Citing increased East Coast competition, AirTran ( AAI) became the second airline in two days to project a modest fourth-quarter loss. In an SEC filing, the Orlando-based carrier also said fourth-quarter revenue per available seat mile will decline between 6.5% and 7.5% compared with the same quarter a year earlier. On Wednesday, Continental ( CAL) projected a fourth-quarter loss. In a research report, JP Morgan analyst Jamie Baker wrote that Continental reported "respectable demand data" but that AirTran's demand suffers from its status as "a spill carrier" without a unique claim to its traffic. He said AirTran has been the only carrier to report a RASM decline for the quarter. AirTran said a pickup in East Coast capacity led to declines in its load factor and yield. Fourth-quarter load factor was 69%, down 2.5 points. Baker now projects AirTran will lose 7 cents a share for the quarter, while Merrill Lynch analyst Mike Linenberg wrote in his own report that he expects a quarterly 5-cent loss. Both analysts had previously been anticipating profits. JP Morgan and Merrill Lynch have financial relationships with AirTran, and Merrill Lynch acts as a market maker. AirTran's prospects are enhanced by the possibility of a proposed hostile takeover of Midwest Airlines ( MEH), the analysts said. Linenberg said the transaction makes sense and maintained a buy rating as a result. He forecasts a 2007 profit of 70 cents a share for AirTran and a share price of $14 based on a multiple of 20. Baker believes AirTran will earn 55 cents a share this year, but he noted that consolidation "is specifically required" to support the estimate. Otherwise, he's expecting a RASM decline. "It is difficult to make a value case for AAI shares," wrote Baker, who maintains a neutral rating. For its part, AirTran said that East Coast capacity peaked in November and that its December load factor increased slightly to 70.4%. Capacity gains in key markets are expected to moderate in the first quarter, AirTran said.