Airline Winners & Losers: US Airways

Updated from 2:57 p.m. ET

NEW YORK -- Airline stocks were mostly lower in midday trading Wednesday after US Airways (LCC Quote) said it would report a loss for 2008 and reduce capacity this year, undercutting the prospect of lower oil prices.

Analysts had expected US Airways, like most of its rivals, to post a loss for 2008, but the forecast of a reduction of 4 to 6% in mainline capacity served as a reminder of tough conditions facing the industry.

Most major carriers have reported this week that traffic slumped in December, although the impact was softened by capacity cuts that the airlines made last fall -- there were fewer passengers, but there were also fewer seats to sell.

The airlines cut capacity last year to cope with record-high fuel prices. Fuel prices later plunged, but the capacity cuts helped save the airlines when the recession caused a slump in air travel demand.

Take US Airways, for example.

On Wednesday, it joined the list of carriers reporting a dip in December traffic. But because of fewer seats, revenue per available seat times miles flown -- an important statistic in the airline industry -- rose between 3 and 5% compared with a year ago.

Oil prices should have given airline stocks a boost Wednesday, as they fell on news that U.S. reserves were much larger than expected in the face of falling demand.

Sweet crude for February delivery dropped $4.04, more than 8%, to $44.54 a barrel on the New York Mercantile Exchange at midday.