The NW and CO bashing aside, let's look at the specifics. NW's ability to acquire CO would be determined by its debt rating, and by CO's debt rating, which determines the amount of debt the acquiring party (NW) can successfully tackle. I'm using the latest debt information published by Moody's, on Nov 28, 2001. These data, to my knowledge, take into consideration loans and other financing secured post-9/11.
CONTINENTAL has two lines of credit. One is for term loan A, which matures on 7/31/02, for $275 million. The other is for term loan B, which matures on 7/31/04, for $75 million. For both of those lines of credit, Continental's debt rating is Ba3. Both Ba3 ratings carry the possibility of being downgraded soon.
NORTHWEST has a revolving line of credit for $725 million, one that matures on 10/24/05. Its debt rating is Ba3, as well, and also carries the risk of an imminent downgrade.
So it's clear that Northwest, despite having much less tangible equity, and abyssal return on assets, has a decent line of credit. Regardless of which carrier has been the government's "baby" (give me a fricking break, whoever said that earlier), and regardless of which carrier has been placed under bankruptcy protection, it looks like Northwest's debt rating and revolving line of credit are healthy enough to sustain some kind of acquisition.
And since CO's market capitalization is relatively low, I could see the acquisition happening. But, just my own $0.02, I don't think it would. NW needs to focus on improving its return on assets and equity; the last thing it needs to do is go into debt by acquiring a large carrier like CO, with a different cost structure, and tackle all the problems like staff reductions, etc., that always come along with mergers.
NW should make the most of its tolerable financial situation without pursuing added debt. It's one airline that's on thin ice right now; one slip-up, and it could easily be submerged. I don't care about whether or not NW is a "good" airline -- you just can't argue with the numbers.