The decision was made earlier this month by U.S. Trust Corp., an independent financial advisor that was recently appointed to manage the Delta Stock Fund, a fund available in Delta's 401(k) retirement plan that invests only in shares of the airline.
U.S. Trust was also tapped to oversee Delta's Employee Stock Ownership Plan, which the airline uses to match a portion of employees' retirement contribution with Delta stock.
Previously, those funds had been overseen by a committee of directors from Delta's board.
Atlanta-based Delta operates a hub at Dallas/Fort Worth Airport, and has about 4,000 employees based in North Texas. The struggling airline has lost $3.6 billion since 2000, and most analysts believe it will be in bankruptcy by the end of the year if it cannot cut costs substantially.
Airline officials did not return calls for this story Friday. Neither did officials with U.S. Trust.
In an Aug. 9 letter to employees, U.S. Trust said that "because of the very serious financial difficulties that Delta is currently facing," it was freezing the Delta Stock Fund. That means employees cannot put any more contributions into that fund, or transfer money into it from other funds in their 401(k) plans. Employees, however, are not barred from selling stock they own in the fund.
In making the decision, U.S. Trust cited "the widely recognized possibility of bankruptcy if Delta were to fail in its restructuring efforts."
When a company files for bankruptcy, its stock generally loses all of its value.
Delta's stock closed at $4.27 per share Friday, a 5 percent jump from the previous day. The stock's price has dropped 65 percent in the last year.
Officials with Delta's pilots union, which is negotiating a request for $1 billion in concessions with airline management, declined to comment on the freezing of the stock fund.
In a message to pilots, union spokesman Chris Renkel said the hiring of U.S. Trust "is consistent with the practice at many other corporations."
A similar move was made at Fort Worth-based American Airlines last year, when that carrier was facing a possible bankruptcy filing. U.S. Trust was also the advisor in that case.
The firm said it is considering terminating the Delta stock fund entirely. In that case, the shares would be sold and the proceeds distributed elsewhere in employee 401(k) plans.
U.S. Trust is also pondering freezing, and possibly terminating, the ESOP, which is managed as part of the 401(k). It would take that step only if "the bankruptcy of Delta is unavoidable," the firm said in its letter. Delta continues to match employee contributions with Delta stock.
Like the Delta Stock Fund, proceeds from selling the stock in the ESOP would be invested elsewhere in the retirement plan.
Employees held about 7 million shares in the airline's stock fund at the end of 2003, according to financial reports filed with the Securities and Exchange Commission. At that time, the shares were worth about $85 million -- about 2 percent of the plans' total value of $4.5 billion.
At today's prices, the shares in the fund at the end of the year would be worth about $30 million.
The ESOP, however, is far richer, valued at about $552 million at the end of the year. That accounts for about 12 percent of the retirement plan's total worth. Based on Delta's current stock price, the ESOP would be worth about $479 million.
Like many companies, Delta matches much of workers' 401(k) contributions with its own stock. According to the SEC filing, the first $1,700 matched by Delta every year goes into the ESOP.
The rest is allocated to other investments within the plan.
Delta employees aren't allowed to shift money out of the ESOP unless they are 55 or older and have been in the retirement plan for at least 10 years.