The airline industry is in precipitous decline—across all regions and categories, from the low-cost carriers to the legacy giants. Even the success stories are doing little more than treading water.

This is the stark picture that emerges from Aviation Week’s 2009 Top-Performing Companies study.

Survival was the theme last year, and it appears even more relevant today. As bad as the problems were 12 months ago—led by soaring oil prices—they pale in comparison to the demand slump airlines are now battling. Average TPC scores for the three major regions have dropped sharply (see graph, p. 48), indicating a downturn that is both broad and deep.

Reflecting the changing nature of airline challenges, the TPC metrics place strong emphasis on liquidity. This is the factor that the TPC Council of Advisers agrees will best determine which airlines come through the current downturn relatively unscathed. But liquidity alone will not be enough: Investment strategy will play an equally important role. While risky, expansion through acquisition can still work if it is done right.

Unlike past TPC studies, no common trend can be gleaned from the first 10 airlines in the mainline/legacy category. The top of the table features a broad mix of geographic locations, sizes and airline types. This underlines the lesson that no part of the world is immune, and no business model is a magic formula in this environment.

Looking at the full list of 32 major carriers, almost all saw a drop in total score. The only two that increased were Hawaiian Airlines and LAN Airlines. Hawaiian was a rare bright spot among the U.S. carriers, which are predominantly clustered in the bottom half of the table. While all regions saw a similar decline in average score, European airlines as a group were still relatively healthier than their Asia-Pacific and North American counterparts.

Singapore Airlines (SIA) is the top performer for a fifth consecutive year. However, some worrying signs are emerging even for SIA. Its total score plummeted nearly 20%, and the carrier recently recorded a rare quarterly operating loss.

The industry downturn has hit Asian airlines the hardest, and the increasing threat from local low-cost carriers is also counting against the Asian legacies. Almost all have dropped in this year’s rankings. The TPC panel believes the business model of airlines such as SIA—previously a strength—could now pose a problem.

SIA and Cathay Pacific are both based in relatively tiny markets and rely heavily on connecting traffic, says TPC adviser George Hamlin. Their home markets do not provide them with a solid demand base when long-haul connecting traffic faces more competitive pressure.

Hong Kong-based Cathay is faring particularly badly, falling from the fifth spot in last year’s study to 18th this year—with one of the largest total point declines of any major carrier (last year’s rankings have been adjusted for new scoring methodology). Cathay faces the problem that Hong Kong has become less important as a gateway to China—and between China and Taiwan—as other entry points have become more prominent.