(Reuters) - A U.S. judge on Friday said Southwest Airlines ( LUV ) must face a lawsuit by a prominent affirmative action opponent claiming a now-defunct program that awarded free flights to Hispanic college students was racially discriminatory.

U.S. District Judge Sidney Fitzwater in Dallas said Southwest's ( LUV ) elimination of the 20-year-old program and offer to pay Edward Blum's American Alliance for Equal Rights one cent - the amount of damages sought in the lawsuit - did not make moot claims that the airline discriminated against two students, one white and the other Asian.

Since 2004, Southwest's ( LUV ) "¡Lánzate!" program helped 1,500 Hispanic undergraduate and graduate students who lived at least 200 miles (322 km) from their school.

The Dallas-based airline, which did not immediately respond to a request for comment on Friday, ended the program after the lawsuit was filed in May.

Southwest ( LUV ) had argued that its offer to provide all relief sought by Blum's group made the entire lawsuit moot.

But Fitzwater disagreed, allowing the group to move ahead with claims Southwest ( LUV ) violated a Civil War-era law barring racial bias in contracting.

Such a ruling could be cited in future cases over diversity and inclusion programs, which are facing increased scrutiny and a growing number of legal challenges.

"This decision is a powerful tool to prevent case-mooting tactics from discriminators nationwide," Blum said in a statement after the ruling.

The lawsuit is among the latest in a series of cases Blum has filed challenging corporate diversity programs after another group he founded last year convinced the conservative-majority U.S. Supreme Court to bar the consideration of race as a factor in college admissions.