>From today's Aviaiton Daily By Dan Silverman, Aviation Analyst, AVITAS Inc. The predictions all seemed so apocalyptic. Former CEO James Goodwin warned, "United may perish." Midway Airlines actually did, sort of, but is now back from the abyss. US Airways MetroJet is gone, along with Shuttle by United. Capacity has been cut, aircraft retirements accelerated and new deliveries deferred. Thousands of people are on the unemployment line as the airlines contract. It's been called a crisis by industry executives and the federal government, and Congress has appropriated billions of dollars to "save" airlines from bankruptcy. The question is, can the airlines be saved from themselves? While the aviation industry suffered a tremendous blow from the events of Sept. 11, it is disingenuous for the airlines to blame all, or even most, of their current woes on the terrorist attacks. While the financial positions of most airlines have certainly gotten worse due to the attacks, most airlines were losing money at an increasing rate throughout 2001. Even with a $15 billion taxpayer bailout and added security surcharges, some airlines are destined to fail. And that's the way it should be. Innovate or Perish More than 70 years ago, economist Joseph Schumpeter came up with the term "creative destruction" to describe the notion that in a free market economy, corporations will either innovate or perish, and that, either way, it is a good thing. By allowing companies that don't innovate to fail, capital is thus freed up to be invested in other ventures, instead of remaining tied up in companies that are moribund. This concept should be kept in mind as the great airline drama of 2002 unfolds. Remember the dog days of 2001, with rampant delays, airlines blaming the FAA for air traffic control delays, the FAA blaming the airlines for scheduling more flights than the airports could handle, and airline management and unions blaming each other for just about everything? While these debates have been off the radar lately, as passenger demand comes back, these same, unresolved problems are likely to return. Back to creative destruction for a moment. For all of the airlines' complaints, many of them valid, about the state of capacity and the air traffic control system, two airlines seem to be doing something right. Southwest and JetBlue were making lots of money before Sept. 11, and, shockingly enough, have been making money since Sept. 11 as well. Profitable While there are many differences between the business models of these two airlines and the rest of the industry, their performance proves it is possible for an airline to be profitable, and, in the case of Southwest, to be profitable over the long term. Right now, I'm looking to buy a ticket from Washington Dulles to go visit family in Southern California in May. I would love to fly on my favorite carrier, which is one of the "majors," however, since I've started looking, my favorite airline's lowest fare is double that of JetBlue, which starts service on my route in May. I used to prefer my airline because it was "full service" compared to Southwest and JetBlue. But the last few times I've flown, there was very little service to speak of. For half the price and roughly the same service, JetBlue looks pretty good. JetBlue's in-seat satellite television seems pretty innovative as well. I mention this not as an advertisement for JetBlue but to illustrate a point. If the major airlines don't get their act together in terms of customer service, delays and plain old public perception, there are other options for the flying public. I would hate to see my preferred airline go bankrupt, but I'm not going to pay double to fly it and get the same service. There are lots of us out there who feel the same way. This is what the major carriers need to realize, and soon, because the forces of creative destruction are at work, and the bailout has bought them just a little bit more time. Opinions expressed are not those of Aviation Daily or McGraw-Hill. Bylined submissions should be sent via e-mail to Michael Miller, Editor, at mmiller@mcgraw-hill.com and limited to 650 words. A photo of the author, in print form or via e-mail, is welcomed. Submissions become the property of McGraw-Hill and will not be returned. Copyright 2002 The McGraw-Hill Companies, Inc.