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The price of oil is killing the airlines. Analysts tell us the business models of the industry are predicated upon oil priced at $90 a barrel or below. The airlines earn, on average, $160 per one-way ticket and pay over $120 per passenger for fuel alone. The remainder must cover wages and benefits, landing fees, pensions, and improvements or upgrades to infrastructure. With the exception of Southwest, whose foray into the futures market allowed it to "lock down" a rate of just over $50-a-barrel, the industry is dying on the vine.

No one knows for sure just what a $140-a-barrel airline industry will look like, but the major carriers will have to sustain some fundamental and seismic changes to weather the storm. Though no one likes to talk about it, ticket prices will have to rise. Until 1978, the US government regulated the prices airlines could charge, maintaining a price floor and allowing the carriers to compete on service. Ticket prices in the '70s, adjusted for inflation, were substantially higher than they are today. Deregulation allowed a drop in airfares but its effect was marginal until 2001, when 9/11 and the subsequent rise of discount carriers Southwest and Jet Blue--whose business models were predicated on low fares--sparked a price war. "Legacy" carriers, fearing permanent loss of business, quickly followed suit, dragging ticket prices to levels unsustainable even with oil below $90 a barrel.

As long as oil remained cheap the agile low-fare lines enjoyed a competitive advantage above and beyond their business models: the young age of their fleets and their employees. While the legacy carriers shouldered the burdens of decades-old pension agreements and withstood increasingly hostile confrontations with the pilots' union, Jet Blue and Southwest enjoyed extremely high ratios of active workers to retirees and virtually no union entanglements. (For a dissertation on the often understated effects of an aging workforce, see Malcolm Gladwell's excellent article here.)

But even low cost carriers based their business models on cheap oil. That their albatross effect on fares opened up air travel to millions of Americans, including the author, who might otherwise have driven cars or taken the bus may end up being more detrimental to low-costers than to their rivals. Despite their ungainly workforces and aging fleets, the legacy carriers have at least one advantage: they never expected to make much money from the "cheap seats" in the first place, garnering the vast majority of their profits from first-class cabins and overseas flights. Their relative neglect of "break even at best" coach cabins while emerging from bankruptcies after 9/11 provided the low-fare carriers with their golden opportunity to capture market share. Ironically, if ticket prices rise to sustainable levels low-fare customers will likely be the first to drop out of the market.

But while soaring fuel costs are likely to prove most detrimental to low-cost models the legacy carriers, caught between the need to reduce costs and raise fares and the ever-decreasing ratio of active workers to retirees, are in no position to capitalize on higher ticket prices. In the end the companies with the most visionary leadership and the most flexibility to adapt will probably prove most resilient. Southwest has its superior vision to thank for its temporary supply of cheap oil. And a company with the moxie to think outside the box and invest in the futures market may yet have something else up its sleeve to deal with the fallout of the low-end market. (For now, at least, it can enjoy a windfall of frustrated customers startled by rising fares and the "nickel-and-dime" pricing structures of its rivals.) Others, like Richard Branson's Virgin, are making moves to exculpate themselves from the fossil-fuels market altogether. (Virgin's first "all bio fuel" flight enjoyed great press, but we've yet to see if bio fuel is any more viable in the long term than petroleum.)

For those carriers whose destinies are still tied to the price of a barrel (Jet Blue this means you), the survival of the low-fare market will likely depend on revenue sources other than fares, which means we may soon be seeing more partnerships with advertisers. One oft-overlooked source of potential advertising dollars is on company websites. Carriers looking for advertising revenue but understandably wary about filling their cabins with corporate logos need look no further than the "new media". Sites like Salon.com offer their visitors a choice: see the content free and agree to sit through a few advertisements and to put up with animated sponsor logos on the page, or pony-up a nominal monthly fee to read without ads. Imagine visiting an airline website and having the opportunity to save 20% on your ticket if you agree to watch a 30-second ad or to take a consumer survey (or to pay the regular price and skip the ads). Internet-based low-costs like Jet Blue already enjoy the advantage of a "hip" market segment accustomed to web-business. Just as Ikea does, the company could be very overt in explaining "how we keep your fares low", and let customers decide. (I'd sure watch a land rover commercial for a discount ticket.) If Jet Blue is not willing to go there, the right start up soon will.