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Although Delta Air Lines Inc. is inching closer to reaching a concession agreement with its pilots union, a deal might be too late to save the carrier from bankruptcy. The Atlanta-based company is in discussions with pilots, its only major unionized work force, on cuts that could save Delta upwards of $1 billion per year. Delta had hoped to reach a settlement by Tuesday to meet a deadline to exchange unsecured debt for lower-yielding securities. A failure to win cuts from its pilots would likely push Delta into court protection, where the company would join rivals US Airways Group Inc. and UAL Corp.’s United Airlines. US Air also is in negotiations with the company’s labor groups, warning late last week that it may request court permission to terminate many of its union contracts in a move to preserve cash. For Delta, coming to terms with its pilots may not be enough to prevent a Chapter 11 filing. A company vice president of flight operations warned in a message to employees recorded late last week that “there are still several important issues outstanding.” The company, which lost more than $600 million during the third quarter and is running dangerously low on cash, needs to renegotiate some of its more than $20 billion in debt. Its offer to unsecured debt holders is contingent on the airline reaching a deal with its pilots this week. Many in the industry expect Delta to file for bankruptcy by midweek if it fails to reach a deal with pilots. An agreement, by contrast, could buy the company more time to restructure outside the courts. “We believe that there will be a pilot agreement and that bankruptcy will be avoided for the time being,” Ray Neidl, an analyst with Calyon Securities Inc., said in a research note Monday. Delta did announce some positive news Monday, disclosing that it has secured up to $600 million in new financing. The company obtained a $100 million loan from American Express Travel Related Services Co. and struck a deal for American Express to purchase $500 million worth of Delta frequent-flier miles. American Express issues a credit card that awards consumers Delta SkyMiles based on their purchases. Delta CEO Gerald Grinstein in a statement said that the American Express package “demonstrates the commitment and determination of one of our key stakeholders in helping to restructure the company.” At US Airways, meanwhile, unionized employees have been given until mid-November to reach long-term concession agreements. The bankrupt airline has warned that if it does not get the cuts, it will ask the court to terminate the existing contracts. The warning, which was expected, does not apply to the Arlington, Va.-based carrier’s pilots union. US Air and its pilots earlier this month finalized a new five-year contract that will save the company $300 million per year. US Airways hopes to engage the International Association of Machinists, the Association of Flight Attendants and the Communications Workers of America in talks aimed at new deals that would save the company upwards of $500 million annually. The airline received court approval Oct. 15 to impose temporary 21 percent cuts on its unionized employees, but those reductions are set to expire in February. The airline, which was unable to secure debtor-in-possession financing, says it needs the cuts to preserve its cash and avoid liquidation. Copyright �2004 TDD, LLC. All rights reserved.

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