LONDON, England - I always look forward to interviewing British Airways CEO Willie Walsh. No matter how much doom and gloom there is in the industry, the Irishman has a smile on his face and also has a positive spin on his airline going forward.

That was the case again early Friday when he did his normal round of recorded interviews in London as BA announced their latest results.

Yes, BA recorded a record pre-tax half-year loss for the six months to September, yes the airline faces possible strikes by cabin crew, yes oil prices are going up again, yes premium traffic is being hit hard, yes airlines make little money from the majority of those passengers that sit in the back half of the airplane - but Walsh still appears more optimistic then the heads of the other European legacy carriers.

Why, you ask. And with good reason: BA is in the midst of drastic cutbacks. It's mothballing planes (if only temporarily), cutting thousands of jobs (3,000 more announced Friday), delaying the delivery of new airplanes, wringing out hundreds of millions of dollars in costs.

Walsh says these aren’t just steps to get through the recession. He says short haul premium traffic has changed, for good, and BA needs to make "structural changes" to reflect that reality. If you have ever flown from London to Edinburgh or Paris to Amsterdam and wondered why people paid triple for the privilege of sitting in a seat no bigger than those in the rest of the single-aisle plane, companies have asked the same thing and decided to cut back. BA says that will not return.

What seems to be on the rebound is premium traffic yields (average price per passenger per mile). That is where BA makes its money. Of course its just recorded a record loss, so there is a long way to go, but if companies are willing to pay just a little more for a flexible business ticket, then as Walsh says, BA may be "bottoming out."

This, of course, could all go horribly wrong if cabin crew go on strike just before Christmas, which is entirely possible. Walsh didn’t smile when he reminded me that the union has not yet even balloted for a strike, much less announced a date to walk out (all because, believe it or not, of BA’s plan to cut the number of cabin crew on long-haul flights from 15 to 14).

Walsh has a challenging time ahead.

BA is known for its decent service, great Web site and friendly enough staff, but has to compete with the incredibly well managed and well financed Middle East airlines that are ever expanding.

On the other side, Ryanair is driving hard towards its goal of being Europe’s biggest airline that charges peanuts for flights, many of which compete on BA routes.

Meanwhile, Walsh has to battle unions, cut more costs, and deal with a huge pension deficit while trying to grow the business through its never-ending attempt to merge with Iberia and by increasing an alliance with American Airlines.

Can he keep smiling?

Five years ago, Garuda Indonesia was an airline that seemed to be on a path of constant turbulence. It was losing money year after year, battling allegations of corruption within the state-owned enterprise and stained with a questionable safety record. Today, Garuda is a symbol of what's possible in the difficult airline industry. You need a leader with focus.

Emirsyah Satar, 50, is the CEO of Garuda. Now in his fifth year as the head of the national airline, he has turned Garuda from problematic to profitable through staged planning. “In the first two years, just surviving was good enough. And then the next two years was the turnaround stage,” he said. Now the airline is embarking on the growth stage.

The son of an Indonesian diplomat who grew up in Mexico City and Prague, Satar went on to become a banker and then the CEO of Bank Danamon, Indonesia's fifth largest bank. In 2005, he was brought to Garuda as President and CEO and he made drastic changes from the start.

"What happened in 2005, the business model was just not working,” Satar said. It increased accountability at all levels in the organization. And in the short term, Satar decided less was more: “We got out of routes where we were losing money … it was ok if we reduced our market so we could become profitable again."

He positioned Garuda as a “premium airline” and told his staff not to worry about local competition. With a domestic population of 240 million people, he bet focus on the cream of the crop would keep Garuda afloat while it restructured. His bet paid off, in part because Indonesia sidestepped the brunt of the global downturn thanks to the strength of its domestic market: Indonesia's economy is still growing at around 4 percent.

While Garuda is still juggling $700 million in debt, the state-owned enterprise has been able to turn a profit the past two years. Satar has plans to make what he calls a "quantum leap."  By 2014, he wants to bring the fleet from the current 66 to 116 aircraft.

The big challenge now is getting a stalled IPO back on track. Satar had wanted to bring Garuda public this year, but the global downturn put a halt to that. Now he's shooting for an IPO for June 2010. The airline is also in the process of restructuring its debt, which Satar hopes to have completed by the end of this month.

Then there was the issue of safety. In the past decade, a string of crashes involving various Indonesian airlines eroded the public trust in Indonesian air safety. In March 2007, a Garuda plane overshot a runway in Yogyakarta and crashed, killing 21 people. In June 2007, the European Union banned all Indonesian airlines in European airspace. Satar hired an American consultant and and cracked down on safety issues. In July of this year, the EU lifted the ban on certain airlines included Garuda.

The airline now plans to get into the long-haul market, starting with an Indonesia-Amsterdam route by June 2010. That will be followed by routes to Frankfurt, London, Paris, Rome and eventually in 2012, Los Angeles.

"We (Garuda) travel to Australia, Japan, Korea, China and these people still travel. And Bali is still a good attraction," Satar said.

PARIS, France - There have only been two commercial orders of note so far for either Airbus or Boeing here at the Paris Air Show. One was Qatar Airways’ firm $1.9 billion order for 24 Airbus planes (new engines are included in that value) from the A320 family. 

The showpiece at Le Bourget is a major shop window for aircraft manufacturers.

Vietnam Airlines also placed an order for 16 single-aisle A321 planes and options on two A350 XWB - a plane not yet built and rival to the Boeing 777.

That's it. Nothing has been heard from Boeing yet, though it tends to lag behind the French plane maker when it comes to orders in Paris, where Airbus likes to make a splash in its own backyard.

Both aircraft manufacturers have barely made a dent in their order book this year because new orders are offset by so many airlines delaying - or in some cases outright canceling -  orders. Until the show Boeing had no new net orders and Airbus had more than 11 for 2009.

And yet in my interviews with the men who sell the planes, John Leahy of Airbus and Scott Carson of Boeing, show them to be in buoyant mood. One of them even joked to me that there is trouble if they are both of the same mind.

That's because they say new plane orders follow GDP growth - and it looks as if the economic tide is turning. It’s also the case that financing appears to be getting easier to source. Boeing says it has not had to finance as many of its customers as it was prepared to do. But it has been helping airlines find financing when they couldn't.

That too, is getting easier, and since the rationale for newer, lighter, more fuel-efficient planes has not changed, airlines are expected to pick up business replacing fleets once the credit crunch and recession ends.