UPDATE 2-US Airways loss narrows on capacity cuts and fuel

* US Airways reports Q1 net loss of 90 cents/shr

* Special items incl a $170 mln fuel hedge gain

* US Airways ends Q1 with $2.1 bln in cash, investments

* US Airways shares up 8.5 percent (Recasts; Adds comments from analyst, US Airways CEO, background, details; Updates shares)

By Kyle Peterson

CHICAGO, April 23 (Reuters) - US Airways Group (LCC.N: Quote, Profile, Research) on Thursday reported a quarterly loss on weaker travel demand, but the loss narrowed 57 percent on capacity cuts made throughout the airline industry to combat wilting demand.

JetBlue Airways (JBLU.O: Quote, Profile, Research), meanwhile, reported a quarterly net profit, reversing a year-ago loss. Alaska Air Group (ALK.N: Quote, Profile, Research) reported a net loss that had narrowed year over year.

Despite $1.78 billion in net losses reported by the top six U.S. airlines in the last two weeks, analysts hoped that massive industry downsizing would lead to 2009 profits.

"The U.S. airline industry has done what it has had to do to get back to some level of profitability," said Helane Becker, an airline analyst at Jesup & Lamont.