By Christian Plumb
NEW YORK (Reuters) - The boards of Delta Air Lines Inc. (DAL.N: Quote, Profile, Research) and Northwest Airlines Corp. (NWAC.O: Quote, Profile, Research) are expected to meet on Wednesday as the third- and fourth-largest U.S. air carriers teeter on the edge of bankruptcy.

Bankruptcy filings by both would double the ranks of major U.S. airlines operating under court protection to four, dramatizing the industry's struggle with soaring fuel prices and competition from low-cost carriers.

The sector's woes went from bad to worse this month as refinery outages caused by Hurricane Katrina sent jet fuel prices spiking. U.S. airlines are expected to post some $10 billion in losses this year.

Northwest's planned board meeting, disclosed by its pilots union on Tuesday, will consider whether the airline should file for Chapter 11 protection from creditors or continue trying to restructure outside of bankruptcy.

Atlanta-based Delta declined to comment on press reports that its board would meet today to decide on a bankruptcy filing that could happen as soon as Wednesday afternoon, after the U.S. financial markets close.

Delta is seen as the weaker of the two troubled carriers, burdened by a debt load of over $20 billion, while Northwest's woes are focused on high labor costs.

"Delta is overleveraged and they weren't going to stay out of bankruptcy, no way," said Ray Neidl, an analyst at Calyon Securities.

COSTS OF DOING BUSINESS

Both airlines are also struggling with pension costs which they say are unsustainable and which they would likely use bankruptcy to slash, following in the footsteps of No. 2 U.S. carrier United Airlines, the main unit of UAL Corp.

(UALAQ.OB: Quote, Profile, Research).

Bear Stearns & Co. analyst David Strine cut his recommendation on both companies' shares to "underperform."    
He also lowered his rating on AMR Corp. (AMR.N: Quote, Profile, Research), parent of American Airlines, citing concern that the No. 1 U.S. carrier would become less competitive relative to rivals able to restructure, shed costs and ditch pensions in bankruptcy.

Analysts said on Wednesday that while a Delta bankruptcy was seen as imminent, Northwest could be using the threat of a filing to squeeze concessions out of its unions, from which it is seeking some $1.1 billion in savings.

It has hired replacement workers to substitute for mechanics and cleaners who struck last month over the airline's demands for steep wage cuts and layoffs.

"There's a good chance (of a Northwest filing)," Neidl said, adding: "It depends on who wins that debate" at today's board meeting.

Credit rating firm Standard & Poor's said on Wednesday that Northwest's failure to make $42 million in payments due on Tuesday made a bankruptcy filing likely, adding that it was probable as soon as Wednesday.

Adding to pressure on the Eagan, Minnesota-based carrier, Northwest would face a lien against its assets if it missed a $65 million pension payment due on Thursday, S&P said -- unless the airline sought court protection.

J.P. Morgan and Morgan Stanley on Wednesday both reiterated "overweight" ratings on Northwest's stock, betting that the airline would hold out for now.

United and US Airways Group Inc. (UAIRQ.OB: Quote, Profile, Research) are both already operating in bankruptcy, though both are hoping to emerge soon -- US Airways with the help of a group of investors led by America West Holdings Corp. (AWA.N: Quote, Profile, Research).

In Wednesday midday trade, Northwest shares, which were hammered Tuesday on expectation of a bankruptcy filing, had recovered 30 cents or 19.1 percent to $1.87 each in busy trading on Nasdaq. Delta shares were down 6 cents, or 7.7 percent, at 72 cents on the New York Stock Exchange.

Northwest's stock has plunged 86 percent so far this year, while Delta has lost 90 percent of its value.

On the debt markets, Northwest's 10 percent notes due in 2009 rose to 26 cents on the dollar, about 2-1/2 cents higher on the day, after tumbling more than 9 cents on Tuesday, according to MarketAxess.

Delta's 8.3 percent bonds due 2029 rose to 16 cents on the dollar, about 0.5 cent higher on the day, according to MarketAxess. They are still about 3/4-cent lower month-to-date.

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What a damned shame! Thanks alot,Leo,and those 2 other turds that left! Fuckers will still get their pension,bastards!