European Regions Airline Association

ERA's Regional Airline Conference (RAC) in Porto has concluded with calls for the industry to strive harder to get its message across to politicians and legislators in Brussels. The conference, with the theme 'Regions at Risk' served to illustrate to those present - including representatives of the European Commission - that many of Europe's regions rely heavily on air transport. Many remote areas with difficult terrain and weather conditions can thrive with air transport links, but quickly wither without it.

Current moves to revise regulations relating to slot provision at Europe's airports, ostensibly to increase capacity, were heavily criticised by speakers who pointed out that even secondary slot trading, if not managed properly, could see slots go to operators outside Europe wanting access with their larger aircraft, to the detriment of regional communities closer to home.

In an attempt, which worked very effectively, to drive this message home, the conference included presentations from three airlines in the regions - where some 85 percent of the population lives. These were Widerøe of Norway, SATA of the Azores, and Greece's Aegean Airlines. All are working hard to implement new strategies in order to cope with the economic troubles in Europe, and discussed their relationships with local government in providing PSO (Public Service Obligation) routes - which are often subject to strict conditions which makes it hard for airlines to maintain profitability, despite being allowed to operate the routes exclusively.

Yesterday Fernando Pinto, president & CEO of TAP Portugal, opened the conference by saying that the airline’s regional subsidiary, PGA Portugalia, is “important to the TAP results as it brings very important passengers from small cities to long distance services.”

Generally, his main issue in the airline industry is the lack of recognition and the erroneous assumption that TAP only works because it has support from the government. “It was just in people’s minds - we don’t have any such support. We are the biggest exporter in Portugal - we pay taxes, employ people, bring tourists and allow commerce.” He recognised the importance of ERA in trying to get the industry’s views across to politicians but noted that the industry should work more closely together on presenting single messages on issues.

In the first session, chaired by Cimber Sterling CEO Jan Palmer, Henrik Hololei of the European Commission (Chef de Cabinet for Commission vice president and transport commissioner Siim Kallas), said that the EC was “definitely guilty” of over-regulation sometimes. He also lamented that regional airlines had been left to focus on feeding the hubs for larger carriers, at the expense of regional hub-bypass routes. He also said that the EC did not see rail and air as competing as much as complementing each other - with better rail links to airports being “a good thing.”

Hololei defended the commission’s slot Regulation proposals as promising to address an “inefficient and inflexible” system, allowing far more airports to operate at full capacity - and leading to “24 million passengers a year by 2025.”

However he added that, “One of the most important sentences in the [EC Transport] White Paper is that curbing mobility is not an option. But mobility does have to come with sustainability… ETS is clearly a complication especially when dealing with third countries.” He said that “this must be tackled in the context of ICAO” - although clearly the EC sees ETS as a viable step despite the potential damage.

Giving “the airline view”, former Aer Arann boss Paul Schütz said that the “regional carriers of Europe are (if nothing else) a resilient bunch.” However he added to warnings about losing slots and the regions suffering as a result and continued: “Legislation can increase the risk to routes… airlines are not opposed to legislation …but we are a soft target [and] we have a big problem with ridiculous legislation.” He concluded that legislation needed to be “necessary, concise, unambiguous and defined.”

Laurie Price, director of aviation strategy with Mott MacDonald, said: “In 40 years I have never known such consistent high levels of fuel prices, representing a third of airlines’ costs. It can’t continue.” He said that there was “clear evidence that regional airports are losing flights to hub airports” and suggested that those benefiting were carriers from outside Europe, for example from the Middle East. “Does that really help Europe?” he asked. “Do we really want to go to South Africa via the Middle East anyway [for example]?” Price also pointed out how although only around 253 Airbus A380s have been purchased to date, “They do seem to be replacing regional aircraft at hubs, for example at [London] Heathrow.”

Price carried out for ERA a “rebuttal report” into the slot issue following the EC’s controversial study, produced by consultants Steer Davies Gleave, which encouraged the move towards using larger aircraft to utilise slots ‘better’. He pointed out that for the vast majority of routes in Europe, “you just couldn’t do it with the rail system - but we don’t say it!” He then reiterated the finding of ERA’s rail-air report that rail in Europe was subsidised to the tune of around €45 billion - versus the €0.338 billion received by aviation, in state aid. He also threw in a swipe at low-cost carriers: “Which is better [use of airport capacity], three times a day with a low-cost carrier to a sunspot or a two times a day link to a business destination.”

This led well into the next conference session, addressing the rail-air issue in more detail. Simon McNamara, ERA Deputy Director General, gave a comprehensive overview of the key findings of ERA’s air-rail study, which aimed to “set the record straight” as to the very skewed playing field. “There is a perception that it is the preferred mode in Europe and the EC actively promotes it [above air].”

Robert Deillon, CEO of Geneva International Airport, explained the central role rail connections have had in allowing it to strengthen its catchment area, especially into France. David Jevons, of consultant Oxera, pointed out that the EC Transport 2050 goal was a 50 percent shift for medium-distance routes between cities to rail and water transport and away from air/road, and that by 2050 the goal was to connect all “core network airports” to the rail network, “preferably high speed.” He warned however of the costs of building rail infrastructure and that, in general, you get “diminishing returns as you build more and more - the benefits decline until the cost [outweighs] the benefit.” He also pointed out “the speed at which airlines change in response to market changes - there is far less scope for that for rail.”

He concluded by giving other examples of where rail connections had helped airports to grow, for example at Paris Charles de Gaulle, where as long ago as 1994 a study showed that there had been a 30 percent increase in traffic “on both modes [air and rail]” thanks to a structured investment plan. He suggested also that rail may work well where airports are capacity constrained if longer rail routes were encouraged into the airport rather than short ones.

A full conference report will appear in the May issue of Regional International, which will be available as an eBook on this website.