Eos was an improbably candidate for success in the airline industry. It flew one route, from New York's JFK to London. It was an all-business-class carrier.

Now, Eos is bankrupt. Having only one route, added to the rising price of jet fuel, cut the carrier down.

According to the AP, "The company, based in Purchase, N.Y., said it intended to eliminate most of its work force."

The news raises the question, once again, whether small and large airlines alike can make it though the current increase in fuel prices and a recession without having to file for Chapter 11. It was only four years ago that most U.S. carriers had to seek protection in the courts. AMR (NYSE: AMR) was one exception. That hurts it now because it did not use bankruptcy to cut its debt and the costs of its workforce. That may make it the most likely candidate of any American carrier to hit the air pocket of insolvency.

The oil price crisis my be so bad that, coupled with falling passenger revenue in a sharp and prolonged downturn, even mergers like the one planned by Delta (NYSE: DAL) and Northwest (NYSE: NWA) will not save them.

That will leave the banks, who hold most of the debt on airline balance sheets, holding the bag.

Douglas A. McIntyre is an editor at 247wallst.com.

Fort Worth-based AMR Corp. (NYSE: AMR), parent of American Airlines, was the first major U.S. airline company to report first-quarter results, and it posted a loss of $1.32 per share. Revenue rose 5% to $5.7 billion. Analysts surveyed by Thomson Financial had expected a loss of $1.34 per share on revenue of $5.73 billion.

Filling seats wasn't American's problem -- average occupancy hit a record 79.1% percent in the quarter. Average fares paid rose 5.1%, as airlines raised ticket prices. But executives said they were concerned about the weakening economy and even more worried about skyrocketing fuel costs. American's fuel spending jumped 45%, offsetting further increases in revenue.

American announced that it will be cutting U.S. capacity by 3.6% this year and selling 90% of its investment arm, American Beacon Advisors. The company also expects to sell or spin off its American Eagle regional airline this year to raise additional cash.

American is also speeding the replacement of its fleet with more fuel-efficient Boeing (NYSE: BA) 737-800s, taking delivery of 30 new planes in 2009 and 2010 instead of the previously planned 23.

AMR shares rose 35 cents, or 4.1%, to $8.92 in trading Wednesday.

Don't look for airlines to stop raising prices anytime soon, nor bend over backwards to provide creature comforts to travelers, according to one analyst.

Further, Northwest Airline's (NYSE:NWA)most recent decision to increase "fuel surcharges" - - i.e. raise ticket prices - - will remain a sector theme for at least the next few quarters, so says independent stock analyst C. Leonard Bauer.

"Airlines are facing rising fuel costs at a time when passenger demand is still solid. That means they have power to raise prices and pass their higher costs on to the consumer," Bauer told BloggingStocks Friday.

Fuel surcharge

Northwest announced Friday that on March 18 it raised fuel surcharges generally by $10 or $20 each way for flights from North America to Europe, India, Japan and most other destinations in Asia, The Associated Press reported Friday. That brings the surcharges to between $115 and $155. The surcharge on flights from Japan to North America will rise by $20 to $160 beginning May 1. Northwest also said it plans to freeze hiring pilots and flight attendants and cut domestic schedules by 5% beginning in September 2008, The AP reported.

Northwest's shares fell 5 cents to $9.16 on the news on Friday at mid-day.

Analysts, shareholders (and would-be shareholders), and many others no doubt will be keeping on eye on Memphis-based FedEx Corp. (NYSE: FDX), the global leader in express transport and delivery, when it reports Q4 2007 earnings next Wednesday, June 20. Many consider FedEx to be a bellwether for the economy.

Since FedEx reported a mild Q3 back in March, the trend of its share price hasn't been especially impressive these past three months. Blame it on the economy, fuel costs, the weather, or stiff competition from rivals United Parcel Service (NYSE: UPS) and DHL, a Deutsche Post (LSE: DPO) company, but FedEx has struggled of late, as reflected perhaps in the BloggingStocks Battle of the Brands match-up: FedEx vs. UPS. Analysts' feelings are mixed on FedEx as well, and the company does still face such troubles as discrimination lawsuits.

But it's no accident that FedEx is within the Fortune 500's top ranks. It continues to expand, both domestically and internationally, and stands to benefit from impending increased air traffic between China and the United States. General Motors (NYSE: GM) recently declared FedEx its 2006 Supplier of the Year, and the FAA has given FedEx a vote of confidence as well. And in May, FedEx announced a 10% boost in its cash dividend, to ten cents per share. The Motley Fool thinks FedEx may be a bargain, as well.

According to Thomson Financial, the brokers' consensus on FedEx is buy (6 buy, 7 strong buy, 7 hold). Its P/E is 15.89 (compared to 11.96 industry average), and its market cap is $33.16 billion. When FedEx reports earnings next week, Wall Street is expecting revenue of $9.14 billion, or earnings per share of $1.89, compared to $1.82 actual last quarter, and $1.35 a year ago. Its price target is $124.42; the 52-week low was $97.79 in August 2006 and the high was $121.42 near the end of this past February. FedEx closed Wednesday at $108.82.

Southwest Airlines (NYSE: LUV) went from being a tiny regional airline to a major low-cost carrier under former CEO Herb Kelleher. He must not be very happy these days.

Southwest announced that its growth was slowing (subscription required) and that revenue for the next quarter would be disappointing. Other airlines including Northwest (NYSE:NWA) are saying that they will have to cut capacity.

According to The Wall Street Journal, airlines are able to sell seats, but must offer large discounts because passengers have less discretionary spending due to economic problems including the slowdown in housing. And Southwest's jet fuel prices rose 47% last year as oil and gas prices moved up.

Southwest used to be able to handle cost problems better than most airlines because it only had to maintain a fleet of one type of plane, the 737, and its workers were the most productive in the industry. Low prices drew customers from large rivals especially American. The airline's share price had a huge run from 1980 to 2001, up from $.16 to over $20. But, the competition caught on and began to offer better fares on many routes and cut labor costs.

The price of success.

Douglas A. McIntyre is a partner at 24/7 Wall St.