Continental Airlines Inc., the No. 5 U.S. air carrier, on Wednesday posted a third-quarter profit, saved by $243 million in federal grants aimed at helping the troubled airline industry stave off the sharp travel decline after the Sept. 11 attacks.

Houston-based Continental reported an operating loss of $97 million, or $1.76 per share, compared with a profit of $135 million, or $2.21 per share a year earlier. Including $243 million in cash payments from a federal bailout program, Continental earned $3 million, or 5 cents per share. 

As air traffic and bookings return, Continental remains focused on liquidity, reducing operating costs and evaluating the profitability of its network, Gordon Bethune, the airline's chief executive and chairman, told analysts during a conference call. Continental is losing about $4 million to $5 million a day, he said, but ended the quarter with about $1.2 billion in cash reserves. 

"We have a ways to go, but revenue is heading in the right direction," Bethune said. 

Continental shares climbed 66 cents, or about 4 percent, to $17.31 in early afternoon trading Wednesday on the New York Stock Exchange. 

Wall Street analysts polled by research firm Thomson Financial/First Call had expected Continental to report a quarterly loss ranging from 50 cents to $4.84 per share with a consensus loss estimate of $2.25 per share. 

Revenues in the quarter fell to $2.22 billion from $2.62 billion a year earlier. While demand is returning, yields — which measure the average level of fares — fell 10.2 percent for the quarter as business travel remained depressed. 

The airline also said that it was in talks with Boeing Co. about the deferral of some of its firm aircraft orders scheduled for delivery between 2002 and 2005. Continental also expects its security and insurance costs to climb about $150 million to $200 million for next year as it absorbs changes required after the attacks. 

Wall Street analysts said while Continental had managed to reduce costs, it still faced hurdles to recovery. 

"Like all airlines, it struggles to regain the confidence on the flying public. The rate of improvement has not been encouraging so far," said Samuel Buttrick, a UBS Warburg airline analyst. 

U.S. airlines are expected to report as much as $5 billion in losses this year as the Sept. 11 attacks on New York and the Washington area curtailed travel and further weakened revenues hurt by business spending cuts and costs of new labor contracts. 

Before the attacks, Continental had been one of the few major U.S. airlines posting profits this year. 

Amid warnings of potential bankruptcies, the Bush administration has approved a $15 billion aid package for the airline industry. Bethune said that the airline had not decided whether to apply for the loans included in that package, but considered it a safety net should an application become necessary. 

Last month, Continental said it would cut about 12,000 jobs and reduce its schedule as part of its cost cutting. Top executives also said they would not take pay for the rest of the year. 

Since January, Continental shares have plummeted more than 67 percent. In contrast, the broad benchmark S&P 500 index has fallen about 19 percent over a similar period while the American Stock Exchange Airline Index has shed about 59 percent over that period.