Delta May Get $600 Million From American Express Unit

A unit of American Express Co. agreed Monday to provide Delta Air Lines Inc. with as much as $600 million in financing -- if the cash-strapped airline persuades its reluctant pilots to accept $1 billion in concessions. Delta shares soared on the news.

The deal with American Express Travel Related Services Co. calls for as much as $100 million of the financing to be in loans.

The remaining $500 million will be in the form of a prepayment of SkyMiles, which is Delta’s frequent flier program. American Express credit card users already can earn SkyMiles with their purchases.

The agreement provides no timeline for when Delta will get the $100-million loan. The remaining $500 million will be split into two payments; the first payable when Delta meets the conditions, the rest payable at least 90 days later.

Delta, the nation’s third-largest airline, has warned it will have to file for bankruptcy protection without the $1 billion in cuts from its pilots union. It also has said that even with the cuts it might have to file for bankruptcy protection because of its $20.6 billion in debt.

In the regulatory filing Monday announcing the financing, Delta said it also had agreed that -- should it seek Chapter 11 protection -- it would ask the bankruptcy court to put American Express at the top of the list of those owed money.

Delta shares rose 54 cents, or 17%, to $3.78 on the New York Stock Exchange. American Express shares fell 58 cents to $51.15.

The airline, which had only $1.45 billion left at the end of the third quarter, desperately needs cash for its survival.

Late Monday, Delta reached an agreement with some of its creditors allowing the airline to defer $135 million in debt due in 2005 for two years, to 2007.

Negotiations continued with its pilots Monday over the concessions the airline said it needed.

In a memo to pilots late Monday, union spokesman Chris Renkel said the union and company negotiators were meeting in Washington and would continue their talks throughout the evening.

The pilots have publicly offered as much as $705 million in savings.

On Oct. 8, the pilots union made a new proposal to management. It did not say whether the offer included a higher amount of concessions.

In a regulatory filing a week later, Delta said that to date the union’s “counterproposals have been for substantially less than $1 billion.”

The company also said in the filing that the union was requesting a stock option program for pilots that involves “substantially more equity” than management’s proposal.