Airlines Try to Learn From Past

Consumer spending should also ease, Melek said. While GDP growth has slowed to a 1.6% annual rate, largely because of the decline in housing and construction, consumer spending "continues to chug along at 3.1%." The balance must be restored, he said. In the meantime, the impact of declining GDP has been mitigated because the oil price drop has freed up about $35 billion for spending.

Over the longer term, oil prices should rebound to above $60 in the latter half of 2007, as the economy picks up again, Melek said. And of course, they could go higher, given the geopolitical threats in Iran, Nigeria and elsewhere.

"If the president of Iran hugs Hugo Chavez on camera one more time, God knows what could happen with oil prices," said aviation consultant Mike Boyd. "Right now we've got about $10 to play with," he said, but broader increases could negatively impact airline results.

Service issues might also hurt the industry. So far this year, passenger load factors are historically high, while on-time arrival rates are historically low.

Airlines filled a relatively robust 80.4% of their seats in the first seven months of 2006, including 85.1% in July, according to the most recent available Bureau of Transportation Statistics data. Last year, occupancy averaged 77.6%, the highest annual average since World War II.

In the meantime, 76.5% of flights arrived on time during the 12 months ended Sept. 30, below the average on-time arrival rate of 78.6% over the 19 years since statistics were first kept, according to the Bureau of Transportation Statistics.

Loads approaching 80% are a big operational challenge, said Robert Mann, partially because anyone who misses a flight faces the probability that later flights will be fully booked.

"There is no margin for error. That's been a calculated risk," Mann said. But he noted that whenever airline executives pledge to reduce capacity, "they get a big thumbs-up from the street."