Airlines may be ready for a spring fling.

"It is now spring, when an investor's fancy turns to airline stocks as the industry heads into its two best quarters," wrote Calyon Securities analyst Ray Neidl, in a report issued Thursday. "We expect the whole sector to participate."

Several indicators are sending positive signals for the sector.

In intraday trading on March 29, the Amex Airline Index reached 51.66, its lowest level since mid-October. The index has risen since then. On Thursday, it was up 1% at 54.58, but it is still down about 6% this year.

Earlier this week,

Continental

(CAL) - Get Report

reported strong March performance figures, raising hopes for airline shares. Its numbers surprised, because difficult winter weather has led several carriers to make cautionary statements about first-quarter results.

Leisure fares are trending upward. While business fares have declined slightly year over year, "leisure fares appear to be gaining strength," Cathay Financial analyst Susan Donofrio wrote Thursday. "Leisure fare performance is most important as spring break traffic is a significant factor in first-quarter profitability," she said, noting that fares should rise moderately throughout the year.

The 2007 outlook "is the most promising in several years," according to the Air Transport Association, which projects profits of about $4 billion. Neidl wrote that he expects a 2007 profit of $5.9 billion.

And not to suggest that load factors bear a direct relationship to profitability, but on March 31,

Delta

( DALRQ) recorded all-time daily record load factors of 98.1% over the Atlantic and 93% on mainline Latin routes. Delta expects to emerge from bankruptcy and offer new stock to the public in early May.

Also this week, Prudential Securities analyst Bob McAdoo reiterated his support for major airline stocks, noting that growth at regional airlines is slowing because major airlines are adding fewer regional jets.

"We recommend moving funds out of the regional airlines and into our favorite legacy airlines," McAdoo wrote. "We view this as a time to buy airlines -- when investors are selling for reasons that don't likely reflect the two current fundamental positives of limited industry capacity and stable air travel demand."

McAdoo recommends Continental,

American

(AMR)

,

US Airways

(LCC)

and

Southwest

(LUV) - Get Report

. He wrote, "These shares have sold off on oil price worries and fears of largely weather-related weaker first-quarter results."

Donofrio said her top picks are American, Continental, Southwest,

Alaska Air Group

(ALK) - Get Report

and

SkyWest Airlines

(SKYW) - Get Report

.

Neidl recommends Alaska, US Airways, American, Continental and United, in that order.

At the same time, airline shares are notoriously risky investments. Since the Wright Brothers flew their first plane, the industry has lost around $3 billion. Five of the six remaining legacy carriers have sought bankruptcy protection at least once. Existing shares in Delta, which continue to trade, will be canceled in the next few weeks so that Delta can issue new stock.