Concerns about Brexit, competition from low-cost carriers and a call for a new re-engined turboprop. These are some of the issues concerning the European Regions Airlines Association (ERA). BILL READ FRAeS reports

On 20 March, the European Regions Airlines Association (ERA) held its annual Media Briefing at the RAeS in which the Association outlined the hopes and fears of its members relating to the future of regional airlines in Europe. ERA is well qualified to speak for the industry, with a current total of 193 members comprised of 49 airlines from across Europe, 11 manufacturers, 21 airports and 112 suppliers. Airline members include independent airlines, wholly-owned subsidiaries, franchised airlines, aircraft crew maintenance insurance (ACMI) operators, cargo operators and hybrid mixed airlines. ERA also has a number of specialist workgroups which share experience and knowledge of different aspects of regional air transport, including safety, regulations, finance and MRO.

Regional revolution

The growth in European flights. (ERA)

The session was begun by Peter Morris, Chief Economist at Flight Global’s Flight Ascending consultancy, who gave a presentation on recent trends in the regional aviation industry. “Up to about the year 2000, there was little change in the major players in European aviation,” said Morris, “However, following the introduction of common standards across Europe, the past 15 years or so have seen a real transformation from production to consumption. The business model in Europe has changed significantly. The introduction of on-line booking has changed the way passengers book tickets. It used to be that one Euro in four of money made from ticket sales went to intermediaries; now this is down to around 2%. This can now be used to operate a service to pay for staff and aircraft.”

"There has also been a revolution in pricing. There used to be a crazy pricing system with very expensive tickets just to fly within Europe. But then came the low-cost revolution and now prices are now much lower. However, the problem now is that passengers are treating low-cost fares as standard which makes it harder for regional carriers to compete.”

Fuel prices

Is there a market for a relaunched version of the Saab 340? (Paavo Piheigas)

“Fuel prices have had a critical role in shaping the regional market, as they impact the economics of smaller aircraft on shorter journeys,” stated Morris, “There was a period of around 20 years where fuel cost 50c per gallon but this then rose to $4 per gallon. This eightfold increase particularly hit regional carriers who now couldn’t afford to fly smaller aircraft. This also led the manufacturers (Boeing and Airbus) to develop re-engined narrowbodies (the MAX and the neo) which were more economical to fly. However, these benefits have not come to the smaller-sized aircraft. In the regional market, while there has been some progress with new versions of regional jets (such as the Embraer E2), there have been no re-engined turboprops, thus leaving the regional market with an operational efficiency disadvantage whenever fuel prices are high. “The market would benefit from new turboprop types which offer more fuel efficiency,” said Morris. “There have been a number of proposals we’ve heard about for new turboprops but the majority of these (around 80%) have withered away before getting beyond the planning stage. As for the remaining 20%, it could be up to ten years before we see any actual new aircraft designs. However, there could be great efficiency and operational advantages in introducing a revamped regional aircraft design, perhaps based on an updated version of an earlier design – such as say the discontinued Saab regional turboprops.”

Larger aircraft

There has been a decline in the number of regional jets over the past ten years. (ERA)

There has been a trend towards an increased number of flights flying further. There are over 600 airports with some kind of service but only 163 which handle over 1m passengers a year. The UK accounts for around 17% of departing seats in Europe.

There has also been a fall in the total number of regional turboprops. (ERA)

At the same time, there has also been a trend towards larger aircraft operating in Europe. “Between 2007 and 2017, there was an overall decline of 20% in smaller regional jets in service from 785 to 628, although the number has increased in two countries – Russia and Sweden,” said Morris. Regional turboprops have also declined in number, with a 15% fall in total numbers over the past ten years. At the same time, the number of narrowbody aircraft operating in Europe rose by 1,000 aircraft, a rise of 33%. However, Morris noted the interesting statistic that 289 out of 657 European airports (43%) have an average of fewer than 110 seats on scheduled services. “This means that there is still clearly a market for smaller aircraft types,” he explains.

In April Embraer delivered the first production E190 E2 to Norwegian regional carrier Wideroe. (Embraer)

Morris explained how the recent changes in aircraft size and route length within Europe have been driven by a combination of economic factors. Demand for air travel was being increased by a rise in GDP and travel growth, particularly from the eastern side of Europe and the proliferation of low-cost flights. However, there was also constraints on demand due to higher fuel costs, increased competition from high-speed rail on some routes and passenger service charges on UK domestic air routes. “Even if you built every rail line dreamed up by every enthusiast, you would only link 19% of the city pairs linked by air transport. Aviation is the only element that unwraps the travel potential.”

As well as new aircraft designs, Morris also highlighted a number of other future opportunities for regional carriers. Network carriers could look to ensure continuing connectivity to hubs with (lower cost) regional carrier agreements while secondary markets will continue to be generated and discarded. Flights to remote community destinations supported by state-funded public service obligations (PSOs) route subsidies are going to be restricted by other political priorities and the main driver for the air operators will be that of economics. “There is still a strong market potential for regional operators but they will need a real focus to succeed against the challenges of network and low-cost carriers," he said. "The real challenge for regional success is to gain the greater stability of a wider European network.”

There may be trouble ahead

What is currently concerning the members of ERA. (ERA)

A recent survey of ERA members identified a number of industry issues that were of concern over the next three years. The top five most major concerns were the impact of Brexit, regulatory burden, pilot shortage, industry consolidation and increased fuel prices. Other concerns included the financial burden of EU261, congestion, slot availability, industry financing, the environment, engineer shortage and ATC.

