NEW YORK -An analyst on Tuesday said he believes most U.S. airlines will remain profitable even if the country were to fall into a modest recession, thanks to capacity reductions the airlines have made this year.
American Airlines announced late Monday that it will reduce passenger-carrying capacity through the end of the year by about 3 percent compared with 2010. It cited the weak economy, high fuel costs and an increase in pilots retiring. United Continental and Delta have announced similar plans.
Airlines can reduce capacity by either parking planes or using smaller planes to better match demand. The reduction makes airlines more efficient and often gives them the opportunity to raise fares because seats grow scarce.
Barclays Capital analyst Gary Chase raised his third-quarter earnings estimates based on the airlines cutbacks, combined with falling fuel prices and stabilizing revenue. But he maintained his expectations for the fourth quarter and next year, fearing that growing economic uncertainty might drive people to put off vacations and corporations to scrap business trips.
The only U.S. airline Chase is expecting to post a loss next year is American.
Shares of American's parent AMR Corp. rose 17 cents, or almost 7 percent, to $2.70 in afternoon trading. Delta Air Lines Inc. gained 13 cents to $8.18. United Continental Holdings Inc. added 27 cents to reach $19.59.
Major U.S. stock indexes, meanwhile, bounced between small gains and losses. The Dow Jones industrial average was down 25 points, or 0.2 percent, to 11,407 as of 2:30 p.m. Eastern. The Standard & Poor's 500 index slipped less than one point, or 0.1 percent to 1,194.
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