Yellow Snow, I think that's right. But as the Irishman said when asked the way to Dublin, you don't start from here. Yet we are where we are now. Recent years have been devoted to boosting load factors so capacity can be cut (in the name of reducing costs). On the revenue side, however, the yield earned by the majors has been undercut by the low-cost airlines and, above all, by continuing high demand for travel, so much so that airlines don't need to place customer service as a high priority. Why should they when they can fill aircraft with zero service ! Of course, whether demand for travel will continue at the same levels in the current economic environment remains to be seen. I think the airlines themselves think it may not : hence further capacity reductions that have been announced in recent weeks (eg. United 4% reduction in overall seats).
One thing the major airlines in the US do have going for them is higher yield international flights, so the domestic low-cost people, in my view, may be even more vulnerable. A similar parallel may also exist in Europe.
Finally, on the cost side, US airlines were actually quite well hedged against rising fuel costs up to 2007. What we are seeing now is a double whammy : oil hedging at $60-70 no longer available, while the oil price has risen way above the $80-$100 or so that was expected last year.