Delta Shares Flying Again

The stock jumps 8% as investors hope peace is at hand with unions.
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Delta Air Lines

(DAL) - Get Report

stock took off for a second session Thursday, notching more than an 8% gain on the back of Wednesday's 21% run-up.

Thursday's jump came after the nation's third-largest airline -- which has warned it could slide into bankruptcy if it can't restructure some $20 billion in debt and nail down labor concessions -- said it was extending a debt exchange until Nov. 18 and amending some of its terms.

The airline is offering up to $680 million of new senior secured notes to holders of $2.6 billion in outstanding unsecured debt securities. The new notes are backed by planes, flight simulators and flight training equipment with a current market value of $1.2 billion.

Shares of the volatile stock were up 32 cents to $4.12.

Recent gains in Delta shares likely were magnified by short-covering, said Suzanne Betts, an analyst at Argus Research. Investors wanting to make bearish bets on a stock borrow shares and then sell them short. When prices decline, these investors buy back shares and pocket the difference. But rising prices can send short-sellers scurrying to cover their positions, thus intensifying a rally. As of Sept. 8, 65.1 million Delta shares were sold short, accounting for more than half of the company's 125.6 million shares outstanding.

On Wednesday, Delta appeared to receive a lift from an early decline in oil prices that was later erased. It also appeared to benefit from investor hopes the airline would cut a deal on labor concessions with its pilots. The

Atlanta Journal-Constitution

reported Wednesday that negotiations were intensifying and noted the pilots union had delivered the company a new proposal on pay cuts. Karen Miller, a representative of the union, confirmed presentation of the new proposal, but declined to provide details. The airline is looking for $1 billion in pay cuts and other concessions.

The news came as the big carriers ranging from

Continental

(CAL) - Get Report

to

AMR

(AMR)

prepare to roll out what is generally expected to be an ugly set of third-quarter results. The exceptions lie with the lower-cost carriers such as

Southwest

(LUV) - Get Report

, which earlier Thursday posted a

solid third-quarter profit.

Delta is due to post third-quarter results next Wednesday. The average Wall Street estimate is for a loss of $3.79 a share.