US airlines, set to start reporting quarterly losses next week, are likely to offer more evidence of returning business travel demand as the industry gropes its way out of the 2009 economic recession.

Of the six-largest US carriers, only Southwest is expected to post an operating profit.

Relatively low fares are behind the expected fourth-quarter performance, but analysts are hopeful that 2010 will be a year of recovery.

"Everyone is getting better, and they're doing the best they can with the hand they've been dealt," said Morningstar airline analyst Basili Alukos. He said, however, that the strain of the recession will be evident in the results.

Lower fares had been a feature of the year. "We were in a recession, so we need people to come back to fly so they've been lowering prices," Alukos said.

The airline industry suffered in 2009 from a lack of demand for business travel as companies trimmed travel budgets to hold down costs. But airline executives say they saw signs of recovery in travel demand on the business side in the quarter.

American Airlines' parent AMR leads off the airline earnings season with its report on Wednesday. Continental Airlines and Southwest are due to report on Thursday.

UAL, parent of United Airlines, Delta Air Lines and US Airways are scheduled to report the following week.

Monthly data from US carriers on traffic capacity and loads were mixed in December, with some carriers reporting high passenger volume and planes that averaged about 80 percent full. Load factors were high thanks to capacity cuts in 2008 and 2009 by airlines struggling against volatile fuel costs.

Airlines also have benefited from a series of new fees for products and services sold to passengers at the airport or during flights. Just this month, United, Delta and Continental raised their unpopular bag-check fees.

While carriers are seeing some traction on recent fare increases, experts advise them to restrain growth.

"Hopefully carriers will indicate that even though revenue trends are improving, there is still a pretty limited appetite for new growth at this point," said Hunter Keay, airline analyst at Stifel Nicolaus.

"The last thing investors want to see is (capacity) growth at this point in time given that pricing is still relatively fragile," he said.

Meanwhile, airlines battled rising fuel costs in the fourth quarter. The price of crude oil, which directly influences the cost of jet fuel, rose about 12 percent between October and December and extended the rally in January.

"We are cautiously optimistic on the airline space entering 2010 particularly following generally strong (passenger revenue) results from many US airlines in December," said Keay in a January 11 research note.

"However, we believe investors should remain focused on key risks to the recovery given the fragility of pricing, the still uncertain outlook into latter 2010, and the industry's mixed track record of capacity discipline," he said.

(Reuters)