Jessman has hit the nail absolutely on the head. His theory makes a fitting corollary to my thesis which states that "Without a complete overhaul of operating costs every decade, an airline cannot remain competitive in a deregulated environment."
Historically, this has proven to be very accurate. The first round of industry deaths was seen in the early 80s with consolidation being the fate of those unable to control operational costs, with a few shutdowns (Braniff). A decade later saw a spate of bankruptcies, some resulting in liquidation (Eastern, PanAm) and others in restructuring (Continental, TWA). This time round, the ranks are being thinned again with TWA already biting the dust, with the jury out on USAirways and United.
How do the survivors keep themselves viable? Their methodology varies. In the first round, some sought to survive by acquisition, seeking instead to increase revenue rather than cut costs. PanAm acquired National, TWA acquired Ozark, Northwest acquired Republic and Texas Air acquired pretty much everyone else. Others went the way of labor concessions, which took the form of B-scales at American, "Blue Skies" at United and the infamous Lorenzo bankruptcy at Continental. American's B-scales were the only truly long-term solution to the problem, which bought them an additional generation of savings and allowed them to consolidate their strong position. Similarly, Continental's abrogation of labor contracts achieved the same end, but killed the golden goose while doing it. In the second round, some achieved their targets by acquisition again (Delta acquiring Europe, AA acquiring LatAm), with United using ESOP as a means towards their target for that generation. Continental used bankruptcy yet again, as did TWA. Throughout this, USAir continued to acquire many small carriers and built themselves up into the major carrier than they became. Northwest played conservatively and chose to avoid major capital expenditures while increasing revenue streams through the introduction of the first comprehensive marketing alliance. Fleet renewal programs at most of the carriers also slashed direct operating costs.
In their own way, each of these carriers thus were able to overhaul operational expenditure every decade. Usually, this was done at the expense of the labor groups, but occasionally at the expense of creditors or other airlines.
As Jessman points out, with maturity comes seniority, and seniority brings with it the related pitfalls of higher labor costs and less efficient workrules. A new entrant, by definition, does not have any of this baggage. Additionally, a well-funded new entrant has the advantage of choosing the most beneficial markets for infrastructure investment and vendors for capital acquisition, benefits that existing operators utilized generations earlier and are now irrevocably tied into, despite possible changes in the operating environment. In the short term, provided sufficient capital exists, and provided the appropriate markets are targeted, it is very easy for a new entrant to be succesful, often to the detriment of the incumbent who is handicapped by pre-existing baggage outlined above. However, as new entrants themselves consolidate and become incumbents, the next generation of operational streamlining comes knocking and the cycle continues.
"The A340-300 may boast a long range, but the A340 is underpowered" -- Robert Milton, CEO - Air Canada