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Delta, American Express extend card agreement
2008-12-09
ATLANTA - Delta Air Lines Inc., the world's biggest carrier, said Tuesday it is getting a $1 billion boost following a credit card agreement it has reached with American Express Co. A company executive also said Delta expects to turn a profit in 2009. The agreement between Delta and American Express is a multiyear extension of their existing partnership. The companies have offered a portfolio of card products since 1996. Delta will receive an immediate $1 billion boost to its liquidity from a purchase of SkyMiles that American Express will use in part for its membership rewards program. Delta said it expects to receive an additional $1 billion from contract improvements through 2010. American Express cardmembers will be offered expanded options for booking travel on Delta, and American Express will have the opportunity to increase merchant acceptance in more places in the Midwest. Delta expects to end 2009 with roughly $7.5 billion in unrestricted liquidity. Like other airlines, Delta has been trying to raise cash and preserve it as long as possible, as lower demand for seats has eroded industry revenue amid the global economic downturn. "We're pretty confident where our cash position is," Chief Executive Richard Anderson said. The news about the credit card deal came ahead of an investor conference the Atlanta-based airline hosted. At the conference, Delta President Ed Bastian said the carrier expects to be "solidly profitable" in 2009. He declined to provide specific figures. He made the projection even as he predicted that overall industry revenue will fall 8 percent to 12 percent in 2009. He also said Delta faces higher pension costs due to the decline in the value of its employee pension trusts, which have been affected by the market meltdown. Late Monday, meanwhile, an arbitration panel ruled that the pilot seniority lists at Delta and Northwest Airlines will be integrated based on pilots' status and aircraft category, though pilots from one carrier will not be able to fly for a period of time certain planes that the other carrier brought to the combination. The three-member panel's decision, which affects roughly 12,000 pilots, is binding and effective immediately. Delta, which acquired Northwest on Oct. 29, wants to smoothly integrate the two work forces as part of its effort to achieve significant cost savings from the deal. A joint pilot contract was reached previously, but seniority had remained unresolved until Monday. Pilots value their seniority. Those at the top of the list get first choice on vacations, the best routes and the bigger planes that they get paid more for flying. In late 2009, Delta plans to merge Northwest's WorldPerks reward program with Delta's SkyMiles reward program. Delta said it plans to continue its long-standing partnership with U.S. Bank through their existing corporate relationships including merchant acquiring, an expanded debit card program and corporate lending. Last month, Alaska Air Group inked an expanded marketing alliance with Delta. The move will help feed passengers to support new international routes Delta plans to launch next year. Delta's chief said at the time that the two carriers have not had any discussions about a combination. At Tuesday's investor conference, Anderson offered a quick "no comment" when he was asked why Delta hasn't sought to acquire Seattle-based Alaska Air, which operates Alaska Airlines and Horizon Air. Asked if he sees the possibility of further consolidation in the industry, Anderson said, "There don't appear to be any indications, but I have no better evidence than you."
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