Listen in as European Regions Airline Association (ERA) Director General Montserrat Barriga shares her insights on Europe’s smaller operators, which are grappling with supply chain problems while also bracing for basic air service rule changes and new technologies that could transform their business.
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Rush Transcript
Victoria Moores:
Hello, everyone, and thank you for joining us for Window Seat, our Aviation Week air transport podcast. I'm Air Transport World European bureau chief, Victoria Moores. Welcome on board. This week I'm joined by Montserrat Barriga, who is director general of the European Regions Airlines Association, which is also known as ERA for short. Now, ERA is a trade association which represents more than 50 airlines and over 150 associate members, and that covers all areas of the industry, including manufacturers, airports and suppliers.
So, Montserrat, welcome to the podcast. It's great to have you here with us.
Montserrat Barriga:
Thank you, Victoria. It's a pleasure to be with you.
Victoria Moores:
So, Montserrat, you are representing Europe's regional airlines, specifically. I think the beauty of ERA is the fact that you represent small airlines, but you have a lot of small airlines together giving them a collective voice. I’m aware that some of your members aren't so small, but for the smaller ones that does give them a lot more impact. And, I'm wondering, when you hear from your members, when you get them all together, what's troubling them at the moment? What are the issues that are really worrying them, concerning them about European aviation?
Montserrat Barriga:
Yes, absolutely. I think the main problem at the moment, if I jump straight into the issue, is the supply chain issues, shortage of aircraft capacity, and the shortage of spare parts, inventory costs going through the roof, so it's a lot of cost pressure, and the risk of counterfeit parts entering the system because of these pressures.
Victoria Moores:
So, we definitely see there that there are issues impacting airlines all around the world with supply chain at the moment, and particularly in Europe as well. And, I'm wondering if you could give us a bit more color on how the supply chain issues are impacting specifically regional airlines?
Montserrat Barriga:
I think the problem does not lie with one particular OEM, or any particular manufacturer. There is overall a shortage of spare parts and partly the issue...because we speak to the airlines that talk to the OEMs, the OEMs talk to the suppliers, the suppliers talk to their own suppliers, who talk to their own suppliers, and in the end there is an issue with raw materials and labor issues. The raw material availability with this ever-evolving geopolitical situation is difficult to control. Or the same with labor shortages, these are very strategic structural issues. So, the airlines coming in with mitigation costs and ‘Plan Bs’ and try to avoid grounding aircraft, but we have seen cancellations and we have seen shortfalls in planned capacity because of these disruptions in the supply chain.
So, the airlines are quite worried that, yes, there are process improvements in place and action plans with their own OEMs, their own suppliers, and learning about each other’s process, and partnering - OEMs and airlines together - but there have been issues over the last couple of years, and they will continue through 2024 and into 2025. We're certainly not through the other side yet, with all this economic uncertainty and the impact of global political issues.
Victoria Moores:
I think it can be difficult as well, from the outside, for passengers who feel as though everything's back to normal in life again, and then the airlines are experiencing still these difficulties with supplies and with aircraft parts. I'm wondering what ERA's role is in that? How are you able to help your members in these supply chain shortages?
Montserrat Barriga:
Well, that's a very good question because our airlines have come to us and they have asked us the same question, how can the ERA help? You are a network of different companies, we should be able to find a solution collectively. And our role is quite difficult because they're all members of the association, so if there is a commercial or operational issue with any of our members, or there is a conflict between companies, then how...we cannot be in the middle. We are not mediators, or anything like that.
But however, because we are proud to be an airline association and our airlines rely on the fact that we can gather all these companies for the good of the industry and to be able to come up with joint solutions, what we have done is we have provided them in the past few months with a platform for meetings and even writing joint letters and just getting all together in the same room, so at least they can share the same issues. They can try to find solutions, they can share possible ways out of the problems, from their own experience. And I think that's already helping a lot.
And we see from the ERA groups, something that works really well is when you have operational guys that are really involved in the day-to-day operations of an airline, sharing with other airlines, on a Chatham House confidential basis, stuff that then can help others find solutions for problems that some of them have gone through before. That's the role of the association, is just bringing them together and providing [them] with a platform where they can talk and share the issues, instead of just bilaterally with a wider group.
Victoria Moores:
Yeah, that's a slightly different place for you to be, because I know that normally the priority clearly for ERA is to be usually acting as that facilitator, in a way, between the airlines and also the European institutions. And I'm aware that there's a dossier which is being considered by the European institutions at the moment, which could impact regional airlines, and that's the Basic Air Services review. I wonder whether our listeners are aware of this piece of regulation, So would it be possible for you to give us a bit of color on what the Air Services regulation is? And also, what's happening, what's on the table at the moment with that?
