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Legacy Carriers’ Restructuring Shakes Confidence over Value Recovery

September 20, 2004

The re-entry of US Airways [UAIR] into Chapter 11 and the restructuring of Delta Air Lines [DAL] have increased investor anxiety, but any negative impact on values is expected to be type-specific rather than general. The restructuring of Delta provides for the most significant localized adjustment to current values. The recovery of mainstream values is not expected to be impacted in the short term by the Delta plan. The restructuring of Delta calls for the usual streamlining of the fleet. This is partly a consequence of the potential retirement of many senior pilots. Pensions and employee benefits, as much as yields, are at the core of the legacy carriers' problems. Delta is seeking to eliminate at least four aircraft types from its fleet over the course of the next four years.

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