Discount carrier Southwest Airlines posted a higher-than-expected quarterly profit, excluding special items, and said bookings look strong, sending its shares up more than 4 percent.

Dallas-based Southwest, which acquired AirTran Holdings earlier this year to get access to new U.S. East Coast markets such as Atlanta, said it expected solid growth in passenger unit revenues during the current fourth quarter as business travel was stable.

Despite the cautious economic outlook, our booking trends remain strong, Chief Executive Gary Kelly said in a statement on Thursday.

U.S. carriers are reducing service, retiring less-efficient planes and looking to cut costs as the uncertain economy threatens to sap demand for travel.

The airlines have to be aggressive in managing their business and they need to report consistent profitability, said Helane Becker, an analyst with Dahlman Rose & Co. Most analysts and investors have been surprised at how well the airline industry has managed its capacity this year.

Southwest reported a third-quarter net loss because of the way it accounts for the value of its hedges, or contracts intended to blunt the impact of sharp rises in fuel prices.

Write-downs in the airline's fuel-hedge program led to a net loss of $140 million, or 18 cents a share, in the third quarter, compared with profit of $205 million, or 27 cents a share, a year earlier.

The latest results included unrealized, non-cash markdowns of $227 million tied to some of the carrier's fuel hedges for future periods. The carrier marked down the value of some hedge positions that had deteriorated as oil prices fell during the third quarter. Southwest said rebounding oil prices since then meant that its hedges have recouped some of those losses.

Excluding one-time items, profit came to $122 million, or 15 cents per share, down from a year-earlier profit of $195 million, or 26 cents a share. Analysts expected 14 cents a share.

Quarterly revenue rose 35 percent to $4.3 billion, compared with $4.23 billion expected by analysts. Passenger revenue rose 32 percent and freight sales gained nearly 13 percent. Other revenue more than doubled, aided by early check-in fees and the airline's loyalty program.

Operating expenses rose 44 percent in the period as fuel and oil costs were up 71 percent from a year ago.

Southwest shares rose 4.4 percent to $9.09 in morning trading as most other major U.S. airlines rose. But American parent AMR, which posted a quarterly loss on Wednesday, was down 3.8 percent to $2.51.