J.P. Morgan airline analyst Jamie Baker put it plainly in a research note: "We're hoping for a strike."

Baker wrote that the market would welcome a deal that avoids a strike, but if the Aircraft Mechanics Fraternal Association walks off the job, a walkout may well give Northwest management a feather in their cap.

"We believe that an AMFA strike coupled with generally smooth weekend operations would receive an even warmer market embrace, as it would validate management's high-risk, hard-line labor approach and further weaken whatever shreds of resolve the IAM and PFAA may be clinging to," Baker wrote, referring to unionized workers represented by the International Association of Machinists and the Professional Flight Attendant Association.

How the weekend will play out remains uncertain. The airline is adamant it's made the right preparations and set up enough contract workers to cover any walkout, but the union isn't sure that its members can be so easily replaced and calls management overconfident.

Baker says a bad weekend would be a big blow for the airline. "Simply put, an unsuccessful weekend operation would likely radically increase Northwest's near-term probability of a bankruptcy filing, as other unions call management's 'we-can-fly-through-a-strike' bluff," he wrote.

Morgan Stanley's Runte also said that the specter of bankruptcy continues to loom for the Eagan, Minn.-based carrier.

"Northwest is at a crossroads, with one path leading to Chapter 11 bankruptcy and a 50% or more stock price decline from current levels, and the other path leading to a successful out-of-court restructuring with the prospect of equity upside to $9-10 within 12 months," Runte wrote.

Source: Market Watch