United Continental Holdings Inc and its rival US Airways Group Inc said on Thursday their quarterly profits were battered by soaring fuel costs, but travel demand appears to be robust despite gathering economic threats.

The third-quarter results conclude the earnings season on a mostly positive note for major U.S. airlines and reflect a newfound ability to manage capacity, one analyst said.

United Continental's shares gained 1.6 percent to $20.67 on the New York Stock Exchange although its profit came in below forecasts. US Airways shares gained 6.0 percent to $6.00.

There's no signs of weakness yet, said Helane Becker, an analyst with Dahlman Rose & Co. What you're seeing across the board for the group in general is pretty positive.

The airline industry is on the mend after a decade-long downturn that sent several carriers into bankruptcy. But even as soaring fuel costs and economic gloom threaten to disrupt the recovery, carriers have managed the plight effectively by cutting the number of seats they sell when times get rough.

Airline analysts had been on the lookout for signs of weakness in travel demand in the fourth quarter and in 2012. But those signs have yet to materialize.

While everyone talks about economic weakness, we're not seeing it, said US Airways Chief Executive Doug Parker on a conference call with analysts and reporters.

United Continental, in a regulatory filing on Thursday, said its advance bookings for the next six weeks were up 3.2 percentage points from the same period a year ago on domestic routes and down half of a percentage point on international routes.

Despite the concerns we all read about, we are not currently seeing a reduction in business demand, United Continental Chief Executive Jeff Smisek said on a conference call with analysts and reporters.

Should we see demand decrease, however, we will respond nimbly and appropriately by decreasing capacity and taking costs out to help ensure we remain profitable throughout the business cycle, Smisek said.

The sentiments echo those voiced recently by Delta Air Lines Inc and Southwest Airlines Co .


United Continental, the parent of United Airlines, the world's largest carrier, said its third-quarter net profit fell to $653 million, or $1.69 per share, from $852 million, or $2.16 per share, a year earlier.

Excluding one-time items related to its 2010 merger, the company said it earned $2.00 per share. That compares with the average Wall Street forecast of $2.08 per share, according to Thomson Reuters I/B/E/S.

The company, formed last year from a merger of UAL Corp and United Airlines, reported revenue of $10.2 billion, up 8.7 percent from a year before.

United Continental said its third-quarter fuel expense, excluding the impact of hedges, increased 41.3 percent, or $1.0 billion, year-over-year.

The company took a $56 million charge related to fuel hedge ineffectiveness because it hedged in West Texas Intermediate crude oil, which saw a price decline in the quarter while jet fuel prices remained high.

United Continental ended the quarter with $8.4 billion in unrestricted cash, cash equivalents and short-term investments.

The airline flies as two carriers while it integrates operations but said it is on track to get government permission to operate as a single carrier by year's end.

US Airways reported a smaller quarterly net profit, hit by a 44 percent increase in its fuel costs. The carrier said its third-quarter profit was $76 million, or 41 cents per share, compared with $240 million, or $1.22 per share, a year before.

Excluding one-time items, the airline earned 51 cents per share. That beats a Wall Street average forecast for a profit of 48 cents per share, according to Thomson Reuters I/B/E/S.

The company reported about $19 million of net special items, including costs related to its Delta slot transaction.

US Airways said its revenue was $3.4 billion, up 8.1 percent from a year earlier. The company ended the quarter with $2.4 billion in total cash and cash equivalents, of which $384 million was restricted.

(Reporting by Kyle Peterson, editing by Gerald E. McCormick and Maureen Bavdek)