Spiking fuel costs are grounding airline stocks, offering new evidence that something always spoils the party in the airline industry.

The eleven major carriers enjoyed a fabulously successful third quarter, in which they reported earnings of $1.7 billion. The results put the group on pace to its second consecutive profitable year for the first time since 2000.

And yet, the Amex Airline Index closed Wednesday down 3.4% to 41.40, which is approaching its 52-week low of 40.15. For the year, the index is down almost 29%. American Airlines parent

AMR Corp.

(AMR)

closed Wednesday at $21.52, nearly half its 52-week high of $41.

Continental Airlines

(CAL) - Get Report

shares, which closed Tuesday at $29.60, also has lost more than 40% of their value since early in the year.

The root cause is record fuel costs. The Air Transport Association estimates that, on an annualized basis, a $1 per barrel increase in the price of crude oil costs the industry $470 million. With crude hovering just below $97 a barrel, the industry must spend nearly $22 billion more annually than it would have spent when oil traded at its 2007 low per-barrel price of $50.51, in January.

It is no wonder that many investors shun airlines, which cumulatively have failed to make a profit since the Wright Brothers first flew. It's always something with this industry. Fuel prices. Labor issues. Terrorist threats. Irrational competition. Or even the possibility that Congress will step in to help.

Essentially, this is an industry that, nearly 30 years after it was deregulated, is still seeking a successful model. That is why there is often chatter about reregulation. From 1948 through 1978, the industry suffered just three unprofitable years. Since 1978, it has lost more than a billion dollars in nine different years.

As it happens, two industry leaders have recently identified better models.

On the third-quarter conference call for

US Airways

(LCC)

, CEO Doug Parker spoke of "a pivotal and probably momentous change" in the industry this year, as nearly every airline has moved to reduce capacity in the face of declining unit revenue. "I've been doing this quite awhile now," Parker said. "I've never seen that."

While past periods of inflating oil prices would send airlines ducking for cover, Parker noted the recent spike came at a time when the industry's leaders were reporting profits.

"If indeed everyone stays where they say they're going to stay

on capacity, I think what's really happened here is we've dramatically reduced the cyclicality of our business, which is very, very important," he said.

At

United

(UAUA)

, which also reported a strong quarter, CEO Glenn Tilton also spoke of significant change. But while Parker talked about the industry as a whole, Tilton, a former oil industry executive, seemed to retain his outsider's perspective, speaking of change that is confined to United.

"Our five-year plan provides a road map to better manage through the down cycles that are inevitable, and create value for all stakeholders, both of which the vast majority of the U.S. airline industry has consistently failed to do," Tilton said, during a third-quarter conference call. "Rather, as those of you on the call know better than most, U.S. airlines have consistently destroyed value."

The few public details of United's plan include improved yield management, a focus on high-end passengers and strategic transactions, including spinoffs of the airline's maintenance division and frequent flier program. Tilton said such moves would relieve United of the burden of "cross subsidies that mask inefficiencies."

Of course, it is unclear whether airlines can find salvation in either Parker's or Tilton's vision. Many observers and some carriers are skeptical of spinoffs that trade long-term revenue for immediate gain.

And while capacity reductions enable carriers to more easily raise fares to compensate for fuel price increases, the downside is that increased fares could scare off passengers. That evidently is what the stock market expects.