Originally Posted by sailingfun

The facts of the chapter 11 filing at Delta are quite a bit different then what is posted here.
The reality is the company did everything possible to stay out of chapter 11 and in fact waited to long to file. They should have filed at least a year earlier. As a consequence Delta came very close to shutting down. DIP financing was hard to obtain and the rates were very high. Delta was in a critical cash position.
Management fought to stay out of Chapter 11 because the vast majority of their potential compensation was tied up in stock options. The Chapter 11 filing wiped that out. Leo Mullin held so many options that a 1 dollar move in the stock price was worth more to him then his entire Serp. I believe when he left he got 16 million dollars. Peanuts compared to the potential of his options if he could have kept the airline out of Chapter 11. In addition he took on the stigma of a failed CEO. To postulate that he was hired to bankrupt the airline is just plain dumb. If that was the case why did he set up his compensation package to be mostly based on stock options?
You would have thought he would have been smarter then that. I personally listened to him discuss how options are how you build wealth.
Delta ended up bankrupt because of a combination of a bad economy that started in the spring of 2001 before Sep 11. Business yields experienced the biggest drop ever seen in the industry that spring. This was followed by 911. A huge double whammy.
In addition to that management made several bad decisions. One of the biggest was spending 2.2 billion dollars in cash to buy back stock. If you going to take a company to chapter 11 you don't buy back stock. They bought the stock back trying to increase the stock value so they would get rich off their options. Sadly Delta could have really used that cash in 04. As it was the money was simply flushed down the toilet and never really moved the stock price.