Low-Cost Airlines Are Beginning To Fly In Europe.

<FONT SIZE="+3"><B> Low-Cost Airlines Are Beginning To Fly In Europe</B>

By David Osler

Now that the European Union has decreed that the airline industry liberalization long in place on the other side of the Atlantic will proceed next year, some European carriers are out to repeat the phenomenal success of no-frills carriers in the United States.

There are many obstacles to universal cheap flights in Europe, such as the high cost of labor and airport charges. As one industry cynic observed: "In continental Europe, you have high-cost airlines and higher-cost airlines."

But entrepreneurial souls in the airline industry are undeterred. A handful of no-frills carriers-airlines that dispense with food and beverages and deep-discount the price of a seat accordingly-already are up and running, including Ryanair, EasyJet and Virgin Express.

In attempting to list Europe's no-frills carriers, the first question is one of definition. "It's such a gray area, and there is no legal distinction," argued Simon Tudge, a spokesman for the European Regional Airlines Association.

In many ways, the mold-breaker has been Ireland's Ryanair, now 11 years old. More than any other, this airline has been responsible for forcing other carriers on U.K. domestic routes to bring down fares. Routes include London Stansted to Cork, Dublin and Knock; London Stansted to Glasgow Prestwick; and Dublin to Birmingham, Bournemouth, Cardiff, Leeds Bradford, Liverpool, London Gatwick, London Luton and Manchester.

Satisfied customers include Joan Scales, travel manager for the <I>Irish Times</I> in Dublin and a spokeswoman for the International Business Travel Association.

"We use Ryanair quite a lot because of their prices, but not at all times; particularities have to be taken into account," she said. "We don't know where people have to go until something comes up. If it's a news story, you pay whatever price you have to in order to get someone where they have to be."

EasyJet offers flights from London Luton to Glasgow for as little as $43 one way, advertising the fare as cheaper than a pair of jeans. It also serves Amsterdam, Barcelona and Nice from Luton.

EasyJet founder Stelios Haji-Ioannou, the son of a Greek shipping tycoon, boasts that he has never paid a penny to any travel agent because of his direct-sales-only policy.

U.K. newcomer Debonair, owned by Italian national Franco Mancassola, also offers flights from London Luton to destinations including Barcelona, Dusseldorf, Madrid, Munich, and Newcastle. It has just launched a ground-breaking London-Barcelona-Munich-Dusseldorf-London service. Copenhagen will come on board in August.

"We are not targeting any specific sector, but our airline will appeal to cost-conscious, discerning business travelers who value punctuality, value for money, reliability and no compromise on comfort," Mancassola said.

While Debonair will happily own up to the no-frills tag, it insists that it is a quality airline. It has even written a letter to a U.K. national newspaper deploring the widespread association between low fares and low safety standards.

The major catalyst for change could well be Virgin, which has pledged to halve European short-haul fares with its Brussels-based Virgin Express, the carrier formed after Virgin acquired a 90 percent stake in Eurobelgian Airlines last May. The airline already is reporting considerable business traveler interest.

Virgin Express chief executive Jonathan Ornstein committed the carrier to "providing our customers with what they want-a reliable and friendly service at less than 50 percent of what they are currently forced to pay."

The old Eurobelgian flew six scheduled routes within Europe; Virgin has promised up to 10 more within three years. The first routes will be Rome-Milan, Brussels-Geneva and Brussels-Copenhagen, all planned for September.

The launch of Virgin Express has meant the end of Irish carrier CityJet's Virgin Atlantic franchise on Dublin-London City and Dublin-Brussels. CityJet says it will be launching two more European routes over the next year.

Outside of the United Kingdom, Ireland and Belgium, true low-cost carriers are somewhat harder to find. French regional carrier Air Littoral has promised to build Nice into a low-fare hub with a new subsidiary, Air Littoral Riviera, targeted to the business traveler. Service will begin in October this year, with up to 34 routes promised by April 1988.

In Greece, a number of primarily charter airlines offer bargain-price scheduled service. Apollo Airlines flies to Germany, while Air Greece, Cronus Airlines and Venus Airlines run low-cost domestic routes.

These bargain-basement fares come with strings attached. Some use second or third airports-some of which are poorly located-in many cities. Some travel managers find that flight times are more in tune with the demands of the leisure traveler.

"Many businessmen don't want to have to go from Luton," said Andy Weeks, travel manager at mineral mining company Borax Europe and chairman of the London chapter of the Institute of Travel Management. "It's not a businessman's airport. It suits the leisure traveler because of their pockets, but businessmen are prepared to pay more for the frills."

The Belgian operation of Inter IKEA, the furniture store chain, has looked into Virgin Express for the Brussels-Copenhagen route, its most frequently used route. But even though the prices are obviously attractive, travel manager Yves Galimidi has reservations about its potential. "The schedule is so bad that even with the will to find cheap prices, we won't use it that often," he said. Inter IKEA sometimes used Eurobelgian to send people to Barcelona or Madrid, but scheduling meant that for one-day trips, they had to fly home on Sabena, he said.

Nevertheless, one result of the upsurge in the number of low-cost carriers is a massive increase in pressure on the big boys to slash their own fares rather than lose market share. For that, even the dwindling band of elite executives who never set foot on a cheap flight have reason to be thankful.