G157-A

Despite falling revenue and passenger numbers, Southwest Airlines Co. and United Airlines eked out small profits in the latest quarter, while Continental Airlines yesterday reported a loss of $213 million for the three months ending June 30.

Faced with volatile fuel prices and a decline in business travel, Continental announced that it will cut 1,700 workers, or 3.4 percent of its work force, and increase fees for checked baggage and telephone bookings.

Low-fare carrier Southwest said 1,400 employees, or 4 percent of its work force, have accepted voluntary buyouts. United said it planned to cut international capacity - seats and flights - by an additional 7 percent after Labor Day.

"We're all suffering from a significant decline in business travel demand," said Southwest chairman and chief executive Gary Kelly. "We've detected a slight improvement in July, but post-summer we are prepared for significant continued weakness on the revenue front."

Southwest, Philadelphia's second-busiest airline, said its second-quarter profit fell to $54 million, or 7 cents a share, from $321 million, or 44 cents a share, in the year-ago period.

Dallas-based Southwest has cut 300 flights, or 9 percent of its schedule, since November and said it will further cut seat capacity 6 percent in the third-quarter and 8 percent in the fourth-quarter 2009.

United posted a profit of $28 million, or 19 cents a share, after losing $2.74 billion, or $21.57 per share, a year earlier.

The Chicago-based airline attributed earnings to fuel hedge gains and other accounting charges. Excluding the items, United said it would have lost $323 million, or $2.23 per share, which is less than analysts were expecting.

Revenue fell 25.2 percent to $4.02 billion. United ended the quarter with $2.8 billion in total cash, of which $2.6 billion is unrestricted.

Analysts are watching United's cash balance because several have said the airline is at risk to file for bankruptcy if the economy does not recover.

"Our solid cash balance means we have no incremental credit card reserve requirements with either of our two major credit card processors," United's chief financial officer Kathryn Mikells told investors. "Importantly, we've already posted non-cash collateral with our largest credit card processor that would cover any reserve requirements through early next year."

Continental, in the meantime, reported a second-quarter loss of $213 million, or $1.72 per share, from a loss of $5 million, or 5 cents, a year earlier.

Revenue fell 22.7 percent to $3.13 billion from $4.04 billion.

Excluding special charges, Continental said it lost $169 million, or $1.36 per share, slightly better than analysts were expecting.The Houston-based carrier said it lost $50 million in in the quarter because of swine-flu fears.

Continental said it would generate $100 million annually in revenue-raising initiatives, including increasing by $5 - to $20 - the checked bag fee for customers who don't prepay online. The airline will add a $5 fee to reservations booked by telephone.