By Megan Rowling reporting from the South of France

Drop by the Saturday farmers market in the Catalan town of Ceret, and you'll be greeted with a dazzling display of home-grown fruit and vegetables, local cheeses and saucisson.

Could Ryanair desert Perpignan?

You'll also hear an impressive array of Northern European languages being spoken, English being the most common.

In the past few years, British people have flocked to France's sun-drenched Catalan region, snapping up stone farmhouses and quaint village cottages for a fraction of the price of a London family home.

And it's low-cost budget airline Ryanair that has brought many of them here.

Since 1999, when Ryanair's planes first touched down on the tarmac at Perpignan-Rivesaltes airport, the local economy has benefited from an influx of British cash.

"More and more British people are installing themselves here, working from home, and nipping back to London when necessary," explains airport director Yves Mauroy.

"We have seen a very positive impact on tourism, and property prices have risen substantially."

Trouble in paradise

Nonetheless, the region's relationship with Ryanair has hit some turbulence.

Earlier this year, there were rumours the low-cost carrier would desert Perpignan for the newly renovated airport at Girona, not far across the border in Spain.

Perpignan handled a record 650,000 passengers in 2002

So far those fears have not been realised. But Ryanair is now operating multiple services between the Spanish airport and several northern European destinations.

As a result, it has cancelled its Perpignan-Frankfurt route, preferring to deposit its German clients closer to their beloved Costa Brava.

The latest worry for Mr Mauroy and his team is that Ryanair could stop flying to France altogether.

Ongoing rows in France and at the wider European level threaten the marketing agreements that Ryanair has in place with many airports.

Ryanair has already said it will cease flights to Strasbourg after a court ruled that its deal with the local airport amounted to an unfair subsidy.

And it may choose to pull planes from other routes if the European Commission decides in the coming months that it received illegal state aid in Belgium.

All this is troubling for the growing army of British homeowners who count on the airline to reach their French properties.

Under pressure

On top of the uncertainty surrounding Ryanair, Perpignan airport has also had to deal this year with the bankruptcy of Air Lib, the first French airline to launch low-cost services.

Alongside its other routes, the company had been the sole operator of flights between Perpignan and Paris.

My Aeris flights were 200 euros cheaper than if I'd gone with Air France Hadji Farida Business traveller

Didier Brechemier, an analyst at KPMG Consulting-Syntegra, attributes the Air Lib failure to a poor business mix. "Its low-cost model for some routes was profitable, but it was losing money on longer routes."

When Air Lib's Paris slots were divided up, Easyjet and Aeris, a Toulouse-based charter company, were among the main beneficiaries.

Aeris then decided to have a stab at the low-cost market, and launched cheap flights between Paris and the south of France in June.

Here it sees its main competitor as Air France, though it is also up against Easyjet on routes to Nice and Toulouse.

Low-cost battle

According to Aeris' marketing director Alexandre Scherer, the aim is to lure business travellers from small-and-medium-sized companies away from the national giant.

Perpignan is one of these battlegrounds, with Air France operating four daily round-trips from Paris, and Aeris three.

Waiting in the departure lounge for the 13:25 Aeris flight to Orly, Hadji Farida, 25, from Lille, suggests that the low-cost company's tactics may be working.

Aeris has had problems filling all of its seats

Her employer, TV channel France 3, decided to send her to Perpignan on Aeris to save money.

"My Aeris flights were 200 euros cheaper than if I'd gone with Air France. So it's not just smaller companies that want to take advantage of this."

Despite the apparent demand for low-cost domestic services, Aeris has only been managing to fill 60% of its seats on average.

The company says this is improving, but eyebrows were raised at the end of August when it missed a government deadline to raise extra capital.

That has been extended, and the airline is now hoping to raise 15m euros in the coming weeks from a mixture of foreign and domestic investors.

Financing

As analyst Didier Brechemier points out, financing problems continue to thwart the launch of would-be low-cost carriers in France.

"There are a lot of people who want to do it, but attracting investors is very difficult with the airline market in such a poor situation."

Loic Lacam, chief executive of start-up Jupitair, can testify to this. He was unable to raise the money he needed in France, and so turned to foreign banks.

Now he says he has the necessary funds, but the French aviation authorities have asked him to find French investors before they will allow him operate.

Instead, he has decided to launch low-cost services from Sweden to France.

"I was trying to safeguard my own market in the face of penetration from foreign companies. But the authorities didn't seem to understand that.

"Even if you have the money, they play a protective role towards Air France," he claims.

Gripped

Others in the industry agree that Air France's dominance has made life tough for smaller airlines in France.

In August, well-established regional airline Air Littoral went into administration, and analysts aren't ruling out further bankruptcies.

France's airline market may become more open to competition after the government disposes of its majority shareholding in the national flag carrier, which could happen by the end of this year.

"Air France, and through it the government, maintain a grip on the French market," explains Mr Brechemier.

"But with privatisation and deregulation, you could see a French low-cost carrier succeed."