Losses were narrowed substantially as cash flow increased for the B.F. Saul Real Estate Investment Trust in the quarter and fiscal year ended Sept. 30.

Saul, the region's largest real estate trust, reported yesterday that its net loss for the year was $4.9 million compared with a year-earlier loss of $8.5 million.

In the recent quarter, Saul reported loss of $1.17 million comapred with loss in the 1977 period of $1.78 million.

Included in the fiscal 1978 results were gains of $1.5 million from the sale of equity investments compared with similar gains the previous year $597,000.

Saul's cash flow, measured by income of losses before noncash charges, produced a loss of $1.6 million in the year compared with a loss of $3.7 million in the previous fiscal period.

The improvement in cash flow was atributed to increased cash from equity investments, the virtual elimination of non-earning loans and a reduction in overhead expenses.

Allegheny Airlines reported October profits of $3.8 million compared with $3.4 million in the sane month last year as revenues rose to $52 million from $46 million.

For the first 10 months of 1978, the Washington-based airline listed profits of $26.1 million compared with $12.7 million a year ago. Revenues increased to $472 million from $404 million.

Potomac Electric Power Co.'s profits for the first 10 months of the year declined to $71.1 million ($1.56 a share) from $73 million ($1.57: a year earlier, as revenues increased to $620 million from $575 million.

Washington Homes Inc., an Oxon hill home building firm, reported a rebound during the first quarter ended Oct. 31. Earnings totaled $293,452 (23 cents a share) compared with a loss of $103,194 last year as sales increased to $11.5 million from $3.1 million.