Well Pan Am actually went bust during the recession which occurred during the first Gulf War in 1990. The boom period for the airline market in the USA that preceded that ended in 1988. However the fate of the airline was sealed before deregulation in 1978. Back then Pan Am was solely an international carrier and though the details elude me right now I recall that in the years preceding deregulation the US government allowed some domestic carriers to apply for and receive rights to fly international routes. Pan Am was at a distinct disadvantage as it had no domestic network to feed its international routes. There was an attempt to merge with National Airways before 1978 but that was prevented in the regulated environment of the day. By 1978 Pan Am was already a white elephant and the next decade was an exercise in slow death. Assets were sold progressively for cash but the low yield ($)deregulated market with Chapter 11 protection for sick/mismanaged carriers gave Pan Am no chance to rebuild. The Lockerbie bomb fallout and a couple of years later the recession and bust in the industry was the last straw. I was at LAX as one of the last 747's landed and the fleet was parked forever.
As for smaller carriers surviving, well many don't trust me. and many end up in mergers so we don't tend to see their demise quite the same. As for those legacy carriers like Pan Am, Braniff, Eastern, TWA, and the plethora of deregulation carriers they were largely mismanaged or intentionally hit by corporate raiders. Look at the Frank Lorenzo years. Alaska and Westjet largely serve in hubs that have little competition on the same scale in that region. For many years Alaska and Southwest served niche markets in their regions and only expanded significantly in the boom years of the mid 90's. Also there is a pretty clear link between profitability and fleet simplicity. All those still struggling legacy carriers like United, American, Delta, Northwest, US Airways all have fleets of just about everything ever built. When fuel was cheep the older long since fully paid for jets were seen as cheaper to operate that newer jets. But that is typical of US airline philosophy where the industry fleet average age has always been by far the oldest in the world outside of third world and former Soviet Union countries. This isn't the first time fuel costs have risen faster that an US airlines can shift their fleet mix to more efficient newer types. And as we are sure to see there will be bankrupcies and failures of legacy carriers yet again. United and US Airways have been pursuing a merger to stave off a failure of one or the other as have Northwest and Delta. Thats all off as they all struggle with rising losses yet again. As I said I don't wish it on anyone at all but I still think that at least one large legacy carrier needs to fail completely in the US for there to be any chance of stability in that market, and maybe even two carriers. There are too many seats, to much competition and no price mobility at all except downward between carriers. I blame Chapter 11 for creating this scenario which has never seen the market settle at a suitable staus quo since 1978.