The Rise of European Low Cost Airlines

This article from Reason is a great analysis of the changes in the European airline industry.

In less than a decade, the Southwest Airlines revolution has swept through sclerotic Europe like a capitalist hurricane, leaving a fundamentally altered continent in its wake. Low-cost airlines have grown from zero to 60 since 1994 by taking Southwest's no-frills, short-haul business model and grafting on infinitely variable pricing, aggressive savings from the contemporaneous Internet revolution, and the ripe, Wild West opportunities of a rapidly deregulating and expanding market. Europeans, fed up with costly train tickets, annoying motorway tolls, and Concorde-style prices from national "flag carriers" such as Air France and Lufthansa, have defected to the short-hoppers in droves—200 million, nearly 45 percent of the entire E.U. population, took a low-cost flight in 2003 alone.

These airline upstarts are run by swaggering young CEOs whom the European press treat like rock stars, living up (or down) to the billing by issuing manly predictions of price war "bloodbaths" and pulling off daring publicity stunts, such as Irish carrier RyanAir's post–September 11 sale of 1 million tickets for "free" (before taxes). Their companies have been rewarded with dot-com-bubble-like stock valuations—and the volatility that comes with them—while their long-haul counterparts dodder toward cutbacks, bankruptcy, and worse. (Switzerland became the first European country to lose its national airline when Swiss Air and Sabena folded in 2001.) In less than a generation, one of the Western world's most notoriously regulated and distorted markets has become a poster child for unified Europe's 21st century ´┐Żlan.

Somehow the U.S. has lost the lead despite a huge head start from deregulation. The article ends with this note:

As painful as it may be to admit, it looks like the United States, which blazed the global trail of airline deregulation nearly three decades ago, will be choking on the exhaust of Old Europe for years to come, denying Americans the benefits that have transformed the way Europeans behave. Amazing what a little political cowardice can do.

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