U.S. airlines see less traffic, fuller planes

* U.S. airline traffic down sharply in April

* Load factors higher

By Kyle Peterson

CHICAGO, May 7 (Reuters) - U.S. airlines saw a steep decline in the number of passengers they carried in April, but planes were more full, a sign that steep capacity cuts may be serving their intended purpose.

Monthly data on airline operations released this week show traffic declined for all but two of the nine largest U.S. carriers. Load factors, which reflect how full planes are, were up for seven of the nine.

Only low-cost carriers Southwest Airlines (LUV.N) and AirTran Holdings' (AAI.N) AirTran Airways saw increases in traffic.

"Because they offer lower ticket prices, we expected low-cost carriers like Southwest and AirTran to show an increase in traffic," said Morningstar equity analyst Basili Alukos. "As for the raise in load factor, the capacity cuts are working well."

The U.S. airline industry has been hit hard this year and last year by an economic recession that put a crimp in travel demand.

United Airlines, a unit of UAL Corp (UAUA.O), saw the biggest decline in traffic at 10.5 percent. But the carrier also had the largest decrease in capacity -- number of seats for sale -- at 10.2 percent. United's load factor slipped 0.2 percent in April.

Delta Air Lines (DAL.N), which last year bought Northwest Airlines, said its April traffic was down 7.7 percent year over year on a 7.1 percent capacity cut. Delta's load factor slipped 0.5 percent.

Other major airlines like AMR Corp's (AMR.N) American Airlines, Continental Airlines (CAL.N) and US Airways (LCC.N) saw higher load factors.

Alukos said the higher load factors could be a sign that demand is starting to pick up but that it was more likely the numbers are distorted by the shift of the Easter weekend from March to April in 2009.

(Reporting by Kyle Peterson; editing by Gunna Dickson)