(FORTUNE Magazine) – The airlines face a brutal summer. The end of the Iraq conflict marks a drop in fuel costs and an increase in travel, but if the latest round of fare wars continues, more losses threaten the carriers. So why fight? The airlines want to build customer loyalty. Although competition for domestic travelers is becoming fierce, the long-term target is to build international business and the U.S. hubs that feed it: That is where the growth is. The number of domestic passengers is up 55% since 1980, vs. 77% for international. Several airlines have launched fare wars (see table for a sampling of recent round-trip bargains). Expect more as carriers focus on passengers flying between the U.S. and Europe. The British government's approval of the transfer of all five of Pan Am's routes into London's Heathrow to United Air Lines and three of TWA's six to American Airlines has already set off a price battle. Says Lee Howard, CEO of Airline Economics, a consulting firm: ''All in all, it'll be a wonderful time to plan a trip to Europe. But I'm not sure if it'll be a good time for the airlines.'' (Before you book anywhere exotic, see following story.) Meanwhile, the U.S. Transportation Department's refusal to let TWA sell its other three routes to American pushes yet another struggling carrier closer to bankruptcy. Says TWA chairman Carl C. Icahn: ''The order could well become a disaster for TWA.''

CHART: NOT AVAILABLE CREDIT: NO CREDIT CAPTION: NEW TRAVEL BARGAINS FROM AIR FARE WARS