Europe's regional carriers are facing an unwelcome double-whammy. Sandwiched between failing economies and rapidly evolving business models, they could be forgiven if they lacked confidence about the future.
Yet they were in bullish form during the recent European Region Airlines association general assembly in Dublin.
"Traffic growth in the first quarter was quite good," says ERA's long-serving director general Mike Ambrose, who steps down this year. "Unfortunately there was a deterioration in the second quarter. That means there was a net reduction of 3% for the first half."
But he notes a majority of airlines were able to cut capacity quite swiftly, generally faster than demand fell. As a result load factor actually improved.
The tough conditions were underlined by the loss of Swedish regional carrier Skyways earlier this year. "There have been some casualties, though this is not restricted to the regional sector," says Ambrose. "It is a very hard, cruel world out there and it is foreseeable it will stay that way for some time."
Against this backdrop Ambrose feels it is key for European countries to understand the benefits of regional airlines. "EU states struggling to manage current economic constraints are seeing increasing taxation of air passengers and higher user charges as easy ways to raise state revenues, without consideration of the effects that such increased burdens have on air transport and the consequential negative effects on their national economy," he says.
IATA's latest forecast showing expected deepening European carrier losses of $1.2 billion for the year underlines the pressure on the continent's airline sector as a whole. And Ascend chief economist Peter Morris believes that Europe's airlines cannot rely on a recovery driven by the same kind of economic growth rates seen in the past.
"What we are likely to see are sparks of growth potential here and there. My feeling is there is no cavalry coming to bail Europe out. We should not hope universal growth will quickly return, it won't."
He likens the predicament of regional carriers to being sandwiched in a room between the floor of a rising cost base, and a revenue ceiling being driven down by bigger competitors, including low-cost carriers. "The regionals have to find a niche in the middle, but at a time when both business and leisure customers' budgets are under pressure," he says.
A particular problem are the limits on regional airlines' cost flexibility, created by the high fuel price and the limited aircraft technology developments, notably in regard to engines, likely for smaller aircraft, particularly when compared with the powerplant advancements taking place on narrowbody aircraft.
"It worries me a little bit about where the regional market will get and retain its competitive edge from," Morris says.
Much has been discussed about the regional model, knocked by the growth of low-cost carriers, squeezed out of some key congested business airports and challenged by changing attitudes and reorganisation among struggling network carriers.
"They have to have a differentiated product," says Morris. "If it is just about trying to ape elements of the network or low-cost carriers, the segment won't survive. But by differentiating their products and with a ruthless approach to costs, I believe regional carriers can continue to create and maintain a significant market in Europe.
"What they do need though is support from manufacturers to develop cost-effective aircraft for their markets. And those could well be turboprops rather than jets."
Christoph Mueller, who at Aer Lingus has teamed with Irish regional Aer Arann to develop services linking the Irish and UK regions under the flag carrier's name, believes there is an opportunity for regional airlines to thrive because of the smaller aircraft they operate.
He notes Aer Arann, for example, has pioneered new routes for Aer Lingus, while these carriers can also benefit in the current climate as turboprops are less sensitive to fuel price hikes.
But he adds there is a need for business models in the sector to change. "Social media has reinforced the importance of brand in the customer decision. I believe it is very important to have a brand with a global recognition," he says.
But Mueller stresses it remains important that regional carriers are not swallowed up by their larger network partners. "One important thing is that regional carriers should remain firewalled from the network carriers," he says, pointing to the additional complexity it would add to the regional model.
"Regional carriers are complementary to network and low-cost carriers because of the aircraft, but to find the niche is the trick," he says.
There remain new players ready to believe they can find that niche. For example the new owners of BMI Regional - which In October fully relaunches as an independent carrier - still believe there is an opportunity in the sector. The carrier has already rolled out its first new routes and will look to expand beyond the existing BMI Regional network.
"Because of its relationship with Star Alliance, quite a lot feed into Star hubs," says chief commercial officer Cathal O'Connell. "As we are an independent, we don't need to focus on destinations that only make sense to Star Alliance, but on routes that make sense as an independent.
"We are trying to develop more connectivity from regional UK cities into major European hubs and from European regional points in UK cities."