Airlines: Low-cost operators thrive as rivals crash

The defining event for the world's airlines this year was 11 September and the defining image was of a hijacked passenger jet crashing into the twin towers. The airline industry was thrust into a state of paralysis followed by freefall. Since that dreadful day, the world's airline industry has shed nearly 200,000 jobs and is heading for combined losses this year in excess of $20bn.

The defining event for the world's airlines this year was 11 September and the defining image was of a hijacked passenger jet crashing into the twin towers. The airline industry was thrust into a state of paralysis followed by freefall. Since that dreadful day, the world's airline industry has shed nearly 200,000 jobs and is heading for combined losses this year in excess of $20bn.

Faced with a 50 per cent decline in US domestic air travel and a danger that the country's biggest airlines would be forced into bankruptcy, the Bush administration sanctioned an $18bn rescue package. On this side of the Atlantic, the response was more limited. The European Commission gave member states the right to compensate their transatlantic carriers for the losses incurred through the four-day closure of US airspace. Governments were also permitted to provide national airlines with insurance cover to allow them to fly.

But there was no grand bail-out of US proportions. This was partly at the behest of low-cost carriers which not only weathered the storm but also benefited from it. While British Airways reported a 36 per cent decline in passenger numbers in the first seven days following the attack, traffic on low-fare airlines had returned to its pre-11 September levels within a week and then continued to grow, fuelled by promotions.

BA's response to the collapse in passenger numbers was to announce a 20 per cent reduction in capacity and 5,200 job losses in addition to 1,800 already announced. Further reductions in staff levels are expected in the new year.

In the US, the corrective action was even more draconian. United Airlines, one of the two carriers whose jets were used in the suicide hijack attacks, cut 20,000 jobs. One of them belonged to its chief executive, James Goodwin, who had warned staff in an internal memo that United might "perish" because of 11 September. United has not perished, neither have any of its US counterparts. But 11 September did spell the end for two European flag carriers – Swissair and Sabena of Belgium. And others announced restructurings in order to survive.

Out of tragedy, good has come for passengers in the shape of improved security. Reinforced cockpit doors, sky marshals and enhanced check-in and baggage screening are likely to become common features of air travel.

There was also the Concorde comebackto cheer the industry. On 9 November it took its first commercial flight since the crash outside Paris 16 months earlier.