This article examines recent market behaviour of EU airlines. After a short description of the EU liberalization process the article continues to analyze the network related cost characteristics of airlines in the deregulated U.S. domestic market. Network economies have been a decisive factor in market concentration and competition. The article concludes that during the first years after the liberalization neither fares nor frequencies reflect an intensified competition in the internal market. Different developments in network restructuring of EU airlines are described, indicating the first steps towards market concentration.