By Kathy Fieweger CHICAGO, June 3 (Reuters) - The third attempt by financially struggling U.S. airlines to raise airfares since the Sept. 11 attacks failed after Continental Airlines Inc. (CAL) over the weekend rescinded its hike of late last week. Continental, based in Houston, had tried to raise leisure fares by $20 roundtrip, but No. 4 rival Northwest Airlines (NWAC) failed to go along. In the airline industry, fare hikes never stick unless rivals agree to charge the same prices on competing routes. After several days, No. 5 Continental then pulled its higher fares out of computer reservation systems. That's good news for consumers, but not for the nation's airlines whose losses have reached epic proportions -- about $9 billion in 2001 and counting. "The third attempt since mid-April to raise leisure fares by $20 roundtrip, which Continental Airlines initiated May 30, now is officially a bust," said Tom Parsons, chief executive of bestfares.com. "A $20 differential per ticket is plenty of money to prompt a family of four to switch to a competing carrier. American, Delta or Continental couldn't afford to give their competitors this big of an advantage." PACE OF RECOVERY SLOWS AMR Corp. (AMR), parent of American Airlines, TWA and American Eagle, sent out an ominous warning late Friday for the investors and the rest of the industry. The Dallas/Fort Worth-based carrier said its "significant" second-quarter loss will represent a slower rate of recovery than took place in the first as a key measure of performance lags. While it had already predicted a second-quarter loss and potentially for the year overall, AMR said the drop in its unit revenue, also called revenue per available seat mile, was falling behind that of the rest of the industry. Coming from the world's largest carrier, such news indicated that the lingering effects on air travel from the Sept. 11 attacks continue nearly a year after the four commercial airliners were hijacked and crashed. Stocks of major airlines fell sharply in early Monday trading. Northwest was down 7 percent to $15.56, AMR fell 4.5 percent to $20.00 and United Airlines parent UAL Corp. (UAL) was down 2 percent to $11.95. NO REVENUE REDUX Traffic, measured by revenue passenger miles, and unit revenue remain below year-ago levels since the Sept. 11 attacks slashed both demand for air travel and the prices passengers were willing to pay. Unit revenue is widely watched as one of the best indicators of an airline's true performance. It measures the amount of money in cents that an airline takes in relative to the capacity it has available to fly in seat miles. Domestic unit revenue was down 12.8 percent in April, a reversal of the year's previously improving trend. After AMR's revelations, Goldman Sachs analyst Glenn Engel on Monday widened his loss estimate for carrier for the second quarter, full year 2002 and 2003. He also recommended investors swap holdings in AMR for rival UAL. "AMR has yet to achieve higher revenue per aircraft on its purchased TWA assets, and the world's largest carrier's unit revenue comparisons continue to lag the industry," Engel said. Still, Parsons expected airlines would once again attempt to raise fares as the industry continues to suffer huge losses. "The only question left is what day or time will one of the major airlines go for fare hike No. 4," Parsons said. Several airline analysts on Wall Street recently have predicted ongoing financial shortfalls not only for this year but for 2003 as well. ©2002 Reuters Limited.