VIENNA, Austria -- Europe's regional airlines need to pay greater attention to their passengers and take a few lessons from the low-fare carriers if they want to prosper in the years ahead.

Members of the European Regions Airline Association (ERA), meeting here for their annual general assembly, got an earful of advice during a roundtable session that featured the CEO of a U.S. low-fare airline, a European Commission (EC) transportation regulator and a former European Parliamentarian.

"The lesson from low-cost airlines is that they put a 'bum' on every seat," said Brian Simpson, a transportation consultant and a former member of the European Parliament's transportation committee. "They taught us that you don't need to first fly to Frankfurt or Charles de Gaulle in Paris. Flying became affordable for the working people."

For regional carriers to counter the impact of the new low-fare airlines, Simpson said, they need to offer quality service at a reasonable price. The carriers, he suggested, need to get out of the hub network and do more flying region to region, point to point.

He noted that new regulations, such as the controversial measure to reimburse passengers who have been bumped or delayed, as well as new rules protecting the rights of the disabled, are the result of passengers being treated poorly. "While it is fine to seek a level playing field among all transport modes, you can't deny these passengers their rights," he said.

"Aviation needs to retake the moral high ground on the environment," Simpson added. Concern for airport noise and exhaust emissions are concerns of the people -- the passengers, he said. Acting on these concerns rather than reacting to proposed regulations can improve the industry's standing in the eyes of the public.

"In Europe, we have a culture to protect the consumer from their own mistakes ... the government makes decisions for them," said Pieter Bouw, chairman of Swiss International Air Lines. "The airlines need to be more socially responsible."

The regional carriers need to take a look at retailing as well, Bouw said. Airline tickets have become a commodity purchase. Just as retail shops have developed niche specialties, so too should the regional carriers. "You need to differentiate yourself from the others," he said.

While the European and North American air markets now are strikingly dissimilar, there may be lessons from the United States that European carriers can adopt, said Joe Leonard, CEO of Atlanta-based AirTran Airways [AAI]. The situation in the United States is so different because there is far more supply than demand.

Instead of dropping some routes after the Sept. 11, 2001, terrorist attacks, AirTran contracted with Air Wisconsin to fly 70-seat regional jets on some routes as a way to maintain thinly traveled routes. However, Leonard explained that as the carrier obtained more Boeing [BA] 717s, it found it could more economically serve those routes with the slightly larger planes than with the RJs.

The new aircraft has been a key to the carrier's performance, he said. The new jets reduced AirTran's maintenance and fuel costs. Leonard noted that in the fourth quarter AirTran's cost per available seat mile (CASM) will drop below 6 cents.

AirTran, JetBlue Airways [JBLU] and Southwest Airlines [LUV] -- all low-fare carriers -- have remained profitable in part because of the image they have been able to convey with their new equipment. The new equipment boosts the carriers' reliability. At the same time, the U.S. network carriers have not been able to buy new, more efficient aircraft.

With the higher price of oil, Leonard said that he is now paying 25 percent of his revenue in fuel bills. A year ago, it was 15 percent. Without the new efficient planes, he said, his carrier would be losing money instead of earning a profit. The second lesson, Leonard said, would be for carriers to invest in technology, which can result in a "sea change" in distribution costs. AirTran now sells 65 percent of its seats on its Internet site and 42 percent of its passengers now use either the Internet or kiosks to check- in. An Internet ticket sale costs the airline 20 cents versus $8.50 for a ticket purchased through a traditional travel agent.

Since Leonard took over at AirTran in 1999, every piece of hardware and software has been turned over at least once. The carrier continues to spend $15 million to $20 million a year on new software.

European regulators will not be charging the airlines for new air traffic control equipment as Europe moves to implement the Single European Sky program, said Ben Van Houtte, the head of Air Traffic Management for the EC's Energy and Transport Directorate. With the unified air traffic control system for the entire continent, steps need to be taken to improve the efficiency of the system.

Van Houtte noted that air traffic control costs nearly twice as much in Europe as in the United States because of poor controller productivity. As the skies above Europe are unified, equipment will be standardized among the 31 nation-service providers. The EU is committed to spending ?200 million (US$249 million) per year for several years to buy the new equipment. The funds, he said, will come from the European Union (EU) and not assessed against the airlines.

Creating a new air traffic control system is easy, he said, compared to regulating the airports. It is difficult to "find harmony" among the airports because most are locally controlled. In addition, the level of environmental complaints varies from airport to airport.

Just as the issue of slot control is opening a hornet's nest of controversy in the United States, it also stirred debate during the roundtable discussion. Slot controls may be a valid way to control congestion at major airports, Van Houtte said. The EC soon will be issuing a proposal on the subject that will be presented as a series of questions rather than answers.

However, it is not clear who actually owns the slots -- the government, the airlines that pay them, or the airports. "That is a valid question," Van Houtte said, "and not an easy one to solve."

ERA Award Winners

Airline of the Year:

Gold Award -- Aegean Airlines, Greece

Silver Award -- Eastern Airways, United Kingdom

Bronze Award -- Aer Arann, Ireland

Best Airport:

Southampton International Airport

Director General's Commendations:

Markus Kochle, Tyrolean Airways

Palme D'Or Honour:

Air Nostrum, London City Airport for sustained excellence

Source: 2004 ERA General Assembly