Updated from 9:26 a.m. EDT

Continental Airlines

(CAL) - Get Report

, the fifth-largest U.S. air carrier, posted a wide loss in the second quarter as discounted fares and sluggish demand continued to plague the industry, still reeling more than 10 months after Sept. 11.

Continental lost $35 million, or 55 cents a share, in the quarter, excluding the effect of a previously announced fleet change and a writedown of a government grant receivable. Analysts had been forecasting a loss of 76 cents a share. Including all charges, Continental had a loss of $139 million, or $2.18 a share, for the second quarter.

The bottom line was bad, but the top line is more troubling. Second-quarter passenger revenue came in at $2.1 billion, off 14.8% from the same period last year, because of capacity declines and lower ticket prices. Analysts had been forecasting revenue of $2.23 billion.

"Heavy fare discounting and a sluggish economy are bad enough," said Gordon Bethune, chairman and CEO of Continental, in a statement, "but when coupled with extraordinarily high security costs and the increasing airport 'hassle factor' we're in a no-win situation."

Indeed, airlines have been on a long losing streak. This is the fourth straight losing quarter for Continental, which along with other airlines has been struggling to raise ticket prices and control capacity and make a return to its profitable past.

Ahead of the July 4 holiday, Continental,

UAL's

(UAL) - Get Report

United and

Delta Air Lines

(DAL) - Get Report

hiked roundtrip fares in select markets by $20, only to roll back those increases when

Northwest Airlines

(NWAC)

refused to go along.

It was the industry's third failed attempt to raise prices this year, leaving carriers to take unusual measures to cut costs and raise revenue. Over the last three weeks,

AMR's

(AMR)

American Airlines, Delta, Northwest and

US Airways

(U) - Get Report

eliminated senior citizen discounts.

Continental's heavy losses and revenue shortfall could be a harbinger of things to come as a plethora of airline carriers release earnings this week. Tomorrow, AMR and

Forward Air

(FWRD) - Get Report

report earnings, followed by Delta, Northwest and US Airways on Thursday. The week ends with

America West's

(AWA)

earnings release on Friday.

Early morning strength in airlines stocks faded as the lunch hour approached. Continental was up 40 cents to $11.96, but everyone else was down. Delta dropped 53 cents to $16.97, Northwest slid 5 cents to $9.53 and AMR fell 47 cents to $13.00. UAL dropped 7 cents to $8.38 while U.S. Airways fell 9 cents to $3.50. The discount airlines were just about breakeven.

Southwest

(LUV) - Get Report

was unchanged at $13.63, while

JetBlue

(JBLU) - Get Report

dipped a penny to $43.