Airlines haven't been this profitable since 1978

    At least all those extra airline fees are doing some good -- for the CEOs that are charging them, that is. Over the last week, airlines have announced their quarterly earnings statements, and they're all written in black. Delta (DAL, Fortune 500): $363 million in profit. United (UAUA, Fortune 500): $387 million. Continental (CAL, Fortune 500): $354 million. JetBlue (JBLU) had its best third-quarter ever. Southwest's (LUV, Fortune 500) revenue rose nearly 20 percent.

    For an industry that's supposed to be suppressed in times of economic downturn, that's incredibly good. Good for the corporations and shareholders, that is. Average consumers, meanwhile, should be concerned. Because the profits aren't stemming from more people are buying plane tickets -- rather, it's that plane tickets cost more money to buy.

    Some historical context: This is the airline industry's best quarter since 1978. Back then, Pan Am and TWA still ruled the skies, JetBlue and AirTran didn't exist, and Capt. Sully was flying an F-4 Phantom II in the Air Force. It was a different era of commercial flight.

    And a profitable one, according to data from Vaughn Cordle, the chief analyst at Airline Forecasts in Washington, DC. Cordle's data, which includes private and public companies for the last 30 years, claims that the industry's quarterly net margins -- profit after legal, regulatory, etc. fees are taken into account -- is the highest in 32 years. Those net margins: 7.7 percent. This quarter, in other words, is a once-in-a-generation success.

    (One caveat: His 2010 data includes only public companies for now, since those are the only ones that have reported. But they also the companies that bring in the large majority of the industry's revenue.)

    So how did the airlines actually manufacture that success? By raising prices, adding fees, and cutting seats. Let's review how recessions torpedo airline business models, and what the carriers do to calibrate to the new normal:

    • First, people stop having as much money or credit as they used to.

    • Then people stop spending as much money on flights.

    • The airlines, stuck with their pre-recession routes and schedules, stop making as much money. This is why, in 2008, the industry's net margin was a negative 5.3 percent.

    • The airlines adapt. By merging:

    The newlyweds: Delta and Northwest; Continental and United; Southwest and AirTran. The mergers consolidate the industry and soon thereafter consolidate travelers' options. Fewer airlines means fewer flights, and fewer flights means fewer seats.

    In 2009, before the mergers, airlines reduced their capacity by 5.9 percent from the previous year, according to Cordle's data. It's expected the industry's overall capacity will now be in flux, perhaps with some new seats added as airlines fill in the gaps left behind by the mergers.

    After capacity and competition are cut, it's time to nickel-and-dime. Stand-by charges, cancellation penalties, and, of course, baggage fees are all in play for airlines now. (For most of us, that may be for the best, since it keeps the actual ticket price slightly lower for those who only bring a carry-on.)