Updated from 8:55 a.m. EST

Low-fare carrier AirTran ( AAI) lost $3.3 million in the most recent quarter, largely as the result of a strategic move aimed at acquiring scarce gates in Atlanta.

The airline's loss was 4 cents a share, matching expectations. Revenue was $461.9 million, up 12.7% from a year ago. Analysts surveyed by Thomson Financial had expected a top line of $463.1 million. For the same period a year earlier, the carrier earned $400,000.

During the fourth quarter, AirTran's average fare was $87.74, down 2.3%. Yield dropped 3.8%, while passenger revenue per available seat mile fell 7%. The declines were driven by capacity increases at Atlanta's Hartsfield-Jackson International Airport by both AirTran and Delta ( DALRQ).

AirTran added flights in August after the airport made three gates available on a first-come, first-served basis. "We had to operate at a level we normally would not have done in the third quarter, a slow period when we typically reduce capacity," said CFO Stan Gadek, in an interview. "It was an interim strategy to get scarce real estate in Atlanta."

Now, Delta's buildup has ended, and AirTran has enough gates to begin new flights to major markets such as St. Louis and Phoenix. On a conference call, President Bob Fornaro said AirTran expects a 3% to 4% RASM decline in the first quarter. "It starts getting progressively better," he said.

On the cost side, cost per available seat mile, excluding fuel, fell 4% to 5.94 cents, the lowest in the company's history after five consecutive years of reductions.

Meanwhile, the carrier said its hostile effort to take over Midwest ( MEH) is going well. AirTran, which has launched a $345 million tender offer for Midwest, talks regularly with mutual funds that are major investors in the Milwaukee-based carrier, Gadek said.

"We have maintained a high level of dialogue with the institutions, and the longer we talk to them, the more traction we are getting," he said. AirTran hasn't decided whether to extend the tender offer beyond its Feb. 8 expiration, he noted.

Gadek said the hostile bid for Midwest differs from the offer for Delta by US Airways ( LCC). AirTran would increase daily departures at Midwest's Milwaukee hub from about 85 today to about 150 within two years, while US Airways' largest hub in Charlotte would likely shrink in a merger.

Additionally, while a US Airways/Delta merger would be driven by capacity reductions, an AirTran/Midwest merger would lead to the replacement of Midwest's aging MD80s with newer aircraft. Unlike AirTran, Midwest lacks the resources to upgrade its fleet, Gadek said.

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