Airline Sector Gets More Good News About Demand & Passenger Revenue

Airline stocks opened higher Thursday while analysts were busy adjusting forecasts upward on additional good news - this time from United Continental Holdings UAL.

United said consolidated unit revenue, also known as passenger revenue per available seat mile, grew to 3.5 percent in the second quarter from the year-earlier period. Previously the carrier estimated the measure would rise one percent to three percent.

"It's not surprising in light of what other carriers have indicated thus far," Deutsche Bank's Michael Linenberg said in a note maintaining a Buy rating and $50 target.

Linenberg raised his second-quarter profit prediction for United to $2.20 a share, from $1.70 and his full-year forecast to $41.10, from $3.60. The Street consensus is $1.90 and $3.98 respectively.

Southwest Airlines Co.'s LUV similar report Wednesday prompted Imperial Capital's Bob McAdoo to boost his target and estimates for the carrier.

Southwest's recent guidance "highlights continued high demand among U.S. consumers for air travel," McAdoo said.

The trend, coupled with stable capacity and fuel prices "should provide Southwest with a nice tailwind, " McAdoo added. Southwest is taking on new routes later this year with the expiration of a key regulation.

McAdoo raised is second-quarter earnings estimate for Southwest to $0.68 a share, from $0.50, and boosted his target to $33 from $30. The Street view is for $0.55 cents of second-quarter earnings.

Airline shares also got a boost recently when the International Air Transport Association last week said worldwide demand from passengers grew more than six percent in May from a year earlier.

“We are seeing healthy demand for air traffic to support and help sustain the pick-up in global economic activity,” the trade group's Chief Executive Tony Tyler said July 3.

United traded recently at $43.29, up more than eight percent; American Airlines Group AAL was up 1.6 percent to $42.67; Delta Air Lines DAL was up slightly $37.13 and JetBlue Airways JBLU was up nearly one percent to $10.59.

Southwest traded recently at $27.14 down 0.26 percent.