Delta likely to require more time to reach deleveraging goal

By Jennifer Lanning Drey

Savannah, Ga., March 22 - Delta Air Lines, Inc. will likely be delayed in meeting its previously stated goal of reducing adjusted net debt to $10 billion by the end of 2012, Ed Bastian, Delta's president, said during a Tuesday presentation at the JPMorgan Aviation, Transportation and Defense Conference in New York.

Higher fuel prices and the recent events in Japan may push back delivery of the goal by six to 12 months, Bastian said.

However, the company's debt reduction efforts remain on track at present, he said.

"We still anticipate generating between $4 billion and $5 billion of free cash over the next two years that will allow us to hit these targets, if not by the end of 2012, certainly by some point in 2013," he said.

When later asked about Delta's tolerance for allowing the goal to further slip in a downside scenario, Bastian said Delta remains committed to hitting the goal. That said, the company has no plans to issue equity in order to reach the goal if it were to further slide, he said in response to a question.

Instead, the company would look to cut capital expenditures, as it has no significant aircraft on order, he said.

Delta has already reduced its projected capital expenditures in 2011 by $350 million from the $1.6 billion of capital expenditures estimated at the start of the year.

At the same time, Delta expects unrestricted liquidity to be $5.4 billion at the end of March, which is better than the liquidity guidance provided at the start of the year.

Focus on refinancing loan

Bastian also said during Tuesday's presentation that Delta remains focused on refinancing its exit facility, which matures in 2012.

Delta already has $1.2 billion of revolver commitments that will be used to refinance the $900 million revolver portion of the 2012 facility, he said. Delta will be working to refinance the rest of the term loan over the course of 2011, he said.

"We're very comfortable with our maturity stream," he added.

Delta is an Atlanta-based air carrier.

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