Updated from 3:21 p.m. EST

The charts of many airline stocks have resembled the arc of the emotional response to the war, falling recently as anxiety about a protracted conflict boosted crude prices and chilled travel.

News that demand had fallen sharply in the week since war broke out has analysts and companies warning that losses will be even steeper than feared in the coming quarters. Wednesday night,

Continental Airlines

(CAL) - Get Report

became the latest to warn, following similar reports from

Delta

(DAL) - Get Report

and

UAL

(UAL) - Get Report

, parent of United Airlines.

Thursday morning,

US Airways

(UAWGQ)

, which is bankrupt and trading for 10 cents a share, said it too would suspend certain flights, citing the effect of war.

The US Air announcement followed similar actions from Northwest, which cut capacity 12% and plans to eliminate 4,900 jobs, and Continental, which is cutting capacity 12% and plans to eliminate 1,200 jobs.

Continental, the nation's fifth-largest airline, will report "significant" losses in the first quarter and fiscal year due to slumping travel demand, terrorism fears and higher costs for fuel and security -- all directly or indirectly the result of the war against Iraq. "Current trends in the airline industry make it likely that we will continue to post significant losses for the foreseeable future," the company said.

This means Continental will miss current Wall Street estimates, which are calling for a loss of $2.25 a share in the first quarter and $3.44 for the fiscal years, according to Thomson Financial/First Call. The warning comes less than a week after the company announced it would slash 1,200 jobs by the end of the year, in hopes of cutting costs by $500 million annually.

Airline stocks were stumbling. Continental dropped 6.3%, Delta fell 3.7% and UAL was off 2.4%.

Northwest Airlines

(NWAC)

was off 2.9%, while

AMR

(AMR)

unit American Airlines, was down 3.2%.

Earlier in the week, Delta said first-quarter losses would equal or be worse than last year, with the company posting losses for the full year, as well. Meanwhile, UAL, which is also bankrupt, announced it lost $367 million during the month of February, with even deeper losses coming in the months to come -- something that could increase the risk the carrier will need to liquidate.

Meanwhile,

The Wall Street Journal

-- whose reporting on such matters can be self-fulfilling due to its effect on lenders -- said Thursday the airline is deftly using bankruptcy protection to lower its costs and might avoid liquidating. And there were new signs UAL is finally making strides to get its labor unions to cut costs after months of stalled negotiations. On Thursday, the company reached a tentative agreement with its pilots' union, the Air Line Pilots Association, which will be subject to a vote by its members on April 11.

In his twice-yearly report on the industry, "Industry Survey on Airlines," S&P equity analyst Jim Corridore said Thursday that UAL could well determine the future of the industry once the war ends.

"If United were forced to liquidate, we believe that enough capacity would come out of the U.S. airline industry to allow the remaining carriers to raise fares and operate more profitably," said Corridore, in his report. "If, however, the company is successful in obtaining the concessions it is seeking from unions, suppliers, lessors and debt holders, it could emerge from bankruptcy a much healthier operator, pressuring the rest of the industry to make dramatic cost cuts to match a leaner United Airlines."

The threat of additional bankruptcies looms large as well, with American battling its unions to gain $1.8 billion in wage concessions -- as a part of a plan to cut costs by $4 billion -- to avoid filing Chapter 11. This effort hit a snag Wednesday night, when American's plan to furlough an additional 1,000 pilots rankled the union leadership from which the company hopes to gain concessions.

But finding ways to cut the $4 billion has been so difficult that American's bankruptcy filing could happen as early as next week. On Thursday,

Reuters

reported that the company had stepped up discussions to secure $1.5 billion in financing, citing sources in the banking industry.

And with advance bookings off 20% since the war in Iraq began, according to industry trade group Air Transport Association, industry boosters concede that bankruptcies are extremely likely if the situation doesn't improve soon.

"Given the economic circumstances of the industry, it is not that far down the road," said Jim May, the chief executive of the Air Transport Association.

The airlines continue to wonder about the prospects for another government bailout. While the industry was shut out of the $75 billion supplemental war expense bill proposed by President Bush, recent comments from Capitol Hill have been positive on the prospects of aid.

Late Wednesday, Sen. Ted Stevens (R., Alaska), who is chairman of the Senate Appropriations Committee, said he would push for airline aid when his committee looks at the supplemental war bill next week. This follows Senate majority leader Bill Frist's (R., Tenn.) earlier comments that some kind of relief is probably in the cards.

What isn't yet clear, however, is how much aid the airlines can expect, or even whether it becomes part of the war spending package. If the airlines are forced into a separate piece of legislation, then it could take months for relief to come and by that time it could be too late -- additional carriers, like AMR, could be in bankruptcy.