Between 2001 and the end of 2008, for example, no less than 15 U.S. airlines filed for bankruptcy. Around 2008, however, something unexpected occurred. Airlines suddenly leveled off. In the past few years, profits have become positive across the industry, and market caps are soaring from prior lows.

So what happened? It is the result of the slicing of airlines’ base offerings into customizable “options and extras.” The most famous of these options was checked-bag fees, but most of the recent innovations have focused on “upselling” passengers into an improved experience (e.g., selling fast-track boarding, lounge-access, extra leg room and others).  In 2012, the major U.S. airlines earned an estimated $12.4 billion from such “ancillary revenue” alone, grown from a negligible base six years ago. For many airlines, this simple innovation was the difference between survival and insolvency.

Alan Lewis and Dan McKone term the steps that the airlines took to save themselves “edge strategy” — the strategic monetization of the huge value that often lies untapped on the edge of a core business, but which many businesses miss because they are focused on nurturing their core. In the case of airlines, many carriers had become trapped by thinking of themselves only in terms of their company’s core offering: transporting passengers by air from Point A to Point B. The breakthrough came when the airlines collectively realized that they should think of themselves not as pure transportation providers but as providers of travel solutions. They recognized that they had many different types of customers, all with different needs (beyond needing to get somewhere), and all with differing willingness to pay for goods and services.

At the time, airlines already let some people experience travel differently — boarding the plane first, sitting in a better seat, relaxing in an airport lounge. But these services were typically only accessible via a first-class ticket or through elite status on a frequent flyer program. Of course, some people who didn’t fit into the above buckets are still willing to pay for some of these upgrades.  And since the capability to provide these services was already in place, all the airlines had to do was provide passengers the ability to buy them: the additional “ancillary” revenue would be nearly all profit. United Airlines first introduced checked-bag fees and other extras in February 2008, but within months all the other major carriers, except Southwest, joined them.

As part of this shift, airlines realized that some people didn’t need everything that was included in the sale of a standard ticket; this opened the door to unbundling the “one size fits all” offer — and led to the introduction of fees for checked bags. Many business travelers never check a bag but historically subsidized the substantial cost for leisure travelers who did. Today, those who need the option pay for it. Many passengers grumbled, but the impact has been undeniably positive for the industry. Last year bag fees alone generated $3.6 billion in revenue in the U.S. Imagine where the industry would be without this?

An edge strategy can either mean capturing profit from peripheral products (e.g. extra leg room, on-board meals, etc.) or it can mean unbundling core products and pushing them out to the edge as options (e.g. bag fees).  The margins for edge offerings can be extremely high. They leverage existing resources and captive customers, who often tend to be less price sensitive (think of the price of a soda at a movie, or in a hotel min-bar). It has also never been easier for a company to find its edge. Technology has dramatically increased the potential for creating options around most core offerings. We simply know more about customers today, thanks to the ability to capture and crunch vast oceans of marketing data and put it in the hands of employees on the front lines.