UAL Corp. (UAUA), parent of No. 2 U.S. carrier United Airlines, Tuesday posted a third-quarter profit, reversing a year-ago loss, sending shares higher in early trade.

The No. 2 U.S. airline said quarterly profit amounted to $190 million, or $1.30 per share, compared with a net loss of $1.77 billion, a year earlier.

Analysts had expected the carrier to earn $1.43 per share, according to Reuters Estimates. But the company noted that it recorded income tax expenses in the quarter that reduced its earnings by 43 cents per share.

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On that basis, the airline topped expectations, said Helane Becker, analyst at The Benchmark Company.

"Most people did not have them on a fully-taxed basis," she said.

UAL, which emerged from bankruptcy in February, said that excluding special items profit was $335 million, compared with $165 million a year earlier.

The carrier posted revenue of $5.18 billion, compared with $4.66 billion in the third quarter of 2005. UAL said its operating expenses increased by only 8 percent, despite a 23 percent increase in fuel costs.

"Expenses were little lower than I was expecting. So it was not a bad quarter," Becker said.

U.S. airlines have been battered by soaring fuel costs this year. Intense low-fare competition in the industry has made it hard for airlines to raise fares enough to cover costs.

Carriers, however, have managed to pull capacity -- the number of seats for sale -- from their systems and raise fares accordingly. As a result, airlines are seeing profits.

UAL used its bankruptcy protection to slash its costs by $7 billion a year. The carrier, along with its rivals, continues to seek ways to trim labor costs and costs of operations by improving airline efficiency.

"We reported costs that were competitive with our peers," Chief Executive Glenn Tilton said in a recorded message to employees.

"Through our continuous improvement efforts, we are improving our work processes and identifying new cost-savings opportunities," he said.

UAL said it ended the quarter with a cash position of $4.9 billion, including $860 million in restricted cash.

Shares of UAL were up 1.28 percent at $37.24 in early trade on Nasdaq.

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