ATLANTA – A top Delta Air Lines Inc. (DAL) executive defended the struggling carrier's transformation plan Friday and reiterated the need to further cut costs, but offered no new guidance on the possibility of a bankruptcy filing.
Chief financial officer Michael Palumbo told analysts at an investor conference in New York that the nation's third-largest airline will need to dig deeper to slash costs because of persistently high fuel prices.
"No commercial airline's business model works at $50 to $60 a barrel for oil," Palumbo said.
Palumbo did not elaborate in his prepared remarks or in a question-and-answer session directly afterward on Delta's warning Tuesday in a regulatory filing that it will record a substantial loss for the rest of the year and will need to file for bankruptcy if its cash reserves fall too low or lenders seek immediate payment of its debts.
He did say, however, that Delta's transformation plan is designed to be executed out of the "statutory process."
"Delta is not failing on its plan and we are certainly not planning to fail," Palumbo said.
Delta shares fell 3 cents, or 1.1 percent, to $2.74 in morning trading Friday on the New York Stock Exchange.
At the conference, which was broadcast via the Internet, Palumbo struck a more positive tone than the company's Securities and Exchange Commission filing that outlined Delta's financial problems.
Delta, which reported a nearly $1.1 billion loss in the first quarter, had $1.8 billion in unrestricted cash at the end of March. But in Tuesday's filing, the airline said it expects that its cash level will be substantially lower by the end of the year if it can't increase revenue, cut more costs, sell assets or restructure debt.
Palumbo said Friday that Delta's plan to cut $5 billion in costs is working, but the airline needs to do more because of high fuel prices.
"We believe this is a new reality in the industry," he said of expensive fuel.
In addition to defending Delta's transformation plan, Palumbo also stood by the airline's fare simplification plan announced in January that cut its most expensive fares by as much as 50 percent nationwide and eliminated other restrictions.
While acknowledging that some observers have described Delta's SimpliFares (search) plan as "simply stupid," Palumbo retorted, "In our view, they're simply common sense."