Although short selling -- the practice of selling borrowed shares with the hope of repaying the loan by buying back the shares at a lower price -- goes against the American belief that stocks always go up, I have long been fascinated with it. Short Stories discusses what works, what doesn't, and what some of the leading lights in shorting stocks think about its opportunities and threats. I describe possible short trades and seek your comments and questions for story ideas. I don't offer any investment advice and I don't trade on any of the posts I write.

Bally Total Fitness Holdings Inc. (Other OTC: BFTH), which I suggested shorting back in November, has filed for bankruptcy. According to Reuters, Bally listed $396.8 million of assets and $761.3 million of debts as of December 31. Its bankruptcy plan would wipe out common shareholders reduce debt by $150 million and provide $90 million of capital through a rights offering. Bally also lined up $292 million of financing to fund operations during and after bankruptcy proceedings. Today's announcement is confusing since it reportedly filed for bankruptcy in June, as well.

When I first suggested shorting Bally, I thought it was losing so much money that it would not be able to pay back its debts. It also had lots of accounting problems and was in violation of the terms of its lending agreements. But I was concerned that JPMorgan Chase & Co. (NYSE: JPM) had offered a rescue finance package and that hedge fund guru, Stevie Cohen was a big Bally investor.

But I turned out to be right and investors who had followed my advice and covered today would be 709% richer since Bally dropped from $2.59 to $0.32.

Peter Cohan is President of Peter S. Cohan & Associates, a management consulting and venture capital firm. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in Bally.

Northwest Airlines (NYSE: NWA) believes that a reduction in flights may restore orderly service after a week of massive cancellations last month. The airline blamed those cancellations on severe weather, air traffic control problems and pilot absenteeism, which was an astonishing 80% higher last month than in 2006. The Air Line Pilots Association's Monty Montgomery told Reuters that it would be more accurate to attribute the cancellations to inadequate staffing during the peak summer travel season.

The number five U.S. airline said last Friday that it would cancel one of its Detroit-to-Frankfurt flights starting July 18th to free up pilots, and would cut its domestic mainland capacity by 3%. "I think this is better than last-minute cancellations, but we would prefer that we have enough pilots to fly all the revenue flights," says Montgomery.

The cancellations come shortly after Northwest's exit from Chapter 11 during which relations between management and workers had been far from stellar – mainly due to the forced pay cuts for many workers. Instead of looking ahead, workers have focused on the millions in stock awards given to CEO Doug Steenland, while rank-and-file sacrificed to keep the company afloat.

At a time when pilot salaries are seemingly continuously cut, executives decided to give themselves a hefty raise. One day, executives will figure out that it was the workers who helped to pull the company out of bankruptcy, and that maybe they should get a raise, too.

Delta Airlines Inc. (OTC:DALRQ) Chief Executive Gerald Grinstein isn't expecting a pat on the back when the airline emerges from bankruptcy. In fact, he's not expecting much of anything.

Grinstein, who is planning to step down when Delta emerges from Chapter 11, declined all management equity awards, payments or severance that he otherwise would be entitled. When asked why he's forgoing the money, Grinstein told the Wall Street Journal (subscription required) that Delta "is a terrific company, and I wanted to see it succeed if I could help." He will continue collect a base salary of $338,000.

How refreshing to find a CEO that understand that it's not all about him. The Journal points out that Grinstein already has amassed a fortune from his business career.

Of course, Delta's employees deserve to be rewarded for their sacrifices.

When Delta emerges from bankruptcy in May about 39,000 workers will share $480 million in lump-sum payouts and equity, according to the Associated Press, adding that 1,200 management employees will hold a 2.5 percent stake in the company valued at $240 million. Pilots and flight dispatchers, who are represented by unions, will not receive lump sum and equity payouts but will participate in profit sharing and rewards program in exchange for wage concession.

Once Delta emerges from bankruptcy, investors should avoid the stock for a long time. The future remains as cloudy as ever for the airline industry.