London Briefing:The economics of the budget airline industry have always been a finely-balanced affair, writes Fiona Welsh

For the low-cost model to work effectively, operators must pack in as many passengers as possible, offloading them at their destinations with minimal delay, and preferably having sold some sort of add-on service along the way.

But as the industry moves into its peak summer period, the low-cost carriers' sums are looking increasingly stretched. At the heart of the problem is falling load factors - bums on seats - which have forced market leaders Ryanair and easyJet to slash their prices during their most profitable months.

Although easyJet's new chief executive Andy Harrison last week insisted that the group is on course to push profits ahead by up to 50 per cent this year, he alarmed the market with news that its load factor last month dropped from 86 per cent to 83 per cent.

At Michael O'Leary's Ryanair, the figure fell from 85 per cent to 83 per cent.

Shares in easyJet slumped on the back of the figures, losing as much as 17 per cent of their value in the course of the week as analysts feared its ambitious profit target cannot now be met, despite Mr Harrison's optimism.

Along with the rest of the industry, both carriers are suffering from the impact of chancellor Gordon Brown's doubling of air passenger duty, now at £10 a trip for short-haul flights and accounting for a sizeable proportion of overall ticket price.

That may have deterred some price-conscious passengers, while others may have decided to stay at home instead to enjoy the record April temperatures. And, although it is impossible to measure, anecdotal evidence suggests that growing concerns over the environmental impact of cheap air travel may finally be starting to have an impact on the industry.

All this comes at a time when the low-cost carriers have expanded their fleets substantially, adding more and more routes and leaving themselves with even more seats to fill.

Hence the fierce fight for business - Ryanair's latest sale of seats for as little as £10 is billed as its biggest ever and easyJet is also slashing its prices. That may well boost load factors, but will have a serious knock-on effect on ticket yields.

The growing pressures on the no-frills flights industry will do little for its relations with the environmental lobby.

Not that Ryanair has much of a relationship with green campaigners. Last week, unveiling his latest seat sale, chief executive Michael O'Leary was typically blunt in discounting their impact: "There is no suggestion the loonies are dissuading people from travel," he insisted.

Doubling prices

It is not often that a share price doubles within the space of a few hours but that's what happened to Aim-listed tiddler Blueheath last week, as it clinched a reverse takeover deal with Britain's biggest cash and carry group, Booker.

In a move that values Booker at some £375 million (€547 million), Blueheath is issuing 1.3 billion shares to fund the acquisition of the cash and carry business, marking its return to the stock market after two years under private ownership. It also marks a return to the public arena for Charles Wilson, the highly regarded former right-hand man of Marks & Spencer chief executive Stuart Rose.

Numbers-man Mr Wilson, a long-time lieutenant of Mr Rose, was a key player in the team that transformed the fortunes of M&S following the failed bid from billionaire Sir Phillip Green. He surprised the City when he quit the rapidly recovering high street chain in 2005. He joined Booker - which he used to run with the M&S boss - as it was taken over by Icelandic retailer, Baugur.

The Icelandic company will retain a 35 per cent stake in Blueheath, which will be renamed Booker and is expected to move up from the junior Aim market to a full share listing over the next year or so. Shares in Blueheath celebrated the deal with a leap from 12.75p to 28p. They have been as high as 55p over the past 12 months, but have also been as low as 7.75p.

This will be the first time Mr Wilson has run a publicly quoted company and, announcing the deal last week, the former management consultant said he had no regrets about leaving M&S.

If he had, they would certainly be eased by his 8.1 per cent share stake in the new Booker group, a holding likely to be worth getting on for £30 million once the takeover goes through.

Fiona Walsh writes for the Guardian in London