he bankruptcy filing of Midway Airlines, coming in the midst of severe airline industry losses, serves as a brutal reminder of how fragile this industry can be.

The U.S. airline industry began the decade of the 1990s with five bad years that produced a cumulative net loss of $13 billion, more than all the profits the industry had generated in the previous 60 years.

Things turned around in 1995, the first of six consecutive profitable years. During this era of record profits, the airlines aggressively slashed their distribution costs, at the expense of the nation's travel agents.


Much of what happens on airline bottom lines is the product of leverage. A small fluctuation in the price of oil or a few percentage points off the commission rate can mean a swing of hundreds of millions of dollars. Likewise, a 5% drop in traffic can mean a 50% drop in profit if the people who stop flying are high-yield business travelers. But if fuel prices stay down and business travel stays up, the airlines are in clover -- which is where they've been for the past few years.

They've also been high on everybody's hate list for high fares, bad service, flight delays and schedule-wrenching labor squabbles. You couldn't swing a carry-on bag on Capitol Hill without hitting a passenger rights advocate.

But now the airlines are down and out. The industry is expected to lose about $1.5 billion this year, and the latest round of labor contracts gave airline unions even more leverage than they already had.

Some experts say that the business travelers will never come back until the airlines find a way to narrow the gap between their highest fares for business travelers and their lowest fares for discretionary travelers. That could be a radical move for many airlines.

We suspect some airline executives are asking themselves, "So how can we get the travel agents to help us out of this jam?"

If they aren't asking that question, they should.

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