Airline stocks were slumping Wednesday morning, following some gloomy news about spring travel. Late Tuesday, the Air Transport Association, a trade group representing the major carriers, said the postwar rise in travel demand has stalled, with traffic for the week ending May 25 off 9.9% from year-ago levels. This marks the second straight week that traffic is off nearly 10% from year-ago levels. The news prompted James Higgins, an analyst at Credit Suisse First Boston, to warn investors that the trend has turned negative heading into the summer season. "As we enter June, carriers have increased their summer schedules to capitalize on the seasonally strong leisure period -- meaning that a watchful eye on traffic is very much in order," said Higgins. He added that traffic could get worse heading into June, because the latest data don't fully factor in the effects of the increase in the terror alert level, which tends to depress demand for travel. The Amex Airlines was off 1.8%, led lower by shares in the bankrupt parent of United Airlines, UAL ( UALAQ), which was off 14 cents, or 7.1%, at $1.78. Meanwhile, Delta Air Lines ( DAL) was off 81 cents, or 5.8%, at $13.22, after The Wall Street Journal reported that its ramp-up could be "premature." But while travel demand is weak heading into summer, Higgins said there are still a few bright spots. The government's four-mouth repeal of the security fees that airlines have been charging has
enabled airlines to raise prices, adding 0.5% to industry revenue, Higgins said. He said he is maintaining his favorable intermediate-term position on the industry, and that investors should hold their shares and add positions when airline stocks dip. "There will be a time to sell airline shares later this year," he said. But Higgins' view is not a unanimous one, after many airline stocks have doubled and even tripled recently. On Friday, another bull in the sector, Blaylock & Partners' Ray Neidl, told investors that stock prices could face downside pressure before they rally again. "It may be time for short-term investors to adjust their portfolios," Neidl said. "We see no factor to propel legacy airline stock prices for the immediate future and believe that all of the 'easy' money has been made for the time being."