ERA (European Regions Airline Association) director general Montserrat Barriga tells ATW European bureau chief Victoria Moores about how her members have been coping with the COVID-19 crisis and what changes to watch out for in the regional airline sector.

This interview is part of Air Transport Month, a detailed examination of the future of the air transport industry as we begin to climb out of the COVID-19 crisis.

 

Rush transcript:

Victoria Moores:

Good afternoon. My name is Victoria Moores. I'm European Bureau Chief for Air Transport World magazine, and with me today is Montserrat Barriga who is the Director General for the European Regions Airline Association. Good afternoon, Montserrat.

Montserrat Barriga:

Good afternoon, Victoria.

Victoria Moores:

Montserrat, obviously the topic of the day is COVID and the impact on the industry as a whole. What I'm wondering is, you're specifically representing Europe's regional airlines, and I'm wondering what the impact has been specifically on the regional sector in this crisis?

Montserrat Barriga:

Well, I haven't been that long with the association. I've only been [here] a few years - this is my third year - but the association has been in business since 40 years ago. This year is our 40th anniversary. And I can tell you, from discussions with members, we have never seen anything like this before. It's completely unprecedented. I mean, I know this is what everyone is saying these days. What else can you say? But it's true. It's true.

I think we've only seen, maybe, the tip of the iceberg, and we have seen already some bankruptcies and some companies, especially airlines, going into administration. Unfortunately, the regional airlines have traditionally been more vulnerable to bankruptcies, and we might see some more of those.

I was looking at some of the statistics from our members, for example, the Eurocontrol flights in terms of routes, city pairs, for September this year versus September last year, and there's already a reduction of approximately 30% in routes. So, this is actual routes that are not being connected. So we're going to see an impact in connectivity as well. A lot of smaller airports, they have to close down, because there's literally no traffic. So yes, I mean, it's very worrying. Yep.

Victoria Moores:

You talked there about the impact on your members and their ability to literally survive in the market. We've seen quite a few examples of that, maybe even going into the crisis. There was the failure of Flybe. We've seen other airlines have had financial difficulties, CityJet in examinership, similar situations across Europe. What are you hearing from your members about the actual situations that they're in and do you think we will see more failures?

Montserrat Barriga:

Yes. In the past few years we have seen a few airline bankruptcies. Unfortunately, some of the ERA members have disappeared. You mentioned Flybe. We also lost Adria, a long-standing airline in Slovenia, BMI Regional, unfortunately many. But this was due to strong competition. And the fact that, because of the business model of a regional airline, obviously with a lack of economies of scale, they are more impacted by costs, such as for example, EU ETS or passenger compensation. Obviously when you look at a per seat or per passenger KPI, they're obviously more impacted because of those lack of economies of scale, like I said, but in these days, it's not just, I mean, it's competition, but it's basically the lack of passengers, lack of business.

We have heard yesterday that the there's been an announcement about the extension of the temporary framework for state aid. That's absolutely needed. We need cash into the system. We need state aid support to our airlines, smaller and medium-sized, larger airlines. And some of the European champions or larger airlines in Europe have already got hold of some government support, but not all the airlines, actually not all the players in the aviation ecosystem. And we hope that there will be more, hopefully more airlines accessing this kind of government supports through backup loan guarantees and just some financial oxygen to go through the next few months. But this has been unevenly spread. So, we don't really know how much competition is going to be distorted in the long run. And so it's something that we will need to watch very carefully.

Victoria Moores:

I like that phrase financial oxygen, that really seems very, very relevant right now. And with that changing landscape, that changing environment, do you think we're going to see significant changes to the regional airline model at all, coming out of this?

Montserrat Barriga:

I think we do. We will see some changes. Definitely. I mean, in the last few months we've seen more consolidation. I think they will still be needed definitely. Secondary-to-secondary airport connectivity will be needed. Many of our airlines, especially those connecting remote regions, archipelagos, islands, they have kept a minimum level of activity, a decent level of activity, but I think there will need to be, some of them will need to go back to their operations, because otherwise we will see more airlines disappearing.

Victoria Moores:

And do you think that you could see any targeted support specifically for the regional sector? Because a lot of the way that you go to bodies, like the European institutions, is saying that your members connect the European regions, which is a fundamental tenant of mobility within Europe. Do you see any specifics support for regional airlines coming from that?

Montserrat Barriga:

I think there are instruments already, like the PSO obligations, the public service obligations, for example. I would see more of those going forward because there will be more regions that will stop being connected. And those citizens are European citizens that obviously have the right to be connected to their friends, relatives, or for medical reason, for business purposes, etc. So, I think there will be other instruments, such as such those PSO obligations, that traditionally it takes time and effort to develop a PSO. In the last few months, we've seen more emergency PSOs being approved. And I think we will see more and more of that.

Victoria Moores:

A potential, a bit of financial oxygen that might come from that, and it’s difficult for the industry to breathe at the moment.

Montserrat Barriga:

There is something else. As an industry, we're working together with other airline associations, with A4E, with ACI, for the Airports Council, for the air navigation service providers, and the unions, and the NGOs, etc, also the manufacturers. We're calling for a specific aviation relief program. So that aviation, being a key sector, basic sector that is actually at the basis of any economic recovery, will need to be specifically targeted to get financial support. That can come from the recovery funds, general recovery funds, or it can be a specific program, but we think it needs clearly a different focus from the rest of the industries. It's clearly supporting millions of jobs and the GDP in Europe, so it does need to have a special focus.

Victoria Moores:

Is there a specific name for that program or that project?

Montserrat Barriga:

No, we're calling it specific aviation relief program for now, then different possibilities have been discussed.

Victoria Moores:

Okay. And any idea when there might be an update on that, or revenues coming through?

Montserrat Barriga:

The final report for the aviation recovery round table is going to be presented in November, the first week in November. And I think from then, the project will then break down into specific milestones and actions. So, hopefully very, very soon.

Victoria Moores:

And it's great to see the industry coming together in that way, to create a joined up message to regulators.

Montserrat Barriga:

Yeah, absolutely. I mean, if there's one thing that has brought us together, it is this crisis. And I would say also sustainability, those efforts that we are all doing together, to ensure that we are proactive, rather than reactive. We come up with a plan, but we say, "Guys, we can do it, but we need cooperation from the institutions and the industry working together." Yes. So yeah, there's always a bright side of things, right?

Victoria Moores:

Absolutely. Cooperation is the way forward. Well, thank you very much for your time today, Montserrat. I really appreciate your contribution to our program.

Montserrat Barriga:

Thank you very much.

Victoria Moores:

Thank you. This is Victoria Moores, reporting for Air Transport World