Continental, Southwest Beat Profit Estimates

Two major airlines--Continental and Southwest--beat second-quarter earnings expectations Tuesday despite this year’s surge in fuel prices. But America West Holdings fell short.

Overall, the results suggest fare increases and the strong economy are keeping airlines riding high:

* Continental said its second-quarter profit rose 16% as an increase in passengers and fares helped the carrier overcome higher fuel costs. Profit from operations climbed to $153 million, or $2.46 a share, from $132 million, or $1.73, a year earlier. Analysts had expected $2.02 a share. Sales rose 18% to $2.6 billion.

Continental “faced an unbelievable head wind in terms of costs, mainly on the fuel side,” said Robert Gendelman, a money manager at Neuberger & Berman. “Yet they were able to show higher profit through higher revenue.”

Continental’s stock (ticker symbol: CAL) rose 81 cents to $53.81, a 52-week high.

* Southwest said net income totaled $190.6 million, or 36 cents a share, a 21% jump from the $157.8 million, or 29 cents, of a year ago. Analysts had expected 31 cents.

Revenue for the three months rose nearly 20%, to $1.46 billion. Although Southwest’s spending on fuel rose 92% to $198 million from a year ago, it said total operating expenses rose 19%.

Southwest’s shares (LUV) rose 81 cents to $21.94.

* America West said operating profit fell to $27.3 million, or 74 cents a share, down 33% from a year ago. Analysts had expected 89 cents. Sales rose 9%. Analysts said the company struggled with fuel costs and late flights.

America West shares (AWA) fell 50 cents to $17.75.