Airline stocks are hot again, sort of.

Arguably no industry has performed worse since 2000 than the airlines. Collectively, they've lost about $35 billion.

What's more, fuel prices, though down from their post-hurricanes peak, are still three times higher than 24 months ago. Yet consider this:

The Amex Airline index is up nearly 24 percent since Sept. 21.

The new US Airways, formed by the merger of America West and the old US Airways, has seen its stock price grow 49 percent to $28.80 since it was floated on Sept. 27.

Continental is up 41 percent since late September to $13.25.

AMR, American Airlines' parent, has seen its shares rise 39 percent since late September, to $14.38.

Southwest shares have risen 25 percent to $16.30 since bottoming out at $13.05 on Sept. 1.

Why is this happening?

American CEO Gerard Arpey admits some bewilderment. "The environment remains very difficult" for airlines, he says. American needed to earn $400 million to $500 million in the third quarter. Instead, it lost $95 million. Arpey, like so-called value investors, is focused on profits and long-term viability.

But traditional airline stockholders, such as institutions and professional traders, try to time the price swings that go along with an airline's cyclicality and volatility.

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"Airlines have always been momentum stocks," says Goldman Sachs analyst Glenn Engel. "The day that (earnings per share) projections stop going up is the day that their stocks start falling." And right now, all the projections are rising.

Gary Chase, analyst at Lehman Bros., is among the strongest boosters of airline stocks. "The long-awaited capacity rationalization of the airline industry is finally beginning," triggered by jet fuel prices that hit $131 a barrel after the hurricanes. That, in turn, is allowing airlines to raise posted prices and to more tightly restrict the availability of lower-priced seats.

JPMorgan analyst Jamie Baker says operating profit margins excluding fuel "are headed to historic highs." So, a business model that "supposedly was not built for $40 oil appears poised to function at $60."

But skeptics such as Ray Neidl, analyst at Calyon Securities, says the current surge is just the usual fall rally. "There's probably a little steam left in this, but when the cold winter comes, everybody will come back to reality." And Kei Kianpoor, CEO of Investars, which tracks the performance of analysts, says experts often get it wrong. Many issued buy ratings on airlines in the spring of 2002, expecting post-9/11 demand to come roaring back. But it didn't happen, and the stocks tanked.

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