Up, up and away?

Is that where earnings and stock prices are headed for the legacy airlines that have been struggling so badly over the past four years? You might almost start to think so after reading this brief item on MarketWatch.

As has become all too well known by now, the big boys on the tarmac have been suffering. The post-September 11 economic downturn cut into expensive business travel on which the airlines had come to rely for profits. Meanwhile, a rabbit-like proliferation of low-cost carriers (led by Southwest and, now, JetBlue) drove down fares in steerage class. All of which would have been bad enough even without the airlines' hugely expensive and economically outdated labor contracts.

Blue skies might be ahead now, however. Or might they not be? It's hard to tell. On the one hand, the airlines have been moderately successful in reducing their labor costs (two of them -- United and US Airways -- have been aided by bankruptcy court judges). But I have to wonder: In the past week, we also saw news that travel is picking up to pre-September 11 levels for the first time since the terrorist attacks. And there are signs that business travel is also increasing, and that corporate travel offices are more willing now than before to spring for more expensive seats.

The point being that only the next downturn will tell whether this round of cost-cutting "took." The pattern in the past has been for the airlines to panic during an economic downturn, and then wring their hands just long enough for the market to improve, letting them off the hook again. This has allowed them to perpetuate what seems in many ways to be an unsustainable business model. Only time will tell whether we see yet another wave of airline bankruptcies come the next down cycle in the wider economy.