On Sept. 11, 2001, Osama bin Laden tried to break the American economy in general (or as he put it, "make America a shadow of itself"). We now know that he failed. Even the airline industry, which was already weakened prior to 9/11, has been able to withstand the effects of that horrible day.

Five years after the attacks on New York and Washington, D.C., the U.S. economy looks stronger than ever. In 2000, the year before the attacks, the U.S. gross domestic product (the value of the goods and services we collectively produced) amounted to $9.8 trillion. GDP has continued to grow in every year since (and including) 2001, and last year it clocked in at more than $12.4 trillion -- nearly 27% higher than in 2000.

Betting against a winner
According to U.S. government statistics running back to 1929, the U.S. economy has only contracted year-over-year seven times in the last 77 years -- and four of those seven contractions took place during the Great Depression. As a matter of fact, the last time the U.S. economy out-and-out "contracted" was in 1949.

That's right, folks. Vietnam didn't hurt GDP growth. The OPEC oil embargo of the 70s didn't, either. Against the strength of the U.S. economy, 19 suicidal fanatics didn't stand a chance.

Betting against a loser
What's even more pathetic about bin Laden's "grand plan" is that he failed to kill the U.S. airline industry -- prey that was considerably weaker than the U.S. economy at large.

Prior to 9/11, the airlines were already reeling from the popping of the dot-com bubble and a 50% year-over-year rise in the price of oil. Northwest and Delta, for example, had benefited greatly from the low oil prices and bubble economy of the late 1990s. Northwest racked up $1.4 billion in profits in the second half of the decade, while Delta earned $4.4 billion. But in the aftermath of 9/11, both companies plunged deeply into the red; each company lost billions of dollars, and both ultimately filed for bankruptcy on a single, dreadful day in September 2005.

Including Northwest and Delta, a total of 10 airlines filed for bankruptcy in the wake of 9/11. And I choose those words purposefully -- "in the wake of" rather than "because of" -- because the airlines weren't all that healthy to begin with. To illustrate, let's take a look at their profits in the year immediately preceding Sept. 11, 2001, in the year immediately following it, and then look at where the airlines are today:

Profits 2001 2002 TTM

American (NYSE:AMR)




Continental (NYSE:CAL)












Southwest (NYSE:LUV)








U.S. Airways (NYSE:LCC)








[Disclaimer: The results shown above, and the conclusions I'm going to draw from them, are in some measure influenced by "survivorship bias." It may initially seem that I'm examining just the healthy companies, ignoring those that failed after 9/11. Don't worry, though, because I'll address that bias in a moment.]

On balance, the numbers above show that the airline industry managed the disruption of 9/11 remarkably well. True, the seven companies listed lost an average of about $1 billion each in the year following 9/11 -- but they were losing money at more than half that rate before al-Qaeda's attack. 9/11 may have made a bad situation worse, but it didn't kill the airlines. For proof, just look where these airlines are today: generating an average of $640 million per year in profits.

Now about that bias
I promised to address the survivorship bias issue, and I shall. Yes, Delta and Northwest filed for bankruptcy protection, and neither company has yet emerged from Chapter 11. For that matter, Independence Air is in the same predicament today, and both United and U.S. Airways entered and emerged from Chapter 11 (the latter, twice). So to put the above results into context, let's add in Delta's and Northwest's numbers and see how they change the results for the industry as a whole:













New Total:




Add these two bankrupt companies into the mix, and they drag the whole industry down into the red. But notice that even with their numbers added, these airlines today are losing less money than they were before 9/11.

So did 9/11 kill the airline industry? Hardly. 9/11 made a sick industry sicker, but today the patient is already back on the road to recovery.

So what did 9/11 accomplish?
Primarily, it accelerated the business cycle that the airline industry was already traversing: years of feast, followed by years of famine. Today, we're once again seeing airlines feasting on crowded flights of customers paying top dollar for a seat -- any seat -- on an airplane.

As former Fool contributor Whitney Tilson observed in his classic column "Beware of Steel and Airlines," airplanes are just too expensive to be allowed to sit idle. Given the choice, airlines have historically been more than willing to "cut fares to fill seats," rather than ground some planes, keep fares on others high enough to earn a profit, and eat the cost of financing the grounded planes and paying the grounded crews.

The twin challenges of surging oil prices and a nervous flying public finally brought home the need to pull back on the yoke, thus lifting the airlines out of their collective dive. In the years since 9/11, the industry has eliminated more than 150,000 jobs and offloaded billions of dollars of pension obligations onto the government's Pension Benefit Guarantee Corporation. While I consider the layoffs lamentable, and the reneging on pension obligations reprehensible, it's clear that both improved the airlines' balance sheets.

The airlines combined these two moves with a decision to retire nearly 1,000 planes from service, thereby reducing capacity and creating some pricing power. As a result, airlines today are routinely reporting "highest ever" monthly load factors (the industry as a whole hit 86% in July).

In the final analysis, far from destroying the industry, 9/11 sounded a much-needed wake-up call to the realities of economics. Having heeded it, the industry -- like the U.S. economy as a whole -- stands stronger today than it has for nearly a decade.

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JetBlue is a recommendation of Motley Fool Stock Advisor .

Fool contributor Rich Smith does not own shares of any company named above. If he did, the Fool's Rules would require that he tell you so.