Tommy, a few of your assumptions are just plain wrong.
Even with China and India having relaxed the fixed prices of gasoline, the crude oil demand will certainly not fall. And if you look a bit into that region and see Indonesia, Vietnam and the other Tigers, then you understand that the demand from that side of the world will be increasing. Simply due to the fact that the middle class there is growing rapidly.
Accussing Southwest of beeing profitable only for the hedge is just wrong. Southwest is well managed, therefore they are profitable. They secured fuel like many other airlines, and they did factor that costs into their CASM, unlike many of the other airlines.
CO failed to do hedging right and lost millions, Lufthansa does hedge 85% of its fuel and it is profitable. Do you wanna say that Lufthansa is only profitable due to the hedging?
SAS is securing 50-60% of its fuel, but is not profitable. The trick is not to have hedges or not, the trick is to know your costs well in advance and charge the customer what it costs and still fill the seats. And - as written many times before, most airlines have no real clue what the jetfuel that they fill in today is really costing them in these very moments.
You write that Norwegian could not adapt capacity if needed as they would have only -800s to do so? Who said that? If the -800s proves too big and if the -300s get retired or returned to lessors in bigger numbers, I am pretty sure we will see DY doing a Virgin Blue approach and get themselves a 100 seter for the thinner routes.
Capacity adjustments are pretty easy with 25 leased aircraft...
Absolutely agree that the growth bonanza is over for the time being. But, I am old enough to remember the 1998 and onwards, then the downturn after 9-11 and then the upwards trend until somewhen early this year (by the way, with ever increasing oil prices).
Now, we will see a period of consolidation. Changes will come, actors will go, business models will be adapted. At the end of that period, and that will be no indefinate period, a new growth period will come. Just as bullish as the last one. Why? Because that is the industry behaved like all the time, no matter what the crude price was.