Though the Dublin-based group admitted that the earlier-than-expected launch of some new routes had more than doubled the passenger growth figure, the target growth rate remains an impressive 25 per cent.Indeed the firm is in such cocky mood that it is sticking two fingers up at Boeing, the US manufacturing giant. It has cancelled five options on new Boeing 737-800 aircraft saying it wants lower prices. Instead it is scouring the second-hand market for 50 Boeing 737s, saying they will represent better value. All this contrasts sharply with BA, which on Monday reported a fall in passenger numbers and load factors slipping below 70 per cent.There are a number of reasons behind the success of budget airlines which also include Virgin Express, which operates out of Belgium, and Go, the former BA subsidiary which was recently sold to the venture capital firm 3i. A key factor is that lower fares are encouraging people to fly more frequently. A second is that their lower cost structures enable them to make a decent return on relatively modest fares.Howard Miller, finance director for Ryanair, says we are only just seeing the beginning of the shifts in the airline market “There are lots of opportunities for growth. Many of the carriers like BA are cutting back capacity and getting rid of [economy] passengers and increasing prices.

That plays right into our hands.”Toby Nicol of easyJet agrees: “We have a view that in the next 10 to 15 years the vast majority of short-haul traffic in Europe will be on low-cost airlines, though if you fly long-haul you will still go with a traditional airline. We are seeing the start of that trend now.”There is no doubt that the key driver of growth in the budget airline market is their rock-bottom prices. Ryanair, for example, has grabbed the headlines with its offer of £5 one-way flights on its new route between Dublin and Edinburgh. It has also offered some routes for free and claims to typically undercut traditional carriers by 70-80 per cent. At easyJet the model is “the earlier you book the lower the price”. So while a one-way trip to Palma from London might start at £30 several months in advance, it could rise to £200 the day before travel.

This compares with BA’s efforts to compete with a limited number of seats at £80-£160 return on routes such as London-Paris.The budget airline prices have expanded the market for short-haul travel. As Mr Nicol at easyJet says: “People are saying things like, ‘I would never have flown up to Edinburgh to see my 80-year-old grandmother, I would have got the train or the coach instead.’ But now, because it’s cheaper, they are taking the plane.”The route structures of the budget airlines is another factor in their success in the short-haul market. Most major airlines like British Airways operate a hub-and-spoke system with a major centre like London Heathrow acting as its principal hub from which all flights radiate. The problem is that this can lead to multiple changes and longer journeys for passengers.

EasyJet, by contrast, describes its route map as looking more like a spider’s web. It operates 35 routes to 16 cities from a network of four central airports in Luton, Liverpool, Amsterdam and Geneva. This enables passengers to make more direct journeys.Ryanair’s approach is modelled on South West Airlines in the US, which flies to secondary airports in major cities to take advantage of lower landing charges. It also flies on routes that would not interest a larger carrier, such as Trieste in Italy and Esbjerg in Denmark.But the key to the low prices are the low operating costs. Both easyJet and Ryanair have stripped away airline meals to save money.