CHARLOTTE, N.C. -- From Wall Street to Washington, and from homebuilders to cell-phone makers, decrees are coming down that a recession looms. The airline industry still doesn't see it, though. In fact, the first- and fourth-largest U.S. carriers both say they have pored over their advance bookings searching for a slowdown and haven't been able to confirm one. A clearer picture could emerge next week, when more major carriers, including Delta ( DAL), US Airways ( LCC), Southwest ( LUV) and UAL ( UAUA), report earnings and face questions about their outlooks for this year. "Looking to 2008, there have been numerous reports that the U.S. is on the cusp of an economic recession," said Larry Kellner, CEO of Continental ( CAL), during an earnings conference call on Thursday. "We're watching our future bookings closely and do not see a slowdown." To be sure, Continental saw some holiday softness. But on further review, Kellner said, it appeared to result from having Christmas and New Year's Day on Tuesday rather than Monday, eliminating the chance to take a three-day holiday jaunt. Bookings have since recovered. President Jeff Smisek said demand is so strong that Continental has been able to raise fares enough "to recapture a portion of the rising cost of fuel. We've been able to do this without any falloff in demand." On some routes in its Houston and Newark hubs, the carrier has even reinstated the dreaded Saturday night-stay requirements in an effort to separate business fliers from leisure fliers. For the next six weeks, Smisek said, consolidated domestic bookings are up 1% to 2% and bookings for Latin America are higher by 2%. Trans-Atlantic and Pacific bookings are down, but the carrier expects them to pick up because a lot of travel, particularly high-end international travel, is booked in the 30 days before departure. Meanwhile, the largest carrier, AMR's ( AMR) American Airlines, can't tell if there is a recession or not. "The data is conflicting," said CFO Tom Horton, on an earnings call Wednesday. "Our book load factor is up, that's good news. The industry isn't pricing to its cost. That's bad news." Horton said a recent corporate travel survey by an investment bank and the headlines over the past few weeks are bearish, but a survey by American Express Travel Services "was fairly bullish." In response, American plans to maintain its current fleet level through 2008, although capacity will increase about 1% because last year's weather cancellations forced it to fly less. If conditions warrant, the carrier could further reduce capacity, Horton indicated. By the way, if airlines are managing capacity so well that they would be able to avoid the impact of an economic slowdown, might this be a good time to buy airline shares? Despite a recent run-up on consolidation chatter, the Amex Airline Index is trading close to its five-year-low. Avondale Partners analyst Bob McAdoo is bullish. His report on American, issued after the earnings call, was titled: "Our Take from AMR: Just Buy the Shares." "Management is deeply concerned about the impact of high fuel prices and a possible weak economy
and seems willing to take whatever capacity actions are necessary to combat these forces," he said. But some other analysts rate American a sell, based on better prospects at other carriers. McAdoo says consolidation would boost the shares of all six legacy carriers. Overall, he says, in spite of fuel-price increases, "conditions going forward are likely the most favorable we have seen in the last 20 years" due to continued demand, consolidation prospects and widespread capacity discipline.