Continental Air Beats

Updated from 8:39 a.m. EDT

Continental Airlines ( CAL) easily topped Wall Street estimates, but continued to post net losses because of the high price of fuel and low ticket prices.

Continental announced a second-quarter net loss of $17 million, or 26 cents a share, which was worse than the net profit of $79 million, or $1.20 a share it had a year ago, due mainly to a $176 million reimbursement of security fees by the government.

Excluding all items, which is how Wall Street views the company, Continental earned $2 million, or 3 cents a share, in the second quarter, topping the 9-cent loss expected by analysts. Total revenue for the quarter came in at $2.51 billion, up 13.4% from last year and narrowly topping the $2.49 billion expected by analysts.

But costs continue to be an issue for Continental, which noted that crude oil prices hit an all-time high of $42.33 a barrel during the quarter, helping boost fuel costs by nearly 30% year over year. All told, the carrier's expenses came in at $4.9 billion, up 14.8% from last year, with cost per available seat mile, or CASM, coming in at 9.42 cents, up 8.7% from the year-ago quarter.

"These results remain disappointing in a year where we hoped to break even," said Gordon Bethune, Continental's chairman and CEO. "Our efforts to return to profitability were overwhelmed by the continuing soft domestic yields, a record high cost of fuel, and a $265 million burden of taxes and fees paid to the government over the last three months."

The carrier filled more seats, but made less money off them than it did a year ago, the result of low fares and increased competition. Traffic, a key demand metric measured in revenue passenger miles, grew 14.7% from last year against an increase of capacity, as measured in available seat miles, of 12.4%. With demand outpacing supply, the carrier filled 78.7% of its seats, up from 77.1% last year.

Shares rose 30 cents, or 3.2%, to $9.82.

But because of intense competition with low-cost carriers, like Southwest Airlines ( LUV), JetBlue Airways ( JBLU) and AirTran ( AAI), the carrier said that yields fell 1.6% from last year.

Elsewhere, ExpressJet Holdings ( XJT), a Continental spinoff and regional partner for the airline, announced second-quarter net income of $29.7 million, or 55 cents a share, up 10% from last year and better than the 54-cent profit expected by Wall Street. ExpressJet's revenue came in at $370.8 million, up 16% from $320.3 million a year ago, slightly under the Wall Street estimate of $378.2 million.

Continental is the second major legacy carrier to report earnings for the April-June period, which has been a surprisingly difficult one for the industry. Southwest Airlines last week surprised analysts by missing earnings forecasts, even though its profit rose during the period. The industry has rushed to boost capacity, but carriers have slashed fares on the most competitive routes, eroding profits, ahead of the peak summer season.

Delta Air Lines ( DAL ) Monday said that its loss widened in the second quarter and missed estimates.Excluding charges, the company lost $312 million, or $2.55 a share, vs. a net loss of $237 million, or $1.95 a share, in the year-ago period.

Delta shares Tuesday gave back all of Monday's gain, falling 44 cents, or 7.4%, to $5.50.

Northwest Airlines' ( NWAC ) financial results are due out Wednesday, while JetBlue reports Thursday.

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