Rapid change in industry forcing down prices

Series Title
Series Details Vol 7, No.7, 15.2.01, p21
Publication Date 15/02/2001
Content Type

Date: 15/02/01

WHILE Americans fear the current consolidation of the US airline industry will lead to the creation of a quasi-cartel and higher fares, Europeans are looking forward to cheaper tickets as low-cost, no-frills carriers grow their networks across the continent.

Britain has benefited most from airline deregulation with successful newcomers such as Ryanair and easyJet slashing fares and throwing out restrictions on routes within Europe. The upstarts are forcing the established carriers such as British Airways (BA) and KLM to set up their own low-cost units and driving fares even lower.

Until now cheap air travel has been restricted to routes between Britain and Ireland and mainland Europe.

Low-cost carriers have failed to take off in continental Europe, though competition has hotted up in some markets such as Spain, where Iberia has lost substantial market share to Air Europa and Spanair.

The established carriers have responded to competition by cutting fares but there is limited availability of cheap tickets, and restrictions, especially the Saturday-night stayover that hits business travellers, are still in place. That could change soon as the UK-based low-cost carriers are moving to establish hubs beyond their domestic strongholds: easyJet is building a presence in Amsterdam and Geneva and Ryanair will set up a hub in continental Europe later this year.

This will force established European airlines to cut fares to protect their market shares and will also open up the market for new local low-cost carriers.

The structure of the European industry is rapidly changing. Ryanair is on target to become the continent's fifth largest airline while the established carriers such as BA focus on business-class passengers and long-haul routes.

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