NCPA - National Center for Policy Analysis

Europe's Cheaper, Deregulated Skies

March 31, 1997

Europe's fliers are about to reap a bonanza in lower ticket prices as airline deregulation enters its final phase tomorrow. As of April 1, airlines in 17 countries will be allowed to fly domestic routes inside any of those countries. Unrestricted cross-border flying has been allowed since 1993.

  • As a result of freeing-up air carrier markets, dozens of new, cut-rate airlines have sprung up recently to compete with the high-price, high-cost state-owned airlines.
  • Because the U. S. started deregulation in the 1980s, average discounted economy fares here are substantially cheaper than in Europe -- 66 cents per mile for a 200 mile flight here versus 94 cents in Europe, 38 cents per mile here versus 56 cents in Europe for a 600 mile flight.
  • European airline industry economists are in near universal agreement that fares there will come down dramatically as the start-up carriers achieve such economies as abandoning the use of travel agents and computerized ticketing -- which are reported to constitute 25 percent of the cost of tickets -- eliminating frills such as meals, reducing the number of flight attendants and adding the maximum number of seats.
  • As an example of the rewards of being cost-conscious, start-up airline EasyJet gets 12 hours of flying time each day from each of its aircraft, versus only 7 hours per day per plane at state-owned British Airways -- allowing the small carrier to charge only $261 round-trip London to Barcelona, as opposed to $816 for British Airways.

Passengers who chose to fly Virgin Express airlines can make a round trip flight London-Brussels for $104; the British Airways ticket price is $424. And who would pass up Virgin Express's best unrestricted fare of $170 round-trip between Madrid and Rome when Spain's state-owned Iberia charges $1,002?

A final note: while the focus is on Europe, the people behind the cheap European airlines took their cue from the American deregulation experience, and point specifically to Dallas-based Southwest Airlines as a model for their no-frills, low-cost approach.

Source: Jay McCormick, "Deregulation Translating into Cheaper Flights in Europe," and "No Frills is EasyJet's Middle Name," USA Today, March 31, 1997.


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