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Getting the Carriers Back in the Air

FOCUS ON STRENGTHS. A similar effect might be accomplished by dividing the flying world into regional niches, says Young. Big carriers could focus on higher-revenue, transcontinental routes used primarily by business travelers. American, which is already strong in South America, could build on its presence there. Northwest, which has many routes to Asia, could focus on that region. And Continental could get bigger in Europe.

In that scenario, short trips between popular markets in the U.S. would naturally become the domain of Southwest and JetBlue, while regional carriers could focus on the smallest markets. Such an idea raises, but doesn't answer, difficult questions: Who would divide the pie? How to ensure that such mini-monopolies wouldn't lead to out-of-sight fare increases?

The major carriers could be shoved in that direction anyway, as point-to-point carriers attract price-conscious passengers on the biggest airlines' best routes. Without much fanfare, Southwest has become the fourth-largest domestic carrier in terms of passengers carried. In response, United and Delta have unveiled plans to start low-cost, point-to-point subsidiaries. If they can earn a profit on these, they might help stem the loss of market share to the discount airlines. But pulling that off will be tricky: Analysts note that no previous efforts to build a cheap-fare airline within an existing major carrier have succeeded.

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