Dallas, Texas: Continental Airlines and Southwest Airlines posted fourth-quarter earnings that exceeded analysts' estimates as lower fuel spending made up for reduced fares to lure travellers.

Continental, the fourth-biggest US carrier, had a profit excluding one-time items of $4 million (Dh14.68 million), or 3 cents a share, beating the average projected loss of 7 cents. Southwest, the largest discounter, had a profit on that basis of $74 million, or 10 cents, topping the 6-cent estimate.

Declines in jet-fuel expenses of 32 per cent at Continental and 14 per cent at Southwest helped the airlines as ticket prices tumbled after a recession kept higher-fare business travellers home. Continental's profit ended eight consecutive quarterly losses, while Southwest returned to profit after deficits in four of the past five quarters.

Optimism

"Things are heading in the right direction," said Helane Becker, an analyst at Jesup & Lamont Securities in New York, who recommends buying Continental and selling Southwest shares. "We're starting to hear that business travel is returning and they're going to benefit from that."

AMR Corp's American Airlines posted a narrower fourth-quarter loss on Wednesday. Other major carriers are scheduled to report results next week.

Continental rose 82 cents to $21.44 at 9.39am in New York Stock Exchange composite trading, while Southwest gained 21 cents to $11.54. Continental stock advanced 19 per cent in the 12 months through yesterday and Southwest shares climbed 35 per cent in that time.

Continental's net income was $85 million, or 60 cents a share, including $77 million in costs to reduce the value of some international routes and aircraft and a $158 million non-cash income tax benefit. That compared with a loss of $269 million, or $2.35, a year earlier, the Houston-based carrier said on Thursday.

Continental may be the only full-fare US airline with a fourth-quarter profit, "a remarkable feat" amid seasonal weakness in travel, said Hunter Keay, a Stifel Nicolaus & Co analyst in Baltimore who rates the shares as "hold."