Paul Reeder and Edward Shapiro, former airline analysts turned hedge-fund managers, piled half their assets into national and regional carriers during the industry's worst downturn since World War II.

Now they're getting out, Bloomberg News reported.

Reeder and Shapiro slashed their US$940 million equity stake in United States carriers as the Amex Airline Index climbed to a three-year high in the second half of 2006.

The shift, disclosed in regulatory filings by their Boston-based PAR Capital Management Inc, included the sale last month of half its holdings in US Airways Group Inc, which rose 59 percent in the past year.

"The thing about the airline business is, to be a successful investor, you have to be able to time your investments," said Jonathan Ornstein, chief executive officer of Mesa Air Group Inc, a Phoenix-based regional airline. PAR Capital last held Mesa shares in 2002.

PAR Capital's stakes in airlines and travel-related stocks, including US Airways, Sabre Holdings Corp and Priceline.com Inc, have soared since the first quarter of 2003 when the fund increased its investments in the industry.

Airlines are profitable again after recovering from a series of setbacks that began with the terrorist attacks of September 11, 2001.

PAR Capital's fund rose almost 30 percent before fees last year, almost double the 15.8 percent advance in the Standard & Poor's 500 Index, according to Robert Crandall, former CEO of AMR Corp, parent of American Airlines, the world's largest carrier.

Crandall has invested with the firm for about eight years.

"Shapiro and Reeder have done a hell of a job," said Crandall, who likes that the managers invest in the fund. "When you have smart people who are running money and have their own skin in the game, that is a good omen."

Neither Shapiro, 42, nor Reeder, 45, returned telephone calls.

Reeder started the hedge fund around 1990, five years after receiving a master's degree from the Massachusetts Institute of Technology's Sloan School of Management.

Shapiro previously worked as an airline analyst at Wellington Management Co, and Reeder had the same job at Loomis Sayles & Co.

PAR Capital has been making airline investments since at least 1998, according to filings with the US Securities and Exchange Commission.

It started increasing its stake in 2003 when the industry was hurt by the Iraq War and the SARS-virus outbreak. Jet fuel prices soared in 2005 after hurricanes Rita and Katrina shut down refineries in Louisiana and Texas.

"The period was definitely the worst that the US carriers experienced since World War II," said Philip Baggaley, an airline analyst at Standard & Poor's in New York. "The final bit was the jet-fuel prices shooting up in the wake of the hurricanes. That helped put Delta and Northwest into bankruptcy."