Updated from 2:20 p.m. EDT

AMR Corp.

,

(AMR)

UAL Corp.

(UAL) - Get Report

and

Trans World Airlines

(TWA)

reported second-quarter earnings reports that all beat analysts expectations, but an earnings warning by

United Airlines'

parent, UAL, sent many of the major airlines' shares down Wednesday.

Meanwhile, United Airlines proposed merger partner,

US Airways

,

(U)

fell far short of quarterly earnings expectations. The company blamed its earnings disappointment on soaring fuel costs and a drop in passenger volume after some of the carrier's union workers threatened to strike earlier this year. Shares of the Arlington, Va.-based airline fell accordingly, ending the day down 1 1/16, or 2.5%, at 40 15/16.

But even stellar earnings reports were not enough to buoy the country's top two airlines' sagging stock prices.

Industry analysts say UAL, parent company of the U.S.' largest airline, United, likely triggered the slide when it announced reduced third-quarter earnings expectations.

Despite UAL's unexpectedly good earnings report, shares of UAL closed down 5 15/16, or 10%, at 53 5/16.

PaineWebber

airline analyst Samuel Buttrick blamed the losses on the company's announcement that it expected a third-quarter slowdown in revenue growth. The slowdown is due to an expected drop in passenger capacity levels and wage increases associated with the end of the company's stock ownership program.

Buttrick said similar slippage in shares of AMR, the parent company of No. 2 airline

American

, as well as other major airline stocks, was likely a sympathetic and knee-jerk reaction to UAL's lowered third-quarter earnings expectations.

Chicago-based UAL Wednesday reported that its fully distributed earnings climbed to $408 million, or $3.47 a share, in the second quarter compared with $349 million, or $2.86 a share, a year earlier, excluding special charges in both periods. That's higher than the consensus estimate among analysts surveyed by

First Call/Thomson Financial

of $3.24 per share on a fully distributed basis.

Fully distributed earnings take into consideration the company's employee stock ownership program which expires later this year, and excludes program-related compensation expenses. When reporting under Generally Accepted Accounting Principles, the company's second-quarter net earnings were significantly lower, at $374 million, or $3.19 per share.

UAL's reported earnings exclude two special charges in the second quarter: a $23 million charge from the replacement of the in-flight video system on some of its aircrafts and a $15 million charge from taking seven leased aircrafts out of service.

UAL's operating revenues were up nearly 15% for the second quarter, climbing to $5.11 billion from $4.54 billion in the same period a year ago. But operating expenses also jumped about 10%, mainly from a 40% year-over-year increase in fuel costs, which cut into the company's net earnings. It was also plagued by labor- and weather-related delays and cancellations.

In a statement released Wednesday, UAL Chairman and CEO James E. Goodwin said that United's continued revenue growth, particularly in the U.S., helped offset the effect of higher fuel costs and "operational disruptions" that forced the carrier to cut 4,800 flights, or nearly 2%, of its summer schedule, which began in May.

"United's pain is the other airlines' gain," said Buttrick, adding that American will likely be the primary beneficiary. The analyst has a buy rating on AMR's stock, with a $52 target price. PaineWebber does not underwrite any of the major airlines.

American also reported stronger-than-expected quarterly earnings Wednesday, with record passenger demand helping to offset higher fuel costs. Still, shares in its parent company ended the day down 1 3/8, or 4%, at 31 1/2 Wednesday.

Fort Worth, Texas-based AMR said earnings amounted to $285 million in the second quarter, or $1.75 per diluted share, excluding a one-time, after-tax gain. That's 18 cents per share above the consensus estimate among analysts surveyed by First Call/ Thomson Financial and up from $1.36 per diluted share, or $216 million, earned in the same period a year ago.

"A strong economy drove record levels of traffic during the second quarter, resulting in outstanding revenue performance in all aspects of the business," said AMR Chairman and CEO Donald J. Carty in a prepared statement.

Passenger revenue per available seat mile, a key airline statistic, rose 12.5% from the same year-ago period, offsetting a 10% increase in the operating expenses per available seat mile. AMR's American Airlines operates nearly 700 jets serving about 170 destinations in the Americas, Europe and the Pacific Rim.

United did not get the chance to benefit as much from the increased passenger traffic, as it was plagued by an unusually high number of delays and cancellations in the second quarter that airline officials have blamed on bad weather, air traffic control problems and the refusal of some union

pilots to work overtime.

United executives have been locked in negotiations with its pilots union since the group's contract became amendable in mid-April. The airline has also begun talks with the

International Association of Machinists

, or IAM, which represents the airline's nearly 50,000 mechanics, ramp workers, reservations personnel, customer-service representatives, ticket-office employees and air-freight operators. The IAM

contract ran out on July 12.

United said it was forced to remove the thousands of flights this summer largely because it lacked pilots to fly the planes. Of those flights that did take off, just under 57% of United 's flights arrived on time in May -- far worse than delays reported by its closest competitors, according to the latest figures released by the

Department of Transportation

. United canceled 9% of its schedule in the month of May alone, more flights than any other airline.

Also in May, United agreed to buy US Airways, the country's sixth-largest carrier, for $4.3 billion, a deal that would make it responsible for carrying a quarter of the country's air passengers.

Second-quarter earnings for US Airways, also reported Wednesday, fell short of Wall Street estimates. Its shares closed down 1 1/16, or 2.5%, at 40 15/16.

The carrier reported $80 million in net earnings for the second quarter, or $1.17 per diluted share -- 21 cents short of the consensus earnings estimate among analysts surveyed by First Call/Thomson Financial. In last year's second quarter, US Airways earned $1.83 per share. The $80 million figure was nearly 75% lower than the $317 million net income for the same period in 1999.

US Airways' quarterly operating income of $168 million was down nearly 40% from the $279 million income in the same period a year ago. Officials attributed the losses to increased fuel costs and a slowdown in passenger volume following threats of labor disruptions earlier this year.

US Airways operates more than 380 aircraft serving more than 100 airports. Its potential merger partner, United Air Lines, flies more than 590 jets to about 135 cities in the U.S. and 26 other countries.

The only airline stock among the four to end the day up was TWA. Investors reacted positively to the unexpectedly small losses for the quarter, sending shares of TWA up 1/8. or 5%, to close at 2 7/16.

TWA also attributed its smaller-than-expected loss for the second quarter to a 10% rise in the carrier's revenue that helped offset rising fuel costs.

The St. Louis-based airline's net loss narrowed to $4.2 million, or 8 cents a share, from a loss of $6.2 million, or 18 cents, in the same period a year earlier. The eighth-largest U.S. carrier was expected to lose 33 cents a share, according to analysts surveyed by First Call/Thomson Financial.

The St. Louis-based airline reported operating income of $15.3 million and a net loss of $4.23 million, or eight cents a share, for the three months ending June 30. A year ago, the carrier lost $6.2 million, or 18 cents per share.

Operating revenue for the second quarter was $954.9 million, a 10% increase over the $866 million in revenue from the year-ago period.

``While there is still much to be done to restore TWA to sustainable profitability, we made continued progress,'' said William F. Compton, president and CEO, in a prepared statement, citing increased capacity, passenger volume and revenue.

The airline blamed significant increases in fuel expenses, aircraft rentals and labor costs associated with new bargaining agreements for its losses. Operating expenses increased to $939.6 million from $847.6 million spent in the same period last year - $52.9 million of that increase was attributed to higher fuel costs.