Air travellers in Europe are being weaned from a sweet and sour diet of air miles, special lounges, smart(ish) uniforms and high prices. Nearly 10 million a year are swallowing the no-food, no-frills offering of Europe's latest breed of entrepreneurs: founders of low cost airlines. But will the market digest the shares of these new carriers?

Virgin Express will follow Ryanair and Debonair to become the third European low-cost airline to tap the equity markets. Details of the flotation, in Brussels and New York, will emerge from the listing of financial documents with New York's Securities and Exchange Commission.

Ryanair was the first to kick aside its chocks with a flotation in May valuing it at almost £300 million. American institutions scrambled for the stock, familiar with a concept pioneered by home-grown airlines like Texas-based Southwest Airlines. As a result, the share price has doubled in the past four months with the airline now valued at well over £600 million.

Debonair's stock-market takeoff was more low-key. Floated three months ago on Easdaq, Europe's answer to New York's Nasdaq, the shares have risen a more modest 17 per cent. But then, given that the airline was only one year old and boasted just seven aircraft, some analysts were surprised it made it to market.

"For the first time in Europe, airlines are where venture capital meets the markets. This may seem ground-breaking in Europe, but it's fairly normal in America," says one.

What is also ground-breaking is that low-cost airlines can actually make good money flying short-haul across continental Europe.

Ryanair made £24.5 million pre-tax profits in the year to last March. Virgin Express currently makes a small profit, having reached break-even last year.

This is a far cry from Europe's established players, headed by British Airways, Lufthansa, Air France and Iberia, who use their European scheduled flights to feed their far more profitable long-haul flights. BA, for instance, made a paltry £6 million sterling on turnover of £3 billion from its European flights.

But how do they do it? And how long do the likes of Ryanair, Virgin Express, Debonair and Easy Jet have before the leading operators start to fight back?

Low-cost airlines are, predictably enough, all about squeezing costs. As Easy-Jet's founder, Mr Stelios Haji-Ioannou, is fond of reminding his customers: "If you want to have a meal, go to a restaurant." So passengers on his flights from Britain to Nice, Amsterdam and Barcelona are fed jokes instead.

They also have to make do with recycled boarding passes; no fancy first, club or business classes, and they have to trek out to secondary airports like Luton and Stansted - not to mention Charleroi and Beauvais - in the case of Ryanair. But then they also fly "for the price of a pair of jeans", as Easy Jet's relentless marketing machine says.

Ryanair's latest marketing campaign - offering £19 one-way flights on its London, Brussels and Paris routes - is another indication of how the low-cost operators are relentlessly forcing down fares.

By flying out of secondary airports, the airlines also save significant costs on landing charges and obtain take-off and landing slots that are unavailable at more prestigious airports. Landing charges can account for up to 10 per cent of an airline's cost base.

Few numbers are publicly available, but Virgin estimates that its overall costs are probably about 25 to 50 per cent cheaper than the unwieldy, former state-controlled carriers against which it competes.

The other secret of these airlines' success is picking the right fights. Some carriers, such as Ryanair, have avoided direct competition with any large airlines. Many of its routes from Dublin to British cities such as Glasgow, Leeds, Cardiff and Bournemouth were under-developed before Ryanair took them on. Morgan Stanley analyst Matthew Stainer says Ryanair has created more of a market than it has taken away from the traditional airlines.

When the low-cost airlines do go head-on, they go for the fat underbelly of Europe's most unwieldy airlines. In a back-handed compliment to BA, Virgin Express says bluntly that the core of its business is not based on a British strategy.

Instead, it has gone for Sabena, the Belgian carrier. Sabena responded by cutting a deal with Virgin Express whereby the latter flies Sabena customers into London, using Sabena's access to scarce slots at Heathrow. "It's competition by running away," said one analyst caustically. Others, such as BA, have responded by franchising some short-haul routes to other airlines.

So, for the short term at least, the outlook is buoyant. European air traffic in August rose more than 11 per cent on the same month the year before.