Delta Bankruptcy to Lower Digitas Earnings

NEW YORK Digitas said it expects Delta Air Lines’ bankruptcy petition to result in $3 million to $4 million of bad debt.

The Boston-based interactive agency group said the charge would depress its earnings for the third quarter and full year. For the quarter, Digitas said it now forecasts earnings per share of 5 to 7 cents; for 2005, earnings are expected to fall between 40 and 43 cents. Digitas had forecast 9 to 11 cents per share earnings in Q3 and 43 to 46 cents for the year.

Delta is one of Digitas’ three largest accounts through its Modem Media agency. On Wednesday, Delta and Northwest Airlines filed for Chapter 11 bankruptcy protection, which gives companies protection from creditors while they reorganize their businesses.

Digitas said it has set up a reserve fund in the event it cannot collect payments from Delta during the bankruptcy period. The company said it expects Modem Media will continue its work with the airline.

Digitas has suffered previously from business problems at key clients. In July 2004, it lost the AT&T account when the company decided to cease marketing local and long-distance services.