ABSTRACT
A 1998 study conducted by the UK Civil Aviation Authority (CAA) described the emergence in the 1990s of a ‘third way’ in European aviation. ‘Third way’ (low fare) airlines bring together costs at the charter level with the convenience (if not the comfort) of scheduled services (CAA 1998, p. 125). The CAA contends that the spread of third way - low fare - airlines was one of the most striking developments in airline competition in Europe during the latter half of the 1990s and possibly one of the more significant for the longer term. The CAA further states that ‘the entry of these airlines has generally led to substantial stimulation of new air traffic without serious detriment to incumbents’ operations’ (CAA 1998, p.ix). For instance, when easy Jet and Debonair commenced operations on the London-Barcelona route, passenger numbers increased by a staggering 32 per cent in the first year alone (1996-7). This compared with growth of 7 per cent in the previous year (CAA 1998, p. 136). Similarly, traffic growth on the London-Glasgow route was double the UK average in the twelve months following the entry of Ryanair and easyJet in late 1995. Just over 2.2 million people flew between London and Glasgow in the year ended October 1996, compared with 1.8 million in the year previous. Tliis was a growth rate of 21 per cent, compared with a national average of 10 per cent. Such figures indicate that the entry of LFAs onto routes (both domestic and international) generally results in considerable market stimulation. This viewpoint equates with that offered by LFAs, who tend to argue that rather than winning market share from traditional scheduled airlines, they in fact create new market space. They do so by attracting people away from other modes of transport such as the train
or ferryboat and by encouraging people who rarely or never fly to do so on a regular basis. The low price, high frequency service offered by the new entrants brings new customers into the airline market and increases the travel frequency of many existing air travellers. Much of the resultant market growth was captured by the LFAs. The LFAs have also put pressure on traditional airlines to lower their prices and on the charter airlines to sell ‘seat only’ tickets.
