United Airlines parent UAL Corp posted a smaller-than-expected quarterly loss as it cut costs to cope with declining travel demand and said revenue trends continued to improve, sending its shares up more than 3 percent.

The carrier said on Wednesday its fourth-quarter net loss narrowed to $240 million, or $1.44 per share, from $1.32 billion, or $10 per share, a year earlier.

Excluding hedge gains and accounting charges, UAL said its quarterly loss was $176 million, or $1.05 a share. On that basis, analysts expected a loss of $1.47 a share, according to Thomson Reuters I/B/E/S.

Operating revenue fell 8 percent to $4.19 billion, compared with $4.09 billion expected by analysts, according to Thomson Reuters I/B/E/S.

The airline industry was hit in 2009 by falling demand for business travel as companies cut travel costs during the recession.

UAL said consolidated passenger revenue per available seat mile, a key airline measure, fell 5.2 percent in the fourth quarter, an improvement over the third quarter's 14.7 percent drop.

While we certainly have a ways to go before we see a full recovery, the steps we have taken over the last year, combined with improving revenue trends, position us well to improve our margins and put us well on the road to closing the profitability gap, UAL Chief Financial Officer Kathryn Mikells said in a memo to staff.

The cash balance at quarter's end came to $3.4 billion, including unrestricted cash of more than $3 billion.

Shares of UAL were up 3.3 percent to $13.21 in trading before the market opened.

(Reporting by Karen Jacobs and Kyle Peterson; Editing by Lisa Von Ahn, Dave Zimmerman)

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