So far, it's been a relatively easy ride for most of Europe's new breed of low-cost carriers. Four in particular - Ryanair, EasyJet, Virgin Express and Debonair - have built up substantial businesses, and three of them have had successful public flotations. But now, British Airways is fighting back with its own low-cost airline.

At the same time, the US low-fare airlines are suffering from close attention by the majors, as US Airways prepares to join United and Delta in launching a low-cost subsidiary. Some of the US low-cost carriers face financial problems and others are upgrading their products, while Washington buzzes with suggestions of regulatory intervention to protect the low-fare airline phenomenon.

Against this background, here are the answers to all those commonly asked low-fare airline questions:

These airlines also have to decide whether to act jointly or separately. This is tricky because of their different circumstances. Take Virgin Express. It will hardly be affected by Blue Sky since it flies into Heathrow in a lucrative partnership with Sabena. Come to think of it, Virgin Express has effectively become Sabena's low-cost arm anyhow.

Oh, and there was also an internal KLM memo which talked about driving EasyJet out of business. KLM says the memo did not represent official company policy. Anyhow, EasyJet has now dropped its complaint.

It would be unrealistic to ban BA (and others) from launching low-cost subsidiaries. The best plan is to impose severe limitations on them. The Commission should insist on full financial transparency and impose a limit on how much capital Blue Sky can have. Blue Sky should not be allowed to use BA's Air Miles frequent flyer programme to attract or reward passengers, and BA should not be permitted to give its fledgling airline any parental support in any form.

Source: Airline Business