Perhaps the sector of aviation most visibly affected by the events of September 11, the airline industry continues its struggle toward recovery, as security burdens, economic jitters and lingering public apprehension over flying conspire to sustain the worst slump in the history of the business. Although by June overall revenue passenger miles managed to creep back to within 8 percent of the levels registered a year earlier, unrelenting downward yield pressure has forced US Airways into bankruptcy and the rest of the nation’s largest airlines into a reassessment of their most fundamental business models.
As major airlines shed capacity in line with falling demand, the world’s regional airlines became the primary beneficiaries, assuming control of many routes no longer served by their mainline partners. Of course, the smaller airplanes used by regional airlines can profitably fly in markets rendered too small for major airlines by September 11. But the phenomenon also reflects a recognition of the smaller airlines’ fiscal discipline, something few major airlines could preserve during the industry’s money-making period between 1996 and 2000, when break-even load factors rose by 5 percent due to skyrocketing labor and infrastructure costs.
