It's difficult to overestimate how financially fouled up the American airline industry really is.
It hasn't made money since 2000 -- the year before the 9/11 terrorist attacks.
In 2001-04 it lost $32.1 billion, according to the Air Transport Association, a Washington, D.C., trade group that represents the major airlines. They are on track to lose another $10 billion this year.
Most of that money has been lost by the nation's oldest and best-known airlines, including Northwest Airlines Corp., the fourth-largest U.S. airline, and Delta Air Lines, the nation's No. 3 carrier, which were forced to file for bankruptcy Wednesday.
Those older airlines, most of which were around before the nation's aviation system was deregulated in 1978, are sometimes called legacy carriers because of the extra costs they still bear from that period -- unionized workforces and contracts with restrictive work rules and more generous wages and benefits such as traditional pension plans.
That has made it increasingly difficult for them to compete with newer airlines that pay their workers less and have more flexible work rules.
The new airlines can charge bargain fares and still make a profit. The old airlines have to charge the same bargain amount for tickets on competing routes but have no chance of making money because their costs are so much higher.
"The industry has very little pricing power," said Jack Evans, spokesman for the Air Transport Association. "We know that consumers are very price-sensitive when it comes to airline pricing, and with so many competitors, they gravitate to the lowest fare."
Virtually all of the legacy carriers, including Northwest, Delta, American Airlines and United Airlines, have made significant cost-cutting strides since Sept. 11, 2001, winning concessions from workers and eliminating meal service and even snacks.
But industry experts say the airlines still have a ways to go to bring their costs into line with competitors such as Jet Blue, Southwest and Spirit.
Northwest, for example, says its labor costs are the highest in the industry. According to an analysis by New York-based Calyon Securities, Northwest's labor cost to fly one seat one mile was 4 cents for the second quarter. That's higher than American's 3.3 cents and JetBlue Airways' 1.8 cents. Even though more passengers are flying these days, bringing in more revenue for the industry, roughly half of the nation's airplane capacity is handled by bankrupt airlines -- something experts say allows too many carriers to stay in the air, adding fuel to the industry's problems.
In addition to Delta and Northwest, airlines in Chapter 11 are United, US Airways, Aloha Airgroup and ATA Holdings, owner of ATA Airlines. Meanwhile, Hawaiian Airlines just emerged from Chapter 11 this summer and American barely avoided a bankruptcy filing itself.
It's the industry's historical dependence on the government for help that some experts believe further pushes older airlines into trouble. For example, the industry recently sought federal legislation to give airlines 14 years to catch up with pension payments.
But the industry's most pressing dilemma -- one that affects both low-fare and legacy carriers -- has been record-high fuel prices in the last year. The industry will spend $9 billion more on fuel this year compared to 2004, the airline trade group says.
"There is no airline that has a business model that can afford to sustain jet fuel prices in the range of $90 to $100 a barrel, which is what it's costing us now," said Evans, the group's spokesman.
But some experts say the root of the legacy airlines' problems is too much capacity.
"We have a lot of carriers in the game right now," said Terry Trippler, a Minneapolis-based airline expert with cheapseats.com. "Are they all going to survive? I don't know, but every time you talk about the need for capacity reduction, it looks like it will have to be the legacy carriers."
