Europe must adapt to save regional carriers, says ERA

Already this year, Europe has seen a significant increase on passenger traffic across its airport networks, with figures showing January 2016 grew by an average of +6.3%. With passenger growth expected to be a continuing trend, airport hubs across the continent must now adapt to meet these new demands.

Already this year, Europe has seen a significant increase on passenger traffic across its airport networks, with figures showing January 2016 grew by an average of +6.3%. With passenger growth expected to be a continuing trend, airport hubs across the continent must now adapt to meet these new demands.

On March 4, 2016, the European Regions Airline Association (ERA) held a media briefing to discuss the latest developments across the Europe region and the European Commission’s aviation strategy.

Simon McNamara, the Director General for ERA, highlighted the urgency of Europe’s key hubs remodelling and improving their infrastructure to meet these rising demands. “We’re running out of airport capacity at key hubs and there’s all the evidence out there to show that” explained McNamara.

“By 2035, based on expected growth levels, 12% of the expected demand will be unaccommodated at key airports, and that’s equivalent to two million flights and results in a total loss to Europe’s GDP of between 28 and 52 billion euros.  Somebody has to say ‘it needs to be done, we need to grow in Europe’ but nobody is. In the meantime, outside of Europe, there’s plenty of capacity coming online which is leaving Europe behind, unless we build new terminals and airport runways," he said.

“Dubai World has six new runways, Doha has two new runways and terminal and also Istanbul is coming online in two years’ time with a proposal for a 6 runway airport.  Europe will be left behind unless we make a decision on building a new infrastructure in the way of airports, terminals and airport runways. However complicated that is, we need to start having the discussion about doing it, because the risk is that regional carriers are the first to be squeezed out,” he added.

Routes Europe is taking place this year in Kraków, Poland from April 23-26, 2016. This year’s event will feature a ‘What Europe Needs Is…’ panel discussion aimed at the development of the region, including consolidation and how the market must adapt and change.

Last December, ERA published “An Aviation Strategy for Europe” report focussed on: encouraging investment; improving safety; competition (taxes); airport capacity; regional connectivity; and how to move forward on the Single European Sky.

One main point this raises is “to promote a more efficient and transparent functioning of the PSO regime and a means of promoting air connectivity, especially to and from the regions”. This aims to support regional carriers through recognising and promoting the value of regional connections.

“ERA is lobbying for the PSO system. It’s a government supporting a community and route, so we’re looking for greater use of PSO’s across Europe, where appropriate. This will not aim to replace competition because we’re very pro-competition” explained McNamara. “And more than anything else, we’re looking for governments, and particularly EU legislatures, to recognise the value of those connections more.

“That’s partly what ERA does, which is to give a voice to the carriers. Everybody in Brussels has heard of Ryanair and easyJet because they fly them frequently, but they haven’t heard particularly of some of our smaller brands, so it’s promoting that sector more,” he added.

Unfortunately, regional aviation is a hard market to consistently make money in so LCC’s quickly lose their patience with certain routes, leaving some communities unserved.

Jonathan Sullivan, Managing Director for the Seabury Group, discussed at the ERA media briefing the latest developments in Europe, focussing on the importance of regional markets.

“When the fuel price goes back up, they (LCC’s) don’t have the patience to lose money and they don’t have the cost structure to support flying at a high fuel price on markets that suddenly become marginal, so they cancel routes. Sometimes they’ll lose money for between three and five weeks and they’re done, they don’t tolerate it. And they will brag in all of their investor presentations about the performance of their routes portfolio, but they’re not there to develop, they just don’t have the staying power," he said.

“I suggest it’s in the Europe’s best interest that the infrastructure stays. But we should all recognise that the regional aviation segment is the hardest segment to consistently make money in,” he added.

With the UK facing an EU referendum this June, the In Out debate over Brexit is in full force. Despite the ERA unable to take a political stand, McNamara made the following observation: “Aviation is an industry that doesn’t respect borders as it functions best without it. Anything that introduces more complexity, which I would argue that an exit would, would probably limit the business.

“Introducing new borders will make the industry step back for sure. Ultimately, whatever the UK does, we have airlines in Switzerland, Norway, Ukraine… so whether you’re in or out Europe will still exist,” he added.


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