Continental Airlines, which is being bought by United Airlines, posted a second-quarter profit that handily beat Wall Street expectations, helped by higher fares and reduced capacity.

Continental posted net income of $233 million, or $1.46 per share, compared with a year-earlier net loss of $213 million, or $1.72 per share.

In the second quarter, Continental saw an 18.6 percent jump in revenue to $3.7 billion, boosted by higher fares and a jump in its cargo business.

The company's capacity, as measured by available seat miles, fell 0.7 percent.

Continental projects capacity on flights it operates will rise between 0.5 percent and 1.5 percent in 2010.

Earlier this year, United, a unit of UAL Corp, said it would buy Continental in an all-stock deal to create the world's largest airline. The companies expect to close the transaction in the fourth quarter. (Reuters)