On Thursday, Southwest Airlines announced its first quarterly loss in 17 years. No, this is not the ultimate warning sign that an economic apocalypse is upon us. No, it's not time to stock up on canned goods and bottled water (yet).

Southwest's loss resulted from a $247 million write-down on future fuel hedges, due to oil finally coming off its punishing summer highs. It's a problem that is likely to persist in future quarters assuming that oil prices stay down, but it's not a major source of concern for the carrier's overall well-being.

Excluding the write-down, Southwest actually made a profit of $69 million for the quarter—down significantly from the same time last year, but a profit nonetheless, unlike American, Delta, and Continental, which have all swung to losses because of fuel costs.

Still, while Thursday's results do not suggest that Southwest is running out of steam, they could augur a change in fortunes about to take place across the industry. If oil stays below $70 a barrel, hedging strategies will cease to be the main determiner of which carriers sink and which ones swim. The new challenge will be dealing with a massive falloff in traffic from consumers and businesses alike.

The name of the game as traffic slows will be cutting capacity, doing as much as possible to avoid the half-full flights and low fares that have spelled doom for carriers in the past.

George Hamel, a managing director at aviation and aerospace consulting firm ACA Associates, says that for too long legacy carriers refused to shed capacity due to worries about surrendering marketing share. But now, across the board, airlines have begun to pare back their offerings.

One component of the task is switching to smaller aircraft, a strategy that Southwest has used all along and that legacy carriers are increasingly embracing. So far American, Continental, and Northwest (which is pending a merger with Delta) all have placed orders for Boeing 787s, a narrow-body aircraft with better fuel efficiency and fewer seats to fill.

"Generally, the theory is there are economies of scale in using larger airplanes," says Hamel. "If that's true, then why has the most consistently profitable airline always flown small and midsize planes?"

Cutting capacity will also mean reducing the number of flights and cutting out unprofitable routes, which is likely to mean grounding some planes until demand for seats recovers.

But revamping a fleet and grounding aircraft in response to changing market conditions is easier said than done. Airlines lease a large portion of their fleets on a long-term basis, meaning that they're unable to unload larger planes for smaller ones, and they are losing money every day they keep an aircraft on the ground.

Calyon Securities airlines analyst Ray Neidl says the legacy carriers such as United and American are lucky in that many of them have fleets filled with older aircraft, and leases that are near expiry. That allows them to ground the older and less fuel-efficient planes they own and swap smaller planes for their large ones when leases end.

"Legacy carriers can dodge the bullet now," Neidl says. "They've got enough liquidity, they've cut costs, and they're prepared for this."

Of course, this holds true for some airlines more than others. US Airways, for instance, has a newer fleet and relies more heavily on aircraft leases, reducing its flexibility in reshaping service to meet falling demand. The airline will also suffer as a result of its mostly domestic service, which focuses on leisure hubs.

How does Southwest fare in all of this? The company is still poised to mop the floor with competitors. Southwest is well capitalized, with a mostly owned fleet of small to midsize planes, a history of tight capacity, and plans to cut it further in coming quarters.