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NEW YORK ( TheStreet) -- Strong third-quarter results have left the airline industry feeling good about itself.

"Earnings season proved an unqualified success, in our view," wrote J.P. Morgan analyst Jamie Baker in a report issued late Sunday. He noted that no airlines shut down during the economic downturn. "The industry is generating record profits despite anemic U.S. growth," he said.

Airline shares rose 4.4% last week, as every major carrier reported earnings on Wednesday or Thursday.

Deutsche Bank analyst Mike Linenberg noted that the industry's net income totaled $2.5 billion for the quarter, besting his estimate of $2.3 billion. "One notable take-away from the conference calls was that unit revenues appear to be holding up well as we move into the December quarter, despite more difficult comps," he said.

Rising fuel prices remain the industry's biggest potential threat. "Higher fuel prices worry us more than a slowing economy," wrote Dahlman Rose analyst Helane Becker. But Avondale Partners analyst Bob McAdoo wrote that "the industry has already shown the ability to generate record earnings in the face of a weak economy, high unemployment, and near-$80 oil."

With capacity under control, McAdoo said "we believe next year will be a continuation of record, or near-record, results -- even better if the economy strengthens over the next four to five months."

He added that "it's difficult to distinguish meaningful differences in the various airlines' performances and results."

Still, some carriers stand out.

In particular, JetBlue ( JBLU) reported a 13.6% third quarter operating margin, its highest since 2004 and 5.9 points higher than last year's 7.7% margin. It was also the second highest among all major carrier's after Alaska's ( ALK) 19.6%, Linenberg noted. He has a 12-month price target of $8. Shares traded Monday morning at $7.03, up 19 cents.

Baker upgraded JetBlue to overweight, with a price target of $9. He also downgraded Southwest ( LUV) to neutral, reducing his price target to $15.50 from $16, citing recent price appreciation and integration risk.

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Stifel Nicolaus analyst Hunter Keay recommends United ( UAL), introducing an estimate of five cents for the fourth quarter, which is historically unprofitable. Keay said he is impressed by the carrier's capacity discipline, the likelihood of negotiating new labor contracts and the $9.1 billion in unrestricted cash, some of which will go towards deleveraging.

McAdoo remains bullish on the entire sector, with outperform ratings on all six of the largest carriers. However, he expressed concerns that JetBlue plans fourth quarter capacity growth of 8% to 10%. Becker has buys on Alaska, Delta ( DAL), Hawaiian ( HA) and US Airways ( LCC), with holds on JetBlue, Southwest and United.

-- Written by Ted Reed in Charlotte, N.C.

>To contact the writer of this article, click here: Ted Reed

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