Full planes expected in US for July Fourth holiday

* Airlines expect full planes around July 4

* Load factors seen above 90 pct

* Traffic down sharply amid recession

By Kyle Peterson

CHICAGO, July 1 (Reuters) - Travel on newly downsized U.S. airlines will be as cramped as ever this holiday weekend, despite sharp declines in passenger traffic during the economic recession, experts said on Wednesday.

Carriers are expecting planes on domestic routes to be more than 90 percent full on the days surrounding U.S. Independence Day on July 4.

"From a load factor standpoint, it is going to be very busy around the holiday," said Tim Smith, a spokesman for AMR Corp (AMR.N), parent of American Airlines. "In fact, we have seen traffic all this week already pick up from levels earlier in June."

Load factors are the percent of airplane seats filled.

"The last several days this week we've seen load factors in the high 80s and starting today through July 3 we expect to see domestic load factors in the low 90s," Smith said.

At UAL Corp's (UAUA.O) United Airlines, planes are as much as 94 percent full, a spokeswoman said.

The airline industry has been hit hard this year by weak demand as the economic recession erodes travel budgets. Carriers have responded with capacity cuts designed to eliminate unprofitable flying and to bolster fares.

"Certainly air fares have come up sharply in the last six weeks," said Rick Seaney, chief executive of FareCompare. "Part of that is the lack of sale fares in the system right now."

Huge capacity cuts began last year and continued into 2009. Last month, Delta Air Lines Inc (DAL.N) said it would cut system capacity by 10 percent this year, compared with earlier plans to cut capacity by 6 percent to 8 percent.

AMR said it would cut capacity by 7.5 percent, compared with a previous forecast for a 6.5 percent decline. Other airlines are expected to make similar cuts.

As a result of the downsizing, planes remain nearly full despite dwindling traffic. But airports are less crowded than they have been in years.

Monthly operating reports from U.S. airlines show big year-over-over year declines in traffic. The Air Transport Association, an industry trade group, forecast in May that 14 million -- 7 percent -- fewer passengers would fly this summer, compared with a year ago.

Independence Day typically marks the busiest time in the peak summer travel season. After July 4, airline bookings often decline into the autumn. (Reporting by Kyle Peterson; editing by Andre Grenon)