EARNINGS PREVIEW: Airlines Set For Better, Still-Weak 3Q

TAKING THE PULSE: The third quarter is normally the strongest period for the U.S. airlines because of the summer travel season, and many airlines have improved their outlooks recently. Companies like AMR Corp. (AMR) and Delta Air Lines Inc. (DAL) have raised billions in new financing, another sign the industry could be turning a corner. And while analysts predict year-on-year improvement in the bottom line for most carriers, last year was terrible for most big airlines.

However, Delta, the world's largest carrier, gave the industry a grim outlook in September, saying it didn't expect a recovery for the remainder of the year. The sector's passenger traffic in the industry appears to remain down on the year, all while the average price to fly has fallen much lower.

COMPANIES TO WATCH:

AMR Corp. (AMR) - reports either Oct. 14 or Oct. 21

Wall Street Expectations: Analysts surveyed by Thomson Reuters, on average, expect a loss of 86 cents a share on revenue of $5.1 billion. Last year, AMR - the parent of American Airlines - posted a 17-cent profit on divestiture gains while revenue was $6.42 billion.

Key Issues: American, the No. 2 U.S. airline by revenue, captured a big boost in new financing to repair its balance sheet, which was one of the worst in the sector. Late in the quarter boosted it checked-bag fees on U.S. domestic flights in an attempt to raise revenue, and it is pruning unprofitable routes. However, it continues to report falling traffic.

Southwest Airlines Co. (LUV) - reports Oct. 15

Wall Street Expectations: Analysts project a 1-cent loss a share on revenue of $2.59 billion. A year earlier, Southwest posted a 16-cent loss on hedging impacts, with revenue of $2.89 billion.

Key Issues: Southwest, the largest U.S. discount carrier, swung to a profit in the second quarter after three atypical periods of loss amid effects from its once-vaunted fuel-hedging efforts. However, Chairman and Chief Executive Gary Kelly said in September that "the worst is ahead of us." But the company on Wednesday reported stronger results for the month.

UAL Corp. (UAUA) - reports Oct. 20

Wall Street Expectations: The parent of United Airlines is seen posting a loss of $1.09 a share on revenue of $4.33 billion. A year earlier, UAL posted a loss of $6.13 a share, largely on fuel hedging, on revenue of $5.57 billion.

Key Issues: Capacity cuts at the No. 3 U.S. carrier will result in lower passenger revenue, but key revenue trends in the third quarter wouldn't be as bad as in the second, the company said in September. United's aging fleet results in it having one of the highest operating costs in the industry, and in June, its CEO said the company will decide by year-end whether it will make a large aircraft order.

Continental Airlines Inc. (CAL) - reports Oct. 21

Wall Street Expectations: Analysts predict a 2-cent profit on revenue of $3.31 billion. The airline posted a per-share loss of $2.15 a year ago and revenue of $4.16 billion.

Key Issues: The airline in September had its first increase in traffic in more than a year, with capacity rising modestly and more seats per plane being filled. But like many of its peers - though not Southwest - it is reporting falling revenue per available seat mile, a key airline performance measure. It has instituted more customer charges to boost the top line.

Delta Air Lines Inc. (DAL) - reports Oct. 22

Wall Street Expectations: The company is projected to post a 7-cent loss on $7.6 billion in revenue. A year ago, Delta posted a 13-cent loss on $5.72 billion in revenue.

Key Issues: Delta said in September it didn't anticipate posting a profit in 2009. Compared to its network carrier rivals, Delta has more cash to weather the travel downturn and it secured the lowest cost base in its bankruptcy reorganization and merger with Northwest Airlines. It has been increasing its focus on the lucrative New York market and has been cutting international flights.

(The Thomson Reuters estimates and year-earlier results may not be comparable because of one-time items and other adjustments.)

- By Joan E. Solsman, Dow Jones Newswires; 212-416-2291; [e-mail]