For years, it's been evident that smaller airlines have had an operating advantage, particularly when they use less expensive airports. They've been able to post better numbers as a result, and in the current travel slump, they've outperformed the larger carriers. Well, they've also picked up a considerable amount of market share.

According to a report by USA Today, low cost carriers now have 30% of the market in the United States. Price-sensitive consumers are turning to cheaper alternatives, even if it means (for fliers with elite status) giving up the perks they've earned through years of customer loyalty.

Across the country, big jets are disappearing -- nudged shoved aside by the little guys, which are cheaper to operate and don't require as many butts to fill seats.

The number of empty seats falls, and revenue per available seat-mile (RASM) goes up. It's pretty straightforward. But, for crowded flights, this could leave a few people stuck without their preferred routes. The alternative, of course, is an unsustainable status quo, in which a few passengers remain happy ... until the airline folds.

The US Airways (NYSE: LCC) ticker symbol says it all: LCC = Low Cost Carrier. With its latest announcement, the airline may want to change it to LEC -- Low Expense Carrier. In an attempt to keep pace with the plunging travel market, US Airways is cutting 1,000 jobs next year, shoving almost all its flying to its three hubs (Philadelphia, Phoenix and Charlotte) and Washington. Several international routes are being cut.

The airline reports that routes from its hubs have been profitable. Currently, US Airways pushes 93% of its flights through these airports, a rate it seeks to push up to 99% in 2010.

If you think all those new airline fees were a temporary measure to help these beleaguered companies through an economic crisis, you're out of your mind. Now that they've had a taste of how much they can make by charging you for an extra bag or a little more leg room, they're hooked. More important, the fees are making up a meaningful portion of airline revenues and profits, so investors aren't likely to be satisfied with a return to normal – well, they can't. Extra fees are the new "normal."

Business travelers still aren't coming back to the good seats, despite airlines' best efforts. FareCompare.com reports that many business class tickets to Europe are going to be 33% to 66% cheaper this fall relative to last year. Companies are being careful with their cash – which means stacking people in coach rather than giving them a little leg room on overseas flights. With back-of-the-plane tickets going for a quarter of the price (or less) than their business class equivalents, this isn't exactly shocking.

On Wednesday, Delta's (NYSE: DAL) cheapest NYC-to-London's cheapest roundtrip coach fare was $716 (for an October 23 departure and October 30 return), according to a report in USA Today. To take the same trip in business class, you were looking at a hefty $4,634. So, even though prices are down year-over-year, it doesn't mean that business travelers are being allowed to enjoy the opportunity.

Bigger fees are compensating for shorter flight manifests. For the first half of 2009, airlines in the United States have raked in $3.8 billion from cancellation, re-booking, checked bag and other fees. Data from the U.S. Department of Transportation puts this result up from the $2.3 billion airlines generated from these fees in the first half of 2008.

While passengers haven't been thrilled with these additional charges, the airlines have had to compensate for a significant drop in passenger traffic, as the industry copes with the worst travel session since the terror attacks of September 11, 2001.

Higher fuel prices and slipping demand for air travel have prompted a change. The International Air Transport Association revised its forecast of global airline losses for the year from $9 billion to $11 billion. Revenues for the air travel industry are expected to fall 15% to $455 billion worldwide. Passenger traffic is anticipated to fall by 4%, with cargo dropping 14% for the year.

Financially, IATA CEO Giovanni Bisignani says the impact of the financial crisis has been more severe than the terror attacks of eight years ago.

Delta Airlines (NYSE: DAL) is looking to buy a piece of Japan Airlines (OTC: JALSY). The move could give the world's largest airline access to more cities in Japan.

A source close to the talks says that the investment would be several hundred million dollars and would open the door for an alliance between the two that would allow each airline to book passengers on the other's flights.

August brought more misery to the airline industry in the United States. Seven of the country's nine largest carriers saw traffic drop, with only Southwest Airlines (NYSE: LUV) and JetBlue Airways Corp (NASDAQ: JBLU) bucking the trend. The continued upward climb of unemployment, tighter corporate budgets and sluggish demand for leisure travel has resulted in fewer passengers in seats.

JetBue was the only carrier not to report a drop in available seat miles (ASMs), the primary measure of airline productivity. Load factors, however, which indicate how full a plane is, tended to be higher, largely a result of flights that have been cut in an effort to reduce costs.

Earlier this morning, Continental Airlines (NYSE: CAL) announced that it will cut 1,700 jobs, along with raising fees for checking luggage. CAL tagged this news along with its quarterly earnings report, in which it reported a loss of $1.72 per share. In the same quarter a year ago CAL lost a nickel per share. Excluding one-time items, CAL lost $1.36 per share compared to estimates for a loss of $1.35 per share. Quarterly revenue slipped 22.7% to $3.13 billion in the quarter, just shy of the consensus estimate.

Staff cuts are coming for Singapore Airlines (OTC: SINGF) with calendar Q2 "almost certain" to be a money-loser. This won't be a first for the carrier, but it's definitely rare. Since going public in 1985, SINGF has only had one quarterly loss until now. It took the SARS epidemic to put this company into the red for three months, back in 2003. According to four of the five analysts polled, there was little the company could do to avert the situation.

In a respectable move, the staff cuts are following that of the executive team, which has had 10% to 20% sliced from its salaries. An operating loss of $50 million or more for Q2 will cause staff paychecks to fall by at least 2.5%. SINGF is on the hook to cut 25% of the "monthly variable component" (MVC) that's included in staff salaries if the airline's loss pierces the $50 million threshold. MVC disappears in its entirety if the loss passes the $200 million mark. Currently, MVC accounts for only 10% of employees' total compensation.

Employees have already been chipping in to reduce the airline's costs. Pilots, for example, have sacrificed 65% of a day's pay every month, and employees in general are working shorter weeks.

But, this hasn't been enough.

AMR Corporation (NYSE: AMR) got spanked in the second quarter, as frequent fliers kept their feet on the ground. The American Airlines parent posted a $390 million loss in a quarter that historically has been kind to travel companies. AMR rationalizes the results with the thought that the loss would have been only $319 million ($1.14 per share) if charges related to selling and grounding planes were excluded. This would have put the airline ahead of analyst expectations of a $1.28 per share loss. AMR's Q2 revenue fell 21% to $4.89 billion.

And, it's far better than the airline's performance in the second quarter of 2008.

Continental Airlines (NYSE: CAL) just got the relief it needs to compete. Despite resistance from the Department of Justice (which can only recommend), the Department of Transportation has granted the airline immunity from antitrust laws. This clears the way for Continental to work with United Airlines (NASDAQ: UAUA) -- and other carriers -- on international routes. Now, the airline can join Star Alliance, which already has antitrust immunity.

At the same time, DOT approved a joint venture among Continental, United, Lufthansa (OTC: DLAKY) and Air Canada. This new relationship would involve trans-Atlantic routes.