Rising costs, acquisitions dominate agenda at ERA

 - November 8, 2006, 5:05 AM

The European Regions Airline Association (ERA) annual general assembly and related industry trade display has become established as a forum for doing “real business,” according to group officials. This year was no exception. In fact, two hours after the two-day meeting’s final session ended delegates were still talking business, which underscored the fact that “the exhibition was used for its intended purpose,” said director-general Mike Ambrose.

After the event, held in Barcelona in late September, Ambrose reflected that the meeting has become an important occasion that satisfies an industry need. “The OEMs and airlines welcome the opportunity to talk with key individuals. One exhibitor claimed to have achieved more in two days [here] than during a week at a major aerospace show,” he told AIN.

Such a dynamic suggests airlines had anticipated Ambrose’s view of what should happen next: “We have to invest to replace [equipment] and to expand,” said Ambrose. “The industry is looking to take things forward. Now, we need to plan the future more constructively.”

As if to confirm an eagerness to develop their businesses, ERA assembly delegates provided good support for two workshops–on airline information technology and aircraft acquisition–that ran concurrently with the principal conference periods. Ambrose said that the workshops were timed to allow delegates to maximize their experience: middle managers could attend the sessions while senior managers were in the main meetings. He added that such events will be a feature of future ERA assemblies.

Ambrose reported that in the last 12 months most ERA members had experienced “reasonably buoyant traffic growth” despite declining yields. Fuel prices had damaged recovery from economic recession, with “strong evidence of continuing cost stringency” among operators. He said that the average fuel price in the first half of this year had risen some 31 percent from the same period last year at a time when passenger revenues had fallen more than 8 percent.

Rising fuel prices have enhanced the appeal of turboprops, which comprise 44 percent of the ERA fleet and have seen increased use this year; jet use has remained essentially stable. Ambrose said all carriers must prepare for lower oil availability and higher prices, since further steep increases would aggravate the effect of any “additional regulatory burdens.” Accordingly, the industry must press for urgent implementation of improved infrastructure and promote its economic and social benefits more strongly.

Key indicators for the first half of this year (compared with the same period last year) show increasing aircraft loads, with 8.2-percent growth in ERA passengers exceeding a 5.1-percent gain in seat numbers. Likewise, a 9.5-percent increase in traffic was well ahead of 5.9-percent growth in capacity.

Typical loads have been running at more than 60 percent, a record level for the first half of a year, said Ambrose. A 1.7-percent gain in hours flown–almost double the increase in landings–reflects slightly greater average sector lengths of about 300 nm.

Pointing out that “aircraft age at the same rate as we do,” Ambrose said that “sooner or later” ERA members must begin to introduce new aircraft. Turboprops have flown an average of 13 years, about three years more than typical regional jets in the ERA fleet. For the past four years the average airframe age has increased in line with the calendar, rather than falling as would happen following the introduction of new or younger equipment.

Ambrose also reported increasing productivity, as members’ average employment rolls per aircraft fell about 1.3 percent, while passengers carried per employee have increased by almost 10 percent. ERA members have cut sales and distribution costs by almost a quarter, perhaps through greater use of electronic booking. First-half overhead costs fell about 10 percent.

Challenges Ahead
With environmental considerations dominating developments, Ambrose sees aviation’s inclusion in the European Union emissions trading plan as inevitable. “It is the least harmful of [alternative] economic instruments,” he said, adding that aviation accounts for only about 1.5 percent of manmade CO2.

Meanwhile, ERA is calling for cooperation among airports, airlines and national governments to ensure the safety and security of passengers and airline employees. A resolution passed at the assembly calls for governments to pay for anti-terrorist security while airlines and airports partner in the development and implementation of new anti-terrorist “solutions.”

Any measures taken should permit air transport to continue functioning effectively to the maximum degree possible.

“Ensuring the safety and security of passengers and employees is the paramount objective of any airline,” according to the ERA. “There [should] be a European Union-wide review of security requirements imposed on airlines by individual states, to achieve a far higher degree of standardization and the elimination of unjustified national variations.”

The move follows heightened levels of security introduced in the UK in August after detection of an alleged plot to sabotage transatlantic flights. Assembly delegates saw subsequent inconsistent security restrictions as a particular threat because the extra time it takes to screen aircraft occupants affects crew duty time and could drive passengers toward other modes of transport.

ERA members have also called for greater European Commission (EC) commitment to ensuring it applies its own “Better Regulation” principles. “The desire to improve European Union lawmaking and regulatory processes is admirable [and] the great strengths of the concepts are that they adopt a business-oriented approach and can be applied universally,” said Ambrose.

“Nobody gains when poor legislation [is] redrafted or implemented. We must work to ensure that rules and regulations are [drafted correctly].” He concluded that the “excellent principles for good governance promoted by EC president [Jose Manuel] Barroso” are still not being applied rigorously in the EC’s day-to-day work.