United Airlines (NASDAQ: UAUA), US Airways (NYSE: LCC) and American Airlines (NYSE: AMR), according to an influential analyst, have run out of options. Jamie Baker of JPMorgan said in a July 20, 2009 report that these companies couldn't do anything to prevent a cash crisis. They only savior available to them would have to be an outside investor. To call the position grim would be optimistic. Unfortunately, it couldn't have come at a worse time.

As Baker was walking the bear into the airline industry, United was starting to celebrate its change in direction. The carrier has improved its on-time rate, according to a USA Today report, and its operations are coming around. Despite the fact that the airline industry has been brutalized by the global recession, the airline has made some progress. Through August, the company's share price doubled, and its ascent has continued in September. So, the company is locked in an ongoing struggle to manage its identity, cope with its past and shape how the world sees it today.

The operational "makeover" has resulted in a reduction of its fleet from 601 jets in 2000 to 386 as of the summer of 2009. In terms of passenger traffic, it's in the #4 spot in the United States – trailing Delta (NYSE: DAL), Southwest (NYSE: LUV) and American. With Q2 revenues off 25.2% year-over-year, however, drastic measures are still necessary.

August brought more misery to the airline industry in the United States. Seven of the country's nine largest carriers saw traffic drop, with only Southwest Airlines (NYSE: LUV) and JetBlue Airways Corp (NASDAQ: JBLU) bucking the trend. The continued upward climb of unemployment, tighter corporate budgets and sluggish demand for leisure travel has resulted in fewer passengers in seats.

JetBue was the only carrier not to report a drop in available seat miles (ASMs), the primary measure of airline productivity. Load factors, however, which indicate how full a plane is, tended to be higher, largely a result of flights that have been cut in an effort to reduce costs.

Late Thursday, Moody's Investors Service announced that it might downgrade its credit ratings for Southwest Airlines Co. (NYSE: LUV). In a statement, the ratings agency said the airline's Baa1 senior unsecured rating is at risk, due to the likelihood of weak demand trends persisting into 2010.

The downgrade warning comes shortly after LUV slashed airfares dramatically to remain competitive, with some one-way flights running as low as $30 during a recent promotion. "Even with the benefits of Southwest's advantageous cost structure, the current yield environment is likely to challenge Southwest to restore credit metrics to levels supportive of the current rating," said Moody's in a statement.

In addition to the fundamental concerns cited by Moody's, LUV is also facing some challenges on the charts. The stock has shed 52.8% during the past 52 weeks, and long-term resistance from its 10-month moving average looms directly overhead. This trendline hasn't been toppled on a monthly closing basis since September 2008.

Analyst upgrades:

• Citigroup upgraded Adtran (NASDAQ: ADTN) to Buy from Hold on expectations the company will benefit from the broadband Stimulus funds.
• Morgan Stanley upgraded Continental Airlines (NYSE: CAL) to Overweight from Equal Weight based on relative valuation and views the company as a "survivor." Additionally, the analyst lowered 2009 industry estimates but believes it is the last cut for the year and is incrementally more positive on the sector.
• Morgan Stanley also upgraded EXFO Electro-Optical (NASDAQ: EXFO) to Overweight from Market Weight based on valuation.
• Tata Motors (NYSE: TTM) was upgraded to Buy from Hold at Deutsche Bank.
• Ascent Solar (NASDAQ: ASTI) was upgraded to Neutral from Underweight at JP Morgan.
• Mechel Steel (NYSE: MTL) was upgraded to Neutral from Underperform at Credit Suisse.

After American Airlines parent AMR Corp. (NYSE: AMR) reported surprising first-quarter results today, eyes turn next to rival Southwest Airlines Co. (NYSE: LUV), which is scheduled to discuss its first-quarter results tomorrow, April 16, in a conference call at 11:30 AM ET with CEO Gary Kelly and CFO Laura Wright. You can catch the live webcast of the call on the company's website.

