The world's biggest carrier, Delta Air Lines has signed a timely $2 billion deal with American Express and said it would cut $100 million operating cost, from combining operations with its newly acquired Northwest Airlines as IATA revealed that the industry would lose $2.5 billion next year due to declining passenger traffic.

The deal extends the long-running SkyMiles partnership with Amex buying $1 billion worth of frequent-flyer miles in advance and Amex concluded the deal two years before its earlier contract was set to expire. Delta will sell an additional $1 billion through rate improvements and increased volumes by the end of 2010.

The agreement has a five-year extension period, running up to 2015 and will have a total value of $15 billion for Delta.

Amex continued its relationship with Delta although it merged with the Atlanta-based  Northwest Airlines, which had US Bancorp as its credit card partner for WorldPerks and points earned on the cards by Northwest will be transferred when WorldPerks and SkyMiles become fully integrated in 2009.

Delta president Edward Bastian said in a news release, ''Pairing the world's premier airline loyalty program with the world-class American Express brand continues a history of offering superior and innovative programs for our customers.''

United Airlines and Continental Airlines raised millions of dollars by making advance sales of reward miles to credit-card partners JPMorgan Chase, this year.

''Working with Delta since the early '90s has helped us strengthen Cardmember loyalty and build substantial amounts of business,'' said Jud Linville, president and CEO of American Express Consumer Services in the release.

''Our Delta Co-brand Cards are among our most successful products, and we are delighted to build on this position following Delta's recent acquisition of Northwest. This is a great opportunity to expand in the Midwest, extend popular Membership Rewards options with new routes, and enhance unique Co-brand Card offers like the ability to redeem miles for any seat, any time on the world's largest airline,'' he added.

Although, Delta had acquired Northwest in October, they will continue with their operations independently until the Federal Aviation Administration provides a single-operating certificate, which is most likely to be given late next year.

In an investors conference held in New York, yesterday, President of Delta, Ed Bastian said the airline will be solidly profitable in 2009 although the industry's revenue will decline by as much as 12 percent due to lower passenger traffic on account of the global economic slowdown.

The deal will boost the cash reserve of Delta to $6.7 billion and the carrier may not require raising funds by selling shares although it lost money till September after an income of $1.6 billion in 2007.