Delta Could Offer New Shares in May

The troubled airline applies lo list new common shares, and analysts say the timing is good.
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Like Jerry Grinstein says, timing is everything.

In one of the final decisions of Grinstein's three-year run as CEO of


, the airline has apparently selected a good time to emerge from bankruptcy and issue new shares.

The third-largest carrier said Wednesday that it has applied to list its new common stock on the

New York Stock Exchange

. Delta expects the shares to begin trading in early May under its old DAL ticker symbol.

The timing is good, said Credit Sights analyst Roger King. "In general, there is more demand for airline securities then there is supply," he said.

Grinstein, who will step down after Delta's board selects a successor, displayed a strong awareness of when other carriers chose to take major steps during an investor conference Webcast on Tuesday. He noted Virgin America's plans to begin transcontinental service from a San Francisco hub, just as the six legacy carriers are concluding the process of cutting costs in bankruptcy. "Virgin's timing, I think, is more than a little off," he said.

By contrast, he said,


(JBLU) - Get Report

showed good timing when it began flying in 2000, before the legacy carriers began restructuring. "I thought there was a certain genius behind JetBlue's timing," he said. "Whether that was chance or design, who knows? But it was perfectly timed for the market."

Later during the same call, CFO Ed Bastian pointed out the 2005 merger between

US Airways


and America West, which occurred just as the recovering airline industry was gathering steam. "Timing was a big part of the success of the US Airways/America West deal," Bastian said.

Morningstar airline analyst Brian Nelson said that now is a good time for Delta to emerge, but not the best time.

"We are still in the early stages of the airline industry cycle, and 2007 is still going to be a good year for the legacy guys, and I think Delta will get a fair shake from the market," he said. "But this isn't the middle of 2005."

In September 2005, the Amex Airline Index traded at $38.22, a two-and-a-half-year low. It rose fitfully to $66.92 in January but has since fallen back. The index traded Wednesday afternoon at $52.53.

January marked a recent peak for airline stocks, as consolidation chatter fueled the market. At the time, "valuations for the legacy guys were far above what the fundamentals warranted," Nelson said. The chatter largely ended when US Airways withdrew its hostile bid for Delta on Jan. 31.

US Airways CEO Doug Parker remains skeptical about Delta's chances. "Those guys are going to come out

of bankruptcy, and they're going to make United look good," he said two weeks ago, at US Airways media day.

Industry observers generally felt that United failed to sufficiently reduce costs in bankruptcy. Its shares traded Wednesday afternoon at $38.11, below their opening price of $40 on the first day of trading in February 2006.

"Delta looks better than United did, because its costs are lower," King said.