The airline industry finally got some good news -- unless, of course, you're UAL ( UAL). Bankruptcy will make life difficult for the parent of No. 2 U.S. airline United and the cadre of banks, suppliers and partners that rely on the company as a source of revenue. But bad news for United Airlines may well be good news for the rest of the airline industry, which faces less competition with the second-largest carrier in Chapter 11 protection. For a change, Wall Street analysts and industry watchers -- many of whom have said the U.S. airline industry can only support five or six major carriers, instead of eight today -- were making positive comments in the wake of the government's rejection of UAL's request for assistance. Because UAL will be forced to cut capacity, jobs and push forward with a painful reorganization, analysts feel the industry outlook will improve -- providing a glimmer of hope that surviving airlines can start recovering after losing $15 billion over the last two years. "Competitors will be helped somewhat in the near- to intermediate-term," said Philip Baggaley, credit analyst with Standard & Poor's. "You'll have some traffic diverting to rivals. The lower wages and compensation that will be negotiated with United's unions will influence the bargaining at other airlines. It will be easier to resist requests for higher pay and ask for concessions. It's also likely to reduce industry capacity." According to Credit Suisse First Boston analyst Jim Higgins, UAL could cut capacity as much as 12%, which is double what the carrier previously announced. "Cuts will help better match supply with industry demand," he said. As a result, the airline stocks rallied significantly on Thursday. The American Stock Exchange Airline Index was up 5.1% on Thursday afternoon, pushed higher by AMR ( AMR), parent of American Airlines, which rose 9% to $7.67. Continental Airlines ( CAL), Delta Air Lines ( DAL) and Northwest Airlines ( NWAC) all had better than 5% gains.