ATLANTA — Airlines are cutting U.S. flights, shedding employees, putting off plane orders and even talking about combinations.

But with cash bleeding fast, fuel prices high and credit tight, nothing they do may be able to stop several major airlines' return flight toward bankruptcy, and possibly liquidation.

Unlike when four of the six legacy carriers filed for bankruptcy protection between 2002 and 2005, airlines facing bankruptcy in this climate may find it tougher to reorganize because of tight credit markets and they have fewer unencumbered assets to use as collateral for loans.

"It may be Darwin's law of the fittest. If one of the carriers goes into bankruptcy and liquidated, it would take a lot of seats out of the market and other carriers would benefit," Calyon Securities airline analyst Ray Neidl said.

A handful of small carriers in recent months have filed for bankruptcy protection or gone out of business altogether.

With losses piling up for most of the major airlines, maintaining a strong cash position is important to avoid the same fate.

Spiraling fuel costs and limited means to trim other costs quickly makes that a tricky proposition.

"Unlike 2002, 2003, 2004, when it was largely a revenue problem that drove them into distress, this is largely a fuel price problem," said Fitch Ratings analyst Bill Warlick. "You could argue that the risk associated with fuel price spikes is largely uncontrollable in contrast to the revenue problem post 9/11, which was addressed through a variety of measures such as cutting costs."

ELIMINATING DEBT

Several of the carriers used their first trip through bankruptcy protection to wipe away debt, resize their fleets and terminate employee pensions.

"There are fewer opportunities to restructure now that the initial work is done," Warlick said.

American Airlines, the nation's largest carrier, teetered on the verge of bankruptcy before winning employee concessions in 2003. Because of high pension and debt obligations, as well as the hefty price of fuel, the unit of Fort Worth, Texas-based AMR Corp. is again facing the possibility of a future cash crunch.

It had $4.5 billion in unrestricted cash at the end of March, but Neidl projects that AMR could have a negative cash balance by the end of 2009 if oil prices remain at the current level of roughly $130 a barrel. Covenants on some of American's debt require the airline to maintain at least $1.25 billion in unrestricted cash at the end of each quarter through at least the middle of next year.

At the current fuel price level, Chicago-based UAL Corp., parent of United Airlines, and Tempe, Ariz.-based US Airways Group Inc., both of which have had trips through Chapter 11, also face the potential for precarious cash positions by the end of next year, according to Neidl's projections. Fitch Ratings said Thursday that US Airways would face a growing risk of violating one of its debt covenants if adverse fuel trends persist through the remainder of this year.

The debt covenant issue wouldn't necessarily force a bankruptcy filing, as airlines could re-negotiate debt agreements with lenders or sell assets to pay off debt. Neidl believes airlines would take drastic actions before the end of 2009 if current fuel trends continue.

POSSIBLE DIFFICULTIES

Having few assets that aren't already being used as collateral on existing loans and the tight credit markets could make it difficult for US Airways, for instance, to raise financing to allow it to reorganize in bankruptcy if it had to file for the third time since 2002, Warlick said, adding that under those circumstances liquidation could result.

Atlanta-based Delta Air Lines Inc. and Eagan, Minn.-based Northwest Airlines Corp., which are seeking to combine, had a combined total of $5.8 billion in unrestricted cash at the end of March, but at current fuel prices Neidl projects that could dwindle significantly by the end of next year. Delta also has said it expects to incur $1 billion in one-time integration costs from its acquisition of Northwest. Both Delta and Northwest exited Chapter 11 bankruptcy protection just last year.

Neidl's cash projections include unrestricted cash and short-term investments, but exclude auction-rate securities.

The airlines are furiously trying to remove domestic flights from the air to reduce costs. At least two have announced plans to cut U.S. capacity by double-digit percentages and trim thousands of jobs. Others, like discount carrier JetBlue Airways Corp., are putting off buying certain new planes.

The price of oil has doubled in the last year. But fare increases have fallen well short of keeping pace with the price of fuel. As their finances have been buffeted, stocks of most major airlines have plummeted by double-digit percentages over the last year.

"Obviously, there are things that are outside of our control," said Beverly Goulet, American's vice president of corporate development and treasurer. "The first thing that comes to mind is the price of jet fuel."

But Goulet said American, by cutting U.S. capacity, imposing new fees on travelers and taking other measures, has been working hard to position itself to remain viable in the current economic and fuel environment. The airline currently isn't considering bankruptcy.

"It's an interesting reflection on perceptions out there to hear people talk about the benefit of walking away from obligations," Goulet said. "Would it be easy to walk away from debt? Yes. But as a manager of this business, as people who take on obligations to those stakeholders, we don't think that's the appropriate way to think about those kinds of tactics."

Goulet said the airline industry will have to change in the face of persistently high fuel prices, and she insisted American doesn't plan to give up.

CUTTING GROWTH

Kevin Healy, senior vice president of marketing and planning for AirTran Airways, said the Orlando, Fla.-based discount carrier is reducing its growth plans starting in September through at least next year, and it will accomplish that through a combination of deferral of aircraft deliveries and the sale of some existing aircraft.

"There's some belief that having international is the great salvation, but what that really means is they can extract higher yields and don't have a cost structure to compete domestically," Healy said. AirTran operates mainly in the U.S. "We do have the cost structure to compete domestically and set the pricing."

Neidl said in a recent research note that mergers, which are supposed to make the industry more efficient, may not work in the current environment because there is a large cash outlay up front and high execution risk. He believes the current crisis, which he described as the biggest challenge the industry has ever faced, may serve to cool the merger frenzy.

For their part, Delta and Northwest insist they are pushing ahead with their plans to combine in a stock swap deal that would create the world's largest carrier, and officials dismissed speculation by some analysts that Delta could possibly walk away from the deal. United and US Airways had been discussing a possible combination of their own, but on Friday the companies said there won't be an agreement "at this time."