DALLAS (AP) — Continental Airlines Inc. said yesterday it swung to a second-quarter loss, hurt by record high fuel prices and weakening economic conditions. The loss was far smaller than expected.

But Continental executives said in a conference call that some businesses are reducing travel and many are putting more limits on how employees fly — in coach rather than first class, for example.

Business travellers are a lucrative market for airlines, and they were viewed as less vulnerable than leisure travellers to higher fares and a weakening economy.

Shares of Continental rallied briefly. But by midday, with oil prices rising again, the shares slipped 40 cents, down 4.4 percent, to $8.75, after a big rally the day before.

For the quarter ended June 30, Houston-based Continental said it lost $3 million, or three cents per share, compared with a profit of $228 million, or $2.03 per share, a year ago. Excluding $22 million in one-time gains, the carrier lost $25 million, or 25 cents per share, in the latest quarter.

Analysts, who usually exclude one-time items from their calculations, expected a loss of 49 cents per share, according to a survey by Thomson Financial.

Revenue rose nine percent to $4.04 billion, helped by increased fuel surcharges and international growth. That matched the average forecast of analysts.

Continental's sales on traffic across the Atlantic and to Latin America grew by about 12 percent, while US passenger revenue rose just 2.1 percent.

In a regulatory filing, Continental said it ended the second quarter with about $3.4 billion in unrestricted cash and short-term investments. It expects the figure to fall to $2.8 billion to $2.9 billion by the end of the third quarter.

Airlines are burning through cash as they struggle with high prices for fuel, which has eclipsed labour as their biggest cost. Continental said it spent $1.36 billion on fuel during the second quarter, an increase of 66 percent over the same period last year.

Like other airlines, Continental is hedging, making financial transactions to lock in lower prices for fuel. The company said those deals saved $112 million during the second quarter, and it has hedged 63 percent of its fuel needs for the second half of the year.

Still, it paid an average of $3.46 per gallon for fuel, up 66 percent from a year ago.

To cope with higher fuel costs and a weakening economy, the airline is cutting 3,000 jobs — nearly seven percent of its work force — grounding 67 planes and reducing flying in the US this fall by about 10 percent.

Continental is also raising ticket prices and some fees, including a $25 charge for checking a second piece of luggage.

The company said bookings for travel in the next six weeks are flat with last year in the United States and to Europe, slightly higher to Latin America and lower across the Pacific.

Revenue per passenger is rising across the board, the company said, a reflection of higher fares, and the airline said third-quarter occupancy on its planes would be flat with a year ago.