By Patrick Markey NEW YORK, Jan 10 (Reuters) - U.S. airlines, hobbled by the lingering travel slump after the Sept. 11 attacks, could post more than $4 billion in fourth-quarter losses, but a drop in oil prices and a steady climb in traffic should ease their woes, experts said. Far from writing off the quarter, Wall Street will try to glean more clues about the industry's recovery when airlines start reporting financial results next week - most are eyeing a turnaround later this year. Industry analysts will also look for indicators on what costs airlines expect this year from insurance, deferred tax payments, and baggage screening requirements, which must be in place next week as part of new security legislation. "The fourth-quarter is going to be horrible, but that is expected, it's factored into the market. People are looking at how the industry will recover," said Ray Neidl, an airline analyst with ABN Amro. Two of the top three U.S. airlines have already warned of huge quarterly losses as they continue to bleed cash due to weak demand and fare sales, which have helped lure back passengers but eroded yields. Last month Don Carty, chairman and chief executive at AMR Corp. (AMR), parent American Airlines, warned employees that the world's largest carrier would post a "very, very big loss." Delta Air Lines(DAL), the No. 3 carrier, said it will report a $500 million loss before items. Wall Street analysts expect American Airlines to post a loss of $5.01 per share on average and for Delta to report a loss of $3.80 per share, according to research firm Thomson Financial/First Call. STILL STRUGGLING U.S. airlines, already battered by a slowdown in business travel, have struggled to recover from last year's hijack assaults on the United States, which curtailed travel demand and shuttered commercial air traffic for nearly three days. Most carriers have trimmed their capacity and are operating on reduced schedules. Revenue per available seat mile, a key figure on Wall Street, remains substantially down but has started to creep back since a disastrous September drop. Wall Street analysts now expect the industry to report quarterly operating losses between $3 billion to $4.5 billion without cash from the $15 billion federal bailout the Bush administration pushed through after the attacks. UAL Corp. (UAL), the No. 2 carrier, is expected to post the worst quarterly loss among the major carriers, with per share estimates ranging from $12.25 to $18 per share. Analysts forecast that US Airways Group (U), hit hard by the temporary closure of its important hub at Washington's Ronald Reagan National Airport, will post a loss of $7.31 per share. The Arlington, Virginia-based carrier is also struggling with stiff competition from low-cost rivals on its major east coast routes. Among the larger carriers, only low-cost operator Southwest Airlines (LUV) is expected to report a profit for the December quarter, while several others will be aided into the black by the federal bailout cash. POSITIVE SIGNS Still, some on Wall Street have started to take a more positive stance on the longer term industry outlook. Salomon Smith Barney on Thursday raised its quarterly outlook estimates for nine out of the top 10 U.S. airlines based on an improving revenue outlook and a drop in fuel prices over the last two months. Airline analyst Brian Harris expects the industry to report a profit of about $2 billion for 2003. In a sign of recovery, Continental Airlines (CAL), the first major U.S. airline to report earnings next week, recently reported that its December unit revenues fell 14 percent to 16 percent from a year ago compared to the 17 percent drop it reported in November. Continental is the only major airline that releases monthly reports on unit revenues -- the widely watched barometer of airline performance that measures revenues against available seat miles. The Houston-based carrier expects a profit by the second quarter. Merrill Lynch also recently narrowed fourth-quarter loss estimates for America West Holdings (AWA) unit America West Airlines, Delta Air and Southwest among the major carriers.