Losses widen at airline giants American, United

— -- Big fourth quarter losses and reports of weak demand from the parent companies of American and United airlines spooked investors Wednesday and sent the shares of most carriers tumbling.

The drops came although industry analysts were expecting the losses. They also expect U.S. airlines to be modestly profitable next year. The industry has reduced capacity between 8% and 12% as demand has fallen. Likewise, oil prices have fallen by $100 a barrel less than their peak last summer, reducing fuel costs.

The two U.S. airline giants were the first to report end-of-year earnings. Other big carriers are expected to report later this week and next. Only Southwest, which reports Thursday is expected to show a profit for the quarter, or for all of 2008.

AMR reported losing $214 million, or 77 cents a share, for the fourth quarter, excluding one-time accounting items. That was in line with what analysts expected. United's parent, UAL, lost only $547 million, or $4.22 a share, excluding one-time items, in the quarter ended Dec. 31. Analysts had been expecting a $4.42 a share loss, according to a survey of analysts' estimates by Thomson Reuters.

American's parent reported that advance bookings are off about 4.5% for the first quarter of this year. They're off about 8% in the international markets, on which most big U.S. carriers find profitability. American also projected bigger non-fuel cost increases in 2009 than most of its rivals. It anticipates increased spending on programs and technology to improve on-time reliability and high pension costs.