returning a node-set from the tables in all files instead of
iterating through each file seems to make more sense.  However, that does
present a secondary grouping problem--your stylesheet outputs a separate
country node for each city.  I think combining your approach with Niko's
suggestion of doing a second pass on the output (and using a key) will do
the trick.

<?xml version="1.0" encoding="UTF-8"?>
<xsl:stylesheet version="1.0"
xmlns:xsl="http://www.w3.org/1999/XSL/Transform"
xmlns:xsi="http://www.w3.org/2001/XMLSchema-instance">
  <xsl:output method="xml" version="1.0" encoding="UTF-8" indent="yes"/>

  <xsl:template match="/">
    <airport-codes>
      <xsl:attribute
name="xsi:noNamespaceSchemaLocation">airport_codes.xsd</xsl:attribute>

      <xsl:variable name="airport-nodes"
        select="document(file-names/file)/xsl:stylesheet/
                xsl:template[@match='/']/html/body/table[1]/tr/td/table/tr"/>
      <xsl:for-each select="$airport-nodes">
        <xsl:sort select="../../b"/>
        <xsl:if test="generate-id( . ) =
                      generate-id( $airport-nodes[ ../../b =
                                                  current()/../../b] )">
          <country name="{../../b}">
            <xsl:variable name="in-city" select="$airport-nodes[ ../../b =
                                                 current()/../../b]"/>
            <xsl:for-each select="$in-city">
              <xsl:if test="generate-id( . ) =
                            generate-id( $in-city[ td[1]=current()/td[1] ] )">
                <city name="{td[1]}">
                  <xsl:for-each select="$in-city[ td[1]=current()/td[1] ]">
                    <xsl:sort select="td[3]"/>
                    <airport code="{td[3]}">
                      <xsl:value-of select="td[2]"/>
                    </airport>
                  </xsl:for-each>
                </city>
              </xsl:if>
            </xsl:for-each>
          </country>
        </xsl:if>
      </xsl:for-each>
    </airport-codes>
  </xsl:template>
</xsl:stylesheet>

--
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G. Ken Holman                mailto:gkholman@xxxxxxxxxxxxxxxxxxxx
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