By Momei Qu

Contributor, Stock Traders Daily

(La Jolla, CA) Analysts, economists, and just about everyone else have long speculated that there will be massive consolidations in the airline industry. Up until now, most carriers have survived as they battle for hard earned revenues and shrinking margins. But much longer can certain carriers survive?

Ireland’s Aer Lingus (London: AERL), who have twice fended off Ryanair’s (Nasdaq: RYAAY) hostile bid in an effort to stay independent, signaled Thursday that they may be open towards a deal. Aer Lingus experienced net loss of $105.5 million in this first half of 2009. The average fare price dropped 17% while fuel costs rose 10%. Aer Lingus’ stock closed down 0.6% Thursday to 50 euro cents. Ryanair’s last offer that Aer Lingus rejected valued them at 1.40 euros a share.

Aer Lingus is not alone. The International Air Transport Association (IATA) said Thursday that the amount airlines can earn per passenger is continuing to fall sharply and a recovery in the industry will be slow and volatile. Volume of passengers is not the only issue. Even the customers who are flying are spending less on tickets, refreshments, bags, etc. Chief Executive of IATA Giovanni Bisignani states that there has been “little change to the unprecedented fall in yields and revenues.”

Airlines have no choice but to chase after pennies and turn to unpopular methods of generating revenue. U.S. Airways (Nasdaq: LCC) has been the latest carrier to raise bag check fees. It announced Wednesday that it plans to charge $20 for the first bag and $30 for the second bag, and $50 for a second bag on international flights. Continental Airlines (Nasdaq: CAL) and American Airlines (NYSE: AMR) have also increased bag check fees in recent weeks.

U.S. Airways was one of the biggest declines among airline stock Thursday, closing down 3% to $3.65. United parent UAL (Nasdaq: UAUA) also saw its stock drop 3% to $6.54. The AMEX Airline index (NYSE: XAL) closed down 1.5% with all but 2 components in the red.

Tying back to our original thought, with economic conditions continuing to be very unfavorable for airlines, Aer Lingus could just be the start to a group of carriers unable to operate under such thin profit margins. Perhaps the consolidation that has been talked about years ago will finally become a trend.