Uncertain Brexit

ERA member airlines across Europe. (ERA)

With less than a year to go until the UK is due to leave the European Union, there is still uncertainty among both UK and European regional airlines as to what exactly its effects will be. “Brexit is not just a UK issue, it is a European issue,” said the new ERA Director General, Monserrat Barriga. “For our members in the UK and Europe, Brexit is a big issue,” added Andrew Kelly, President of ERA.

ERA has recently been engaging with EU and UK authorities and has issued guidance to its members on Brexit, including published a position paper in February. According to ERA’s report, UK-licenced carriers currently operate all the freedoms afford by Community carrier status – including free movement of goods, people, services and capital, market access, pricing, capacity and code sharing – none of which will apply post Brexit. EU community carriers will also lose their freedom to automatically operate in the UK. ERA claims that 46% of its member carriers which have cross-border operations will be directly affected by Brexit and 24% which feed regional traffic into a hub will indirectly affected. The remaining 30% which provide carrier, charter and ACMI (aircraft crew maintenance insurance) operations will also feel effects from cross-border operations, including future customs processes. “Given the planning timescales to which this international business must work, there needs to be more clarity of policy, its achievability and legal certainty much sooner than seems currently to be the case,” Graham Baguley, Director of Operations from Titan Airways, is quoted as saying in the Report.

AMCI operators are also uncertain as to the future legality of Community carrier wet leasing from third-country operators. Up to now, the EU has only preferred that that EU carriers wet lease from with the European Common Aviation Area (ECAA) this may change in the future.

ERA has issued a report to its members on the potential problems posed by Brexit. (ERA)

There are over 140 pieces of EU legislation relating to aviation currently implemented in the UK relating to such initiatives as the Single European Sky air traffic management research (SESAR, Single European sky (SES) and the European Aviation Safety Authority (EASA). If the UK leaves EASA post Brexit, then there would be no mutual recognition of safety standards within aviation and aerospace manufacturing leading to an increase in certification costs.

The UK has three options:

i. The UK could join the European Economic Area and continue to benefit from traffic rights, freedom and internal market access. However, to do this, the UK would have to accept EU air transport policy, decisions of the Court of Justice of the European Union (CJEU) and the free movement of people.

ii. The UK could join ECAA which has EU and non-EU members, although it would have no voting rights on the board

iii. A new bilateral agreement between the UK and the EU which would only offer limited ‘freedom to fly’ rights to UK airlines to fly to and from EU destinations but not between EU countries. Other bilateral agreements would also have to be negotiated between the UK and other countries which could lead to UK international airports having to compete with EU airports for long-distance or transatlantic traffic.

At present, it appears that there is going to be a limited additional transition period after March 2019 – a decision welcomed by ERA, although Barriga stressed the importance of having aviation-specific agreements which were not present in the latest transition agreement. Morris agreed that airlines should be prepared and not be naïve about potential consequences.

No bankruptcy protection

ERA Director General Monserrat Barriga.

Another concern among ESA members is consolidation. Last year saw the failure of three European airlines - Alitalia in May, Air Berlin in August and Monarch Airlines in October. “ERA members are generally strong and stable, although we feel there will be further consolidation,” cautioned Barriga. “However, we do not agree with the idea of common airline bankruptcy funds, as this would be discriminating for the industry and would penalise the prudent airlines versus the most risky ones and passengers already have sufficient protection.”

Fleet replacement funds

In July 2016, a lobbying campaign from ERA resulted in a €1bn loan fund from the European Investment Bank (EIB) which member airlines could use to replace ageing aircraft. A total of €546m of financing from the fund has been approved for use by KLM Cityhopper and Air Nostrum and ERA is hoping that more members will take advantage of the finance opportunities.

Passenger compensation

A chart showing the geographic share of departing seats within Europe. (ERA)

A continuing issue concerning ERA is the EU261 legislation relating to passenger compensation for delayed or cancelled flights. The Association is concerned that the amount of compensation is out of proportion to individual ticket prices. “It’s a bad law which is being made worse all the time,” stated Andrew Kelly, President of ERA. “Currently, the definition of ‘extraordinary circumstances’ are interpreted differently in different countries and courts, with different precedents being set. 

The collective redress regulations are currently being reviewed by the European Court of Auditors which is looking at inconsistencies in the way passengers are informed about their rights and the way they are enforced throughout the EU. “We need consistency in interpretation, so that airlines know where they stand,” said Barriga. “Different court rulings in different places have created confusion for both customers and airlines. The EU’s review of EU261 has stalled and there is no timescale of when it will be completed. We need the revision to be concluded.”

ERA is working with other associations against the regulations.


The implementation of the EU General Data Protection Regulation (GDPR) may affect data flows such as the Passenger Name Records and Advance Passenger Information which may in turn result in problems for airlines. In addition, the UK personal information requirements required by the UK Investigatory Powers Act are viewed as excessive and potentially in violation of EU citizen’s rights by the Court of Justice of the European Union (CJEU)

Pilot and skills shortage

ERA is also concerned by an imminent shortage of pilots and maintenance engineers. Montserrat explained how ERA is addressing the problem by promoting the exchange of information between its member airlines, MRO providers, training facilities and recruitment agencies, as well as lobbying EASA to extend pilot retirement age to 65 years and promoting women in aviation to better attract female pilots and engineers into the industry. Kelly explained that his airline, ASL Hungary, was working on a research project with the Hungarian CAA where its pilots will be monitored to measure physiological elements at various ages.

Bill Read
13 April 2018

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