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UPDATE 3-Planes, autos help Alcoa profit

* Aluminum prices in quarter down from year-ago

* Markets showing some signs of positive growth - CEO

* Shares flat in after-hours

(Adds background) By Steve James and Ernest Scheyder

Oct 9 (Reuters) - Stronger demand for aluminum products fromairplane and automobile producers helped Alcoa Inc'sthird-quarter profit beat Wall Street's expectations, offsettingweak aluminum prices and worries about China's slumping economy.

Boeing Co , Navistar International Corp andother manufacturers have been using more engineered aluminumparts from Alcoa to lighten the weight of planes and trucks.

Making bolts, wheels and other components for thesecustomers is more lucrative for Alcoa than just supplying basicaluminum of which the price has dropped to near two-year lows.

"It looks like the tone of the quarter was slightlybetter-than-expected, particularly in the downstream business,"Kuni Chen, an analyst at CRT Capital Group, said of thecompany's units that sell to manufacturers.

The company posted a net loss of $143 million, or 13 centsper share, compared with a profit of $172 million, or 15 centsper share, in the same quarter last year, the Pittsburgh-basedcompany said on Tuesday.

Excluding charges for settlements with the EnvironmentalProtection Agency and a joint venture partner in Bahrain, thecompany reported a profit of 3 cents per share. On that basis,it exceeded analyst estimates for a break-even quarter,according to Thomson Reuters I/B/E/S.

Revenue fell 9 percent to $5.8 billion, as a result of a 17percent drop in aluminum prices from the same quarter a yearago, said Alcoa, which is traditionally the first S&P500 companyto report quarterly earnings.

Despite the beat, some on Wall Street remain cautious.

"It's nice that revenues are up and that Alcoa is suggestingaluminum demand could double in the next decade, but that's adecade out," said Bryant Evans, an investment adviser andportfolio manager at Cozad Asset Management.

Chairman and Chief Executive Officer Klaus Kleinfeldreaffirmed Alcoa's long-term outlook for aluminum, which is usedfor construction, auto and aviation manufacture, and beveragecans. He expects global demand to double between 2010 and 2020.

He acknowledged there is still a lot of uncertainty, butsaid markets are showing signs of some positive growth.

"Markets seem to be driven more by headlines thanfundamentals right now, but Alcoa remains focused on the thingswithin our control", Kleinfeld said.

"We're capitalizing on pockets of strong growth andachieving record profitability in our mid and downstreambusinesses."<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

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Aluminum prices ended the third quarter at $2,112 per tonne,about 14 percent lower than in the third quarter of 2011.

While its downstream businesses have performed well, Alcoafaces big challenges in its core businesses of mining bauxiteand producing aluminum.

Demand is strong in aerospace and transport, but othersectors, such as construction, have not recovered from therecession and over-supply in the industry has kept prices low.

"It's nice to see global rolled products had a recordquarter, but other segments were negative or flat," JonathanPavlik, portfolio manager at Stewart Capital, said, referencingthe Alcoa business that supplies finished aluminum products. "Tome it looks like it is one step forward, one step back."

Alcoa recently closed its aluminum smelter on the Italianisland of Sardinia and put it up for sale, citing high powerprices that made the operation uncompetitive.

Last week, Dahlman Rose & Co analyst Tony Rizzuto cut hisrating on Alcoa shares to "hold" from "buy" because of weakaluminum prices. "We haven't seen signs of any fundamentalchanges that should provide support for a meaningful movehigher," he wrote.

Early on Tuesday, the company announced it had settled acivil suit brought by Aluminum Bahrain . Withoutadmitting any liability, Alcoa agreed to make a cash payment toAlba of $85 million payable in two installments. It will alsosupply Alba with raw materials under long-term contracts. Alcoatook a $40 million charge against its earnings for thesettlement.

Alcoa's stock was unchanged from its $9.13 close inafter-hours trading on the New York Stock Exchange.

(Reporting By Steve James and Ernest Scheyder; Editing byBernard Orr and Patricia Kranz)

((steve.james@thomsonreuters.com)(1-646-223-6013)(Reuters

Messaging: steve.james@thomsonreuters.com))

Keywords: ALCOA EARNINGS/