Northwest ( NWA) posted a $317 million loss spurred by a fuel-hedging charge Wednesday, but adjusted earnings far surpassed analysts' estimates.

Despite the loss, CEO Doug Steenland was optimistic about the airline's future, saying industry capacity cuts "create the conditions for sustained profitability."

Including a $410 million non-cash charge associated with mark-to-market accounting for fuel hedges, Northwest lost $317 million or $1.20 a share. So far, those losses are unrealized.

In the third quarter, excluding special items, the carrier reported net income of $93 million, or 35 cents a share. Analysts surveyed by Thomson Reuters had estimated 25 cents. Revenue rose 12.4% to $3.8 billion, in line with estimates.

Steenland noted the carrier was profitable even though fuel costs increased by $688 million over the same period a year earlier.

"The prior economic slowdown was not accompanied by capacity reductions of this magnitude, implemented in advance," Steenland said in Northwest's earnings conference call. "The airline industry in general and Northwest in particular are well positioned to prosper."

Even during the most severe historical economic downturns, industry revenue has declined by no more than 1.2% annually, Northwest said in a prepared statement. At that rate, the carrier would experience a $150 million revenue decline, which would be offset by a projected $1 billion decline in fuel costs if fuel averages $78 a barrel in 2009, compared with $104 a barrel in 2008. P/>Northwest also expects $2 billion in annual synergies resulting from its pending merger with Delta ( DAL). That deal is expected to gain regulatory approval shortly.

During the quarter, mainline domestic passenger revenue per available seat mile (PRASM) rose by 10.7%, while system consolidated PRASM rose by 8.1%. In September, domestic consolidated PRASM rose by 20.4%. The carrier said it expects double digit PRASM growth to continue through the current quarter. On the cost side, third-quarter cost per available seat mile excluding fuel fell by 1.1%.

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