Updated from 8:59 a.m. EDT

Fuel costs remained the key variable for major U.S. airlines in the first quarter, with skyrocketing crude prices bringing hefty losses at American Airlines' parent

AMR

(AMR)

and

Continental Airlines

(CAL) - Get Report

.

America West Holdings

(AWA)

swung into the black, however, but only because of a non-cash accounting gain.

All three companies beat Wall Street expectations despite a bruising environment characterized by high fuel prices, vicious price competition and overcapacity.

AMR, which runs the world's largest airline, reported a first-quarter net loss of $162 million, or $1 a share, slightly narrower than the $166 million, or $1.03 a share, it lost a year earlier. The latest quarter's figure included $69 million in tax refunds. Excluding them, AMR lost $230 million, or $1.43 a share. The Wall Street analyst consensus was for a loss of $1.61, according to Thomson First Call.

In reaction, shares gained 72 cents, or 7.1%, to $10.88.

Revenue of $4.75 billion was 5.3% higher than $4.51 billion a year ago, but it fell short of the $4.77 billion analyst consensus.

"In many ways, the story for the first quarter is very similar to what we have seen the past several quarters," said Gerard Arpey, AMR's CEO. "The combination of extraordinarily high fuel prices and low fares continues to take a heavy financial toll."

Arpey pointed out that, excluding the tax credit, Fort Worth, Texas-based AMR paid $346 million more for fuel in the first quarter than it did a year before.

Airlines measure unit revenue with revenue per available seat mile, or RASM -- the money brought in for each seat that flies one mile. First-quarter RASM increased 3.7% at AMR's main-line operations, which exclude regional flights, even though the average fare, or yield, declined 2.1% amid tough domestic competition.

The increase in unit revenue resulted from fuller flights. Passenger traffic jumped 6.7%, but AMR increased capacity by only 0.6%. The load factor, or percentage of seats filled, rose to 75.4% from 71.1% a year before.

Although high fuel prices caused expenses to swell, AMR managed to cut costs elsewhere. Excluding fuel and the tax credit, the airline's unit costs fell 3.2%.

"Our people continue to do a great job in finding ways to reduce costs," Arpey said. "Their efforts are even more impressive, and more important, when you consider that in addition to much higher fuel costs, we are facing significant upward pressure in airport rents, landing fees, healthcare -- for both active and retired employees -- and a variety of other areas."

Meanwhile, America West said first-quarter net income was $33.6 million, or 62 cents a share, vs. a year-ago loss of $1.6 million or 4 cents a share. The profit resulted, however, from a $48.9 million accounting gain reflecting the fair market value of the company's fuel hedges.

In addition to that gain, net income included several other items: $11.6 million in realized gains from fuel hedge transactions; $800,000 from a write-down of deferred aircraft rent payments; and a $3.7 million loss on the sale and leaseback of a new Airbus jet.

Excluding those items, America West would have lost $10.8 million, or 30 cents a share. On average, analysts expected the Phoenix-based carrier to post a loss of 61 cents a share, according to Thomson First Call.

The nation's eighth-largest carrier, America West dominated headlines Wednesday after

The Wall Street Journal

reported

it is in advanced talks to acquire bankrupt

US Airways

(UAIRQ)

.

Despite America West's better-than-expected results, its stock fell 32 cents, or 6.7%, to $4.49. Investors appeared to take a negative view of the potential merger.

"We believe that an outright merger is unlikely, with financing and labor viewed as the primary impediments," says J.P. Morgan analyst Jamie Baker in a research note. "AWA shares are logically expected to suffer during the courtship. It should be noted that neither airline possesses the financial resources

or unencumbered assets to fund any transaction, thereby requiring significant external funding. While the notion of building a supposed low-cost carrier capable of rivaling

Southwest

(LUV) - Get Report

may have a nice ring to it, any resulting balance sheet would most certainly pale in comparison to Southwest's." J.P. Morgan does and seeks to do business with companies covered in its research reports.

America West said revenue totaled $722.8 million, up 11.3% from $649.3 million a year ago. Unit revenue, measured in revenue per available seat mile, or RASM, jumped 7.8% from a year ago. That gain came as passenger traffic increased 6.9%, while America West held capacity growth to 0.7%. The combination resulted in a record 77.7% first-quarter load factor, which measures the percentage of plane seats filled.

The company's unit costs, measured in cost per available seat mile, rose only 0.8%, but that included the special gain. Without it, CASM swelled 9.1%, primarily driven by a 27.6% increase in the airline's net fuel price.

Meanwhile, Continental reported a first-quarter loss of $184 million, or $2.77 a share, wider than the $124 million, or $1.90 a share, it lost a year ago. The latest-quarter's loss included a special gain of $8 million related to the company's pension plan. Excluding that item, Continental's lost $192 million, or $2.89 a share, better than the $3.10 analyst consensus.

The Houston-based airline blamed "extraordinarily" high fuel prices and weak domestic fares. Continental failed to offset their impact despite cost-cutting efforts and recent fare increases on some domestic routes. Fuel cost Continental's main-line operations $137 million more this quarter than it did a year earlier.

Revenue was $2.51 billion, up 8.6% from $2.31 billion a year earlier and better than the $2.44 billion Thomson First Call consensus. Across Continental's operations, RASM gained 3.8% year over year, as the airline filled more of its planes. Traffic rose 11.4%, while capacity increased 4.0%, producing a record first-quarter load factor of 76.8%.

Continental said unit costs rose 6.1% in the quarter and blamed fuel as the primary culprit.

Continental shares gained 16 cents, or 1.3%, to $12.31.