Delta Air: In the Catbird Seat

With operating costs among the industry's lowest, Delta has emerged from bankruptcy in great shape

For all the gloom hanging over U.S. airlines, one of them should come through the turmoil quite well: Delta Air Lines (DAL). Thanks to its 2008 merger with Northwest Airlines, the Atlanta-based carrier boasts a strong balance sheet as well as a route structure that makes it a force from Stockholm to St. Paul to Shanghai.

Delta hardly looked like a global power in late 2005, when it and Northwest filed for bankruptcy on the same day. But both carriers used Chapter 11 to abrogate labor contracts and shuck debt, giving Delta the lowest operating costs among hub-and-spoke carriers today. According to research firm AirlineForecasts, Delta's cost per average seat mile, excluding fuel costs, is now 6.8 cents, vs. 7.7 cents for United Airlines (UAUA), and 6.58 cents for discount king Southwest Airlines (LUV). Indeed, Delta President Edward H. Bastian recently told analysts that Delta could survive as much as a 20% plunge in revenues because of cheaper fuel, route cuts, and savings from its integration with Northwest.

Granted, Delta's stock has been crushed: It's down 45% since its February peak. But with $6.7 billion in liquidity as of Sept. 30 and $530 million in projected 2009 earnings, the carrier is "in one of the best positions to withstand this recession," says Vaughn Cordle, chief executive of AirlineForecasts.

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