Airlines shelve growth plans; investors applaud

Airline shares jumped on Tuesday after investors heard what they viewed as good news that airlines would keep a lid on any expansion plans next year.

Delta Air Lines Inc. had the biggest cuts, saying it will slice 2012 flying 2 percent to 3 percent. United Continental Holdings Inc. said it would hold flying levels flat next year. Southwest said it won't grow next year and probably not in 2013, either.

Cutting capacity can help airlines save money on fuel and crews by running fewer flights. It also can help push fares higher by reducing the supply of seats. Airlines are contending with high fuel prices and worries about demand in a softening economy, although they have said that demand has remained strong so far.

In addition, US Airways President Scott Kirby said September revenue for each seat flown one mile would rise 13 percent. That's a strong showing for a key revenue measure. He also said demand remains strong. Shares of US Airways Group Inc., based in Tempe, Ariz., rose 79 cents, or 16.3 percent, to close at $5.64.

Ray Neidl, an analyst at Maxim Group, wrote in a note that airlines also benefited from a positive cover story in Barron's.

"Investors are becoming more comfortable that the airline management remains committed to cost and capacity discipline," he wrote.

The NYSE Arca Airline index was up 5.1 percent.

Chicago-based United Continental Holdings Inc. rose $1.32, or 7.4 percent, to close at $19.28. Delta Air Lines Inc., based in Atlanta, was up 61 cents, or 8.3 percent, to $7.99. American parent AMR Corp., based in Fort Worth, Texas, rose 18 cents, or 5.5 percent, to close at $3.45. Dallas-based Southwest rose 35 cents, or 4.4 percent, to close at $8.31.

http://www.businessweek.com