Analyst Takes a Dim View of ’92 Rebound by Airlines

CHICAGO —  The nation’s airlines are ill, and no cure is in sight.

After a record loss of nearly $4 billion last year and a dismal first quarter, the airline industry has been eagerly awaiting the second half of the year, when the economy is supposed to rebound and boost travel.

That would lead earnings to rise and make 1992 a year of recovery, industry officials and analysts have said.

But some experts say the picture is starting to change.

Travel remains weak despite signs that the recession is ending and despite competition that has kept fares low. That could add up to a 1992 that will not be a good year for the industry, they say.

“The next few months are critical,” said Paul Karos, an airline analyst at First Boston. “If the numbers don’t come through in the third quarter, people are going to have to start to reassess their assumptions” about improvement in airline earnings next year.

Late Wednesday, United Airlines, the nation’s No. 2 carrier, said that although there has been some recovery in traffic, the recession and industrywide fare promotions have chopped its average fares well below last year’s levels.

The Chicago-based airline said the impact of lower fares would show up in its second-quarter results.

So far this year, many analysts have lowered estimates of airline earnings with each new round of bad news, whether it be high fuel costs, sluggish traffic or weak fares.

But many analysts had left their 1992 estimates untouched, assuming that a 1991 second-half recovery would help heal the airline’s wounds.

On Thursday, however, Karos at First Boston not only cut his earnings projections for major airlines for the second quarter and full year, he also cut his estimates for 1992.

The airlines affected were United and American, the nation’s largest carrier.