Interlaken, Switzerland – European airlines are having a far tougher time than their US counterparts, according to speakers at this year’s European Regions Airline Association meeting last week here. Calling this year an aviation tsunami, attendees heard more than 90 airlines have gone out of business in the past year. Worse, delegates were told that this winter could be a “blood bath” with inefficient airlines being forced to close down.

Jesper Rungholm, president of Danish Air Transport, said: “We are seeing airlines running out of cash and the banks don’t want to help. I think we are in for a difficult winter. We are positioning for growth because we can see this will give us some opportunities. The Copenhagen based airline operate 15 aircraft – MD80s, ATR42s and Saab 340s - on a variety of contracts in Europe and Africa and expect to be profitable this year.

“These are good times for airlines which have taken control of costs and can realize good idles,” he said.
Robin Hayes, chief commercial officer with JetBlue Airways, agreed. “Passengers are no longer prepared to pay $1200 for a round-trip air ticket,” he said. “We have costs under control and are getting good yields. It pays to look after the customer. We’re one of the few airlines who don’t charge for bags. The only airlines doing well are the low-cost carriers like JetBlue, AirTran and Alaska Airlines.”

But Peter Morris, chief economist for Ascend, the London-based consulting company, said different countries would recover at different rates. So-called legacy carriers have to change or go out of business argued Juergen Hild, a senior member of the Lufthansa management team.

“Every crisis is different and I have seen worse,” said Hild. “The economy will eventually recover but we won’t see the high-yield again. That is the legacy of the low-cost carriers to the industry. The only way we can react is to cut costs.” Hild expects airlines to have to cut costs by up to 40% in order to compete

Malcolm Hart chief executive officer of Aurigny Air Services said his airline, which serves the Channel Islands off the northern French coast from various points in England, had seen good passenger number this summer. “It’s a sure sign that passenger confidence is returning but the yields are down significantly,” he noted.

ERA director general, Mike Ambrose, labeled 2009 the year of aviation’s economic tsunami, “one which has been watched in Europe by many states, politicians and regulators with dispassionate and self-interested indifference.

“Air transport’s problems have been vastly overshadowed by the larger economic crisis,” he continued. “Pitifully little attention has been given by either the European Commission or the Parliament to the difficult situation faced by stakeholder companies in European air transport.”

ERA President Antonis Smigidalas, who is also president of Olympic Air, said the association would continue to lobby the European Commission to ensure air transport does not face unnecessary beaurocracy. “It is crazy that we, the airline industry, face so much regulation when other modes of transport do not,” he told delegates. “We must ensure that the ‘train versus plane’ argument does not go too far in the direction of the rail industry. We must force the regulators to accept the environmental costs of building and operating high speed rail links is high and the benefits to the environment minimal.”

The Assembly heard the economic prospects are now improving with finance being easier to obtain and the recession should be declared over by early 2010.

On the positive side, Ambrose noted some states are showing signs of slow recovery. Progress is also being made in regional aircraft manufacturing with new and/or improved aircraft, such as the Bombardier C-Series, the Sukhoi Superjets’ ongoing flights program and the launch of the enhanced ATR72-600 series. “Recent aircraft orders from Sukhoi and the Mitsubishi MRJ are also encouraging signs that industry recovery is beginning,” he added.

Ambrose added further progress has also been made on SESAR and the Single European Sky Package II, which will help to improve costs and reduce environmental impact. “However it is vital that we continue to invest in the development of new capacity to be ready when traffic inevitably returns, but investment requirements are in conflict with airlines’ current ability to fund investment,” he said.

On the recently published European Commission (EC) paper which quantifies the funding needed to support climate change projects in developing states, Ambrose remarked: “Now is the time for us to be honest, even if this might not be politically correct. “First, funding third world projects should come from general taxation, not aviation,” he said. “Second, there is a known level of inefficiency and corruption in many developing states. All funding, whatever its source, must be rigorously controlled and monitored against specific climate change projects. The EC paper discusses only the enormous sums that the EU must provide. It notably omits any mention of the means by which the distribution of these funds will be controlled.”