July 24 (Bloomberg) -- Southwest Airlines Co. and Alaska Air Group Inc., bucking industrywide losses, said second-quarter net income rose as they benefited from contracts locking in lower fuel prices in advance.

Airline shares fell as crude oil rose for the first time in three days. The Bloomberg U.S. Airlines Index of 14 carriers slid 11 percent, the most since May.

Southwest and Alaska became the only two of the nine largest U.S. carriers with quarterly profits, as competitors' net deficits totaled $6.2 billion. The hedges eased the impact of jet fuel that averaged 80 percent more than a year earlier.

``Those guys are geniuses,'' CreditSights Inc. debt analyst Roger King said of Southwest. ``They make so much money every quarter that they should just become hedge investors and stop flying those planes. Alaska has followed their strategy, and they keep putting more hedges on.''

Southwest, the biggest discount carrier, slipped 98 cents, or 6.2 percent, to $14.90 at 4:02 p.m. in New York Stock Exchange composite trading. Alaska declined $1.77, or 9.4 percent, to $17.08.

Net income at Dallas-based Southwest rose 15 percent to $321 million, or 44 cents a share. Excluding a one-time benefit related to its fuel hedges, the biggest discount carrier said it earned 16 cents a share, beating the 12-cent average estimate of 13 analysts surveyed by Bloomberg.

Southwest's fuel expense still rose 47 percent to $894 million, its largest cost, with the hedges.

`Very Critical'

``Our fuel-hedging program is a very critical aspect of our preparedness,'' Chief Executive Officer Gary Kelly, 53, said in a Bloomberg Television interview. ``It's huge, but it's not the total answer. We've got to continue to make other adjustments.''

Southwest today reaffirmed its plan to increase capacity this year by 4 percent, and said it may not add seating in 2009.

Earnings at Alaska, the parent of Alaska Airlines and regional carrier Horizon Air, were $63.1 million, or $1.74 a share. Excluding certain items, Alaska posted a loss of 39 cents a share, which was narrower than the 45-cent average estimate of 8 analysts surveyed by Bloomberg.

The Seattle-based company said it will trim seating capacity at its Alaska Airlines unit by 5 percent and eliminate 5 percent of its management jobs, or 80 positions, to trim costs.

Oil's Rise

Today's rise in oil prices eroded the industry's stock gains in the past week as investors focused on efforts by carriers including UAL Corp.'s United Airlines to boost their cash holdings to withstand future losses.

In the week ended yesterday, the airline index jumped 29 percent even as the largest airlines all posted net deficits. That advance shrank to 14 percent today.

Crude oil, from which jet-fuel is derived, rose less than 1 percent to $125.33 a barrel after dropping in six of the past seven trading sessions. Oil closed at a record $145.29 on July 3.

``Fuel can turn on a dime,'' said King, the CreditSights analyst, who is based in New York. ``All it takes is some little event, and it's off. That can change in five minutes.''

To contact the reporter on this story: Mary Jane Credeur in Atlanta at mcredeur@bloomberg.net.

Last Updated: July 24, 2008 16:22 EDT