The history of the US airline industry has been composed of a series of “boom/bust” cycles, capped by periods of near panic. The record losses of the early 1990s were followed by the record profits of the late 1990s, only to be supplanted again by the record economic losses starting in 2000 (and exacerbated by the events of 9/11). Since deregulation, over 145 carriers have filed for receivership, and the industry still remains in fragile shape in spite of the success of a few members like Southwest and Jet Blue. Many industry analysts argue that the industry’s problems are the result of high labor costs, fuel cost spikes, overcapacity, etc. The authors do not deny the effects of these factors on the carriers’ plight, but there is a deeper, more fundamental factor at work. That factor is the tremendous over leverage, both at the operating and financial levels, present to this industry. The purpose of this paper is to explore this leverage situation and examine the effects on air carrier profitability that results from this state.