To hear

Northwest Airlines

(NWAC)

President Doug Steenland tell it, the airline industry's recovery is a myth.

"We don't see any end in sight. We don't see the light at the end of the tunnel," he said Wednesday at a press conference launching its new transatlantic service on Airbus 330 jets.

Misery has company.

Delta Air Lines

(DAL) - Get Report

CEO Leo Mullin said in June that airlines were in for "another extremely tough year."

But how much of the outlook is genuine, and how much is posturing? Both airlines are battling with unionized pilots over cost cuts.

"It's not in their best interests to come out and say life is wonderful," said Helane Becker, airline analyst at Benchmark, adding that the carrier comments are based in the truth. "Northwest is in a tough position. They have an open pilot contract, and their pilots are among the highest paid in the industry. Delta's are the highest."

Turnabout

The dreary forecasts may catch investors off-guard, if only because just-released results for the second quarter and July have shown remarkable postwar improvement, and companies have generally been more positive. On Monday, when American Airlines parent

AMR

TheStreet Recommends

(AMR)

announced that it would not go through with a planned sale of $250 million in convertible notes, the spin it gave was that an offering was "at odds with the growing improvement of the company." (It was also because the offering was poorly received.)

Three weeks ago, not only did every single major airline top estimates, many were boasting about profitable quarters, thanks in large part to government reimbursements for security costs, and improved metrics such as load factor and traffic.

But in its second-quarter release, Northwest accentuated the negative, with CEO Richard Anderson telling investors that even though the company posted a profit of $227 million, or $2.45 a share, it wasn't "seeing meaningful improvement in the underlying financial performance of the airline." He added that without one-time items like the government aid, the company's results were the second-worst in company history.

Delta, which posted a profit of $184 million, or $1.40 a share, including government aid, downplayed the fact that yield, a key barometer of pricing power, increased by 3.6%. "Delta must remain diligent in our efforts to establish a viable revenue-to-cost relationship," said Mullin in the release. "Delta still faces many challenges as we cautiously emerge from the worst business cycle in our company's history."

Cogito Dim Sum

In the end, there is truth on both sides of the argument. Analysts say the business outlook is mixed and, as other carriers have suggested, there's a very dim light at the end of the tunnel. After its second-quarter release,

Continental

(CAL) - Get Report

said advance bookings were showing positive improvement, although yields were constrained. American Airlines said demand was improving because of stronger summer demand, but nearly everyone agreed that visibility was limited, especially with business travel, and that things were improving slowly.

"I think smart investors know there is some realism to what Northwest has said about business being tough," said Prashanth Kuchibhotla, senior airline analyst at Eclipse Advisors, an airline consulting firm. "But I think that's also part of the negotiating process. Savvy institutional investors know what the carrier is aiming for and that the unions have been intransigent."

During the summer, airline business is strong because of increased leisure demand. But as Becker points out, the real acid test for Northwest, Delta and the rest of the industry will come after Labor Day, when this demand tends to dry up. In September, business travel will have to pick up to sustain a recovery; otherwise it's back to cutting costs to meet reduced demand. Investors should take the CEO statements for what they are and look for improvement to business travel and yields instead.

"The second quarter was good because of government money, but otherwise it was a terrible quarter, and April was a horrible month," said Becker, who noted that business in June, July and August appears to be quite strong. "We need to see what happens with business travel in September. I might take what they're saying with a grain of salt. Everyone has an agenda."

Airline stocks sank late Wednesday on the negative comments from Northwest, but they were mixed Thursday. At midday, the Amex Airlines Index was up 0.6%, led higher by Delta, up 13 cents, or 1.2%, to $10.64, but weighed down by Northwest, down 20 cents, or 2.4%, to $8.04.

(Neither Kuchibhotla nor Becker have had banking or business relationships with Northwest over the last 12 months.)