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Delta is back, but will investors get on board?

When Delta Air Lines Inc. formally emerged from bankruptcy Monday, it marked the end of a 19-month restructuring process that has enabled the carrier to fly high recently.

By slashing $3 billion in annual costs and transferring excess capacity from unprofitable domestic routes to promising international destinations, the carrier successfully repositioned itself to tap strong demand for air travel over the past year.

The formerly money-losing airline has posted an operating profit during each of the past four quarters.

But don’t expect the airline’s new shares, which will replace those that traded over the counter, to take off when Delta begins trading again Thursday on the New York Stock Exchange.

While Delta recently dismissed concerns by rival carriers, such as Southwest Airlines Co. and Continental Airlines Inc., that consumer demand has begun flagging, investors remain skeptical of many airline stocks at a time when the forecast for the U.S. economy is cloudy. Slower economic growth could hurt profits and tempt all carriers to cut fares, reversing an unusually long spell of pricing unity in the U.S. airline industry.

Delta’s new shares, meanwhile, already are trading on a “when-issued” basis at levels suggesting that the valuation placed on the carrier by its financial advisers may be higher than what would-be buyers of its stock are immediately willing to pay.

When Delta filed its final reorganization plan with a New York bankruptcy court in December, advisers suggested the airline, upon exiting from Chapter 11, would be valued at between $9.4 billion and $12 billion. That represents between $23.50 and $30 for each of the 400 million shares to be issued.

Even the lower end of that range would give Delta the second-highest market value in the U.S. airline industry, after Southwest, and a price-to-earnings ratio second to none, based on the airline’s net income forecast of $456 million for 2007.

Delta’s when-issued stock, though, closed last week’s trading at just $20.91 a share and on Monday ended the session at $20.45. Those when-issued shares currently trade at almost 18 times projected per-share earnings for this year, cheaper than Southwest’s price/earnings ratio but richer than most of its other rivals.