Whilst the early year figures of 2011 seemed to be a good omen for a robust year of continued recovery, 2011 final quarter results indicate an abrupt veering off course, recording negative growth in traffic movements of -3.9%. To make matters worse, the deterioration accelerated every single month after October, peaking in December at -5.4%. Coupled with IATA and AEA’s gloomy forecasts, which seemingly have downgraded their predictions for 2012 on a monthly basis (AEA predicted three weeks ago that in 2012 European airlines could lose up to an aggregated 2bn), you may agree there could be better ways to start the New Year. What is certain is that 2012 will be characterized by two parallel trends: difficult economic conditions, and heavy-handed policy. There is not much more we can say about the economy. Every day, front pages of the international press present multiple articles about austerity measures, the woes of the Eurozone, the credit rating downgrades of countries with previously solid reputations and the need for banks to recapitalize. We don’t need a crystal ball to see that these measures, whether they are real or only perceived, will further depress already falling demand. And yet we need to look at all of this from a wider perspective. From 2001 to 2007 Business Aviation grew far more rapidly than commercial aviation. The annual number of Business Aviation flights in Europe grew from just over half a million in 2001 to almost 800,000 in 2007 – a 60% increase! The global financial crisis sharply curtailed the demand for Business Aviation though, with the volume of flights broadly stable over 2008 as a whole, but 2009 around 15% lower. Although 2010 saw a rebound of 5%, and we had hoped for this to continue in 2011, the final outcome was an increase of only 2%. Call me a hopeless optimist, but despite the promised doom and gloom that some detractors predict, it is obvious that there is still ample room for more and better. True, this
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might not occur this year, but the full potential of BizAv is such that it will inevitably be unleashed again at some point. Consider this: today there are 4,500 European BizAv aircraft (incl. turboprops), for a population of 620m from Portugal to Ukraine. In the U.S., which has half that population, there are more than 17,000 aircraft. The ratio of BizAv aircraft per inhabitant is thus eight times higher on the other side of the pond! Without comparing apples and oranges, it simply doesn’t add up. Eurocontrol predicts that our growth is going to plateau at around 3% per annum in the coming 10 years, just slightly above commercial airlines. If this is correct, I maintain we are not doing as well as we could. So what is preventing us? Well yes, the dismal economy and its dire prospects, as I was saying! Let’s look at it from the bright side then: in tough times, the fittest survive, which implies that the sector may need to go through consolidation. It is characterized, today, by a large number of small operators (there are around 500 commercial operators across Europe). There surely must be room for some consolidation! Fragmentation and overcapacity can be dangerous and even harmful to the sustainability of a sector in the mid-term. In this perspective, a temporary dip in demand might force a necessary slimming that would provide a stronger bedrock for future growth. There are, however, not only economic impediments to greater prosperity in the European BizAv sector; there are also political ones. Heavy-handed legislation doesn’t generally go handin-hand with a strong and growing market economy. Yet there seems to be a proliferation of national and European initiatives, and not all of them are helpful. For instance, the UK
believes Business Aviation should be included in the now notorious APD (“Air Passenger Duty”); Italy has followed suit. Other national air taxes also abound, costing the industry around 5bn EURO per year. Despite our excellent environmental record (we only account for 1% of CO2 air emissions in Europe with more than 7% of traffic), in the new EUETS we must pay for more than 95% of our historical emissions, whilst the airlines will have to buy only 15% of their carbon offsets. On the other hand, Business Aviation is disregarded when it comes to a recast of the key regulation on the attribution of slots. It is similarly ignored in the initiative to promote more competition between ground-handlers. And to add insult to injury, Member States claim they are illequipped to combat illegal taxi operators. All in all, these imply important additional operating costs that can further destroy our sustainability in a cutthroat competitive industry such as ours. What can we do? There is no silver bullet I am afraid, just a sensible folk cure. To start with, we must be ready for the economic challenge, slashing capacity where necessary but ready to rebound quickly when things improve. Next, for all those who haven't yet done so, join the EBAA. The sector needs a strong trade association to ensure all this heavy-handed legislation can be contained and controlled. Working together with national associations, we have been able to combat some of these ill-suited policies, as shown recently in the UK where we were successful in greatly reducing the cost of APD from that originally proposed. See? We might not be close to an Annus Mirabilis, but it is down to us to avoid what skeptics are already now calling the second Annus Horribilis after 2009.
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