For the quarter that saw Southwest declare its 130th consecutive quarterly dividend and named by Fortune magazine as one of the most admired companies in the world, analysts polled by Thomson Reuters expect the Dallas-based airline to report a loss of $0.01 per share, compared to a profit of $0.06 cents per share in the same period of the previous year. Revenue for the quarter is expected to total $2.4 billion, 5.1% lower than a year ago. Southwest's earnings have beat estimates in the past five quarters, by as much as a nickel a share.

Late Friday night, Southwest Airlines Co. (NYSE: LUV) reached a tentative agreement with the Transport Workers Union (TWU) Local 555, which represents 7,780 ground workers, including those employed in operations, on ramps, as well as freight workers. The deal comes after more than 13 months of negotiations.

The tentative deal, which has yet to be voted on by all TWU members, would run for three years, through June 30, 2011 (the current contract opened for changes on June 30 of last year).

Southwest Airlines Co. (NYSE: LUV) is spreading its wings to Boston's Logan International Airport beginning this fall, pleasing Red Sox fans (and New Kids on the Block stalkers). Previously, the closest LUV got to Beantown was Manchester, New Hampshire (about an hour's drive).

This latest announcement adds to the discount carrier's list of new destinations, which include Minneapolis (service beginning next month) and New York's LaGuardia (at which LUV will be taking over gates left vacant by bankrupt ATA Airlines).

Southwest Airlines Co. (NYSE: LUV) is scheduled to discuss fourth-quarter 2008 results this morning in a conference call at 11:30 AM Eastern. The call will be hosted by Gary Kelly, chairman of the board, president, and chief executive officer, and Laura Wright, senior vice president, finance, and chief financial officer. To listen in to the webcast, see Q4 2008 Southwest Airlines Financial Results Conference Call.

Analysts surveyed by Thomson Reuters expect Southwest to report a fourth-quarter profit of $0.05 per share, compared to $0.12 per share in the year-ago period. Revenues for the quarter are expected to be 6.4% higher than a year ago to $2.7 billion. Southwest earnings have topped estimates in the past five quarters, by as much as 5 cents per share.

For the full year, analysts expect a $0.37 per share profit (-39.3%) and revenue of $11.0 billion (+11.0%).

The consensus long-term EPS growth forecast is 10.0%. The share price is 30.6% lower than it was a year ago.

See BloggingStocks' Southwest Airlines coverage for more information about the Dallas-based company.

Visit AOL Money & Finance for more earnings coverage.

This post is part of a feature on companies and products that our bloggers think are in need of a makeover. See all 26.

This summer I had the misfortune of flying AMR Corp.'s (NYSE: AMR) American Airlines. In my experience, it ranks near the top in its expression of contempt for its customers. As I wrote in my book Value Leadership, it is almost the opposite of Southwest Airlines (NYSE: LUV), which has tarnished its flawless image with its first quarterly loss in 17 years due to a $247 million charge resulting from a jet fuel hedge gone sour. But to give American Airlines a makeover, it would be wise to borrow selectively from what makes Southwest so great.

In August, I was scheduled on a 1:50 pm flight from Boston to Miami -- trying to get a connecting flight to Chile on its excellent airline, LAN Air. American Airlines said the flight would be delayed for 15 minutes because of a mechanical problem that caused the air-conditioning in the back of the plane not to work. Half the plane got out, and an hour later American Airlines announced an indefinite delay.

A big line formed at our gate to rebook. Next to our gate was an empty one with two American employees who were working on their computers. I waited patiently until one of them finished her work and asked if she could help me. She stared at me and said no, she could only help people on the flight scheduled for that gate, and went back to her computer. No thanks to her I ended up booking a flight that left at 6 pm, causing me to miss my connection to Chile.

Not too long ago Southwest Airlines Co. (NYSE: LUV) used fuel hedging to lock in a $2.19 average per gallon fuel price with its providers. Betting that prices were going to rise, they took a gamble and agreed to pay a set price for a large amount of fuel for their operating costs.

