Look for the stalled Delta Air Lines (NYSE: DAL) / Northwest Airline (NYSE: NWA) deal talks to regain momentum and the merger to be announced in the week ahead, an analyst confidently told BloggingStocks Thursday.

Independent stock analyst C. Leonard Bauer, formerly of Prudential, said the Delta / Northwest talks may be stalled by the inability of the companies' pilots unions to reach an agreement on seniority lists, but that traditional, formidable hurdle will not stop this deal from coming to fruition due to its "strong marriage fundamentals."

Attractive fundamentals

Bauer said three fundamentals will drive the deal: absence of overlapping city pairs, economies of scale and passenger demand.

"First, there's the overall flight route fit. Delta and Northwest have only 10 or 12 cities pairs that overlap, so from a destination coverage standpoint, the deal is very attractive," Bauer said. "Second, the new company will have massive economies of scale and will be a force in the new global market. This will be a profitable airline."

"Third, unlike typical deals which usually involve mega lay-offs, this one won't because of solid passenger demand and prospects for international travel growth," Bauer said. "There will be some cutting of managers and shifting of employees here and there, but anyone anticipating a 20,000 employee lay-off is mistaken. In fact, after a consolidation period, the new Delta/Northwest is likely to add employees as passenger traffic grows."

Both Delta and Northwest traded lower Thursday afternoon amid a broader market sell-off. Delta (NYSE: DAL) declined 68 cents to $14.32, while Northwest (NYSE: NWA) fell 75 cents to $14.36. Bauer added that he does not have a rating on, nor own shares in either company.

Arbitrage: no; invest: si

However, despite the likelihood that the talks will produce a union, Bauer does not recommend that typical investors try to profit from the deal short-term via a speculative trade. "Unless you're well-versed in the complexities and multitude of risks inherent in deal arbitrage, with appropriate hedges, it's best to avoid dabbling in it," Bauer said.

A better investment strategy, Bauer said, would involve waiting for the possible merged company to complete its initial consolidation period of about 2-3 months, then buy a position in stages (dollar-cost-average) over a six-week or two-month period. Bauer likes the inherent value in a potential Delta / Northwest entity, and believes it will be followed by another attractive airline merger, possibly involving Continental (NYSE: CAL) with United Air Lines (NASDAQ: UAUA).

A global market

Bauer puts the probability of Delta / Northwest deal "at 70-80%." The airline sector, in his interpretation, is at the beginning of its second major transformation, which will he believes will involve 2 or 3 U.S. airline mergers to create carriers with the resources and planes to serve "the new mass market of this decade, the global mass market."

A Delta / Northwest merger would create the world's biggest airline in terms of traffic: Delta served about 74 million passengers in 2007 and Northwest, about 56 million -- ahead of American Airlines (NYSE: AMR) 129 million passengers.

Any potential U.S. airline merger would be subject to federal anti-trust and national security reviews, Bauer added.