April 22 (Bloomberg) -- Continental Airlines Inc. and AirTran Holdings Inc. posted first-quarter results that beat analysts’ estimates after falling fuel prices helped blunt a decline in travel.

AirTran jumped the most since October in New York trading, while Continental erased earlier gains when the fourth-largest U.S. carrier said its revenue outlook is “bleak,” especially on trans-Atlantic routes favored by full-fare business fliers.

Both carriers joined peers in selling more discounted tickets in an effort to lure back customers. Job cuts, fewer flights and a 52 percent drop in average jet-fuel prices cushioned the blow from shrinking traffic.

“In the context of industry revenue declining 20 percent in March, they’re doing a good job,” said Kevin Crissey, a UBS Securities LLC analyst in New York. “Nobody’s saying everything’s fine, but certainly there’s an expectation that things are going to start to improve eventually. The question is when.”

Excluding $4 million in costs to ground jets, Continental’s loss was $1.07 a share, better than the $1.18 average of 10 estimates compiled by Bloomberg. Adjusted net income for Orlando, Florida-based AirTran was 20 cents a share, topping estimates for a 4-cent profit.

AirTran surged $1.35, or 24 percent, to $6.93 at 4:01 p.m. in New York Stock Exchange composite trading, the biggest advance since Oct 16. Houston-based Continental dropped $1.40, or 9.3 percent, to $13.60.

Continental’s Outlook

Yields, or the average fare per mile, on trans-Atlantic fares have fallen 25 percent this quarter from a year earlier, worse than the 20 percent decline in the previous three-month period, Continental said.

Fuel surcharges that dropped from a year earlier are partly to blame, and yields also can rise relatively quickly once fares go up, Continental executives said on a conference call.

Jamie Baker, a JPMorgan Chase & Co. analyst in New York, cut his Continental rating to “neutral” from “overweight,” saying a full-year profit is no longer likely at the fourth- largest U.S. airline. UBS’s Crissey recommends buying Continental and AirTran.

Continental’s Loss

Continental’s net loss of $136 million, or $1.10 a share, widened from $82 million, or 82 cents, a year earlier. Sales fell 17 percent to $2.96 billion.

The results marked the last report for the quarter among the five biggest U.S. airlines, all of which suffered losses. Delta Air Lines Inc. is the world’s largest carrier, followed by American Airlines parent AMR Corp. and United Airlines parent UAL Corp. Southwest Airlines Co. is No. 5 by traffic.

Passenger traffic at Continental’s main jet operations slid 11 percent from a year earlier, while average fare per mile dropped 7.6 percent.

Costs for each seat flown a mile, a measure of efficiency, declined 10 percent as fuel prices fell. The carrier ended the quarter with $2.65 billion in unrestricted cash and short-term investments, an increase from $2.52 billion a year earlier.

AirTran’s Profit

AirTran said net income was $28.7 million, or 21 cents a share, compared with a year-earlier net loss of $35.4 million, or 38 cents.

Revenue fell 9.1 percent to $542 million, as average fares per mile tumbled 8.7 percent and passenger traffic slid 6 percent.

AirTran said load factors, a measure of how full planes are, will “hold up” this quarter and for the rest of 2009. Fares may not, Chief Executive Officer Bob Fornaro said in a phone interview.

“Revenues will be down, it’s just a matter of how much,” he said. “People are now searching for bargains. We’re going to be very active in marketing. We want to get certain people who are sitting in their living rooms to realize that prices are great.”

The carrier, which competes against Delta at its largest hub, in Atlanta, said it expects to remain profitable every quarter this year.

“While the weakening economy has begun to pressure prices throughout the airline sector, our industry-leading, low-cost structure has allowed us to offset this challenge,” Chief Financial Officer Arne Haak said in a statement.

To contact the reporters on this story: Mary Schlangenstein in Dallas at maryc.s@bloomberg.net; Mary Jane Credeur in Atlanta at mcredeur@bloomberg.net.

Last Updated: April 22, 2009 16:26 EDT