Southwest Airlines Co

A new skirmish in the West Coast airfare wars has erupted in Orange County, where upstart Virgin America and low-cost behemoth Southwest Airlines are battling for travelers with some of the lowest priced tickets in recent memory.

Southwest Airlines Co., still reeling from a dive in air travel, held out hope Thursday that the plunge may have leveled off. The carrier, which until last summer had gone 17 years without a quarterly loss, posted its third consecutive loss Thursday, a $91-million deficit for the first three months of 2009. Revenue in the period tumbled 6.8% from a year earlier to $2.36 billion. The company predicted another year-over-year decline in revenue in the current quarter.

Southwest Airlines Co. said it lost money in the fourth quarter as its fuel-hedging strategy, brilliant when oil prices were rising, lost punch with tumbling energy prices. It was Southwest's second straight losing quarter after a string of profitable quarters that reached back to early 1991. The carrier is responding by cutting capacity 4% this year -- the first time in Southwest's 38-year history that it hasn't planned for growth -- and reining in fleet expansion.