Only two or three of Europe's low cost carriers (LCCs) are likely to survive long term, a report by consultants McKinsey & Co has claimed.
The report's author, Lucio Pompeo said at the launch in Frankfurt that falling growth rates will increasingly hit the low cost operators.
He cited three causes of their likely drop in profitability: over capacity in the market, aircraft orders exceeding likely demand and growing competition between legacy, charter and low cost carriers.
Mr Pompeo said LCCs currently had a 16% share of the European market compared with 66% for the scheduled airlines.
But the three biggest low cost carriers, Ryanair, easyJet and Air Berlin 300 medium haul aircraft on order for 2012 with options on a further 350 while the scheduled carriers had order for 30 with 160 on option.
“The days when LCCS used market stimulation to expand with practically no competition are over,” he said.
To increase pressure, LCCs were challenging legacy carriers for the business traveller and the charter market forth leisure traveller.
To meet these challenges, legacy airlines were offering cheaper fares, expanding online sales and, in a few cases, setting up their own LCCs and charter companies were increasing their seat only offers.
“Despite cost advantages for LCCs, expected growth will not suffice to achieve profitability for many companies,” Mr Pompeo said.
Airlines raise fuel surcharge
British Airways, Virgin Atlantic and Swiss all announced rises in their fuel surcharge as oil prices surged to a record $60 a barrel.
The first two increases came into force on Monday (June 27) while Swiss's increase comes into effect on Friday (July 1).
BA, in its fifth rise in 12 months, has added £8 to a long haul flight and £2 to a short haul flight.
Its surcharges now stand at £24 for a long haul (£48 for a return) and £8 for a short haul flight (£16 for a return).
Virgin has added £8 to all tickets sold in the UK while Swiss increased its charges on long haul flights from 31 to 34 and on short haul flights from 11.5 to 13.
Martin George, BA's commercial director said the cost of oil made a surcharge rise “regrettably inevitable.”
He added: “Our estimated fuel bill for this year will now be more than £450 million higher than our fuel costs last year. This additional fuel surcharge will help to offset the recent sharp increases in the price of fuel.”