Northwest Airlines ( NWACQ) said it has filed its plan of reorganization, a key step on its road to emerging from bankruptcy in the second quarter.

The plan provides that unsecured creditors will receive common stock and the right to purchase additional shares. Existing shares will be cancelled, with no compensation given to the holders of those shares.

The company also has the right to raise capital through an equity rights offering.

Northwest sought bankruptcy protection in September 2005. Under court protection, it has reduced annual costs by $2.4 billion, including $1.4 billion in labor savings, restructured its fleet, strengthened its balance sheet and returned to profitability.

"Reversing $4.2 billion in losses since early 2001 was not an easy task, but it was essential to the future of the airline," said CEO Doug Steenland in a prepared statement.

The carrier said options for exit financing include converting its existing debtor-in-possession financing into a loan agreement with $175 in revolving credit and a $1.05 billion term loan. Additional information will be provided in a disclosure statement that must be filed by Feb. 15.

Earlier this week, reports emerged that Northwest has held talks about combining with Delta ( DALRQ), which is fending off a hostile takeover bid by US Airways ( LCC).

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