By Shivansh Tiwary

(Reuters) -Shares of major U.S. carriers soared on Tuesday after upbeat airfare data for July signaled improving pricing power for the industry, as airlines bring capacity in check to align with a soft demand environment.

Shares of legacy carriers United Airlines, American Airlines ( AAL ) and Delta Air Lines ( DAL ) jumped between 8% and 10% each, while budget rival Southwest Airlines ( LUV ) gained 4% in afternoon trading.

Smaller peers also rose, with Alaska Air ( ALK ) up 8% and JetBlue Airways ( JBLU ) about 10% higher. Low-cost carrier Frontier Group ( ULCC ) surged 22%.

Data from the Labor Department's Bureau of Labor Statistics on Tuesday showed airfares rose 4% in July after slipping 0.1% in June, marking their first increase in six months.

Indications of improving airfares come after months of margin pressure from discounting, as weak demand from budget-conscious domestic travelers forced airlines to cut prices despite the peak summer travel season.

"With CPI showing airfares up 4% in July, carriers finally have pricing power back in the cockpit," said Michael Ashley Schulman, chief investment officer of Running Point Capital.

Uncertainty stemming from U.S. President Donald Trump's sweeping tariffs and budget cuts has prompted travelers to curb discretionary spending and reassess plans.

Airlines have since been trimming seats on offer and readjusting routes to keep their pricing power in control and shield margins.

During their second-quarter earnings calls in July, major executives expressed confidence in the industry's ability to cut capacity and boost airfares in the latter part of the year.

July's airfare increase, the first in six months, bolstered investor hopes that capacity discipline would help carriers stabilize pricing and profitability.

"The main risk is fuel and labor costs trying to jump the queue, or an unlikely (but possible) recession," Schulman said.