September didn't turn out quite as bad for

Continental Airlines

(CAL) - Get Report

as some on Wall Street had predicted in the wake of a gloomy August.

The company Monday said it filled 74.5% of seats in its consolidated operations, up 2.8% from a year earlier. Traffic, a barometer of demand expressed in revenue passenger miles, jumped 11.8%, and capacity, measured in available seat miles, increased 7.7%. Three major hurricanes during September dented revenue for the month, but Continental described the damage -- about $6 million -- as "minimal."

Still, unit revenue -- measured by revenue per available seat mile, or RASM -- continues to weaken. Continental estimates RASM, a key gauge of industry trends, fell between 1% and 2% from last year, following a decline in August.

Airline shares were higher Monday, with the Amex Airline Index up 1.3%, but Continental's stock was little changed -- up 2 cents to $8.87.

Wall Street analysts raised third-quarter estimates, after having dropped earnings expectations after August's dire report. Merrill Lynch's Michael Linenberg now expects a quarterly loss of 45 cents a share, from a 70-cent loss previously. The analyst had been expecting a larger decline in RASM, adding fuel costs were lower than his forecast. (Merrill Lynch does and seeks to do business with companies covered in research reports.)

Meanwhile, Daniel McKenzie at Citigroup Smith Barney raised third-quarter expectations to account for the increased value of its 3.6 million-share stake in Internet travel seller

Orbitz

(ORBZ)

, whose stock closed the quarter up 26%. Last week,

Cendant

(CD)

announced plans to buy Orbitz for $1.25 billion. McKenzie expects Continental to net about $15 million in third-quarter non-operating income from that gain. (Citigroup Smith Barney does and seeks to do business with companies covered in research reports.)

Continental's results, while better than expected, are still rather weak. William Greene at Morgan Stanley called September's traffic results "disappointing" and lowered his earnings estimates for Continental, warning that fourth-quarter and 2005 estimates may be too high. (Morgan Stanley does and seeks to do business with companies covered in its research reports.)

"The results confirm concerns we have expressed for months, namely, that revenue weakness continues in the face of overcapacity and faltering demand," Greene said.

Elsewhere, low-cost carriers

AirTran Airways

(AAI)

and

Southwest Airlines

(LUV) - Get Report

reported increases in traffic during September.

AirTran said September traffic grew 4.5%, while capacity jumped 10.7%. With a trio of hurricanes affecting results, the Atlanta-based carrier filled 59.8% of its seats, down from 63.4% a year earlier. Southwest said traffic rose 10.5%, offset by a 5.7% rise in capacity, allowing it to fill 71.1% of available seats in September, up from 67.8% a year earlier.

In reaction, Southwest shares rose 27 cents, or 2%, to $14.12, while AirTran shares rose 15 cents, or 1.5%, to $10.32.