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Katrina weighs on Delta, airlines
Lower demand, limited access in the wake of the storm is likely to cut into revenues
August 31, 2005: 4:09 PM EDT

NEW YORK (Reuters) - Hurricane Katrina could hasten Delta Air Lines Inc.'s already likely bankruptcy and add to problems facing the rest of the hard-pressed U.S. airline industry, Standard & Poor's said Wednesday.

"The most serious potential effect is higher fuel prices, rather than direct effects on operations," S&P said in a statement. The storm, which ravaged New Orleans and the Mississippi Gulf Coast on Monday, will also result in ongoing loss of revenues to airlines serving the region, S&P said.

Airlines have been able to raise ticket prices since February, 2005, the ratings agency said. But travel demand will likely fall off in the wake of the storm. In addition, September is usually a slow travel month. Those factors will likely push ticket prices down, S&P suggested.

Delta (Research), which is already bleeding cash and at near-term risk of insolvency, will probably file for bankruptcy within weeks, S&P said.

Because parts of the Gulf Coast are likely to remain badly damaged for an extended period, there will be an ongoing loss of revenues for other airlines serving that region, S&P reported. AirTran is one of those airlines, although it is in a better cash position than Delta, the ratings service pointed out.

-- from staff and wire reports  Top of page

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