Consumers set to gain from budget airlines' tough times

Only days after a third no-frills airlines went bust in the space of a few months, easyJet warned yesterday of a profits slump and saw its shares nosedive. But rather than mark the end of the low-cost flight boom that has transformed air travel for millions of people, it promises more good news for passengers.

Industry analysts say the prospect now arises of a summer of even cheaper flights to more destinations as the airlines compete in what Michael O'Leary, head of Ryanair, recently called the "mother and father of all fare wars". He predicted that it would lead to a "ferocious bloodbath".

Ray Webster, chief executive of easyJet - shares in which fell by by 20 per cent after it reported poor trading for the first three months of 2004 - issued a warning that "unprofitable and unrealistic" pricing was threatening the industry.

And the prospect of some carriers following Birmingham-based Duo, which collapsed at the weekend - leaving passengers stranded abroad and others without refunds for bookings - led to a call by the Association of British Travel Agents for all low-cost flights to be covered by the Air Travel Organisers Licensing Scheme (Atol), which insures consumers against such collapses. Most flights booked directly with low-cost airlines are not covered by the bond.

Despite the warnings, many observers said that while other underfunded operators may go under, the deep pockets of major backers are expected to sustain new market entrants, while consumer pressure will keep prices low everywhere.

A spokesman for bmibaby, which operates out of East Midlands airport, said: "It is an immensely competitive market and the birth of the low-cost carriers means the traditional airlines have had to respond. Fares have dropped incredibly, it is a very fierce marketplace and unfortunately there are going to be casualties and there will be consolidation.

"It is tough but I wouldn't say that the low-cost bubble has burst, by any means.... Demand for no-frills airlines is still there."

The new low-cost battlegrounds are expected to be flights between Britain and Germany, from the new members of the enlarged EU and within Europe as a whole.

In Germany, which has Europe's largest population, Lufthansa - which was hit badly by the rise of cheap fares - is part-funding Germanwings, an airline that flies from Stansted, Gatwick and Edinburgh to Cologne. Tui - the travel group that now owns Thomson - is behind Hapag Lloyd Express, which is flying from Newcastle and Manchester to Stuttgart and Cologne. Both airlines are also flying from their home airports in Germany to many other European destinations.

The EU's open-skies policy means there are no restrictions on the number of flights between Britain and the new EU countries and new operators setting up to take advantage.

Air Polonia, which launched in December in anticipation of Poland joining the EU on 1 May, is flying from Stansted to Warsaw and Gdansk six times a week. Its flights are intended to cater less for the short break and business market and more for Polish people living in Britain, a number likely to increase. Poland is the most populous of the new EU countries. Latvia, Estonia and Slovenia are also likely to become popular low-cost destinations.

Ryanair also appears close to settling a row with European commissioners over subsidies for using Charleroi airport in Belgium, which it uses as a base to fly elsewhere in Europe. Keith Mason, of the Air Transport Group at Cranfield University, said: "The UK market has probably reached its point of maturity and the rest of Europe is catching up.

"There are new markets in the expanded EU to develop. But not everyone will survive.''

LOW-COST CARRIERS

EASYJET

Now second-largest player in the market.

Flies from: Luton, Gatwick Stansted, Aberdeen, Belfast, Bristol, Edinburgh, East Midlands, Glasgow, Inverness, Liverpool and Newcastle.

Yesterday's bargain offer: Bristol to Prague £31.49p

BMI BABY

British Midland's response to the low-cost boom.

Flies from: East Midlands, Gatwick, Cardiff, Teesside, Manchester, Belfast, Dublin, Edinburgh and Glasgow.

Yesterday's bargain offer: Gatwick to Cork £14.99p

MY TRAVEL LITE

Part of the troubled MyTravel group, formerly Airtours, which has seen profits and shares slump. Flies from: Belfast, Birmingham and Manchester.

Yesterday's bargain offer: Birmingham to Alicante £49.99

AIR SCOTLAND

New entrant launched in March this year, backed by Greece Airways.

Flies from: Edinburgh, Glasgow and Newcastle.

Yesterday's special offer: Glasgow to Malaga £12

AIR POLONIA

Created to compete with Lot, the Polish national carrier, and in anticipation a boom in demand for travel between Poland and UK.

Flies from: Stansted and many other European cities.

Yesterday's bargain offer: Stansted to Warsaw £56.22

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