European Regions Airline Association General Assembly: High-load European region face many challenges at quarter-century mark

 - October 18, 2006, 11:07 AM

The first 25 years of the European Regions Airline Association (ERA) has been a story of “bold creativity, progressive thinking and community service,” according to ERA president and Aegean Airlines COO Antonis Simigdalas. He told the annual ERA general assembly in Gothenburg, Sweden, last month that the first half of this year has seen an almost 6 percent growth in passenger numbers, a traffic increase of more than 10 percent and “the best passenger seat factor ever.”

Simigdalas nevertheless underscored the challenges members face as the ERA enters its second quarter-century.  “Industry continues to be adversely affected by regulators’ failure to apply ‘good governance’ principles and impact assessments to ensure better regulation,” he said. The association has also identified a continued lack of consistency and harmony in national regulatory oversight and urges increased vigilance among national aviation authorities (NAAs) as the European Joint Aviation Authorities (JAA) prepares to hand over responsibilities to the new European Aviation Safety Agency (EASA).

Cost-cutting Measures

Simigdalas said that airlines, airports, OEMs and suppliers continue to face cost-reduction pressures, although growing traffic reflects generally increased economic confidence. However, he added that steeply rising fuel prices have “seriously limited” recovery from recession.

The ERA sees little opportunity for airlines to cut costs further, as passenger taxes and other charges often “substantially” exceed average yield. Nevertheless, growing evidence that higher-revenue sectors of the market appear willing to pay for better quality service has encouraged airlines.

ERA director-general Mike Ambrose said additional regulatory burdens have aggravated climbing oil costs despite aviation’s contributions to environmental efforts. “Environmental levies and emissions trading schemes will add little real value in an environment with high fuel prices and meager yields,” said Ambrose. “Politicians and regulators continue to fail to recognize the economic value of intra-European air services.”

Predicting some “inevitable” clashes with the European Commission, Ambrose said that the “champion of deregulation” in the 1980s and early 1990s must not become the re-regulator of the new millennium. He added that he wants to hold EC transport and energy commissioner Jacques Barrot to a promise that the ERA would see greater use of impact assessments in future regulations.

Revenue Stream

European regional airlines have seen passenger numbers grow by 5.6 percent in the first six months of this year, while revenue passenger kilometers increased by a much larger 9.9 percent as travelers flew longer distances. But the overall picture appears balanced, as about one-fifth of operators reported more than 20-percent growth in volumes while some 30 percent have seen only falling numbers.

Although the early 2000s’ five-year trend of roughly 5-percent annual growth remains well below the 10- to 15-percent levels prevailing a decade ago, load factors have grown to almost exactly 60 percent this year– some of the highest the ERA has ever seen.

Rising aircraft use rates– up 6.4 percent during January-June against a 4.9-percent gain in landings–reflect the greater distances flown this year, up almost 6 percent to nearly 350 miles. The ERA says that longer trips, combined with a higher average sector time of 1 hour 14 minutes, reflect the increased use of regional jets, which now account for around 55 percent of the fleet. After a decline in fleet age between the years 1998 and 2000 as operators acquired new aircraft (and disposed of older machines), the average age of the ERA fleet has risen slightly in the past five years, to about nine years for regional jets and 12 years for propeller-driven aircraft.