcy legislation becomes effective," Linenberg said. ''That could be a key factor in a Delta deciding whether to file for Chapter 11 bankruptcy."

Baker said a Delta bankruptcy filing by the end of the year is ''all but assured" if the airline doesn't get a significant infusion of cash in the near term.

Delta chief Gerald Grinstein has said the company's current transformation plan, which includes cutting annual costs by $5 billion by the end of next year, is not enough to save the struggling carrier.

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