US Airways Group swung to a third-quarter profit from a year-ago loss, topping forecasts on strong demand and rising fares, the airline said on Thursday.

The airline, formed in 2005 from a merger of America West and US Airways, said its third-quarter profit amounted to USD$177 million, compared with a year-ago loss of USD$78 million.

US Airways said third-quarter revenue was USD$3.04 billion, a 2.3 percent increase from the year-ago quarter.

The carrier said its fuel bill declined 3.8 percent year over year, and its average fare increased 1.2 percent.

US Airways said its passenger revenue per-available-seat mile increased 6.5 percent, while its costs per-seat mile fell 2.6 percent. Excluding fuel and gains related to hedging instruments, however, costs increased 5.7 percent.

The carrier's Chief Financial Officer Derek Kerr said that US Airways plans to trim capacity by 4 percent year over year in the fourth quarter, 1.5 percent for the full year and 1 percent for all of 2008.

The company ended the quarter with USD$3.1 billion in total cash and investments, of which USD$500 million was restricted.

The profit for the airline reflects the resilience of the recovering airline industry to economic weakness and high fuel prices. Airlines were consistently profitable in the quarter, according to results released so far.

"We are particularly pleased to note that overall industry capacity has remained in check during this period of recovery for our industry, which is a notable change from the past," Chief Executive Doug Parker said in a statement.

He said on a conference call with reporters and analysts that the revenue outlook is strong.

Shares of US Airways fell more than 5 percent, however, along with other airline stocks as the price of oil gained nearly USD$3 a barrel.

The US airline industry is rebounding from a years-long downturn triggered in part by a wave of low-fare competition and exacerbated by high fuel prices. In 2006, the industry began cutting excess capacity -- the number of seats for sale -- and started raising fares accordingly.

The fare increases helped offset high fuel prices. The cost of jet fuel is directly related to the cost of oil, which hit a record high above USD$90 a barrel last week.

The strategy helped major airlines such as American Airlines and United Airlines post profits in the third quarter despite growing signs of economic weakness that threatens to erode travel demand.

"Everybody has been meeting or exceeding our estimates. It's been a good summer," said Calyon Securities analyst Ray Neidl. "But more importantly, most carriers are saying demand is strong going into the fall, which means we'll probably be seeing some (fare) increases."