With everything that's going on in airlines, how do you play them? US Airways (LCC ) is the way to go, argue some pros. On Jan. 10 the company raised its bid for Delta Air Lines (DALRQ ) to $10.5 billion. Delta, which had spurned an earlier US Air offer, wants instead to merge with Northwest Airlines (NWACQ ), also in bankruptcy. The Street isn't optimistic that US Air will win out because Delta management and labor are so hostile toward US Air. No matter. "With or without Delta, US Airways will be a winner," says Vince Carrino, president of Brookhaven Capital Management, which owns shares. "If it fails to win Delta, US Air itself will be a target," he believes. Its assets, particularly its extensive domestic routes, should attract the other majors, including American (AMR ), Continental (CAL ), and United (UAL ), says Carrino. Daniel McKenzie of Credit Suisse (CS ) isn't so sure US Air will be an easy target, but he rates it a "buy," based on valuation alone. It is cheap, he says, so he has raised his 12-month target for the stock, already up from 37 in August to 58.79 on Jan. 17, from 72 to 76. US Airways has other options, he notes, such as buying some Northwest hubs to complement its domestic structure. McKenzie figures earnings will jump to $7.70 a share in 2007 from an estimated $5.59 in 2006, vs. a loss of $5.99 in 2005. Another bull, Ray Neidl of Calyon Securities, has raised his rating from "add" to buy, based on strong demand and stable oil prices. If a merger happens, he says, "it will add momentum" to the stock.

Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

By Gene G. Marcial

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