Tough ClimbTough Climb

So why don't some airlines make these moves? The problem may be cultural. "The airline business is still one of the most vertically integrated industries you will find," Pomeroy says. "It's not like they're picking their own coffee beans, but given the management talent and infrastructure they have, there's a huge misalignment."

No individual IT or business-reengineering project will fix flagging airlines, but industry execs insist the changes they're implementing, combined with concessions from labor and vendors, will get them flying on a cost basis that's sustainable over the long term.

And, in fact, many airlines have outsourced at least basic IT management. The operation of American Airlines' infrastructure, for instance, is 80% outsourced to EDS. Some airlines also are looking at business-process outsourcing to save money. Delta recently handed off some call-center operations to service providers in the Philippines and India and will likely reduce the number of call centers it operates, currently a dozen.

American may begin to outsource some billing and invoicing, Garcia says. "It will be case by case, but we're definitely looking at it." Continental has worked with EDS to move some data processing offshore and is set to disclose a contract under which it will hand off some of its reservations operations to a service provider.

Delta's Robb, however, says wholesale IT outsourcing doesn't guarantee cost savings and better service. "We get payback on a yearly basis [for in-house IT work] and we get it at a fraction of the cost," he says. That kind of conservatism is deeply rooted in airline culture. Only time will tell if it's an approach that will lift industry profits--but for some carriers, time is running out.