Updated from 9:17 a.m. EDT

Continental Airlines

(CAL) - Get Report

handily beat Wall Street estimates for the third quarter, but continued to lose money in the face of high oil prices and stiff price competition.

Continental announced a third-quarter net loss of $16 million, or 24 cents a share, compared to the net profit of $133 million, or $1.83 a share, it had a year ago. The latest quarter's loss included special charges of $22 million primarily due to the retirement of leased MD-80 planes.

Excluding those charges, Continental made a profit of $6 million, or 8 cents a share, in the third quarter, much better than the 17-cent loss expected by analysts. Both the net loss and the adjusted profit figures included a $15 million gain related to the increasing value of company's holdings in Internet travel site

Orbitz

(ORBZ)

, which agreed to be acquired for $1.25 billion by

Cendant

(CD)

last month, causing its shares to rally some 30%.

On a per share basis, the gain from revaluing Continental's Orbitz shares was about 22 cents, said Gordon Bethune, the airline's chairman and chief executive, in what he noted would be his last earnings conference call as CEO. He announced his retirement in January and will be replaced at the beginning of next year by Larry Kellner, the company's chief operating officer. Executives noted that Continental has been including changes in the value of its Orbitz stock in its bottom line results for every quarter this year.

Shares were down 31 cents, or 3.6%, at $8.40.

Continental said total revenue for the quarter came in at $2.56 billion, up 8.4% from last year but just shy of the $2.57 billion expected by analysts.

Costs continue to be an issue for the airline, which noted that crude oil prices are at all-time highs. The carrier's total operating expenses came in at $2.54 billion, up 15.9% from last year, with cost per available seat mile, or CASM, coming in at 9.5 cents, up 4.9% from the year-ago quarter.

If crude oil remains around $50 barrel through 2005, some competitors may go out of business, thus changing the competitive landscape, said Bethune, who added, "We can actually make money at $50 a barrel for oil, if we can price to it."

Both

UAL Corp.

(UALAQ.OB)

, parent of United Airlines, and

US Airways

(UAIRQ.OB)

are struggling to emerge from bankruptcy, while

Delta Air Lines

(DAL) - Get Report

has warned it may be forced to seek Chapter 11 bankruptcy protection soon.

Recent fare hikes by U.S. airlines aimed at passing some fuel costs to customers have had only a nominal impact on Continental's revenues and will only add $1 million to $2 million a month, Continental executives said in the call. The company has about 46% of its of its remaining fuel costs for the year hedged at an average price of $36.50 a barrel but has no fuel hedges in place for 2005, they said.

"With oil at stratospheric prices and the government siphoning off more than $1 billion annually in fees and non-income related taxes, it's amazing that we were able to produce these modest results for the quarter," said Bethune, in an earnings news release.

Continental filled more seats on its planes but still pulled in less money from them, the result of harsh industry price competition. Traffic, a key demand metric measured in revenue passenger miles, grew 9% from last year, while capacity, as measured in available seat miles, increased 7%. The carrier filled a record 81.5% of its seats, up 1.5 percentage points from last year. Still, the average yield per revenue passenger mile -- an important revenue metric -- declined 1.6% from a year earlier.

Looking ahead, Continental said it expects to report a "significant" loss for 2004, and "unless the current environment improves," expects a significant loss in 2005.

In the conference call, company executives said they expect capacity to increase 5% in 2005 from this year. The company also will incur a $17 million charge in the current quarter as it retires five more MD-80 planes, they said.

Continental reported an operating profit of $46 million, "which is likely to be one of the better performances among the network carriers," wrote Merrill Lynch analyst Michael Linenberg in a research note. "That being said, the third quarter is typically when an airline builds cash to 'keep warm for the winter.' Unfortunately, the high fuel prices and intense competition have prevented Continental and others from achieving that goal." (Merrill Lynch does and seeks to do business with the companies covered in its research reports.)