This isn't the first time an airline has done this. But if the cost of fuel had gone down, Southwest would have been sitting on an obligation to pay for fuel at a higher than market price. Fortunately for Southwest, the bet cashed in, and so did Southwest. The Airline company was able to buy fuel at a rate cheap enough to keep its costs lower than rival companies. Southwest reported this week that it increased revenue by 11%, earning $321 million, or 44 cents a share.

But Southwest's fuel hedging earning the company $511 million. When that sweet deal ends, Southwest will be facing fuel costs almost double what they've been paying over this last year. As a nod to that Southwest is slowing growth.

Despite the worries about the upcoming adjustments, Southwest has continued its canny ability to stay nimble and profitable. This is the company's 69th straight profitable quarter.

Was the optimism observed in last week's preview post rewarded? Well, as it turned out there were few negative surprises from the companies listed there, really just Advanced Micro Devices Inc. (NYSE: AMD) and narrow misses from Google Inc. (NASDAQ: GOOG) and Microsoft Corp. (NASDAQ: MSFT).

Again this week, in a list of earnings expectations for some prominent companies in a variety of sectors, we see an apparent optimism. That is, analysts are anticipating more earnings growth than earnings declines.

Analysts surveyed by Thomson Financial expect the following companies to report a rise in earnings when compared to the same period of the previous year.

• Newmont Mining Corp. (NYSE: NEM): $0.48 EPS (50.0%) on sales of $1.5 billion (+15.7%)
• Amazon.com Inc. (NASDAQ: AMZN): $0.26 EPS (26.9%) on sales of $4.0 billion (+37.1%)
• Caterpillar Inc. (NYSE: CAT): $1.54 EPS (19.5%) on sales of $12.7 billion (+11.7%)
• McDonald's Corp. (NYSE: MCD): $0.86 EPS (17.4%) on sales of $5.9 billion (-1.5%)
• ConocoPhillips (NYSE: COP): $3.41 EPS (15.0%) on sales of $198.6 billion (+319.3%)
• Apple Inc. (NASDAQ: AAPL): $1.08 EPS (14.8%) on sales of $7.4 billion (+36.0%)
• Halliburton Co. (NYSE: HAL): $0.68 EPS (11.8%) on sales of $4.3 billion (+13.7%)
• Texas Instruments Inc. (NYSE: TXN): $0.46 EPS (8.7%) on sales of $3.4 billion (-1.1%)
• Yahoo Inc. (NASDAQ: YHOO): $0.12 EPS (8.3%) on sales of $1.4 billion (+10.5%)
• AT&T Inc. (NYSE: T): $0.76 EPS (7.9%) on sales of $31.2 billion (+5.7%)
• PepsiCo Inc. (NYSE: PEP): $1.02 EPS (7.8%) on sales of $10.5 billion (+9.4%)
• Anheuser-Busch Companies Inc. (NYSE: BUD): $0.93 EPS (6.5%) on sales of $4.7 billion (+4.2%)
• Pfizer Inc. (NYSE: PFE): $0.54 EPS (22.2%) on sales of $11.5 billion (+3.5%)
• 3M Co. (NYSE: MMM): $1.35 EPS (8.9%) on sales of $6.7 billion (+9.0%)
• Merck & Co. (NYSE: MRK): $0.83 EPS (1.2%) on sales of $6.0 billion (-1.2%)

There are many ironies in the fact that President George W. Bush will throw the first pitch at Major League Baseball's All-Star Game in New York. For one, President Bush is the first managing general partner of a Major League team (the Texas Rangers) to become President of the United States.

President Franklin Roosevelt was the first to attend an All-Star Game and throw out the first pitch, starting the tradition. He too had to deal with a poor economy and by the time he threw out that first ball the groundwork was being laid for World War II. President Bush has had to contend with his own war.

While there are differing views as to whether we should have gone into Iraq and whether we should stay or get out, this will always be viewed as George's war, fair or not. And the state of our economy in 2008 will also be viewed as George's economy, fair or not.

