Low-cost carriers let well-off people and small businesses fly more

Obvious you may say, but the point is, as a thoughtful and well-researched UK study has just shown, that the LCCs almost certainly haven’t been responsible for the growth in European traffic since the mid-1990s.

The study – No Frills Carriers: Revolution or Evolution? – by the UK CAA’s Economic Regulation Group finds that the LCCs’ gains have come essentially from two sectors: primarily leisure travellers switching from charter carriers to them; and also small businesses, which previously didn’t do much flying at all, discovering that they can now afford it.

Result: the rate of growth in traffic before and since the advent of LCCs is barely changed. You can see that on the graph below, and my colleague David Learmount has written about it in the magazine. There is a lot more interesting stuff in the story and the report.

European traffic graph.JPG

You can see what’s happening: the sort of comfortably off folk who used to take one or two overseas holidays a year have seen their total trip costs drop (plus times have been good in general) and so they’re taking two or three, or perhaps four. Maybe buying a little property. And they’re booking flights and hotels individually on the web rather than through the sort of middlemen that kept the charter carriers in good shape.

And small businesses can now fund sales-drives in European capitals instead of just the domestic market – which they need to do because they’re finding leads via the web.

I’m curious about the implications of this for the idea, beloved of environmentalists and quite a lot of British politicians, that you can use taxes to reduce air travel.  Clearly you can, but this suggests they will have to be very hefty taxes indeed to make much of a dent.

On the other hand, it suggests that the usual objection to such taxes – that they unfairly hit the poor – is somewhat irrelevant, since the poor aren’t flying anyway.

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