In the most dramatic move so far to reduce airline growth, fast-expanding AirTran ( AAI) says it will entirely halt its planned capacity increases in September and keep its capacity level in 2009.

AirTran had been planning to increase capacity by 10% next year, but now says growth will be no more than flat. "Advanced bookings for the summer look very strong, however, we are nonetheless concerned with the continued rise in fuel prices, particularly towards the end of this year," said Senior Vice President Kevin Healy, in a prepared statement.

"Our plan is to remain ahead of the curve and control our own destiny," he said.

The announcement came as the low-cost carrier reported a $34.8 million loss in the first quarter, driven by rising fuel costs. The loss equated to 38 cents a share. Analysts surveyed by Thomson Financial had expected a loss of 31 cents.

Revenue rose 18.3% to a record $596 million, but analysts had estimated $600 million. In the same quarter a year earlier, AirTran had net income of $2.2 million, or 2 cents a share.

AirTran said revenue per available seat mile rose 6.9% during the quarter, while traffic was up 19.2% on a 10.8% capacity increase. Load factor rose 5.2 points to 75.3%, a first-quarter record. Fuel costs increase by $102 million from a year earlier to $268 million.

This is the second busy week for quarterly results from the airline sector. Also Tuesday, JetBlue ( JBLU) had a narrower-than-expected loss, while UAL ( UAUA), the owner of United fell short of Wall Street's bottom-line expectations.

Later this week, Delta ( DAL) and Northwest ( NWA), who plan to merge, will post their numbers. Continental ( CAL), Southwest ( LUV) and AMR ( AMR), the parent of American Airlines, reported last week.

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