America West Airlines ( AWA) stunned Wall Street by announcing a first-quarter profit, as revenue grew by more than 10% while costs continued to fall despite the rising price of jet fuel.

The Phoenix-based carrier announced first-quarter net income of $1.2 million, or 2 cents a share, which is much better than the carrier's net loss of $62 million, or $1.84 a share, a year ago. Excluding special items, the company said it earned $600,000, or 1 cent a share, topping the 42-cent loss that Wall Street expected and the year-ago loss of $66.5 million, or $1.97 a share.

"To break even in the seasonally slow first quarter -- while operating in an industry plagued by extremely high fuel costs, excess supply and sluggish demand -- is extremely gratifying," said Doug Parker, chairman and CEO, in a statement.

Revenue came in at $576.4 million, up 10.2% from the year-ago quarter. Traffic, as measured in revenue passenger miles, rose 8.9%, while capacity, measured in available seat miles, rose 7.3%. With demand rising faster than supply, the carrier announced that it filled 72.2% of seats in the first quarter, setting a company record.

America West was equally adept at slashing expenses. The company's cost per available seat mile, a key metric called CASM, came in at 7.59 cents in the first quarter, down 8.5% from last year, even though the price of a gallon of jet fuel increased 13.8% over year-ago levels. The company said it saved $3.1 million because of fuel hedging, highlighting two advantages America West has over legacy carriers: low costs and the ability to offset the rising cost of fuel.

A big driver behind the falling CASM, aside from fuel hedges, is how America West flies its planes. As part of a cost-reduction plan started in 2003, the carrier flies longer routes and turns planes around faster, making them more efficient and saving money.

Going forward, America West said that it would continue to be profitable throughout 2004.

Despite the upside surprise, shares were lower in pre-market action, falling 30 cents, or 3.2%, to $9.04.

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