Dollars and Jens
Tuesday, September 13, 2005
again with the airlines
Dead man walking:
"Delta’s problem is not labor, it’s debt," said Michael Boyd, an aviation industry consultant. "They have achieved labor cuts, and can achieve more because they have only two unions. But until they can restructure their debt, they are in big trouble."
Know what EBITDA's good for? Not much, but here's what to make of the fact that Delta's EBITDA is negative: even if Delta couldn't liquidate its assets, and was left trying to bleed its assets for whatever it could squeeze out of them, it would find them already squeezed dry, at least with their current uses and management. Restructuring the debt may be necessary, but it's certainly not sufficient; if Delta can't do something about the way it's run — its labor costs, or whatever else — it can't survive. If current shareholders remanded the company to the creditors, the creditors should themselves leave this puppy by the side of the road.

Or, better yet, sell it for scrap.

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