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Airlines’ struggle with rising fuel costs and weak business travel demand are leading to lower traffic and profits. Though fare hikes helped some U.S. air carriers to somewhat manage September traffic in green, the earnings estimates are still trending downward on the back of numerous macroeconomic headwinds. Notably, some low cost carriers once again emerged as the winners in September based on their low fares.

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

Consolidated September traffic fell 2.1% at the largest U.S. airline United Continental Holdings Inc. (UAL - Analyst Report), due to weak domestic and international traffic. Capacity (or available seat miles) slid 1.3% year over year while load factor (percentage of seats filled with passengers) contracted 70 basis points (bps) year over year to 82.1%. United Continental expects unit revenue to decline 2.5-3.5% year over year for the month of September, measured by passenger revenue per available seat mile (PRASM), a key metric in airlines.

In addition, the weak traffic is denting the company's profitability projections. In the last one month, the Zacks Consensus estimates for UAL went down by 47 cents to $2.43 and by 39 cents to $4.26 for 2012 and 2013, respectively. Notably, the Zacks Consensus Estimates for this year and the next were $2.90 and $4.65, respectively, one month back.

The September traffic for the second largest U.S. airline Delta Air Lines Inc. (DAL - Analyst Report) fell 1.1% year over year, as weak domestic traffic offset the strong international traffic. Consolidated capacity slid 0.6% while load factor was down a modest 40 bps to 83.2%. The company’s PRASM increased 0.5% year over year for September. Like UAL, earnings expectations for Delta have also been trending down. The current Zacks Consensus Estimates of $1.91 and $2.50 for 2012 and 2013 are down from $2.07 and $2.67 a month ago, respectively.

Traffic for the low-cost carrier Southwest Airlines Co. (LUV - Analyst Report) also nudged down 2.1% year over year in September on the back of 1% drop in capacity and 80 bps fall in load factor. The company expects PRASM to increase 2-3% year over year for September. The Zacks Consensus Estimates for this year and the next have decreased by 10 cents to 63 cents and by 7 cents to $0.94, respectively, in the past one month.

Discount U.S. airline JetBlue Airways Corporation (JBLU - Analyst Report) reported a 6.1% year-over-year traffic increase in September, the highest compared to its rivals. On a year-over-year basis, capacity rose 7.7% and load factor declined 120 bps to 78.6%. Despite the solid growth in traffic, earnings estimates for JetBlue are substantially down from the last month. The Zacks Consensus Estimates fell by a nickel to 46 cents for 2012 and 4 cents to 60 cents for 2013.

Traffic at Alaska Air Group Inc. (ALK - Snapshot Report) also climbed 5.1% year over year in the month of September. Capacity grew 5.1% while load factor was flat year over year. Like other airlines, earnings estimates for the company dropped for 2012 and 2013 over the past one month. The earnings estimates for Alaska are pegged at $4.76 and $5.30 for this year and the next, respectively.

The month’s traffic for US Airways Group Inc. increased 1.8% year over year on a 0.9% capacity growth and load factor expanded 80 bps to 84.4%. The earnings estimates for LCC have fallen significantly, with EPS estimates currently being $2.33 and $2.91 for this year and the next, down from $2.63 and $3.22, respectively, over the past one month.

Both United Continental and Delta currently hold a Zacks #5 (Strong Sell) Rank, while Alaska retains Zacks # 4 (Sell) Rank for the short term (1-3 months). The other airlines - Southwest, JetBlue and US Airways retain a Zacks #3 (Hold) Rank.

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