Its been a while since we came across such bullish sentiments. We have been mumbling this for a while – starting in the third quarter last year. But for the lunatic in Tehran, oil prices would be even lower and airlines would be rolling in dough.

ATW has a neat summary of the IATA update here. Essentially IATA thinks the industry will go from $2.5bn to $3.8bn in net profits this year and then to $7.8bn in 2008. If you have not bought shares in airlines for a while, you might be too late. You could, maybe, take a run at Boeing because a lot of those profits are going to get recycled for new planes. Especially 787s. Unfortunately Toulouse badly missed this cycle and right sized plane.

IATA correctly talks about shocks that could derail the better scenario. No kidding. One of those shocks that we cannot blame on unstable oil nations is labor costs. Airlines have squeezed nearly all life from their employees and certainly squeezed all service out of their, well, service. Lousy balance sheets are not the fault of labor. Shoddy financials are the work of management. We expect to see bolshie union actions as the money flows back into the airlines. Delta has done a very smart thing with its labor and kudos to Mr. Grinstein on taking none of it for himself. The same cannot be said of United, where the Gordon Gekko school of management still seems to be at work.

As we move deeper into a knowledge based economy you would think management realizes that flatter structures are better. People have to "buy in" to corporate plans. Coercion no longer works like it used to. Labor no longer fears anything – they have been eyeball to eyeball with the White Elephant. Knuckle draggers make poor managers because we see aviation people marketing their skills the world over. Pilots are in demand overseas and go for the work. In the US, airline managers are facing a very new world order. Be nice or get nowhere.

Kudos also go to the managers at Continental, where pensions are funded and people are happy to work. Same thing at Southwest. American is sort of there. Northwest is not. US Airways? Too early to tell.