By Brad Foss
The Associated Press

WASHINGTON - A steady rise in travel demand notwithstanding, the airline industry's financial outlook is wobbly again, with losses in 2004 now expected to surpass $2 billion - about four times steeper than analysts' earlier estimates.

Shares of several large airlines fell Tuesday as investors braced for the release of March traffic and revenue data this week.

Major carriers such as American and United are struggling on many fronts: expensive jet fuel, fierce competition from budget carriers and tight-fistedness from formerly high-paying business travelers.

Delta and US Airways, meanwhile, face the additional challenge of seeking steep pay cuts from employees.

About the best thing the U.S. airline industry can say for itself right now is that losses are narrowing on a year-over-year basis.

Wall Street analysts are predicting 2004 losses of $2.2 billion to $2.3 billion. That's better than last year's industrywide loss of about $6 billion, but worse than analysts' earlier expectations of red ink totaling $500 million-$600 million.

"The only way out of this problem is for costs to go down," said Thom Nulty, partner in The Corporate Solutions Group, a Monarch Beach, Calif.-based airline consultancy.

That's because the rapid expansion of budget carriers such as Southwest, JetBlue and AirTran, which account for about one-fourth of all domestic flights, has made it extremely difficult for major carriers to increase their revenue.

The average one-way domestic fare in 2003 was $276, compared with $311 in 2000, the highest level in the past decade, according to data published by American Express.

Stingy corporate travelers are pushing average ticket prices lower, according to American Express, whose data show that in 2003 business fliers bought tickets that cost 51 percent less than the average listed price for business fares.

That loss of potential revenue comes as carriers have been stung by the high price of oil, the raw material for jet fuel.

Fuel is the industry's second biggest cost after labor and, according to Blaylock & Partners airline analyst Ray Neidl, each $1 increase in the price of oil translates into $425 million in additional costs.

Delta said more than 10 percent of its expected $400 million loss in the first quarter of 2004 will be tied to fuel costs. The airline also has been trying to convince its pilots to accept a 30 percent pay cut. The pilots have offered a cut of 9 percent.

Shares of AMR Corp., the parent of American, dropped 19 cents to $12.25 on the New York Stock Exchange, where Delta's shares fell 15 cents to $7.75. US Airways' stock declined by 13 cents to $4.47 on the Nasdaq Stock Market.