It's been a busy summer travel season for the major airlines, with some carriers posting record occupancy loads on their planes.
Airline profits for the April-June period are higher than a year ago, according to second-quarter results reported this week.
But the outlook isn't all clear skies. Analysts have lowered their earnings forecasts -- in some cases by double-digit percentages -- out of concern over everything from high fuel costs to summer storms.
The up-and-down view from Wall Street is another indication that the industry still faces uncertainty as it emerges from several years of staggering losses.
Southwest Airlines Chief Executive Gary Kelly said in April that travel demand was softening. The carriers' monthly traffic reports for April and May now seem to back that up.
"The good news is that it appears June came in pretty strong and the midsummer travel bulge is helping the industry, as it always does," said Bill Warlick, an analyst for Fitch Ratings. "Everybody is running at full loads."
United Airlines filled 89.1 percent of its seats -- its highest mark ever for June. Continental Airlines Inc. reported a record 87.7 percent occupancy, and American hit 87.1 percent.
But at American and United, planes were fuller because there were fewer of them flying. American, the nation's largest airline, carried 3.5 percent fewer passengers in June after cutting capacity by 5.4 percent.
The first report cards on spring and early summer come Wednesday, when American's parent, AMR Corp.; Southwest Airlines Co.; and Delta Air Lines Inc., all release quarterly financial results.
Ray Neidl, an analyst with Calyon Securities, predicted that the major U.S. carriers earned $1.8 billion in the second quarter, up from $1.1 billion a year earlier.
Neidl said airlines "will make more money than same period last year though not as much as we originally thought because of higher fuel costs and the inability to get through across-the-board ticket price increases."
Even Southwest, which built its business around lower fares, has raised prices several times this year. But Southwest and other low- cost airlines have blocked increases proposed by the larger and older carriers because they've been adding planes and have a lot of new seats to fill, Neidl said.
Robert Barry, an analyst for Goldman Sachs, said a recent pullback in airline stock prices has made them a slightly better investment but that there are still big questions about the fundamentals of the business. He recently lowered his earnings forecasts partly because, he said, airlines are protecting market share even if it means lower fares that sap revenue per passenger.
"We don't think things are bad -- we still have full planes, demand is growing faster than supply, and the economy is expected to accelerate," Barry said.
"But the economic acceleration will be very modest, and supply was actually coming out in the second half of last year. Plus we've got oil at $72," per barrel, he said. "It should dampen expectations for how good the second half can be."
Barry wasn't alone in scaling back his earnings forecasts. In the past month, analysts surveyed by Thomson Financial reduced their forecasts of second-quarter earnings at most major U.S. carriers while raising them for a few, notably post-bankruptcy UAL Corp., United's parent.
AMR, for example, is expected to report Wednesday that it earned $1.24 per share or about $265 million, according to the Thomson Financial survey.
That's not bad for a company that has had just one profitable year out of the past six. But it's 16 percent less than analysts were predicting just one month ago.
Barry lowered his forecast partly due to slower growth in Latin America, a key region. Andrew Light, an analyst with Citigroup, said AMR has the least protection against an increase in fuel prices.
Higher June traffic, strong demand and stagnant seat capacity should make it possible for aggressive airline price increases.
Third-quarter earnings are expected to be dismal. The chief culprits -- high oil prices and the skyrocketing cost of jet-fuel refining.