JUSTIN WASTNAGE / DUBLIN, FAIROAKS AND VALENCIA
Regional airlines in Europe fear legislation from Brussels discriminates not only against air transport, but specifically small carriers
Proposed passenger compensation regulations could leave small regional communities in Europe being left with no air link. This is the view of Carlos Bertomeu, chief executive of Valencia-based Air Nostrum, a partner of Spanish flag carrier Iberia. He and other regional airline heads meet this week in Dublin for the European Regions Airlines Association (ERA) annual general meeting, and the impact of compensation measures and other air transport legislation will feature heavily on delegates' agendas.
Compensation for delays is by far the hottest issue for regional airlines, not least since feeder airlines will be liable for paying out refunds for hold-ups to the entire long-haul journey. The ERA is also working on six other regulatory issues facing its members: reform to the allocation process for airport slots; insurance minima; potential disabled passenger access laws; potential anti-bankruptcy consumer protection legislation; European Single Sky implementation and infrastructure use charge reviews.
The European Commission (EC), which drafts much of the new legislation, has not accounted for regional airlines' circumstances, says the association. Fairoaks, UK-based ERA welcomes much of the new legislation, but says so much fine-tuning is needed that it is spending too much time lobbying European institutions.
Andrew Clarke, director of air transport policy at the ERA, says several recent bills originating from Brussels have suffered from a lack of rigour, notably in the pre-proposal stage when full impact assessment studies are not being implemented. "We have concerns about the EC's ability to draft good legislation," says Clarke. Geoffrey O'Byrne White, chief executive of Irish regional CityJet says: "Again and again legislation arrives from the EC and it's badly drafted and has to go back for amendments."
Boarding denied
Passenger compensation and assistance regulation is a good illustration, Clarke says. The bill started life as a way to prevent airlines from deliberately over-booking flights and then denying boarding to surplus passengers. According to EC data, in 1999 an estimated 250,000 passengers suffered this treatment from the main European Union scheduled carriers, or 1.1 per thousand.
Originally, the regulations were far from subtle: fines of c750 ($827) per passenger on any cancelled flight under 3,500km (1,900nm) were proposed "to deter operators from denying boarding to all passengers, whatever class they travel". Despite those being "bumped off" long-haul flights being awarded c1,500, the EC says operators would pay the fixed rate infrequently, so long as they did not overbook exaggeratedly and were effective in finding volunteers to be offloaded.
However, early in the round of amendments, compensation for delays as well as cancellation was added. It is this amendment that has caused most alarm for the ERA, and the association mobilised its members to start a lobbying campaign. "Regional governments understand that it translates to fewer seats at higher prices on regional air services and they try to change the proposal," says Bertomeu.
This approach has had some success, and the proposal is less damaging to regional airlines than it once was, thanks largely to reviews by the European Parliament and by Europe's transport ministers. For example, pay-outs for cancelled short-haul flights have been cut by around 65%, and exceptions added. But regionals will still have to pay for passengers' missed connections.
This is a huge inconvenience, but is sometimes unavoidable due to external factors, says the ERA. Again the devil is in the detail, because the feeder airline is still liable for refunding the entire journey, not just its affected sector. The measure is designed to force airlines to provide adequate contingency plans, says the EC, but small operators will more likely be forced to de-couple feeder flights from mainline carriers' interline agreements, rather than risk paying for accommodation, meals and personal reimbursement. This will lead to more inconvenience, not less, to travellers from smaller cities, says the association.
External factors
Valent¡n Lago Rodr¡guez, quality control director at Air Nostrum, points to figures showing that in the first quarter of 2003 over 54% of cancellations were out of the airline's control. The vast majority were due to adverse weather conditions; low cloud and fog regularly affect the airline's destinations in Spanish North African enclaves and the rural Galicia province. Frequent air service to such points is politically important in Spain and the prospect of curtailment has spurred politicians into action, which has had a positive effect on the legislation.
The EC's air transport unit says that, while the legislation does not cover every eventuality, it will "be refined by subsequent legal cases". This process will be kickstarted by airlines and their insurers seeking to recoup any costs incurred at the result of others' actions. "It will be impossible to implement if it comes into force as it's written and will give food to all the lawyers in Europe," says Bertomeu. "If I have a 45min delay in [Madrid] Barajas airport and end up paying passengers compensation for missed connections, and if that delay was caused by Eurocontrol refusing to free up a slot, then I will chase them to cover my costs," he adds.
Air traffic controller unions, particularly in France, could become targets for airlines' cost recovery, as strikes cause more cancellations and delays than aircraft technical faults and airport restrictions combined for most European regionals, says Lago.
CityJet would be covered, since it is a wholly owned subsidiary of Air France, but for regionals like Air Nostrum, which works in partnership with Iberia, it would mean a reassessment. "Our current system of transfers of any compensation payouts wouldn't work with the kind of levels they are proposing," says Bertomeu.
Clarke says the holes in the proposal are due to a lack of consultation. He fears a similar approach to forthcoming air transport regulation, including a widely anticipated move away from the current system of allocating take-off and landing slots at busy airports towards a more transparent approach. It is unclear what combination of slot trading, auctions and peak period price hikes the Commission will propose to replace today's acquired or "grandfather" rights, but the ERA is calling for a wide-reaching consultation process prior to any final decision.
