The discount carrier reported a net loss of $16 million, or 2 cents per share. A year earlier, Southwest had logged a $120 million loss, or 16 cents per share.
Excluding one-time items, the airline reported a profit of 3 cents per share, eking by average analyst estimates of 2 cents per share, according to Thomson Reuters I/B/E/S.
Revenue fell 7.8 percent to $2.7 billion.
Southwest also said there was an error in accounting for the value of its fuel hedges in financial statements for the second quarter that would have increased net income by $37 million.
The company recorded charges of $12 million related to a portion of its fuel hedge portfolio. Southwest saw about $78 million in unfavorable cash settlements from derivative contracts in the third quarter.
The Dallas-based carrier has hedged more than 45 percent of its estimated fourth-quarter fuel consumption.
Southwest also saw a $27 million charge for its buyout program, in which about 1,400 employees have participated.
The U.S. airline industry has been hurt by a tumble in air travel demand. Carriers, including Southwest, have cut capacity dramatically to buttress fares and lower costs.
Southwest's total operating expenses fell 5.7 percent in the third quarter, largely due to lower energy prices.
Southwest has cut 10 percent of its most unprofitable and least popular flights in the past year and plans to cut fourth- quarter capacity 8 percent.
We anticipate cost pressures to continue and presently expect our fourth-quarter 2009 unit costs, excluding fuel and special items, to exceed third quarter 2009's 7.11 cents, Chief Executive Gary Kelly said in a statement.
(Reporting by Deepa Seetharaman; Editing by Lisa Von Ahn and Maureen Bavdek)