The ultimate irony for me is that Yankee Stadium is scheduled to be torn apart at the end of the season. This is YANKEE Stadium and the last president to set foot in it will be George W. Bush. The stadium with the greatest heritage in baseball, the 'House That Ruth Built', is going to be torn apart while our economy is also being torn apart. It is being torn out at its roots.

Although its stock is down 45% since the beginning of 2001, Southwest Airlines (NYSE: LUV) is the only airline to make a profit every year since it was founded. As The New York Times reports, Southwest's founder Herb Kelleher retired as chairman after 37 years this week. And he got a very warm send off from employees.

This is really one of the keys to Southwest's success. As I wrote in Value Leadership, here are some big reasons that it's been able to profit over the years:

• Treats employees well. Southwest genuinely cares about its employees. It spends a significant amount of time selecting them and it pays them well -- including giving them stock options and profit sharing -- and treats them with respect. The happy employees treat customers well and the happy customers keep coming back.
• More productive. Southwest turns planes around at the gate in 20 minutes. It doesn't serve meals -- just snacks. This cuts time that might be spent waiting for food to arrive at the plane and cleaning up after. And since employees care about the company and are rewarded for Southwest's profitability, they look for ways to keep it profitable.
• Hedging on fuel costs. Southwest hedges jet fuel -- which is the second biggest airline cost. 70% of its fuel is hedged at $51 a barrel which compares favorably to the current $135.

The oil surge, which gives new indications daily that it's evolving into the world's third oil shock, bodes tougher times for airlines, and travelers alike, many analysts agree.

Moreover, those tougher times may propel "creative and avant-garde" ideas and strategies to cope with the more-challenging flying environment, by both airlines and travelers, so says C. Leonard Bauer, independent stock analyst.

American Airlines (NYSE: AMR) took the first, bold - - and controversial - - step in the 'era of new flying rules' by announcing that it would charge passengers $15 each way to check their first bag, The Dallas Morning News reported. American also reduced its flying schedule by 11-12% at the same time.

Bauer said travelers should brace for more a-la-carte changes from the major carriers, and some truly creative ones, at that. "The airlines will be looking at every way to reduce fuel usage and cover those expenses from added weight," Bauer said, "When oil was at $20 a barrel, weight was a cost factor, but now at more than $125 a barrel, it's a going-concern factor. These high fuel costs can and will force some airlines out of business if they can't recover these costs. 'Light flight' is in." Bauer added that he does not have a rating on nor own shares of any airline.

Here are some highlights from this past week's earnings coverage from BloggingStocks:

• Acuity Brands Inc. (NYSE: AYI) beat second-quarter estimates on increased productivity and new products.
• Advanced Micro Devices (NYSE: AMD) cut its outlook and announced job cuts.
• Alcoa Inc. (NYSE: AA) missed first-quarter earnings estimates but beat revenue expectations.
• Circuit City Stores Inc. (NYSE: CC) surprised Wall Street by posting a second-quarter profit.
• Dell Inc.'s (NASDAQ: DELL) rosy 2008 forecast is based on cost cuts, overseas growth, share buybacks.
• DuPont & Co. (NYSE: DD) raised its first-quarter outlook on strength in agriculture and emerging markets.
• Eastman Chemical Co. (NYSE: EMN) raised its first-quarter guidance on strong sales and higher prices.
• EXFO Electro-Optical Engineering (NASDAQ: EXFO) beat estimates and announced an acquisition.
• Foundry Networks Inc. (NASDAQ: FDRY) slashed its first-quarter outlook, blaming the weak economy.
• Genentech Inc. (NYSE: DNA) beat first-quarter earnings estimates, but not revenue expectations.
• General Electric Co. (NYSE: GE) missed earnings expectations and lowered its guidance.
• Novellus Systems Inc. (NASDAQ: NVLS) trimmed its first-quarter earnings and revenue forecasts.
• Progressive Corp. (NYSE: PGR) beat estimates though first-quarter profits fell due to lower premiums.
• Rite Aid Corp. (NYSE: RAD) swung to a loss in the fourth quarter on acquisition costs and a tax charge.