European demand for air travel will grow despite competition from high speed railways. Richard Parsons investigates what this means for a system already close to capacity.

Regional airports across Europe face a series of key challenges, as well as new opportunities, in the face of a continuing overhaul of the Continent's aviation infrastructure and services.

Across the European Union, regional airports are becoming an increasingly useful resource as key hubs serving major cities become more and more congested.

But they also face problems ranging from competition with high speed rail networks to possible constraints on their ability to service key business markets.

As Simon McNamara of the European Regions Airline Association (ERA) puts it, the days of easy access to Europe's major hubs "are rapidly running out".

The European Commission has warned that almost half of Europe's 50 largest airports have already reached, or are close to, saturation point in terms of ground capacity.

And a report for Europe's Committee of the Regions also concluded that "there is a potential to develop regional airports, which can play a role in relieving congestion at Europe's major hub airports".

While lack of access at some hubs could provide one source of growth for regional airports across the Continent, it could also cause significant problems.

Last year ERA says its members reported that 56 per cent of travel was business related. But if regional airports are not able to provide comprehensive links to key hubs, especially during peak times, it is likely to be the business market that is most hit.

One possible solution to this is the imposition of "public service obligations" on airlines to ensure the provision of key routes.

But while this may offer some help in limited circumstances, there are legal barriers to the government insisting on links to particular airports as obligations can only be imposed on links to particular cities or regions, not specific airports.

And some airlines have suggested that when it comes to public service obligations, some states have set conditions that favour national airlines.Another key challenge for regional airports across the continent comes from changes instigated by the European Commission.

Between 1987 and 1997 a series of liberalisation measures increased freedom for European Union-registered airlines to provide services to and from any destination on the Continent - a move that provided a boost for region-to-region services, as well as region-to-hub services.

The changes paved the way for the rise of the now familiar budget airlines, which have in turn spurred a new growth in air travel. The Department of Transport (DoT) estimates that the number of passengers on scheduled low cost services in the UK is set to rise from 10.8 million in 2000 to 21.5 million by 2010.

However, future growth rates in the low-cost market may not be as high as those seen over recent years.

DoT analysis suggests that the low-cost sector will experience "an exceptionally rapid phase of growth between 1998 and 2005", reflecting the introduction of new routes. But from the middle of this decade onwards there will be a slower expansion reflecting organic increases in passenger numbers on existing routes.

The rapid growth in European budget airlines serving a variety of airports that are sometimes, as critics put it, "in the middle of nowhere" also serves to highlight the increasingly important role of regional air services.

Industry experts say that Britain has been leading the way in the rise of low cost carriers, with BMI Baby and EasyJet standing out amongst a growing field.

This has been one of the key growth areas for regional airports, but it also brings costs as well as benefits.

Some regional airports agree payments to the airlines in order to benefit from the increased revenue that the additional passengers bring. There can also be additional costs from the need to upgrade infrastructure to handle the extra demand.

But with airports sometimes able to make around half of their revenue from sources other than the airlines, such as duty free or car parking charges, the incentive to attract low fare airlines remains.

"Ryanair's success in attracting and delivering traffic anywhere it flies means we are regularly approached by regional airports eager to offer a low-cost deal with the airline in return for increased passenger traffic," says a spokesman for the airline."Ryanair has a good working relationship with the regional airports which it flies into and we work closely with the airport management to ensure that passenger numbers and airport efficiency develop in tandem over the years."

However, Ryanair is currently facing two reviews of the payments it receives from regional airports. A French court has already ruled that one payment from Strasbourg airport was unfair, a decision that is now being contested.

And the commission is also conducting a separate investigation into the landing charges Ryanair pays at Charleroi airport in Belgium.Both cases revolve around whether Ryanair received unfair state subsidies from publicly owned airports.

Should the final decisions go against the airline, it has been suggested the some minor flights could be axed, although key routes are likely to be unaffected.

Authorities in Brussels also view rail as a key alternative to links between some European regions.

In its vision for European transport in 2010, the commission says that air and rail services should be "complimentary" rather than in competition."We can no longer think of maintaining air links to destinations for where there is a competitive high-speed rail alternative," it says. "In this way, capacity could be transferred to routes where no high-speed service exists."

And while there is agreement within the EU on moves to examine the imposition of an aviation fuel tax, the commission has also expressed an interest in the Swedish model of taxing flights only where an alternative rail route exists.

There have also been concerns over plans to introduce market mechanisms into the allocation of airport landing and take off slots.

ERA has warned that such moves could prompt an increase in inter-continental services from key hubs, but a reduction in flights servicing Europe's regions.

And pushing up the price of peak-time slots in order to limit demand has produced concerns that businesses could be the key losers.With business travellers preferring peak times for travel, limiting demand for such services could hit regional airports. ERA reports that business travel accounts for around 60 per cent of travellers on its members' flights.

In its defence, the commission argues that the now traditional "hub and spoke" system is failing to make the best use of stretched aviation resources. Brussels warns that the aim of having different flights arriving at near the same time in order to minimise connection delays has resulted in more frequent services using aircraft with a limited capacity. This produces increased congestion on the ground and a greater effort to direct all the planes while they are in the air.

So while key changes in the aviation industry may pose significant challenges for regional airports over the coming years, it also remains the case that they are operating in an expanding market and are set to become increasingly valuable assets in the overall structure of national infrastructure.