What happened

American Airlines Group (AAL -1.21%) raised its guidance for the recently completed quarter, and the whole aviation sector is taking flight. Shares of American are up as much as 6.8% on Thursday morning, with shares of JetBlue Airways (JBLU -1.99%) and Spirit Airlines (SAVE -11.39%) up about 3% apiece during this time frame.

So what

We knew the airports were packed over the holiday season. If American is any guide, that translated to better-than-expected financial results as well. In a regulatory filing, American said it expects fourth-quarter adjusted earnings to come in at between $1.12 and $1.17 per share, significantly above its prior guidance for between $0.50 and $0.70 per share in earnings. Analysts had expected $0.60 per share in earnings.

The airline also said it expects revenue to be up 16% to 17% compared to the pre-pandemic fourth quarter of 2019, up from previous guidance, for an increase of 11% to 13%. That is despite flying fewer miles in the last three months than it did in the fourth quarter of 2019.

American said it would be putting that added cash to work paying down debt taken on during the pandemic. The airline said it has achieved more than half of its goal to reduce debt by $15 billion before the end of 2025.

This is obviously good news for American, and investors are bidding up shares of other airlines as well on the assumption that it wasn't only American's jets that were packed. JetBlue and Spirit are outperforming many other airline stocks, potentially due to JetBlue's push to broaden its alliance with American.

JetBlue and American have been working together to coordinate schedules in certain U.S. markets, despite criticism from the Department of Justice, which calls the alliance a "de facto merger." JetBlue's pending merger with Spirit has added to the concern. But on Thursday, JetBlue said it was launching additional routes from New York, Boston, and Los Angeles, showing no signs of backing down in the face of regulatory pressure.

Now what

Airline investors spent most of 2022 waiting for demand to fall off a cliff as the post-pandemic travel surge normalized and the Federal Reserve's effort to cool the economy took hold. So far, that fall hasn't occurred, and American's preannouncement is a fresh data point to suggest demand for air travel remains robust.

The risks still remain, especially as interest rates continue to creep higher. Investors will be listening carefully to management commentary about 2023 as earnings season heats up in the weeks to come to try to get a feel for how early bookings are coming in for the all-important summer travel season.

But for now, if nothing else, there is no reason to sound the alarm. That alone is enough to send airline shares higher on Thursday.