European airfares undercut U.S. prices

Europe's low-fare carriers may be best known in America for outrageous proposals to charge for bathroom access or offer stand-up seating, both ideas floated by Ryanair that were never adopted.

But travelers who have flown within Europe lately often took away a different impression — that airline tickets were surprisingly inexpensive, especially compared with prices to fly within the U.S.

A one-way ticket between Edinburgh and Dublin, for instance, can cost as little as $40. A one-way ticket from New York to Washington, D.C., about the same distance, starts at $65. Both prices, which vary depending on the travel date, include taxes and unavoidable fees, but not baggage and other optional charges.

While it is tough to do a statistically rigorous comparison, especially since the EU does not collect fare data for its 27 members, there is little doubt that ticket prices have fallen sharply within Europe, despite higher fuel costs, because of an explosion of competition from low-fare airlines like easyJet and Ryanair. Although Southwest Airlines and other carriers have put similar pressure on prices within the U.S., anecdotal data suggests that it is still generally more expensive to fly between major cities in America than it is to fly between cities in Europe.

"Even after taxes, you see a better fare per mile in the European Union than you do in the United States," said Mark Milke, a director at the Fraser Institute, a public policy research group in Calgary, Alberta, who published a paper last year comparing the lowest fares available on a sample set of routes.

Using that data, Milke calculated that airline passengers traveling within a single country in Europe last year were paying about 11 cents a mile, including taxes and fees, or 14 cents a mile to fly between two European countries. In the U.S., by contrast, passengers were paying about 23 cents a mile.

Since these figures were based on a limited number of case studies, results from a wider set of data would probably vary. In fact, the Air Transport Association, the airlines' trade group, calculates that domestic tickets in the U.S. cost about 16 cents a mile, excluding taxes, or at least 19 cents a mile with taxes. Pearce said European travelers had benefited from the fact that many large cities had multiple airports, allowing newer airlines access to these markets. That is not so much the case in the U.S., where airlines like Southwest have fought to obtain scarce takeoff and landing slots in congested cities like New York.

European airlines also face more competition than their U.S. counterparts from other forms of transportation, particularly Europe's robust rail network.

That competition is likely to increase in the coming years, since the European Commission recently announced an initiative to standardize the information on rail schedules and prices across member countries, making it easier for travelers to compare the cost of airlines versus the train. Some analysts also note that Europe is going through a competitive phase that already took place in the U.S. after airline deregulation in the 1970s.

Others argue that regulatory policies in the U.S. favor established airlines, stifling competition and making it harder for new carriers to enter the market and succeed.

Milke is among those who say they believe that rules prohibiting foreign-owned airlines from operating in the U.S. — for example, allowing Aer Lingus to fly passengers from Boston to Chicago — keeps ticket prices higher than they would be if this restriction were dropped.

"Low fares are the result of the removal of barriers to competition," he said. "With lower prices, people travel a lot more, and that creates jobs."