Delta Air Lines is to sell its Atlantic Southeast subsidiary to rival Skywest for $425m (£235m), to help reduce its debt levels.
Analysts have not been confident about Delta's future
Struggling financially, Delta said the all cash deal would enable it to pay off $100m in debt.
However, Delta added that despite the sale, its financial liquidity would still "decline substantially" in 2005.
The third largest airline in the US, it has faced ongoing speculation that it could file for Chapter 11 protection.
Chapter 11 gives a US company time in which to rearrange its finances while continuing to trade.
Shares in Delta had dropped 14% in Monday trading in New York, but rose by 29% in after hours exchanges following news of the agreement to sell Atlantic Southeast.
The deal is expected to be completed next month.
Delta chief executive Gerald Grinstein said the sale met "important operational and financial objectives".
"As we continue to implement Delta's transformation plan, this transaction not only enhances our ability to operate our business as efficiently and cost effectively as we can, it also improves Delta's liquidity position," he added.
Speculation that Delta could soon file for Chapter 11 bankruptcy protection came after it delayed the publication of its latest quarterly results.
The rumours were fuelled by Merrill Lynch analyst Michael Linenberg publicly advising clients to sell Delta stock; and the New York Times saying at the weekend that the airline has already started financing preparations for entering bankruptcy protection.
Since the 11 September 2001 attacks on the US, Delta has lost almost $10bn (£6bn).
This is due to a number of factors including falling passenger numbers, increased competition from budget rivals, and more recently, higher fuel costs.
"We still maintain that we see an extremely high risk of bankruptcy [at Delta] over the next six to 12 months," said Standard & Poor's analyst Jim Corridore.
He added that Delta's stock would be "completely worthless" if it did file for Chapter 11 protection.
A number of other US airlines have gone into Chapter 11 protection over the last few years, including United, US and Aloha.
Continental Airlines has also faced financial difficulties.
Europe has long argued that Chapter 11 gives US firms an unfair advantage.
The European Commission says Chapter 11 - which does not apply in Europe - is too lenient, and unfairly allows too many struggling US firms to avoid bankruptcy.