Southwest Airlines Co. (LUV) and JetBlue Airways Corp. (JBLU)posted better-than-expected earnings on Thursday, but soaring energy costs are expected to drive JetBLue into the red next quarter while Southwest's fuel hedging keeps it profitable.

The two discount airlines also went in different directions in their latest quarterly reports, even though both beat Wall Street. Southwest's profit soared 91 percent, and JetBlue's sank by two-thirds.

Looking ahead, analysts said Southwest's big bet on hedges looks to protect it from the costs that have decimated the rest of the industry, while they will send JetBlue into the minus column.

That means Southwest, the No. 1 U.S. airline by market value, is likely to maintain its profit streak for at least the next several quarters, while JetBlue, the second-largest, will break a profit run since it went public in April 2002.

"It certainly shows what happens when you're exposed to fuel," Fulcrum Global Partners analyst Susan Donofrio said of JetBlue. "They're a victim of circumstance right now."

Southwest said third-quarter net income rose to $227 million, or 28 cents a share, from $119 million, or 15 cents a share, a year earlier.

Even stripping out $87 million in one-time gains, the results still beat Wall Street analysts' forecasts.

As soaring jet fuel prices hammered most U.S. airlines, Dallas-based Southwest again benefited from a policy of buying contracts that lock in oil — and jet fuel — at certain prices. Southwest said its hedging policy resulted in a $295 million benefit in the quarter.

But the low-cost carrier's results were strong in other areas too, helped by improving results in cities where the airline is expanding service, including Philadelphia, Pittsburgh and Chicago.

"Their newer markets are kicking in with respect to demand," Donofrio said, adding that the earnings were "terrific" overall.

JetBlue on the other hand, said third-quarter profit fell to $2.7 million, or 2 cents a share, from $8.1 million, or 7 cents a share, a year earlier.

Donofrio said that while JetBlue's third-quarter profit beat expectations, the New York-based airline's outlook for a negative operating margin of 5 to 7 percent in the fourth quarter was worse than the break-even analysts were expecting.

Helane Becker, an analyst at Benchmark Cos., noted that JetBlue fell victim to soaring fuel prices and that the carrier needs to find a way to pass the expense on to passengers.

"At some point they're going to have to wind up raising the prices a little bit more," she said.

Calyon Securities cut its recommendation on the stock to "reduce" from "neutral", saying JetBlue could have to try to raise fares, a move that would lead to slower growth.

Alaska Air Group , parent of Alaska Airlines, also reported better than forecast earnings on Thursday, and like Southwest, it benefited from fuel hedges.

Alaska Air's third-quarter earnings rose to $90.2 million, from $74.0 million.

Earnings per share were $2.71, compared with a $2.12 per share forecast by analysts polled by Reuters Estimates.

JetBlue shares were up 5 cents, or 0.3 percent, at $19.59, Southwest shares were off 7 cents, or 0.5 percent, at $15.51, and Alaska Air was up 66 cents, or 2.2 percent, at $30.16.

Even as most traditional U.S. airlines, including newly bankrupt Delta Airlines Inc. (search) and Northwest Airlines Corp. (search) , have said they plan to cut available seats to cut excess capacity which has been depressing ticket prices, Southwest said it will pursue an aggressive expansion plan.

The airline, which said it plans to begin service from Denver International Airport (search) starting in early 2006, expects to take deliveries of 33 new Boeing 737-700 aircraft next year."

Shares in Frontier Airlines , currently the dominant low-cost carrier out of Denver, were down $1.96, or 18 percent, at $8.78.

JetBlue is also expanding, and plans to take deliveries on 16 Airbus A320 and 18 Embraer 190 jets next year.

Southwest shares have gained 11.6 percent since the beginning of the third quarter, compared with about a drop of about 5 percent in the Amex Airline index, while JetBlue has lost 4.3 percent.