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Eruption Casts Shadow on Airline Earnings Reports

The nation's big airlines begin reporting first-quarter earnings this week, and many should show increased revenue. But don't expect a lot of profits.

And the second quarter could be even tougher.

The volcanic eruption in Iceland contin ues to freeze air travel across Eur ope and cost U.S. airlines tens of millions of dollars a day.

The five U.S. carriers that fly to Europe have together lost about $22 million a day since Friday, says airline analyst Robert Herbst.

Boyd Group International, an aviation research firm, says U.S. airlines have lost nearly $80 million in revenue so far.

By Sunday night, more than 63,000 flights in Europe's airspace were expected to be canceled since Thursday, according to Eurocontrol, an intergovernmental organization that wants to create a single air traffic control system in Europe.

The impact on U.S. airlines isn't only on trans-Atlantic flights.

"That passenger flying from Munich to Atlanta also makes domestic trips within the U.S.," Tim Sieber, Boyd Group's vice president, said in a statement.

As for the second quarter, Barclays Capital's Gary Chase said Thursday in a note to investors: "A short-term spike in fuel remains a risk." Still, "We believe continued momentum on the revenue front will offset fuel headwinds. We believe the industry is poised for a prolonged up cycle."

By many measures, the first quarter looks strong:

- The nine largest U.S. airlines filled more than 80 percent of their seats in March. That's after they've cut the number of available seats, however. Airlines have reduced flights and moved to smaller planes since late 2008 because fewer people are flying.

- Demand for available seats is rising, and that's translated into higher fares. The number of passenger miles flown in March was up 2.7 percent. The average ticket price this year is likely to be well above $330, analysts say. In 2009, it was below $315.

- That's raising revenue. The five airlines that report monthly say unit revenue - the amount received per available seat mile - was up sharply. United estimated a 21.5 percent to 23.5 percent rise in March; Southwest, 22 percent; US Airways, 18 percent; JetBlue, 17 percent; and Continental, 13 percent to 14 percent.

That doesn't mean the outlook is all roses. Jet fuel was $2.29 a gallon on average on the U.S. spot market for the week ended April 9, says the Air Transport Association, an industry group. That's far less than the near-$4 peak price in summer 2008 when crude topped $147 a barrel. But it's 21 percent higher than last year's average price of $1.90 a gallon.

Airline managers also fret that if energy prices soar, budget-stressed consumers and business could travel less.

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