Continental Airlines Inc posted a quarterly profit before one-time charges on Wednesday, beating analysts' expectations of a loss, as it benefited from reduced capacity and a drop in costs.

The world's fifth-largest airline said its third-quarter net loss narrowed to $18 million, or 14 cents per share, from $230 million or $2.09 per share, a year earlier.

Excluding $20 million in special charges, the carrier posted a profit of 2 cents per share.

Analysts on average had expected a loss of 6 cents per share, according to Thomson Reuters I/B/E/S.

Revenue fell 20.2 percent to $3.3 billion while mainline unit costs fell 21 percent.

The airline offset weak revenues from softer demand and took full advantage of a 51 percent decline in fuel expenses compared with the same period last year. Jet fuel prices were lower and capacity was cut during the period.

Mainline capacity fell 4.1 percent but load factor, a measure of how full planes were during the quarter, was up 2.9 points to a record 85 percent.

Continental's performance is in line with that of other carriers reporting narrower losses or small profits this quarter on strong cost performance -- signs analysts say the industry may be starting to pull out of its slump.

We are well positioned to take full advantage of improvement in the economic environment, Continental's chief executive officer, Larry Kellner, said in a statement.

Continental ended the quarter with $2.54 billion in unrestricted cash, cash equivalents and short-term investments.

The company anticipates new benefits when it joins the Star Alliance with United Airlines, a unit of UAL Corp , by month's end.

UAL posted a loss on Tuesday that was half of what Wall Street had expected, also helped by lower costs and easing revenue pressures.

AirTran Holdings Inc , the parent of AirTran Airways, reported a quarterly profit on Wednesday against a year-earlier loss.

(Reporting by Deepa Seetharaman; Editing by Lisa Von Ahn and Gerald E. McCormick)