(FORTUNE Magazine) – THE WORLD'S AIRLINE industry seems on the brink of a historic shift. For years the only formula for profits was the hub and spoke system. By pulling in passengers from smaller cities, like Jacksonville, Florida, and Charleston, South Carolina, to one big hub, like Atlanta, an airline could capture traffic for the lucrative long-distance flights across oceans and continents. That old way still works along the Pac Rim, where Singapore, Hong Kong, and Bangkok are international hubs. Singapore Airlines is usually the world's most profitable airline; on this list Swire Pacific, the conglomerate that owns Cathay Pacific and Dragonair, topped the profit ranks with the help of earnings from its property development business. Elsewhere, airlines have flown into trouble. More than half the carriers listed lost money last year, including nine out of the ten American lines. In the U.S. market the old formula has led to cutthroat competition and staggering losses. Carriers offer half a dozen ways to get from here to there using various routes through different hubs, but none of the megacarriers can figure out how to do that and consistently make a profit. The only moneymaking U.S. airline, Southwest, doesn't follow the usual formula. Southwest has no long flights; it links city pairs with frequent flights almost like a shuttle, omitting the niceties of first class, advance seat selection, hot meals, and baggage transfers to other airlines. It keeps a tight schedule and a tight budget. Continental emerged from bankruptcy in April and recently began a service much like Southwest's in the eastern U.S., with nonstop flights connecting Jacksonville and Charleston, among other cities. American has turned over most of the short routes out of its San Jose hub to startup Reno Air. United has been negotiating with its unions to set up a low-cost subsidiary to handle its short runs and compete with Southwest. It would keep the long-haul routes, and the unions could retain their privileges on those flights. Delta is looking into starting a similar short-haul service. Europe's airlines fear the already lower costs of U.S. competitors. Restructuring to get their own costs down will be a challenge. In October striking union members at Air France interrupted operations with near riots on the runways. But the U.S. experience has shown that when fares drop, volume soars. Some smart airlines should be able to make a profit on that basis in Europe too.

CHART: NOT AVAILABLE CREDIT: NO CREDIT CAPTION: THE TOP 50 AIRLINE COMPANIES