Grinstein's Fears Coming True
 

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Grinstein's Fears Coming True As Delta Downgraded

Greg Levine, 08.09.05, 4:03 PM ET

The "economy" as an abstract notion seems to be strengthening. But don't tell that to Gerald Grinstein. The chief executive of Delta Air Lines (nyse: DAL - news - people ) has of late vowed to do all he could to stave off bankruptcy at the carrier--but warned that a Chapter 11 filing may be inexorable.

On Tuesday, the No. 3 U.S. airline got another nail pounded into it, and its stock showed the damage. According to The Associated Press, a Merrill Lynch analyst lowered the Atlanta-based firm's rating from neutral to sell. He augured that the historic jump in oil prices would wipe out cost savings from Grinstein's radical restructuring program. The AP quoted a JPMorgan analyst as declaring it "all but assured" that Delta would file for Chapter 11 if it doesn't get a cash infusion in the near term--and oil prices may tighten lenders' pocketbooks.

Delta shares sank 27 cents, or 12.11%, trading at $1.96 late Tuesday afternoon on the New York Stock exchange.

Meanwhile, another troubled legacy had better news Tuesday. A U.S. bankruptcy judge permitted US Airways (otc: UAIRQ - news - people ) to forward its restructuring plan to creditors for a vote. The judge's OK constitutes a key step in lifting the carrier out of its second bankruptcy. CEO Bruce Lakefield said Tuesday's hearing was a "another good step" in US Airways' path to reorganization. He said the firm hopes to formally emerge from bankruptcy in late September or early October. And what timing: It was revealed Tuesday that investors of America West Holdings (nyse: AWA - news - people ), the parent of America West Airlines, will vote on Sept. 13 on whether to OK the firm's merger with US Airways. Things will heat up in autumn. More...