ERA 2006: Three-time Airline of the Year not content to rest on its laurels

 - September 13, 2006, 4:50 AM

A revolution in Binter Canarias’s approach to business and the Spanish carrier’s distinguished on-time performance record led to its selection, for the third time, as the ERA’s Airline of the Year last October. Binter relinquishes its title at the ERA general assembly in, appropriately enough, the Spanish city of Barcelona at the end of this month.

A former state-owned subsidiary of flag carrier Iberia, Binter Canarias went private only four years ago. Now flying among eight points in the Canary Islands and six mainland destinations in Europe and Africa, Binter describes itself as having “passed from being a mere operative arm of a state flag carrier to an efficient independent and profitable airline.”

Along with privatization has come competition, requiring the airline to reach out to the mainland to limit its reliance on a small home market buoyed by subsidies. All but a few Binter operations comprise public-service obligation (PSO) routes–flights supported by European Union funds to ensure adequate transport and access to remote regional areas.

When selling Binter, Spanish state enterprise holding company SEPI kept a “golden share,” but it has never used its authority to interfere in operations. Officials say that Binter’s freedom to drop handling services provided by Iberia to establish its own operation reflects its “total” independence as a sovereign, autonomous company.

The airline says that private ownership has seen it successfully develop “a good image” with its own identity. Binter has changed its corporate image with the introduction of a new emblem, aircraft livery and cabin interior, crew uniform, airport self-check-in machines and a frequent-flyer program among other initiatives.

At last year’s ERA assembly, Binter announced its order for an eighth ATR 72-500 twin turboprop for inter-island operations, bringing its ATR fleet to 13. Officials acknowledge the political influence in the selection of the Spanish-Indonesian CASA-Nurtanio CN-235 twin turboprops with which Binter began operations in 1989 (along with a few Iberia McDonnell Douglas DC-9s). A company spokesman called the turboprops “magnificent, [although] designed more for military than civil use.” But when traffic growth required more capacity Binter chose the Franco-Italian ATR 72 and hasn’t looked back.

For low-density service, the airline uses two Raytheon Beech 1900Ds belonging to local operator Navegacion y Servicios Aereos Canarias. It also wet leases three Futura International Boeing 737-800s for “thick” routes to the European mainland.

Although the nature of inter-island travel naturally limits potential for local expansion–especially now that competition exists–a major advantage for local operators lies with the fact that the restricted market is less susceptible to global trends. Accordingly, Binter was “scarcely affected” by otherwise widespread negative traveler reaction to the 9/11 terrorist attacks that aggravated an already developing downturn in 2001.

Of course, global trends in fuel prices do not discriminate. “The price of fuel is a critical aspect, [although] the developed economies’ capacity to absorb this phenomenon is surprising,” one official told AIN.

Apart from higher fuel costs, price caps on PSO support influence the Spanish regional’s selection of aircraft. Regional jets simply cannot make a profit in PSO markets, limiting Binter’s choices to turboprops and jetliners holding at least 150 seats. Binter has considered up to five such aircraft for peak-hour island services and for new operations to Paris and Milan. In 2004 Binter opened a route to Funchal on Madeira and has since entered North Africa.

The flights to Africa provide onward long-haul connections, while Binter also wants to offer regular direct links to “diverse” airports in Europe–flights on which it plans to offer business-class service not available on its short-haul turboprop routes.

Under the ownership of Hesperia de Inversiones Aereas since its 2002 privatization, Binter has moved heavily into Internet booking, with about 60 percent of last year’s passengers using electronic tickets and self-check-in. The workforce has doubled to about 850 and annual passenger numbers have increased from 2.25 million in 2002 to 2.7 million last year. The punctuality that contributed to its Airline of the Year award saw more than 91 percent of its flights arrive on time, while cancellations accounted for fewer than 2 percent of scheduled services.

Nevertheless, the past four years have been far from turbulence-free, especially with regard to competition on island routes. Asked if the new regime envisioned the level of development Binter Canarias has had to undertake, one airline manager unhesitatingly responded: “Sincerely not. The work that has been done in the [past few years] has been very intense, [but] has given fruit. Five years ago we were not expecting to have direct competition, which today exists. [Also] we are flying to international destinations that were not contemplated.”

Looking forward, Binter remains determined to develop its European and African networks, despite the inherent competitive challenges it continues to face. “Binter has developed in a [context] of competition and [has learned] to be efficient,” the official said. “We might define ourselves as a [low-cost] regional and [among] the most profitable airlines in the world in proportion to our size.”