Wizz unveiled plans to fly from Prestwick in Ayrshire to Poland, extending both its and Scotland's list of cheap flight destinations. It came just 24 hours after BA confirmed it is rebranding its regional service CitiExpress as BA Connect with one-way fares as low as £25.

EasyJet founder Stelios Haji-Ioannou brought the cheap flights concept to Europe and believes the majority of short-haul traffic will be low-cost within the next decade or so.

But this is an increasingly tough market, and even before the first Wizz flights take off, Prestwick boss Steve Fitzgerald - whose airport has built a future around low-cost flights - warned there are no guarantees. "There is always a risk... but I am confident we [and Wizz] will grow together profitably," he said.

But it is a market that is not without a smattering of failed ventures. They include Buzz, which was acquired by Ryanair three years ago; Duo, which collapsed a year later; and EU Jet, which ceased operating last July. Others include Debonair, Now, Hop, Jet Green, Air Polonia, Volare and Air Planet. Germania withdrew its Prestwick-Berlin flights.

While the sector grew by between 40% and 60% a year in its early days, it is expected to slow to between 15% and 20% as it matures. New operators are regularly emerging but face greater competition against experienced rivals and there will be either more failures or else more consolidation.

Andrew Lobbenberg, an analyst at ABN Amro, told the author of a recently published book* on easyJet: "I can see a lot of low-cost airlines in Europe disappearing. The market simply won't support them all."

The most high-profile merger involved easyJet's £374m acquisition of BA's Go in 2002. Now easyJet is at the centre of speculation that it is being pursued by FL Group, the company that owns Icelandair.

Many industry experts expect the number of low-cost airlines to reduce sharply. David Bryon, managing director of bmibaby, reckons there will be no more than 10, while others say it could be half that.

And even though Willie Walsh, the new chief executive of British Airways, has given BA Connect two years to prove its worth, some question if it will last that long.

"There are not a lot of material changes being made here," says Ralph Brook-Fox at Britannic Asset Management. "It's mainly about presentation. The underlying wage structure among pilots and cabin crew will be the same, and they'll still have the same old fleet that is currently running these routes.

"BA is quite good at marketing, but it seems that most of the structural challenges that are making this business lose money are still there."

CitiExpress was created in 2001 through a merger of BA's four old regional businesses: British Airways Regional, Brymon, Manx Airlines and British Regional Airlines. It runs BA's independent regional operations - those services that don't mesh with its key hubs at Heathrow and Gatwick, such as the flights from Glasgow to Manchester or Aberdeen to Southampton. It also encompasses the short-haul European services run from the regional airports.

Over the last three years, the CitiExpress network is estimated to have lost about £70m. On the domestic routes, it has suffered due to the reinvigorated offering from FlyBe, the airline owned by the late Jack Walker's family, formerly known as British European. BMI also remains a competitor on many routes, along with smaller operators such as Eastern Airways.

On European services, the rise of the budget airlines - including FlyGlobespan in Scotland - has soaked up virtually all the leisure traffic occupying these routes. In Manchester, the rise of Jet2 has had a huge impact on BA.

Even the likes of Zoom, offering cheap flights from Scotland to North America, is chipping away at BA's regional business. Even though it is not competing head to head, it is taking passengers.

And with more direct services now flying from Scotland, there are fewer passengers using airports such as Manchester or Birmingham as a hub to gain access to Europe or America.

There was no point in trying to sell CitiExpress. If any rival wanted access to these routes they could set up a greenfield operation for much less money, which would avoid taking on a share of BA's pension liabilities and being forced to adopt BA's wage structure.

In response, Walsh is slashing ticket prices by up to 40%, with fares starting from £25. Tickets will also be sold as one-ways rather than returns - aping the budget model. Business class cabins, which still existed on the European services, are to be scrapped. And free in-flight catering is to be replaced with paid-for food similar to that provided by easyJet and Ryanair.

All this is expected to slash costs by about £35m a year. Meanwhile, Walsh is pledging to spend about £5m a year on advertising and also spend a few bob to give the planes a new lick of paint, and the new BA Connect logo.

Like Go before it, however, BA Connect is keeping some of its frills. For example, there will still be a pricier business fare available which gives access to executive lounges and increased flexibility.

"They're doing pretty much exactly what we did three years ago," says Jim French, managing director of FlyBe, which plans to float in the next 18 months to two years on the back of its conversion to a low-cost format. "But the unanswered question in all this is what are they going to do in terms of fleet enhancement. In our experience it cost $1.5bn to upgrade our planes. I don't see that type of investment as likely from BA, as this is a very peripheral part of the overall business."

Running a low-cost model with a mixed fleet of older planes is difficult. Ryanair, easyJet and their US forebears were created on the principle of simplicity, running just one type of plane - traditionally Boeing 737s. Late last year, FlyI, a US regional budget carrier set up with smaller planes, went bust. Although BA Connect runs just 50 aircraft, there are four different models in operation - all older and more expensive to run than those operated by most of its rivals.

"But that need not be a problem," says Edward Legget at Standard Life Investments. "Everyone forgets that train fares have been going up quite a bit. The relative difference between travelling by rail and air has narrowed substantially. Take FlyBe's new services from Edinburgh to Norwich - that's a good example of a route where it is a lot quicker to get to by air. These might not be huge markets, but you can make it work with a small plane."

BA has been successful in clawing back market share from its budget rivals on the key domestic routes into Heathrow and Gatwick. It has overcome the prejudice that developed in the public's mind which dictated that only budget airlines could offer competitive fares.

But Walsh has already proved himself a hard taskmaster in his brief time in the BA pilot's seat. If the BA Connect rebranding fails to pull its weight he will have no hesitation in carrying out his threat to pull the plug on these services.

*EasyJet: The Story Of Britain's Biggest Low-Cost Airline, by Lois Jones, is published by Aurum