As gasoline prices remain high, the pressure on the airline industry continues to mount. Last week, Delta
Low-cost carriers were also hit. Frontier Airlines
But higher fuel costs may actually end up being beneficial to the low-cost carriers like Frontier, Southwest Airlines
At a Bear Stearns conference on May 12, Frontier showed data on operating margins for the December quarter for a number of airlines. Southwest, Frontier, JetBlue, and AirTran were all more than 7%. On the other hand, traditional airlines such as Delta, United, and AMR
In addition, attempts by traditional airlines to pass the higher cost of fuel on to consumers are failing to stick. The latest attempt to increase fares, led by Continental Airlines
While higher fuel prices may be putting pressure on all airlines, on a relative basis, it is the weaker, traditional airlines with uncompetitive cost structures that are feeling more pain. In the long run, higher fuel costs may prove to be a great boost to overall industry profitability by accelerating the demise of the traditional airlines that have been able to hang on for longer than many had expected. Sustained higher fuel costs may force the much-needed industry shakeout to finally occur.
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Fool contributor Salim Haji lives in Denver, Colo., and does not own shares in any of the companies mentioned.