Delta Air Lines (DAL) revealed a fourth-quarter profit that flew past Wall Street expectations on Wednesday, as the company’s fuel hedging initiatives and higher fares helped offset a 20% jump in fuel costs. 

The sharp gains came despite growing expenses for fuel that have burdened the entire airline industry, and declines in both traffic and capacity.

Carriers have been forced to cut down on their flights and increase fees to improve efficiencies in an economic environment that has kept costs high and demand low. For the first-quarter of 2012, the company expects to lower capacity another 3% to 5%.

The Atlanta-based carrier reported net income of $425 million, or 50 cents a share, in the fourth quarter, compared with $19 million, or 2 cents, in the year-earlier period.

Excluding one-time items, the airline said it earned 45 cents, ahead of average analyst estimates of 38 cents, according to a Thomson Reuters poll.

Delta, the second largest airlines in the U.S. by revenue, saw load factor increase to 81.7%, cargo revenue grow 8% to $20 million on higher cargo yields and other revenues from third-party maintenance grow 4% to $35 million.

While market fuel prices increased the company’s fuel expense by $515 million, some of that was offset by $150 million of settled fuel hedge gains and stronger revenues. The company also kept operating expenses flat during the quarter.

“With the December quarter's strong revenue performance, Delta produced a revenue premium to the industry and fully covered our fuel cost increase with higher revenues," Delta president Ed Bastian said in a statement.

Total revenues were up 8% to $8.4 billion, trumping the Street’s view of $8.31 billion.

By region, domestic, Pacific and Latin American passenger revenues grew 9.9%, 13.5% and 11.2%, respectively, partially offset by flat year-over-year sales in the Atlantic region.

Smaller competitor U.S. Airways (LCC), meanwhile, reported a non-GAAP profit of $21 million, or 13 cents a share, down from a year-earlier $28 million, or 17 cents, but the results trumped the Street’s view of 2 cents a share.  

The carrier’s results narrowed on a 38% increase in fuel costs, but company CEO Doug Parker said the U.S. Airways was pleased with the stronger-than-expected results in the face of the “extraordinarily high cost of jet fuel.”

Shares of U.S. Airways (LCC) climbed nearly 14% to $7.30 Wednesday morning, while Delta’s surged 8.75% to $10.20.

Follow Jennifer Booton on Twitter at @Jbooton