Europe's Regional Airlines Brace for Big Changes in 2017

 - February 20, 2017, 5:04 PM
Channel Islands-based regional airline Aurigny took delivery of a new Embraer 195 in 2014 and a new program from the European Investment Bank could soon free up just over $1 billion worth of credit guarantees to support other carriers in modernizing their fleets. [Photo: Ian Sheppard]

The European Regions Airline Association (ERA) predicted that 2016 results for its 53 airline members will prove to be “better than expected” when reported at the group’s conference in March. At a press conference in London on Monday, it also forecast “big changes” for the sector in the coming year or so, driven in part by the uncertain Brexit process through which the UK is set to leave the European Union (EU).

The association’s president, Boet Kreiken (who is also managing director of KLM Cityhopper), told reporters, “Europe is in the doldrums; there is lots of complexity and upcoming elections [in various countries]. The effectiveness of the EU institutions is being tested and we are feeling it.”

Kreiken explained that day-to-day ERA airlines are facing “airport capacity issues, lack of physical space to maneuver, and too many ATC delays.” More broadly they face continued threats from low-cost carriers as well as uncertainty with the general economic environment and currency exchange issues.

Acknowledging that Europe’s regional aircraft fleet is generally older than those in other parts of the world, ERA has been working with the European Investment Bank (EIB), which is on the verge of providing just over $1 billion worth of credit guarantees to support fleet replenishment. The exact terms under which these guarantees will be available have yet to be confirmed, but director general Simon McNamara said that negotiations have reached an advanced stage.

ERA, which is currently headquartered in the UK, has a membership consisting of 53 airlines, 22 airports, 10 aircraft manufacturers and 106 suppliers and service providers. Its most recent members are Croatian Airlines and SAS’s external products division.

Apart from fleet finance, McNamara outlined four key areas that ERA is focusing on this year: Brexit, the EU’s Emissions Trading Scheme (ETS), Public Service Obligation (PSO) routes and passenger rights.

By late March, the UK government is supposed to trigger the so-called Article 50 clause that will begin a two-year period of negotiation over the terms of Britain’s exit from the EU. Broadly speaking, ERA’s position is that the UK air transport sector should be able to continue operating under the jurisdiction of rules set by the European Aviation Safety Agency.  

“Once Article 50 is triggered we’ll be able to launch a campaign,” McNamara said. “Our strategic position is to find the fairest way to keep the status quo,” whereby the UK does not gain an unfair advantage by being outside the EU.

On the environment, ERA is concerned that the EU’s ETS will continue to operate even after a new worldwide ICAO system for is introduced in 2021, potentially putting Europe’s airlines at a competitive disadvantage. The association also wants to see the expansion of the Single European Sky rationalization of the continent’s air traffic management system to further reduce aircraft emissions through more efficient routing. “The lack of progress on SES is very, very frustrating,” complained McNamara.

Meanwhile, ERA is calling for more use of state-supported PSO routes to support and stimulate regional economies in more remote parts of Europe. In April, the Europe Commission (EC) is due to issue new regulations covering PSOs.

ERA sees less progress on efforts to reform passenger rights. It claimed that the EC review of Regulation 261/2004 is “going nowhere” for now. At the same time, various court rulings to define when so-called “extraordinary circumstances” should apply to policy covering travel disruption have continued to place a greater passenger compensation burden on airlines. In one recent case, a court reportedly ruled that an airline ought to have been able to foresee a bird strike incident.

The ERA’s annual Regional Airline Conference will be held in Copenhagen, Denmark, from March 29-30. The group's annual General Assembly will be staged in the Greek capital Athens from October 17-19.