Montserrat Barriga:
Yes, absolutely. The [Basic] Air Services regulation is a piece of regulation that regulates basically all the functioning of the air services. So, it includes different things like, for example, the connectivity matters, such as, in particular, for example, the PSO framework, the Public Service Obligation framework. And that's a very, very important part of the regulation for us. But there's other things, like ownership and control, access to airports. But in particular with the Public Service Obligation, if I may, because that's a piece of the regulation that we're most interested in, our airlines, the ERA airlines, operate the vast majority, almost all, except for one or two, of the public service obligation routes. These are routes that are subsidized to either the airline or the passenger. Because there are certain regions in Europe that require to have air connectivity for those citizens living in those regions that have no other way to access either the main hubs or other destinations, because they require essential services, such as access to hospitals, or education, teachers, universities, etc.
We are looking at this piece of regulation very, very carefully, and we are actually working on a document at the moment to propose to the new Commission and Parliament, because we think that can be improved. At the moment, it's a mix of different procedures in different languages, there's no harmonization, it's quite rigid. Because the funds come from each of the member states, then each member state is able to assess or decide what are the routes that they want to subsidize.
We would like to see more of these regulations. We would like to open the possibility to more routes. Why not? And I think there's a great opportunity with the new technology also, because there are some routes that are really thin, very low demand. I think there's endless opportunities for those regions that at the moment have no air services to be able to access in a very sustainable way.
Victoria Moores:
Yeah, and you mentioned there about the new Commission in Parliament. Just for context, that is that we have the European elections this year. They happen once every five years, and I think it's the largest global, multi-country elections anywhere in the world. So, that's happening and that will create a huge turnover of parliamentarians for the European Union, and also potentially in the Commission as well. So, I'm wondering, when you are thinking about this big transition that we're facing this summer, Montserrat, what would you like to see the new Commission really focusing on for aviation in the next term?
Montserrat Barriga:
I think the first would be for the new Commission to realize how regional air connectivity is absolutely essential. It's essential for the survival of many citizens in Europe, local economies and local societies in islands and also in the mainland. And this connectivity is actually provided by small and medium-sized enterprises. And also, small and medium-sized enterprises operating in those regions really need to have access to the European single market through these air links, and be provided with equal opportunities.
So, I think this is what is more important for us, is to ensure that the new commission supports aviation…supports aviation for those regions that actually need it, and that they are given more opportunities, increased business development, tourism, investments, job creation, etc. That’s something we hope to be able to convey this message, which is very, very important. And then once that's said, then we can talk about why is regional aviation different, why the cargo airlines are also absolutely essential.
And we saw that during COVID. They didn't stop flying. One of our members is a cargo airline. They always say any citizens in any remote destination have the same right to have fresh flowers. It doesn't say potatoes, but also potatoes, but fresh flowers. We have a huge opportunity with the next mandate to be able to talk about the beauty of aviation and why, if we solve the issue of making aviation more sustainable, then we should all fly a lot more and give air connectivity to everywhere in the world.
Victoria Moores:
And, you mentioned earlier on as well, clearly the sustainability agenda is absolutely central to everything that aviation companies, including Europe's regionals, are doing. We've got time for just one more quick response, I think, and that is, regional aviation and these new technologies that you mentioned earlier, when are we going to see that begin to roll out among your members, in terms of electric aviation and hybrid aviation, that sort of thing?
Montserrat Barriga:
When I talk to our members, especially the traditional OEMs but also the new technology companies, they talk about...well, there's different dates, depending on the size of the aircraft, but we will see it in the next five, six years, the first electric-hydrogen will be deployed and we will see it. We will actually experience it ourselves. You will get to fly one of these aircraft very soon, and I hope to do the same.
And our sector plays an essential role in the decarbonization of air transport. This has been said in the Destination 2050 roadmap. As you're probably aware, this is the roadmap that the whole industry, all five associations, large and low-cost and regional airlines, plus manufacturers, plus air navigation service providers and airports, we together came up with this scientific report on how is European aviation going to decarbonize by 2050. And we all have roles to play. And the role of regional aviation is essential because we will be the first to implement the new technologies, that start flying, operating the new technologies. And we think that, for example, things like demonizing aviation, banning short-haul flights, making it really difficult for small airlines, that doesn't work. Because then you're going to penalize on those airlines that are willing to...and they have the right operation to be able to implement these new technologies.
Obviously there are all the things there, like access to SAF [sustainable aviation fuel] reserves in regional airports, how we solve this issue, the book-and-claim system, and the use of, financing part of the SAF... SAF is expensive, so maybe continue with the allowance mechanism as part of the EU ETS, and then continue to increase those allowances, or find the right financial incentives to invest in fleet renewal... and where are these funds going to come from, the use of the innovation funds and others, etc.
We're in the middle of a fascinating debate about this, and we're willing to engage with the new Commission about the topic.
Victoria Moores:
Like you say, we're in this time of big transition, both a huge sustainability transition for all of aviation, and also that European transition as we welcome in the new members of the European institutions. So, that's going to be one to watch, and I imagine that that's going to be keeping your team very busy, Montserrat. Really appreciate you joining us today and sharing your insights for regional airlines on Window Seat.
I'd like to also thank our producer, Cory Hitt, and our listeners. Make sure that you don't miss us each week by subscribing to the Window Seat podcast on Apple Podcasts, or wherever you listen. Until next week, this is Victoria Moores, disembarking from Window Seat.
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