Airline Stocks Surge


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Thursday October 9, 5:04 pm ET
Airline Stocks Surge As Analyst's Forecasts for Third Quarter Earnings Brighten

NEW YORK (AP) -- Airline shares rose Thursday, led by American Airlines, after upgrades by analysts pepped up optimism that the companies will beat third-quarter earnings estimates.
The Dow Jones Equity Index of Airlines closed the day up 5.8 percent, while the Industrial Average closed up 0.5 percent

"The market is continuing to recognize that some of the fundamentals are moving in the right direction," said David Strine, analyst with Bear Stearns. "Consensus estimates that are out there may be a touch on the conservative side."

A slew of analysts, including Strine, have increased their estimates for third-quarter airline results. Morgan Stanley and Deutsche Bank chimed in Thursday, prompting the share price rise. Airlines begin releasing results next week.

Analysts think most major U.S. airlines remained in the red during the quarter ended Sept. 31 -- usually the strongest of the year -- but believe that the industry turned an operating profit for the first time since 2000.

The improvement is due to rising airline traffic and leisure fares. Analysts think business fares are beginning to pick up as well, though the data aren't as conclusive.

Susan Donofrio, analyst with Deutsche Bank in New York, said stronger economic indicators are also contributing to optimism that the airline industry is healing. She said the decline in jobless claims for the week ended Oct. 4, as well as reports from retailers of higher sales last month, bode well for the airline industry.

Donofrio said she thinks it's likely that airlines will beat Wall Street expectations for the third quarter. The most likely candidates are Delta Air Lines Inc., Northwest Airlines Corp., Alaska Air Group Inc. and AMR Corp., the parent of American Airlines.

AMR shares lead the surge, finishing up 11 percent at $14.85 and reaching a 52-week high of $15.46. Also on the rise were Northwest, up 13 percent to close at $11.93; Delta, up 8 percent at $14.69; and Continental Air Lines Inc., up 8.8 percent at $21.25.

Low-cost carriers rose, but didn't perform as well as the network airlines. Southwest Airlines Co. rose 4.2 percent to $19.54 .