Third-quarter earnings reports by U.S. major airlines reveal the surprising development of a profitable American Airlines and an unprofitable Southwest Airlines. However, this picture is skewed by large one-off items at each carrier - when these are excluded, normal conditions resume with an American loss and a Southwest profit.

Southwest saw a $120 million net loss, its first quarterly loss in more than 17 years and a reversal from a net profit of $162 million a year earlier. The rare trip into the red resulted from $247 million in special charges, mainly from market-to-market adjustments of the future value of its fuel-hedging portfolio, prompted by the oil price decline.

Excluding special charges, Southwest achieved a profit of $69 million. Operating profit was $86 million, compared to $251 million in the same period in 2007. Revenue rose 11.7% to $2.9 billion, and unit revenue increased by 9.3%. Unit costs, excluding fuel and special items, grew 6.5%.

American recorded a net profit of $45 million, but this was due mainly to the sale of its American Beacon Advisors subsidiary. Excluding special items, the company recorded a loss of $360 million. In 2007 American saw a $175 million net profit for the third quarter, including special items. An operating loss of $216 million compares to a profit of $319 million in 2007.

For the third quarter, revenue rose 8% to $6.4 billion. Mainline unit revenue increased 10.9%, with yield rising 13.2%. Mainline capacity was down 3%, and load factor dropped 1.7 points to 82.2%. Unit costs excluding fuel rose 4.3%.

Meanwhile, Continental Airlines recorded a net loss of $236 million for the third quarter, compared to a profit of $241 million for the same period last year. The 2008 third-quarter loss would have been $145 million excluding special charges. Hurricane Ike negatively affected profits by about $50 million.

Continental's operating loss was $152 million. Revenue rose 8.8% to $4.2 billion, with consolidated yield up 9.6% and consolidated unit revenue rising 7.3%. Mainline traffic dropped 2.5% on a capacity cut of 0.9%, causing load factor to fall 1.4 points to 82.9%. Unit costs were up 21.6% in the quarter, and were down 2.8% holding fuel constant and excluding special charges. The airline said 90% of the 3,000 positions it wanted to cut were achieved through voluntary programs.

Six-week booked load factors are running about 1-2 points higher than last year. For the full fourth quarter, consolidated and mainline load factors will be about flat. Fourth-quarter mainline capacity is likely to drop 7.8%, with mainline domestic down 11%. For 2009, mainline capacity will decline 1%-3%, and mainline domestic is expected to drop 4%-6%.