The airline industry is facing a major shakeout that is likely to eliminate the weakest players and put most of their best routes, planes and markets into the hands of the strongest carriers.

Although airline officials and industry analysts have been predicting such a restructuring for some time, the speed with which this trend has taken hold has caught many by surprise.

"Instead of happening over several years, it's happening much quicker," said Paul Karos, an airline industry analyst with First Boston Corp. in New York.

For travelers, the news may not be good: Further concentration of the airline industry may lead eventually to higher fares, fewer flights and less discounting.

The culprits forcing the restructuring are the rapid increase in the cost of jet fuel and a generally sluggish economy, both of which have put pressure on weaker airlines to sell off major assets just to pay bills. Those airlines often bear the twin burdens of having older, less fuel-efficient aircraft and high debt.

Pan Am World Airways Inc. became the most recent carrier to part with prized assets Tuesday when it announced plans to sell its transatlantic routes and other key assets to UAL Corp., parent of United Airlines, for $400 million.

Eastern Air Lines Inc. already has sold its shuttle, its South American routes and many other assets. Last week, Midway agreed to sell its Philadelphia operations to USAir Air Group Inc. for $67.5 million. Continental Airlines said yesterday that while its directors had recently decided not to file for bankruptcy protection, it would probably be forced to sell some of its routes and planes in the near future.

"The concentration that everyone has been so concerned about is going to be brought about by high fuel prices rather than competition," said Clark Onstad, a former senior vice president of Continental Airline Holdings Inc.

These changes represent special problems for regulators and policy makers worried about concentration in the airline industry and its impact on airline fares and service. Concerns about preserving competition have to be weighed against concerns about keeping struggling carriers alive.

The strongest carriers -- United, American Airlines Inc. and Delta Air Lines Inc. -- are well-positioned to ride out, and even to benefit from, the industry's tough times. Northwest Airlines Inc., Continental and USAir are also expected to be survivors, while Pan Am, Trans World Airlines and Eastern are generally considered the least likely of the largest carriers to make it to the other side of the slump.

"Eastern, TWA and Pan Am have got to do something dramatic" to survive, said Bruce R. Nobles, former head of both the Pan Am and Trump Shuttles.

Smaller carriers like Midway, Southwest, Alaska Airlines and America West are a mixed bag but may survive by lowering their expectations, according to analysts.

United Airlines, which has vied with American for the title as the nation's largest carrier, has had the strongest traffic in the industry for the past three months and has come out swinging after years of uncertainty. Earlier this month, employee efforts to acquire United collapsed, eliminating an issue that had hamstrung the airline's management.

Since then, United has announced the largest aircraft order in the history of commercial aviation, won rights to a coveted route between Chicago and Tokyo, and struck the deal with Pan Am, which will triple its nonstop flights to Europe.

American Airlines and Delta have also been building their presence abroad. American has emerged as an aggressive competitor in Europe and bought Eastern's profitable Latin American routes. Delta was awarded the right to fly from Los Angeles to Tokyo, and it should also benefit from the choice of Atlanta as the site of the 1996 Summer Olympics.

"If you're going to be a large global carrier in this new international environment, you've got to have a large number of hubs in the U.S., a feeder system set up in those hubs, international routes that tie into them, a computer reservation system for distribution and a significant number of aircraft in your fleet or on order" that will meet new, more stringent noise controls, said George James of Airline Economics Inc., a Washington-based industry consulting firm.

Airlines generally have little flexibility in controlling their costs When price increases drive the fuel bill from 15 percent of an airline's costs to 30 percent, the carriers have few ways to offset that cost increase, Nobles said.

Those they do have can be painful.

In the past few months, the airlines have laid off more than 10,000 employees, according to Robert J. Aronson of the Air Transport Association. But the basic number of employees that it takes to run an airline cannot be cut much, Nobles said.

In the meantime, airline industry executives say costs are rising much faster than revenue, despite air fare increases of approximately 15 percent since August.

"If you're a strong carrier and have a strong balance sheet ... you can probably survive this by doing what you can to cut costs," Nobles said. Weaker carriers "are facing an unsolvable dilemma. As a result of that, we're going to see some restructuring."