Delta Air Lines (NYSE:DAL) and Northwest Airlines (NASDAQ:NWAC) have made it official, filing for bankruptcy protection and reorganization under Chapter 11. This isn't a surprise; there had been hints for a long time that it would happen. What is a surprise is that Delta's shares are up 25% today and had risen by as much as 40% at one point.

Let's do a little review. A shareholder's claim is on the company's earnings and its assets to the extent that creditors, preferred shareholders, and suppliers do not already have a claim on the assets. In Delta's case, there are plenty of creditors, such as General Electric (NYSE:GE) and Morgan Stanley (NYSE:MWD), that have claims ahead of the holders of common shares.

The history of bankruptcies bears out that holders of common shares are the last in line. That's the way it was with US Airways (OTC BB: UAIRQ) and United (OTC BB: UALAQ), and it will be that way with Delta and Northwest. But you need not believe me. You can head on over to Delta's website, where you'll find frequently asked questions for investors on the proposed restructuring. Among the items you'll see there:

What value will Delta's common stock have in the future? Is it now worthless?

We cannot predict what the ultimate value of Delta's common stock may be or whether shareowners should expect any financial recovery in the Chapter 11 proceedings. When a company files for Chapter 11, its primary obligation shifts to maximizing the value of the company for its creditors. Shareowners of a company in Chapter 11 generally recover value only if the claims of the secured and unsecured creditors are fully satisfied. Thus, in most Chapter 11 cases, shareowners receive little or no recovery of value from their investment.

How can I buy or sell shares if Delta's common stock is delisted by the NYSE?

If Delta's common stock is delisted by the NYSE, market makers not affiliated with Delta may initiate limited trading on the Over-the-Counter Bulletin Board (OTCBB) and/or the Pink Sheets even while Delta is involved in a Chapter 11 proceeding. Delta will not be involved in initiating or supporting trading on the OTCBB or the Pink Sheets. You should contact your broker for further information.

Can a shareowner file a claim with the court for the value paid for shares?


That's not a cheery view for stockholders, but I think it's accurate, and it's also a warning to investors who hold or might consider holding the common shares in the face of the company's billions of other obligations.

Make no mistake: Filing for bankruptcy is absolutely the right step for the company to take in order to continue operating and paying employees. However, bankruptcy also means that the game is basically over for holders of the common shares. A few months from now, those shares will likely be worth less than your Delta or Northwest frequent flier miles -- because it's reasonable to assume a value of zero for the common stock.

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Nathan Parmelee wonders why Delta goes by "Air Lines" while Northwest goes by "Airlines." He has no financial interest in any of the companies mentioned. The Motley Fool has an ironclad disclosure policy.