ERA 2006: Régional adds muscle with Europe’s first Embraer E190s

 - September 13, 2006, 5:23 AM

In the little more than five years since its formation, Air France domestic partner Régional has evolved from three distinct, ailing French domestic carriers into a single, profitable regional operation and the second biggest French airline after the country’s flag carrier. Last September Régional announced plans to acquire six Embraer E190LR jets and place options on six more, making it the aircraft’s first operator in Europe. Plans call for the first copy to arrive in late October for a network that links 49 cities in France and Europe.

Chairman and CEO Jean-Yves Grosse joined the airline last November 1, following the retirement of Jacques Bankir, the architect of the 2001 merger of Flandre Air, Regional Airlines and Proteus Airlines, the three regional operators acquired by Air France. Air France managing director Jean-Cyril Spinetta asked the three companies involved to formulate a strategy to establish a single entity that would respect employment. All three operators came with Embraer airplanes and a similar approach to the business. A fourth company that unexpectedly fell into the hands of the French flag carrier at around the same time, Brit Air, did not participate in the merger.

Grosse, who joined Régional from Air France operations control, told AIN that the operations of Lille-based Flandre Air, Dijon-based Proteus Airlines and Nantes-based Regional Airlines integrated “progressively and successively” into Régional Compagnie Aérienne Européene, better known as Régional. “Although the process took some time, we did not encounter any major problems establishing a common set of operations,” he said. Even though Régional keeps its own accounting records, Air France consolidates them into its accounts and does not make them public. Grosse insisted, however, that “all Air France 100-percent subsidiaries are profitable.”

Air France acquired Brit Air in June 2000, when a group of its shareholders sold the national carrier 51 percent of the airline’s equity. Since then, the question remains whether or not Brit Air will join Régional, but Grosse still sees little benefit in such a move. “If Air France had the opportunity to set up a domestic airline from scratch it would not have two regional companies today, but one,” he said.

Brit Air did not merge into Régional because it had its own specific history and fleet, he explained. The three airlines that form Régional all flew Embraer airplanes, while
Brit Air, successful and with its own culture, came with a fleet of 20 Bombardier CRJs, seven Fokker 100s and nine ATR 42/72s, limiting the benefits of integrating it with the other three. “Régional has a long-term commitment to Embraer as Brit Air has to Bombardier,” said Grosse. “However, there is some rationalization in that Régional does not operate from Paris Orly airport while Brit Air does.”

Based in the western city of Nantes, Régional ranks as Europe’s largest Embraer operator, with 28 ERJ 145s, nine ERJ 135s and nine EMB 120 turboprops, which, said Grosse, “we intend to reduce progressively.” Its 65-airplane fleet also includes 10 Fokker 100s, five Fokker 70s and four Saab 2000s, due for withdrawal in November. Régional expects its first three Embraer E190s to arrive by year-end, in time for the start of winter schedules. The last three arrive between next summer and the 2007-2008 winter season.

“We inherited the Embraers from Proteus and Regional Airlines and an order for seven ERJ 145s was subsequently renegotiated to the six E190s, which better suits our needs today,” said Grosse. “We also have a guaranteed price for six options but we are now in a period of consolidation and not in a hurry to order more aircraft.”

Régional operates on a four-hub system structured around transversal flights such as Nantes-Lille, Strasbourg-Toulouse and Toulouse-Rome. It serves the Air France group’s two main hubs with 45 departures a day from Paris Charles de Gaulle (CDG) and 33 from Lyon in south central France, and provides the majority of services for Clermont-Ferrand in central France (61 departures a day) and Bordeaux (with 28 daily departures). The network serves 21 French cities and 28 European airports in 11 countries.

Régional abandoned routes such as Nantes-London when demand failed to support direct service, but it has found a role as Air France’s proxy in several markets where there is low-cost competition. They include Régional’s Paris CDG to Bâle/Mulhouse route, also served by EasyJet. It also faces direct competition from Hapag Lloyd Express on the Paris CDG-Hannover and CDG-Nuremburg routes. Grosse also mentioned the effect of “indirect competition,” as “low-cost airlines are pulling down prices on all routes.” For example, Ryanair’s proposed service between Marseilles and Baden-Baden, Germany, could pose problems for Régional’s Marseilles-Strasbourg route.

Meanwhile, competition with France’s TGV high-speed train system, especially on city-to-city routes outside Paris continues to present its challenges, although cooperation between airlines and rail companies has helped lessen the sting to
a degree. The Air France Group even maintains a block seat agreement on trains between CDG and the Belgian capital. The main competitive routes remain Lille, in northern France, to Marseilles in the south and Lille to the western city of Nantes, especially for leisure traffic. Rail competition has ended scheduled air service between Paris and Brussels.

France’s high-quality rail system has limited the prospects for new regional air service, and Régional has consequently streamlined its network over the five years since the merger. This year saw the opening of a Paris CDG route to Leipzig, Germany, for Air France and the takeover from the flag carrier of the CDG-Zagreb, Croatia route. “For the future we have identified some opportunities to feed CDG and Lyons,” said Grosse. “There may be limited possibilities between major French cities and European capitals, but the big competition is with other airlines that feed their own hubs.”

Still, Régional operates some 400 flights daily, about one-third of all domestic and regional flights originating in France–roughly the same proportion it controlled at its founding in 2001. But the airline has seen an increase in capacity and stage lengths. It employs around 1,700 people, including 560 pilots, 400 cabin crew and 500 mechanics. Passenger loads have increased every year since the merger, from 2.1 million passengers in 2001 to 3.8 million last year.