If the Bank of England fails to cut interest rates today (a better than evens probability) and is, as a result, blasted by bruised retailers and housebuilders (a cast-iron certainty), it could do worse than point to the recent experience of easyJet to justify its hawkish stance.

EasyJet has a very different view of the great British consumer from that proffered by most stores groups. According to Andy Harrison, the chief executive, there is absolutely no sign of the downturn having any impact on demand for discretionary air travel. Profits are going to be down this year, but not for want of paying passengers. EasyJet's aircraft are as full as ever and it is managing to squeeze slightly higher revenues per seat out of its army of passengers. Forward bookings for this summer are slightly ahead of this time last year. Whatever the passenger category - business travellers, short-breakers or people visiting friends and relations - demand is as buoyant as ever.

Low-cost airlines might be partly shielded from any economic slowdown as premium price passengers trade down. Even so, easyJet's experience is striking.

It is dangerous to extrapolate from one company or industry, but easyJet gives the lie to the notion that consumer confidence has been hammered and that the slowdown is universal.

Instead, its experience strongly supports the argument that the economy is, if anything, running too hot, not too cold. Cost inflation is the big bogeyman at Gatwick and Luton.

Inflationary pressures have become entrenched - most notably in the cost of fuel, but also in landing charges, maintenance costs and staffing costs. The weak pound, relative to the euro, is also pushing up the sterling amount of many of its continental expenses.

EasyJet's fuel bill rose in the winter half by 42 per cent and in the full year will be £800 million, four times its wages bill. The average cost of fuel has gone up by £2.18 to £11.36 a seat.

Jet fuel, because it is not taxed, is much more sensitive to crude oil price changes. Airlines are under even more pressure than motorists from the rocketing of crude oil to more than $120 a barrel.

EasyJet is more fuel-efficient than most, has better scale economies and is better placed to withstand the margin squeeze. Its workhorse, the Airbus A319, for example, is 40 per cent more economical than an ancient McDonnell Douglas 80 still flown by rivals such as Alitalia.

Even so, fares are likely to go up, both in the short term and looking farther out, as the fuel crunch puts rival airlines out of business and shrinks capacity. It is another reason why the Bank is right to worry that inflation could take hold.

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