Since many regionals need to feed services into the hubs of their network partner airlines, the prices cannot be prohibitive, or else the feasibility of the carriers' business models is challenged. CityJet operates the French flag carrier's thinner international routes into Paris Charles de Gaulle airport, with over 50% of its passengers taking onward flights, says O'Byrne White.
Easy slot access
Clarke says access to slots is essential to ERA members, as is the ability to retime them to maintain harmonised schedules with network carriers. For around 12 months, however, while economists NERA completed their report, there has been uncertainty as to what the EC will propose. This has discouraged regional airlines from taking long-term leases on new aircraft, he says.
Yet the closeness of CityJet to the Air France network throws up additional conflicts between European legislation and national law. Airline pilots have the right to refuse to fly passengers they consider to be security hazards, while the Irish government is increasingly using its immigration legislation to deport unsuccessful asylum seekers back to their country of origin at the original airline's expense. This clash has caused serious delays in the past, with Irish authorities refusing to grant clearance for take-off without immigrants on board and captains refusing to let them board. O'Byrne White says this is a classic example of airlines being forced to bear the brunt of all new European regulations. "We are already responsible for primary immigration checks at airport of origin, and we have to pay for security screening and soon we will have to provide secondary screening," he says.
These security measures should be harmonised through the new European Aviation Safety Agency, but here the ERA fears mounting costs through different nations' interpretation of rules. "Each new or revised regulation should enhance safety but also level the playing field so that no player is prejudiced," says Nick Mower, the ERA's general manager of technical services.
Double standards
Regional airlines are aggrieved that their main competitors, intercity buses, ferries and trains, have had their enhanced security measures provided by police forces, usually at government expense. Bertomeu asks: "Why don't these security costs apply to trains as well?"
The ERA perceives an EC bias against air transport, which means that infrastructure grants given to other means of transport are not given to airlines, which are also saddled with extra costs. This is backed up by the EC's White Paper on European Transport for 2010, which gives high priority to improving the rail network, and cautions against further growth in air transport without "striking a balance with the environment".
As such, the less frequent use of larger aircraft is promoted, which is potentially damaging to regionals' business. This perceived anti-small aircraft policy translates to such matters as minimum third party insurance cover, which applies disproportionately to commuter aircraft. The levels of third party insurance were reduced by the European Parliament after hearing evidence from aviation consultants, a move then overturned by the Commission, without expert help.
"When dealing with dossiers like these, the parliament recognises its lack of technical expertise and is very open to hearing outside views, before making an informed decision," says Clarke.
Key future legislation expected includes a bill of rights for disabled passengers, guaranteeing equal access to air transport for people with reduced mobility. Despite some reservations about the feasibility of fitting wheelchair access toilets on small turboprops and other costs to be borne by small operators, the ERA is broadly in favour of the proposal, but asks why it has not been applied equally to trains, or even public buildings. "Why should a disabled Belgian resident face more difficulty in negotiating the train station at Ostend than at the airport in Brussels?" Clarke asks.
Furthermore, despite other modes of transport being potential terrorist targets, they have not been required to have minimum insurance levels, another sign of competition distortion, say the regional airlines.
The Commission maintains that few rail and waterway services fall under its competence to govern, since the majority of services are national. This misses the point, says Bertomeu, since national air services are subject to EC regulations. Proposals are being drawn up to protect consumer rights for rail travellers, the EC says, although it is unclear what these will include. Clarke believes that air transport is targeted "again and again" as each new cost is small in the eyes of legislators. Mandatory bankruptcy insurance, expected next year, for example, would raise airfares "only by c1 per ticket" the EC says, but "it's the cumulative effect that really damages airlines, especially smaller ones," says Clarke.
The EC counters accusations of an anti-air transport agenda by pointing out that tax-free kerosene already provides airlines with a competitive edge over other modes of transport. It also says that air transport does not require any assistance, unlike rail, since it is already a successful industry, largely thanks to earlier EC intervention.
Clarke says: "one of the EC's biggest achievements was to take on the USA and force through liberalisation of the air transport sector between 1987 and 1993, in the face of major opposition from national governments." Attempts to liberalise Europe's rail network are likely to hit even more vociferous protests from the states, but the Commission should take its experience of battles with government-owned flag carriers as an example, he adds.
Single European Sky
Clarke cites the creation of the Single European Sky, a series of specific proposals establishing EU legislation on air traffic and introducing effective co-operation both with the military authorities and with Eurocontrol, as an example of what the EC can achieve when all parties are consulted.
Bertomeu says if the air traffic management reform is implemented even "one-third as efficiently as it could be", it will lead to substantial cost savings for airlines.
However, the ERA is concerned the long-promised benefits of the SES could turn into additional burdens if navigational charges are changed from weight-based calculations to fixed rates, as proposed by air transport policy officials at the Commission. "We estimate that under any such flat-fee approach, only airlines operating Airbus A320-sized aircraft or above would benefit," says Clarke. The end result would be that long-haul operators, predominantly foreign carriers, would be subsidised by short-haul, predominantly European carriers, he adds. The ERA fears economists will conclude that "one blip on a radar screen equates to the same workload," he says.
With this issue added to passenger compensation, slots and security charges, the ERA anticipates heavy attendance at its sessions in Dublin this week. Later in the week the mood is blackened further, as ERA member Arkia Israeli Airlines has been invited to speak about a more direct threat to regionals in the future: surface-to-air missile attacks.
Source: Flight International
