Airlines will look back on a solid 2006 as they start reporting year-end financial results this week, but investor attention will be riveted on their outlooks for 2007.

By all accounts, this year should be even better, with industry profits the highest since 2000 because of continued strong travel demand, fewer flights and lower oil prices. And none of the forecasts includes any merger benefits should the US Airways-Delta deal or other talked-about pairings get off the ground.

"I would expect it to be a very good year, and if oil prices stay where they are ... an exceptional year," said Jim Corridore, airline equity analyst with Standard & Poor's.

Of course, a very good year in the perpetually challenged airline industry would be a mediocre year in many businesses. But few in the industry are complaining, given the four-year bruising the industry endured after Sept. 11. The industry lost $35 billion in that period, according to the Air Transport Association.

The trade group's earnings forecast for 2007, which includes U.S. passenger and cargo airlines, is for a profit of $4 billion to $6 billion. That's double the expected tally for 2006.

Airline analyst Roger King says the key to the strength of the recovery is the ability of airlines to continually raise fares.

Buoyed by flight cutbacks, airlines raised fares several times last year without scaring away passengers.

"So far, the consumer's not revolting," said King, of bond research firm CreditSights.

Southwest has repeatedly raised its fares, albeit in small increments. CEO Gary Kelly said the airline was seeing some pockets of resistance to higher fares in the second half of 2006. It raised fares during the holidays, so analysts will be looking for further insights from Kelly when the airline kicks off earnings season tomorrow with its fourth-quarter results and conference call. Southwest, the industry leader in profits, is expected to report a fourth-quarter profit of 13 cents per share.

US Airways is also expected to be profitable, with per-share earnings of 80 cents. The airline has led the industry in revenue gains thanks to higher fares.

Analysts are forecasting a loss for many airlines for the quarter, a reversal from forecasts of almost across-the-board profits even though the fourth quarter is airlines' weakest.

Bookings, which were on a tear for most of the year, didn't turn out as strong as expected and, in some cases, holiday storms hurt business. Frontier Airlines said December blizzards in Denver cost it about $12 million.

But that's in the past.

The focus is now on 2007. In addition to the industry's improving foundation and a sharp drop in oil prices this year, the prospect of mergers has industry watchers frothing. Airline stocks are up sharply in anticipation of deals.