Squeezed by high fuel prices and aggressive price cutting by discount airlines, traditional US carriers are facing another dismal year.
If dismal enough, the industry's crisis could actually be good news for its strongest players, as it could force weaker rivals out of business for good, easing competitive pressure.
"The industry could do with less capacity and the elimination of at least one major legacy carrier would probably be a good thing for the survivors," said Doug Abbey, a consultant with Velocity Group.
But the airline that analysts say runs the greatest risk of grounding, US Airways, is only the seventh-largest. There would have to be some bigger failures -- and those still look unlikely -- to benefit the industry's stronger airlines.
Even US Airways has so far confounded the doom sayers, putting together a package of USD$1 billion in labor cost savings and meeting the terms of an aircraft financing agreement with its largest creditor, General Electric.
"Those companies closest to the brink, and that would be US Airways, will continue to limp along for a little longer," Abbey said.
Other analysts say removing surplus planes and seats from the crowded US skies would help the industry, which lost more than USD$9.4 billion last year, but would be far from a panacea.
"None of the so-called legacy airlines are in very good financial shape," said Philip Baggaley, an analyst at Standard & Poor's in New York.
A US Airways failure would be "somewhat of a benefit for the survivors, but not a huge one," he said. "They're only 5-6 percent of the total market."
This year US airlines' losses are seen narrowing to about USD$5 billion, according to the Air Transport Association, helped by aggressive cost cuts.
Those losses will again outstrip the combined USD$3.6 billion market value of traditional carriers American Airlines, Continental Airlines, Delta Air Lines and Northwest Airlines.
Discounters like Southwest Airlines and JetBlue Airways, which have managed to keep their profit runs unbroken despite record fuel costs, would remain a thorn in the side of the traditional carriers whatever happens with weaker rivals.
"Low-cost carriers would capture a lot of their market which means that pressure for low prices would continue," Baggaley added.
JetBlue this year will expand its fleet by 21 planes and boost available seats by nearly one third. Southwest plans to boost capacity by 10 percent.
The discounters are not just underpricing the traditional airlines but offering better service, having some of the lowest complaints per passenger and arriving on time more often, according to recent Department of Transportation figures.
After US Airways, analysts mostly cite already bankrupt United Airlines and Delta, which posted a USD$5.2 billion net loss for 2004, as the industry's weakest links.
United's parent company, UAL, has been in bankruptcy for 2 years and cannot emerge until it overcomes hurdles including union anger about benefit and pension cuts.
Both United and US Air will also struggle to attract the equity investors, burned by past airline failures, they would need to come out of bankruptcy.
"Despite restructuring and bankruptcy, they keep losing lots of money," said Clark Orsky, an analyst with KDP Investment Advisors. "That makes it very difficult to put forward a plan that makes investors comfortable."
As for Delta, it avoided a bankruptcy filing in November, but with the industry's worst-ever loss last year, the Atlanta-based carrier has little room to maneuver.
Yet the loss is no death sentence.
"Airlines have unbelievable tenacity because they generate a lot of cash flow," said Patrick Murphy, a Washington-based consultant. "People who have predicted the failure of airlines over the years have almost always been wrong."
