Delta Air Lines Inc.DAL

Delta's merger with Northwest could yield as much as $2 billion in annual network and cost synergies. Such savings will augment the combined entity's best-in-class cost structure if it can avoid integration wrinkles.

Delta's employees have traditionally preferred working without union representation. This preference could ensure that the Delta-Northwest entity maintains the lowest percentage of unionized workers in the industry, which puts the firm in a better position to combat inflationary pressures from its workers, relative to its peers.

During bankruptcy, Delta terminated its pilot defined benefit pension plan and froze all future payments for its nonpilot pension plan. As a result, we expect much smaller future pension cash outflows, improving Delta's liquidity position considerably. Read more 

As the liberalization of international air travel (referred to as open skies agreements) proliferates, low-cost carriers will eventual infiltrate the more profitable international transportation market. This infiltration will put the merged company's trans-Atlantic plans at risk to more competition, which will create downward pressure on yields.

Currently, Delta is under audit by the Internal Revenue Service for the 2005 and 2006 tax years. If the IRS rules against Delta, the firm could face significant penalties and potentially jeopardize $9.1 billion of its net operating loss carryforwards.

During its bankruptcy proceedings, Delta entered into two third-party agreements totaling $1.3 billion to sell 31 of the 58 aircraft scheduled for delivery of over the next five years. Given the corroding outlook for air travel, however, it is possible these parties could face financial hardships and leave Delta responsible for the remaining commitments. Read more