North American airlines are performing better than their peers from other regions. Over the past three months, the carriers are improving their profitability on the back of falling fuel costs and growing business travel demand.

The major carriers are adding novel features to their services and introducing products that are contributing to the rise in air traffic, thereby leading to increased profits. We are already seeing evidences of these positives in a pronounced uptrend in earnings estimates for the U.S. carriers.

Airline traffic is customarily measured in billions of revenue passenger miles (RPM), which imply revenue generated per mile per passenger.

Consolidated June traffic inched up 0.1% at the largest U.S. airline United Continental Holdings Inc. ( UAL - Analyst Report ) . Growth of 1.9% in international traffic was partially offset by weak domestic traffic (down 1.9%). Capacity (or available seat miles) slid 0.3% year over year while load factor (percentage of seats filled with passengers) grew 40 basis points (bps) year over year to 86.5%. United Continental expects 5–6% year-over-year increase in unit revenue for the month of June, measured by passenger revenue per available seat mile (PRASM), a key metric in airlines.

This is starting to show in improving expectations for the company's profitability. Last month, the Zacks Consensus estimates for UAL went up by 48 cents to $4.53 and 22 cents to $6.09 for 2012 and 2013, respectively. Notably, the Zacks Consensus estimates for this year and next were $4.06 and $5.44 three months back.

The June traffic for the second largest U.S. airline Delta Air Lines ( DAL - Analyst Report ) increased 0.4% year over year on growing business travel demand and flight expansion in the New York market. Consolidated capacity fell 1.7% while the load factor improved 180 bps to 88.1%. Domestic traffic grew 0.9% year over year on a 120 bp expansion in load factor, which partly offset capacity reduction of 0.5%. International traffic slid 0.3% year over year due to a 3.3% decline in capacity that partially offset a 260 bp growth in load factor. The company’s PRASM increased 8% year over year for June.

Like UAL, earnings expectations for Delta have also been trending up lately. The current Zacks Consensus estimates of $2.40 and $3.03 for 2012 and 2013 are up from $2.28 and $2.87 a month ago, respectively. Earnings estimates for this year and the next were $2.32 and $2.56, respectively, three months back.

The low-cost carrier Southwest Airlines Co. ( LUV - Analyst Report ) recorded a slight year-over-year drop of 0.1% in June traffic on a capacity decrease of 0.7% that fully offset the improvement of 50 bps in load factor. The company expects PRASM to increase 6% year over year for June. However, earnings estimates are moving up as falling fuel expenses are offsetting the carrier's traffic woes. The Zacks Consensus estimates for this year and the next have increased by a nickel (to 80 cents) and by 4 cents (to $1.09) in the past one month.

The discounted U.S. airline JetBlue Airways Corporation ( JBLU - Analyst Report ) reported a 9.7% year-over-year traffic increase in June. On a year-over-year basis, capacity rose 4.8% and load factor grew 380 bps to 85.9%. Traffic at Alaska Air Group Inc. ( ALK - Snapshot Report ) also climbed 10.3% year over year, the highest compared to its rivals, in the month of June. Both capacity and load factor rose 7.4% and 230 bps, respectively, year over year. As a result, earnings estimates for both carriers are nicely up since the past one month.

Over the past one month, the Zacks Consensus Estimates for JetBlue increased 2 cents to 55 cents for 2012 and a penny to 69 cents for 2013. Similarly, earnings estimates for Alaska are pegged at $4.83 and $5.44 for this year and the next, respectively. These estimates are also trending upwards over the last one month.

The month’s traffic for US Airways Group Inc. ( LCC - Snapshot Report ) grew 1.7% year over year on strong capacity, which improved 2.3% from the year-ago month. Load factor however contracted 60 bps year over year. The earnings estimates for LCC have risen strongly of late, with current EPS estimates of $3.14 and $3.70 for this year and the next, strongly up 54 cents and 40 cents, respectively, over the past one month.

For the short term (1-3 months), Delta, Southwest, JetBlue and Alaska hold the Zacks # 2 (Buy) Rank while United Continental and US Airways retain the Zacks #1 (Strong Buy) Rank.