The Budget Airline Industry's History - The Early Days.

Herb Keheller, Southwest's original founder  www.swamedia.com.
Back at the beginning of the 1970's, two guys in the USA (Rollin King and Herb Kelleher) decided to start a different kind of airline. Their airline business plan was simple. They decided to fly passengers to their destinations at the lowest possible fares. No more rip offs. If you got there on time and people liked using your service, they'd come back.

So one day in 1971, Southwest airlines took off and started flights from Dallas, Houston and San Antonio. In 1973 it turned a profit. In 1974, it carried its 1 millionth passenger. 1977 saw it carry its 5th millionth passenger, and it listed on the NYSE. It carried on growing at a phenomenal rate. By 1983, it flew 9.5 million passengers that year alone and in 1990, less than 20 years after its birth it passed the billion dollar revenue mark. In 1994 Southwest pioneered ticketless travel (now you know who thought of it) which has since been copied by airlines around the globe. By 2000, Southwest Airlines had become the fifth largest major airline in America. That year, they flew more than 57 million passengers a year to 57 cities all over the US. They operate over 2,600 flights every day. And they also had the first ever airline webpage. A stunning success story.

All this wasn't going unnoticed outside of the US.

Europe follows suit.

In 1985, a little company known as Ryanair started flying a 15 seater turboprop airplane between Waterford (SE Ireland) and London Gatwick. Nobody really noticed at first, but the following year they started flying Dublin to London. With an introductory fare of 95, this completely destroyed the usual 209 fare offered by BA or Aer Lingus. The company continued to grow, but costs started to go out of control. By 1989, they had 4 different types of planes, 350 staff, 600,000 passengers but were 20m in the red. Something had to be done.

Ryanair's CEO Michael O'Leary in a rather cheesy PR photo op with Boeing's Vice President Carolyn Corvi after picking up yet another new plane (no 24 I think this is)
They relaunched as a no frills airline, copying SouthWestern. Non profitable routes were cut, the fleet reorganised so all planes were the same (this reduces maintenance costs substantially) and the pricing structure was reorganised. The global airline industry suffered terribly in 1991 due to the Gulf War, but Ryanair emerged unscathed. In fact, it emerged with its first ever profit. The airline continued to enjoy strong growth, but it exploded in 1997. The EU finally deregulated air transport, and it was open season for all. Suddenly the major established european airlines were facing stiff competition from an airline who could offer seats at 50% of what they could. In 2000, they achieved their target of 7m passengers and they were now a major player.

In January 2002, they came up with their most audacious move yet - they ordered 100 737's with options on a further 50. This is the single largest order Boeing has had for the 800 series. It's a big business gamble, but they estimate that it will let them carry 40m passengers a year, which would make them Europe's largest scheduled carrier, bigger than Easyjet or even British Airways. The challenges facing the major players in Europe has changed. Easyjet bought out Go!, Ryanair took out Buzz and then promptly binned all their inefficient and slow BAE146's and kept the 737's. They did get a vast amount of slots at Stansted though. The European situation has developed to the point where some established airlines are having to redesign themselves to stay competitive. The latest one to launch is BabyBmi, owned by British Midland Airlines. This isn't just happening Europe mind - Delta has launched Song, Qantas has launched Jetstar whilst in the third quarter of 2004 Tiger Airways launched. Tiger's parent is none other than Singapore Airlines, which is highly regarded for its customer service throughout the industry.

The future?

Budget airlines are continuing to spring up all over the world. They now exist in New Zealand, South Africa, Brazil, Australia as well as a whole fistful in Asia. Fuel prices have rocketed recently - up by 60% between the start of 2004 and mid October 2004 and this is hurting the airlines deeply, who have had little choice but to pass on the costs to consumers. Analysts do not predict a let down in the oil markets, at the beginning of November 2004 George Bush was relected and resulting US foreign policies will probably keep oil prices high. If these airlines can overcome these challenges and enjoy anything like the success of Southwest or the European airlines, expect a revolution in air travel the world over.