Battle for the Friendly Skies

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Why does one airline go bankrupt and another airline go to the bank?

While the big boys are hurting and revamping their business plans, it is the smaller airlines who are racking up revenue and travelers with a sleeker model.

Industry analysts say the business of flying is changing. Discount carriers like Spirit, Mesa and Air Wisconsin, now account for 20 percent of all domestic travel. And they are practically the only airlines whose accounts add up in the plus column.

"It's the scale -- they are much smaller and much leaner," says Standard and Poor's Jim Corridore. "But as they stay in business and try to get larger -- which is the name of the game -- they are going to run into some of the same problems as the bigger carriers."

The friendly skies' best friend has always been the last-minute high-priced business traveler. But now he's taking the train, or checking low fares on the Internet.

Analysts also say the so-called 'full service' airlines are weighed down by high fixed costs and arcane fare structures. And they are hampered by the 'hub' system that feeds travelers through a central location, instead of flying from point A to point B.

"What they are able to do is leverage their hubs to provide a lot of non-stop services," says US Bancorp Piper Jaffray's Joel Denney. "But it's more expensive to operate a hub so you have the premium business traveler to justify it."

Larger carriers are handling survival of the fittest by getting smaller: From American to Northwest, staff and service cutbacks are the rule. There may always be a place in the skies for the big carriers -- perhaps, just not as many as there are now.