Continental Airlines--American Airlines--America West Airlines

Airline earnings are coming in better than projected. CAL lost $2.89 per share but the First Call forecast was for $3.10. This is a significant "beat" that would cause excitement if it were a positive $3.10 versus a positive $2.89.

AMR is up this morning on an equally good report. America West, which also had a good report, is trading down on the report that it is well into discussions to merge with bankrupted USAir. Merrill Lynch is reported to have issued a negative report on the advisability of merging with the bankrupted carrier.

The second half of a business recovery is often called the expansion phase. During the expansion phase, business travel is typically very strong. Business travel is typically the high margin business. I project an expansion phase of three to five years. The cumulative profits for the surviving airlines during the expansion should be substantial.