The challenges could mean the that industry will be reduced by 25 percent, including one or more airlines going out of business.

To survive, the nation's big airlines are making drastic changes: grounding aircraft because they cannot afford to fly them, thus markedly reducing the number of flights and seats available to passengers; significantly raising ticket prices; and cutting thousands of jobs.

Continental Airlines Inc. said yesterday that it would retire 67 of its older and least-fuel-efficient planes through 2009, reduce capacity by 11 percent, and slash 3,000 jobs.

"The industry faces its worst crisis since 9/11," Continental said.

A day earlier, United Airlines said it would ground 70 planes from its 460-aircraft fleet. The company had announced it was taking 30 planes out of service to save money.

Other airlines are likely to make similar moves, adding to the disruption for would-be air travelers.

"The race is on to see if airlines can raise fares high enough to cover the fuel bills before they run out of cash," Roger King, an analyst with CreditSights of Norwalk, Conn., said in a research report.

This crisis is different from other times of upheaval for the airlines because their costs were not skyrocketing in the way jet-fuel prices have, climbing 85 percent over the last 12 months.

In the past, carriers were able to reduce their biggest expense, labor, mainly through layoffs or by forcing wage-and-benefit concessions under the threat of liquidation.

This time around, with the economy tanking and people feeling the pinch in their own pocketbooks, fewer passengers may fly, which will force even more cuts to match the lower travel demand, industry analysts say.

Airlines need to shrink from 20 percent to 25 percent of their capacity to earn a profit and survive, some analysts said.

As necessary as the big changes are for airlines, even those cuts may not save them all. Analysts say they believe that one or two, maybe several, carriers could file for bankruptcy next year.

"We think the market consistently underestimates the power of capacity reduction," Lehman Bros. Holdings Inc. analyst Gary Chase said yesterday in a research note. "We also believe the economics of capacity reduction are more compelling than at anytime in the last two decades."

US Airways Group Inc., the Philadelphia region's dominant carrier, said in April that it would cut capacity 2 percent to 4 percent in the second half of the year and also would replace older aircraft, letting leases run out on 28 planes - four Boeing 757s and 24 Boeing 737s. Those aircraft will be replaced with 14 Embraer 190s and five Airbus 321s.

Morningstar Inc. analyst Brian Nelson said US Airways must make more cuts because of its financial position, which, he said, is "among the least-attractive" of the big U.S. carriers.

US Airways spokesman Philip Gee said the nation's fifth-largest carrier was "pretty close" to its minimum fleet requirement, 332, under its labor contracts. "Because of our pilot contracts, we have to have so many planes," Gee said. "We couldn't get rid of 50 planes tomorrow."

US Airways has 357 planes in its fleet. However, 19 are Embraer 190s, which do not count against the 332 minimum, Gee said. "So, I guess technically we could go down to 313."

The cuts by Continental will not have much impact in Philadelphia, said James M. Tyrrell, city deputy aviation director. Continental operates six mainline and five regional jet flights a day to Cleveland and Houston.