There are rules, and there are exceptions. In the troubled airline industry, examples of both released earnings Thursday morning.

Delta Air Lines

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was the rule, representing the industry's challenges, such as the corrosive effect that falling ticket prices have had on both the top and bottom lines.

The company announced a second-quarter net loss of $162 million, or $1.34 a share, before unusual items. That report came in slightly better than the consensus estimate of a $1.39 per-share loss, but it's far worse than the year-ago quarter, when the company posted a loss of $123 million, or $1.03 a share, excluding all items.

Southwest Airlines

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proved to be the exception. Its low-cost, super-efficient business model has enabled it to be the only major airline to remain profitable after Sept. 11. Southwest posted a second-quarter profit of $84.5 million, or 10 cents a share, excluding all charges.

Although Southwest is profitable, it hasn't been able to avoid the airlines' rampant problems. The company's second-quarter report missed the 11-cent analyst estimate and was off 51.9% from year-ago levels. Southwest added that third-quarter profits won't be as strong as they were in the second quarter, which means analysts will have to lower their per-share earnings estimate of 15 cents.

As was the case with


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American Airlines

, both of which released earnings

earlier in the week, Southwest and Delta both blamed revenue declines on ticket discounting. In the second quarter, Southwest saw operating revenue dip 5.2% from the year-ago quarter, while Delta's operating revenue dropped 8% over the same span.

In 2002, the industry has struggled to reduce capacity levels, while using low-cost ticket prices to stimulate demand. While that tactic has kept planes relatively full, it has largely backfired because airlines have been unable to raise fares, even after three attempts this year.

A look at the net profitability of both companies, which includes all charges, shows how drastic business has fallen, even for Southwest. The low-cost carrier had net income of $175.6 million in the second quarter, down 41.8% from year-ago levels. Meanwhile, Delta's net loss in the second quarter was $186 million, more than double the year-ago loss of $90 million.

"Delta's financial performance is recovering slowly as we work through one of the most challenging times in the history of our company and our industry," said Leo Mullin, company chairman and CEO, in a statement. "While these second-quarter results are substantially better than those in the first quarter ... they clearly show that difficult times are not yet behind us."

To combat the huge losses, Delta, like Continental and AMR, has vowed to perform a top-to-bottom analysis of its business, looking to trip costs and control capacity.

Ultimately, this week's earnings releases have reminded investors that the industry will remain mired in losses for the time being, as business travelers shy away from the skies and ticket prices remain low. The major U.S. airlines are expected to lose $1.4 billion in the second quarter, adding to the $2.4 billion loss booked in the first quarter and $7.4 billion in 2001.

In midday trading, airline stocks were getting beaten up. Southwest was off 49 cents to $13.44, while Delta slipped 30 cents to $16.15. AMR fell 31 cents to $12.56, and Continental lost 47 cents to $11.22.


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, parent of United,

US Airways

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America West




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also saw their stocks declining in Thursday trading.