British Airways has announced it made a pre-tax loss of £50m ($79m) in the three months to December 2009.
This was down from the £122m it lost in the same period in 2008 and smaller than many analysts had expected.
However, BA's pre-tax loss in the nine months to December rose to £342m from £70m in the same period in 2008.
BA is currently locked in a High Court battle with the union Unite over changes to cabin crew and is facing possible strike action.
Analysts had predicted BA would announce a loss of £151m in the third quarter, taking its loss for the nine months to £443m.
British Airways' chief executive Willie Walsh said the figures were representative of cost-cutting measures across the company.
"Operating costs are down by 10.5% and show that we've adapted quickly to the new businesses realities created by the global recession.
"We still expect to make record losses this year. Permanent structural change is being introduced in all areas and will return us to sustained profitability," he said in a statement.
Mr Walsh also said the company was working with staff, unions and trustees to address BA's £3.7bn pension funds' deficit, and said this involved "a range of changes to future pension benefits".
In November, the airline said the surplus in the older APS scheme had fallen to just £27m while the deficit in the larger NAPS scheme had risen sharply to £2.66bn.
The combined deficit in the two main BA pension schemes has ballooned by £1bn in just three months.
British Airways shares opened up 2.2% at 216p before falling to 207.5p in midday trading.
Howard Wheeldon, of BGC Partners, said there were still "manifold problems" for British Airways.
"Despite these figures being better-than-expected, the situation for BA that does remain very serious is its industrial relations problems," he said.
BBC business editor Robert Peston said that the results were evidence that the worst was over for one of the biggest corporate victims of the recession in the UK.
"For BA, the volume of people travelling has stabilised which is extremely good news and the figures show they made a profit at an operating level for the first time in 15 months," he said.
"BA should be shouting this from the rooftops, but it isn't. It still faces industrial action and its pension deficit of nearly £4bn is huge," he added.
The airline avoided strike action over the Christmas and New Year period after winning a legal challenge against the Unite union.
Unite is re-balloting its 12,000 cabin crew members, with the result due on 22 February.
In a statement, the union urged the airline to stop warring with its cabin crew and concentrate on building for the future.
"While BA is not out of the woods yet, it is turning the corner. This ought to make it more flexible in reaching a negotiated settlement with its cabin crew."
"So again we urge BA to end the war it is waging against its 13,000 cabin crew because management by imposition will cost the airline customers and a damaged brand. It must stop," said Len McCluskey, Unite assistant general secretary.