Fasten your seatbelts for an airfare crash

If you are one of the 300,000 who will be struggling through Gatwick between today and Easter Monday, console yourself with the knowledge that you are taking part in a great revolution.

The changes taking place in air travel will be almost as important as those happening in telecommunications. Air travel may already have become much cheaper than it used to be, but it is set to become cheaper still. And that is going to change economic relationships both between countries and within them.

You can catch a glimpse of the way competition is bringing fares down in the price war started by British Airways. Last week it announced that it was cutting fares on 50 of its most popular routes. Virgin promptly responded by cutting its fares. A return from London to New York is now officially less than pounds 239, and to Paris it is pounds 85 to pounds 89. Special fares are lower still: shop around and New York may cost you less than pounds 200.

But such cheap fares usually have some restrictions - airlines do not really want to offer those prices if they can manage to charge more - and the main cuts are on long- haul flights. More interesting is the revolution taking place in the United States on shorter routes, not just on special fares, but on regular ones, too. A year ago it cost dollars 730 for a regular return from Baltimore to Chicago; now it is dollars 178. Newark to Atlanta is down from dollars 370 to dollars 170.

Air fares have been getting steadily cheaper since the post-war boom in air travel took off (in 1960 the cheapest round trip to New York was pounds 154, or about pounds 1,700 in today's money), but most people have assumed that the fall in fares was more or less over. By the mid-Eighties it was felt that aircraft were not going to become any cheaper; nor was fuel; nor the various ground and other services that airlines used. But such has been the pressure of competition in the US that these assumptions are being challenged, suggesting that there may still be a long way to go in cutting costs, and hence fares.

Two big costs are falling at the moment: interest charges (a very important component in the cost of operating an aircraft) and fuel. Less obvious are the savings that US regional airlines are discovering they can make. These include: using turbo-prop aircraft rather than jets for short trips; streamlining boarding procedures, for example by not allocating seats in advance; stricter rules on carry- on luggage, which further cuts boarding time; not providing meals, which saves meal costs and cuts the number of cabin staff, cleaning time, and time on ground for loading the meals; having cabin staff clean the plane, instead of separate ground crews; lowering commissions to ticket sales offices; and using less congested airports.

Many of these changes have been pioneered by a small regional carrier called Southwest, which is doing for US regional airlines what Virgin has done for the international ones. It sees itself as setting fares not just to compete with other airlines, but to compete with people's cars.

There is nothing particularly difficult about all this - it is simply a question of applying the American genius for increasing efficiency in service industries - but the effect is dramatic. Planes can get in and out of airports in 25 minutes or less, instead of the standard 45-minute turnabout. The result is that each plane can fly more legs. USAir, British Airways' new partner in the US, is trying to increase average daily departures for each plane from 6.9 to 8.4, which would give it another 3,500 seats to sell each day, a 21 per cent increase. And passengers? They seem happy to go along with the fewer-frills policy if it means cheaper fares: there are increases in traffic of 30 to 60 per cent on routes where prices have been cut. Apply this approach to Europe and one could envisage not just cheaper fares - say, a round- trip from London to Paris or to Edinburgh at less than pounds 50 - but a much greater variety of services to different parts of France from different parts of the UK.

Will this happen? Yes. For political reasons European air fares have long been a scandal. But governments no longer feel the need to protect state-owned national carriers once those carriers have been privatised, while the rise of regional political power has created a more effective lobby for cheap fares. Cheap air travel can, along with cheap telecommunications, help to eliminate geographic disadvantage in Europe, just as it is helping to do in the US.

Look at a map of the European Union, graded by wealth per head of population, and the core is clearly the richest: the north Italian cities, the Rhineland, the south-east of England and the Paris and Lyon regions. On the periphery are the poorer areas: Greece, southern Italy, Portugal, Ireland north and south, parts of northern England and eastern Germany. Differences in wealth between regions are much more important than differences of wealth between countries. While peripheral regions cannot change their location, they can reduce the economic disadvantage by making themselves cheaper to reach.

The prospect of US-level air fares has enormous regional implications for the UK. London will always have a wonderful air service - it has more international flights than any other place on earth. But the South-east is an expensive region from which to operate, and there is no reason why regional cities should not use the lower cost of ground facilities, lack of congestion and lower wage rates to help airlines to offset the fact that these cities are another half- an-hour's flying time from most EU destinations.

Local authorities and businesses based in Glasgow or Manchester should be encouraging airlines to undercut London fares to the rest of the EU. The Channel tunnel may be a white elephant, not because the ferries can do the job more cheaply, but because the airlines can. People in the north of England should not be pressing for a better rail service, but for upgraded airports.

As for the continental infrastructure, the idea of a continent-wide high speed rail service will come to be seen as an economic catastrophe because the airlines will do the job both more cheaply and more flexibly.

But if this argument is right and the cost of air travel is about to come down sharply, surely the journey through Gatwick (or any of the main London airports) will become even more fraught in 15 or 20 years' time than it is now?

Not so, because for many people it will not be necessary to go to a hub airport. The lesson of US air travel is: provided a route can support four flights a day, it can be run profitably. In fact a cheaper and more flexible air service ought to make it possible to ease congestion at Heathrow and Gatwick by shifting short-haul traffic on to smaller airports in the region, not only reducing the crush on the terminals but on the surrounding road network too.

It can also help to ease general traffic congestion. Americans are even harder to extract from their cars than Brits, and Texans are the hardest of all. But Southwest is managing to get people to fly between Houston and Dallas, a distance of 210 miles, by such devices as two-for-one fares. If they could price the London- Manchester air fare at a rate which would save us slogging up the M1 and M6, that would be triumph indeed.