Is it third time unlucky for business aviation in Europe? In less than a decade, the sector has experienced two sharp downturns in traffic – once in the midst of the global crisis of 2009 and again in 2011 and 2012 after a short-lived rebound. Now, as the sector prepares for its annual get-together in Geneva, the fears are business aviation is heading for the dreaded triple dip.
According to a study from the European Business Aviation Association – co-host of EBACE – the most concerning aspect of a 2% decline in business aviation departures from the region’s airports in 2015, is a mismatch from European Union GDP – something it traditionally mirrors. GDP over the same period grew 1.8%. “The decoupling is worrying,” admits chief executive Fabio Gamba.
And while growth in other aviation segments has slowed, it has remained positive for cargo, legacy and low-cost carriers in Europe, with the latter enjoying 5.4% growth between 2014 and 2015. By contrast, after seeing an annual growth rate of 10% in 2006, business aviation has experienced an annual decline in all but two of the past eight years.
One reason for business aviation’s ills, suggests Gamba, could be the collapse in the economies of Russia and its neighbours. This has hit business travel out of Moscow and Ukraine and also affected the charter and services market in the Baltic and eastern European EU members, such as Poland. Economic problems in China, Nigeria and Brazil are also likely to have affected traffic.
While, 10 years ago, the emerging markets of Russia and Eastern Europe were seen as the great hopes of business aviation, those countries have been by far the worst hit in terms of declining traffic. Average yearly departures from Russia plunged 40% between 2014 and 2015, while Ukraine and Belarus – albeit from smaller bases – have dropped 57% and 72%, respectively.
However, while the study finds traffic has fallen across most of the region’s key business airports, there appears to be no real pattern. Moscow Vnukovo’s traffic has, perhaps not surprisingly, tumbled by an average 4.5% over five years but Geneva – with a 4.7% decline – and Rome Ciampino, down 7%, have fared even worse.
By contrast, Paris-Le Bourget, Europe’s busiest business aviation airport and the only one serving the French capital, has seen traffic fall just 2.6%, while Nice, the region’s third biggest, has held almost steady at -0.3%. The UK’s main two businesses aviation hubs – Luton and Farnborough – have seen traffic rise marginally, at 0.7% and 0.6%, respectively.
Virtually all Europe’s busiest business airport pairs also saw a decline in traffic between 2014 and 2015, the only exceptions being Luton-Le Bourget, Ibiza-Palma, and Geneva-Milan, plus two domestic UK routes – Broughton to Bristol and Farnborough – that are served by an Airbus staff shuttle.
The study does find some positives. Business aviation’s share of European flights has remained constant over 10 years, at 7%. Europe is also seeing more long-haul flights, arguably more profitable for operators. In 2005, intercontinental flights accounted for 5.9% of departures from the region’s airports. By 2015, this had grown to 8.1%.
The EBAA study also evaluates the impact of business aviation on Europe’s economy, something the organisation is keen to impress on politicians and a public often too ready to associate the sector with fat cats and wasteful luxury. It concludes the industry supports 371,000 jobs and adds €27 billion ($31.3 billion) in gross added value. “The sector punches above its weight,” insists Gamba.
The association has released a publication which breaks down the economic impact of the sector, country-by-country. While France and Germany represent 53% of the gross added value of the industry – and the UK adds another 10% – business aviation’s benefits are felt throughout the region, accounting for more than 1,500 jobs in Finland and contributing €148 million to the Maltese economy, for instance.
EBAA’s sister organisation – the USA’s National Business Aviation Association – has made great play of its long-running “no 'plane, no gain” campaign, emphasising the benefits to companies of using private flights. The European association want to get the same message across, maintaining business aircraft are “time machines” to help executives get directly to meetings.
Its study finds 20% of business aviation flights are more than five hours shorter than their best commercial alternatives, while the average time saved using business aviation over the fastest commercial alternative is 127min. It also claims there are more than 25,000 airport pairs in Europe served by business aviation which are not connected by airlines.
However EBAA recognises there are obstacles to overcome – including a lack of satellite-based precision approaches at smaller airports – while at busy hubs business aircraft are often squeezed out by commercial airliners. “There is a problem with slots,” admits Gamba. “It means that someone is going to say ‘Why am I bothering to fly business aviation if I can’t leave at the time I want?’”
Consolidation in a sector can be a positive or negative thing – an indication of a surfeit of supply or a trend towards better-financed operators and stronger brands. The third-party services market for business aviation in Europe has traditionally been highly fragmented, with a series of locally-based charter and management companies operating a small number of aircraft.
Gamba does see an “acceleration” of merger and acquisition activity in the sector after a string of takeovers in recent years by Luxaviation – including ExecuJet and London Executive Aviation – and the merger of Gama and Hangar8. These have for the first time created companies in the sector with substantial purchasing power and the scale to be able to operate across several markets.
“Consolidation tends to come in waves,” says Gamba. “We are in uncharted territory and what we have seen could give rise to a second wave. The industry is looking at how it will function in three, four or five years, and next time we could see a wave of consolidation that includes FBOs [fixed-base operations] and airports.”
Whether that consolidation will be against a backdrop of a prospering or faltering sector remains to be seen. While interest in EBACE appears as strong as ever, falling oil prices, a struggling Russian economy and stuttering Eurozone growth are all factors that could see current patterns repeated when 2016 figures emerge a year from now. Four months in, all signs point that way.
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Source: Flight International
