Actually, the biggest problem with the airline business is labor.

Labor holds the airline over a barrel. There is too much of an imbalance between the power of labor and management.

Unions are strong in the USA today only in two areas, really: transportation and government. In each case they hold most of the cards.

I think new business structures might be the answer, perhaps a franchise model a la "United Express" where many different local operators work together under a common tradename.