Merrill said a Northwest Airlines (nasdaq: NWAC - news - people ) bankruptcy isn't as likely as the other two, but is nonetheless growing in probability and would support a call for the removal of 100 to 200 aircraft from the domestic market due to record high fuel prices.
"We now estimate 60% probability of [a] Northwest Chapter 11 filing prior to Oct. 17," Merrill said.
As for Northwest, the analysts continued, "a lot of elements for an out-of-court restructuring are in place: the pilots, the mechanics by default, and probably some key lessors, private debt holders, and vendors. What is missing are the flight attendants and pension reform."
Chapter 11 still avoidable
Susan Donofrio, analyst at Fulcrum Global Partners, backed her buy rating on Northwest and said bankruptcy can still be avoided, although time is running out.
"Events that need to move quickly for Northwest are more labor concessions, either stabilized or lower fuel prices, and confidence that pension reform will go through," she said.
"All three can still happen, although it may be management's level of confidence and very quick wage concessions that are really going to matter in the very near term," she added.
Morgan Stanley's Douglas Runte took a similar stance, maintaining his overweight rating on Northwest's stock.
"We do not believe that the company will file for bankruptcy on Wednesday and that it can and will restructure out of court," he said.
Northwest's stock, after a precipitous 53% plunge to record lows on Tuesday, rebounded, adding 30 cents, or 19%, to finish at $1.87 on heavy volume of nearly 68 million shares.