Southwest Airlines (NYSE: LUV - News) , whose hedges against rising oil prices have helped stave off losses, saw its 17-year streak of profitability end after a stunning reversal in commodity prices forced the carrier to mark down the value of some contracts.

Southwest and its US rival Continental Airlines (NYSE: CAL - News) reported quarterly net losses on Thursday as fuel costs and a rash of hurricanes and tropical storms, in Continental's case, offset revenue gains.

The credit crisis has continued to push commodity prices lower, leaving airlines to navigate through a business environment dominated by two volatile, countervailing forces - cheaper fuel and fewer passengers.

"On the one hand, fuel prices have declined significantly, and if they stay around the current level will benefit greatly," said Larry Kellner, Continental's chief executive, in a conference call with analysts.

"On the other hand we know the demand for air travel would be adversely affected by a recession, and it remains to be seen how deep, wide and long the recession will be."

While most carriers had predicted the economic slowdown would eventually take its toll as business and leisure passengers alike cut back on travel expenses, none could have anticipated the events that have gripped Wall Street in recent weeks, or their effect on commodity prices.

Only months ago, mounting fuel costs had threatened to drain the cash reserves of even some of the nation's biggest carriers, sending them back to the bankruptcy court for the second time this decade. They slashed capacity, retired older planes, introduced new passenger fees and sought to squeeze every dollar of liquidity from their balance sheets as they braced for even higher fuel bills.

Southwest, the biggest low-cost carrier, swung to a third-quarter net loss of $120m, or 16 cents a share, from income of $162m, or 22 cents, a year ago. Operating revenue rose 12 per cent to a record $2.9bn.

The drop in oil prices during the final weeks of the quarter forced Southwest to mark down the value of some derivatives contracts by $247m, reversing mark-to-market gains recognised in past quarters. Despite the reversal, fuel costs still rose 44 per cent from a year earlier. Continental reported a net loss of $236m, or $2.14 a share, compared with a profit of $241m, or $2.15 a share, a year ago. Operating revenue climbed 8.8 per cent to $4.2bn.