Delta Loss Narrows Amid Bankruptcy Talk

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Delta Air Lines Inc. (DAL) posted a narrower second-quarter loss on Thursday but shares in the No. 3 U.S. carrier plunged on revived speculation that it could file for bankruptcy.

The airline, widely seen as the weakest U.S. carrier, also said it had decided to defer delivery of eight Boeing 737-800 (search) aircraft from 2006 to 2008.

The Atlanta, Ga.-based airline posted a quarterly loss of $388 million, or $2.64 a share, after payment of preferred dividends, compared with a loss of $1.97 billion, or $15.79 a share, a year earlier, which included one-time charges related to pensions and other items.

Delta shares were down 36 cents, or 9 percent, at $3.55 on the New York Stock Exchange (search) on concern that continued losses could drive the airline into seeking Chapter 11 (search) bankruptcy protection from creditors.

Delta appointed a new chief financial officer and chief operating officer on Wednesday, and analysts asked Chief Executive Gerald Grinstein (search) whether that was a sign the company had recognized that bankruptcy was inevitable.

"We continue to believe an out-of-court restructuring is the best way...," he responded.

Still, Grinstein has said in congressional testimony that a bankruptcy filing could be unavoidable if Congress fails to pass legislation easing the airline's high pension costs.

Jim Corridore, an analyst at Standard & Poor's, said Delta shares were also hurt by concern that the airline's operating earnings and revenue were weaker than those of leading rivals American Airlines and Continental Airlines.

"It does seem like they're lagging American and Continental in reported results in terms of their unit revenue growth and their yield improvement," he said.

Delta's second-quarter results were depressed by a $96 million charge for pensions and related items, partially offset by an $18 million benefit from a reduction in its deferred income tax reserve.

Excluding one-time items, the second-quarter loss was $304 million, or $2.11 a share. Wall Street analysts had expected a loss of $2.39 a share.

Delta said it sold one MD-11 aircraft during the second quarter for $26 million.

It said it had $2.0 billion in cash and cash equivalents and short-term investments as of June 30, $1.7 billion of which was unrestricted.

Corridore called that a "decent" level.