United Air Lines Corp. (NASDAQ: UAUA) issued an updated outlook for the company’s second quarter of 2010, and the news is pushing UAL shares higher this morning. Not to be left out, Delta Air Lines Inc. (NYSE: DAL) also issued an update for the second quarter, and it too pumped up expectations. This is after airline stocks bucked the market downturn in May, with a number of major carriers posting gains in a down month.

United’s merger with Continental Airlines, Inc. (NYSE: CAL), following its aborted merger talks with US Airways Group, Inc. (NYSE: LCC), has boosted airline shares in general and today’s outlook statements should boost shares even more.

United said that it expects consolidated passenger unit revenue to rise 26%-27% in the second quarter compared with the same period a year ago. Both capacity and traffic have also increased. Delta expects passenger unit revenue to rise 20% in the quarter, but it does not expect any change in capacity.

Deutsche Bank initiated coverage on US airlines yesterday with ‘Buy’ ratings on Continental, Delta, United, AMR Corp. (NYSE: AMR), and Alaska Air Group (NYSE: ALK). The ratings release noted that airline stocks have risen 16% year-to-date compared with a -2% decline in the S&P 500, and that the bank believes that the stocks “are just now approaching their half-way mark in potential appreciation” for the next year to 18 months.

The United-Continental merger is largely responsible for that rosy outlook. Before the deal was announced, there were simply too many competitors in the US airlines business. In today’s uncertainty-driven world, too many competitors put too much risk on every competitor, not just the weaker ones. Fewer airlines means less competition for available cash and more focus on profits and mending the survivors’ weak balance sheets.

United shares are up about 5% in trading this morning, while Delta shares have moved up about 2%, US Airways shares are up about 6%, and American shares are also up about 2%.