UPDATE 3-US airlines cite recovery signs, bolstering shares

* UAL, Continental, Delta say demand coming back

* Airlines eyeing new potential revenue fees

* Airline shares up
(Adds comments from US Airways, Delta, analyst, updates

By Karen Jacobs and Deepa Seetharaman

ATLANTA/NEW YORK, March 9 (BestGrowthStock) – Demand for air travel
among business customers is rising and major U.S. airlines said
on Tuesday they would consider charging additional fees while
cutting costs to increase their profits.

Delta Air Lines (DAL.N: ), the world’s largest carrier, said
business trends were improving. Unit revenue in March would be
up 16 percent, the company said.

United Airlines is “clearly seeing signs of economic
recovery and premium and corporate travelers returning,” UAL
Corp (UAUA.O: ) Chief Financial Officer Kathryn Mikells told
attendees at a J.P. Morgan conference.

“The return of higher quality traffic, combined with the
significant reductions in capacity that we undertook in 2009,
has really begun to improve our relative revenue results,”
Mikells said.

Traffic reports for the first two months of 2010 signal
that demand is improving at major U.S. airlines. Load factors,
a measure of how full a plane is, were higher for the top six
U.S. airlines last month. For table see [ID:nN09244467].

American Airlines parent AMR Corp (AMR.N: ) expects unit
revenue to be up 6.5 percent to 7.5 percent in the first
quarter. Low-cost carrier Southwest Airlines (LUV.N: ) said March
bookings were “very strong” while rival AirTran Holdings Inc
(AAI.N: ) cited “rapid” improvement in yield trends.

“Things are moving in the right direction,” said S&P
analyst Jim Corridore, who has “buy” ratings on many airline
companies’ stocks. “The airlines have really improved the
supply-demand balance in terms of capacity, so pricing should
go up on strengthening demand.”

Airlines should be able to raise fares this summer,
Corridore said.

The Arca Airline index (.XAL: ) hit a two-year high in
afternoon trading. American shares vaulted more than 11 percent
before paring gains to rise 9 percent.


The airline industry cut back on the number of fare sales,
which led to higher ticket prices, said US Airways (LCC.N: )
Chief Operating Officer Robert Isom at the JP Morgan event.

Airline executives also reiterated the need for the
industry to temper capacity increases as the industry recovers
from high fuel prices in 2008 and a severe recession in 2009.

U.S. airlines cut capacity nearly 7 percent in 2009, the
deepest annual cut since 1942, according to the Air Transport
Association. Airline executives said Tuesday they were not
ready to put seats back into the market.

“There is no indication we should be adding capacity,”
American CEO Gerard Arpey told reporters at a conference in
Washington. For American, he said, “we’ve got to generate a lot
more revenue.”


Baggage fees are now the norm for many airlines and new
revenue streams are in the offing.

Last week, Continental Airlines Inc (CAL.N: ) unveiled a new
passenger fee for booking seats with extra legroom.

Continental is working on other “little things” to grow
ancillary revenue, CEO Jeff Smisek said at the J.P Morgan
event. Mikells also said United was mulling other products and
services that customers would be willing to pay for.

Continental expected bag fees alone to generate $350
million in 2010. U.S. Airways projects a la carte revenue will
total more than $500 million this year.

UAL shares closed up 3.6 percent on Tuesday, while industry
leader Delta gained 2.2 percent. Continental was up 4.9
percent, while US Airways Group rose 5.3 percent.

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(Additional reporting by John Crawley in Washington; editing
by Dave Zimmerman, Andre Grenon and Robert MacMillan)

UPDATE 3-US airlines cite recovery signs, bolstering shares