United Airlines parent UAL Corp, Delta Air Lines Inc and other airline shares rose after some carriers reported improved passenger traffic last month, another sign of recovery from the recession and Sept. 11 attacks.
UAL climbed US$2.73, or 20 percent, to US$16.40, aided by optimism that United mechanics will vote for a new contract.
Delta, the third-largest carrier, gained US$2.42, or 7 percent, to US$38.59 to become the first of the five largest US airlines to regain all of its price decline since the attacks.
``A lot of people were talking up the economy and that has really helped the whole airline industry'' said ABN Amro analyst Ray Neidl. The Dow Jones Industrial Average rose to its highest level in at least seven months.
Airline stocks gained partly because of signs of improving traffic, analysts said. Continental Airlines Inc. and AMR Corp's American Airlines said Friday that miles flown by paying passengers, compared with year-earlier months, fell less in February than in January. Southwest Airlines Co's February traffic slid 4.4 percent, a half-point improvement from January.
Analysts said United mechanics are likely to vote in favor of a tentative contract tomorrow, letting the second-largest carrier dodge a Thursday strike deadline and a bankruptcy filing that might have accompanied a walkout.
"These guys would really have to be suicidal not to pass this contract," said analyst Neidl, who has a "hold" rating on UAL shares and doesn't own the stock.
Some carriers were confident enough about demand last week to attempt to increase business fares for the first time since the terrorist attacks, said Deutsche Banc Alex Brown. The carriers that raised the fares removed the price increase when rivals failed to match, she said.
Average business fares were up 1 percent last week and would have been 2 percent higher if the increase had lasted, according to a Donofrio report. Business fares, or full fares, are typically priced higher because they're purchased closer to the date of travel and have fewer restrictions.
"As the economy improves and business travel picks up, there will be a natural demand for full fares," Gary Kelly, the chief financial officer for Southwest Airlines, told a Raymond James & Associates conference. "It's just a question of how long that takes."