The latest Top-Performing Companies report proves once again how quickly fortunes can change in the airline industry. The 2007 version showed legacy carriers gaining strength as the lingering effects of the post-2001 slump finally dissipated. But just a year later, the focus has switched to which can best ride out yet another potentially destructive downturn.

With few exceptions airlines are under extreme financial pressure as economies falter and oil prices remain abnormally high. A siege mentality is beginning to take hold, with traffic demand starting to slide and airlines in most regions slashing capacity. "The industry will go on, but only after a deep transformation and a new focus on efficiency," observes Christian Torrego of PricewaterhouseCoopers, one of the advisers who helped Aviation Week & Space Technology analyze this year's TPC results (see p. 54).

The TPC study offers clues about who the winners and losers will be as this transformation unfolds. One trend in particular that stands out is the continued strong showing of Asia-Pacific carriers at the top of the rankings.

Four of the first eight in the major airlines category are from the Asia-Pacific region. Singapore Airlines (SIA) is at the head of the list for the fourth year in a row, biggest improver Malaysia Airlines is in second place, and Qantas and Cathay Pacific are not too far behind. The TPC advisory panel agrees that these airlines are among the best situated to weather the latest slump.

Another common thread from last year's study is the stability of European national airlines compared with the U.S. majors, which are firmly ensconced in the bottom half of the list. The gap between the Asian and European top performers and the U.S. airlines has only grown larger over the past year.

The TPC airline formula has been revamped this year, with much more emphasis placed on "survivability" measures like liquidity and financial health. Liquidity is the factor that really sets the highest-ranked airlines apart, notes TPC analyst George Hamlin of ACA Associates. "There's a stark difference [in liquidity] when you get below the top 10."

There are many reasons why the leader board is heavy on Asian carriers - true, these airlines enjoy some advantages unique to their markets. But the TPC analysts also stress organizational strengths that stem from good management rather than geographical location.

The inherent advantages are simple, says Raymond Neidl of Calyon Securities: long-distance routes with very little competition. Hamlin adds that these airlines operate in a region where economies are still robust, and low-cost competitors have been a relatively recent arrival compared with the U.S. and Europe. Lower labor costs help, too.

Another factor that must be considered is state ownership. Many airlines in this region - including Malaysia and SIA - have significant levels of government investment, which is not factored into the rankings. While this can be an advantage, the TPC analysts agree that in the case of the top two in particular, they are so commercially successful that any government safety net is probably of little consequence.