1. Finding a reason......

2. • The price of an airline ticket has worldwide
increased substantially over the past year as
unrest in the Middle East once again worries
investors about the oil supply. As fuel
surcharges rise, the overall cost of travel
jumps for the average consumer. In
comparing the ticket costs for American
airlines versus European airlines, the latter is
still significantly cheaper.

4. Partial Airline Deregulation
More Alternate Airports
Excess Capacity
Volume
The Bottom Line

5. • In the late 1990s, the airline industry in most of Europe went
through a partial deregulation. This allowed a barrage of
new airlines to enter markets where only a single national
airline existed before. This increase in competition not only
drove down prices for the new low-cost carriers, but also
forced the legacy carriers to drop their prices to compete.
This deregulation also created a substantial number of new
routes around Europe, which allowed travelers to fly more
often and more conveniently.
• In the United States, low-cost carriers, such as JetBlue, have
entered the market and put some downward pressure on
prices, but this has not provided competitive motivation to
the extent it has in European Union.

6. • The geography of many European countries lends
itself to lower prices. The physical closeness of cities
allows for more alternate airports to spring up nearby
to established airports, in order to alleviate delays and
air traffic snarls. London, for example, is serviced by
its main airport, Heathrow, but has Gatwick,
Stansted, Luton and City nearby. More airports allow
travelers more choices for departure and arrival
points. Some of the smaller airports have lower
landing fees and, therefore, tickets are less expensive.
Travelers within the U.S. have fewer alternative
options, which keeps pricing high.

7. • According to the International Air Transport Association,
the United States has done an efficient job of cutting down
capacity (both number of flights and number of planes) to
reflect a reduction in demand for flights. This enables
the U.S. to "right-size" its operations and cut down on the
fixed costs of keeping flight routes.
• The European Union, on the other hand, has been slower to
react to a decline in demand and has more excess capacity.
Because most of the costs of running a flight are fixed -
meaning the cost is the same if there is one flyer or 200 -
airlines are more willing to offer bargain airfares to fill the
seats. This keeps the overall price of the average ticket lower
in Europe.

8. • The final reason that flights are cheaper
in Europe is that there are simply more of them.
Because of the density of the population, air
travel is fast and convenient for most Europeans.
The population of Europe is approximately 857
million versus America's 300 million in a space
about two and a half times smaller. Europeans,
on average, fly more often than Americans and
airfares must compete with other convenient
methods of traveling short distances, such as
driving or taking the train.

9. • There are several reasons why airfares are
cheaper on average in Europe than the United
States. Culture, geography, competition and
regulation all play a part. Eventually,
continued rises in oil prices will force prices
to increase and the threatened recession is
likely to dampen demand for tickets. Airfare
costs in Europe will likely approach those of
the United States in the next year, but should
continue to lag behind.

10. Courtsey: Angie Mohr