EBACE 2011: Challenges Ahead for EBAA
With its partners at NBAA, the European Business Aviation Association (EBAA) this week stages its 11th annual EBACE show here in Geneva. The event already is 16 percent up in size on last year and is the biggest yet in terms of the amount of exhibit space booked. And the association itself is back on growth mode, with almost 500 members and around four or five more joining each week.
All of EBAA’s share of the profits raised by the EBACE show are plowed back into the association to help it to represent the industry’s interests. This is just as well because EBAA’s lobbying work is never done, with a growing list of battles to be fought and complex issues to be navigated, as EBAA president and chief executive Brian Humphries explained to Charles Alcock ahead of EBACE 2011.
What is the current state of the European business aviation community going into the 2011 EBACE show? Is the industry now achieving a lasting and sustainable recovery?
Well, if we look at the Eurocontrol traffic figures, we have seen continuous growth, with some ups and downs, since April 2010. We were very pleased to see the 2010 report. Eurocontrol now produces not only monthly figures but also an annual report, which is very helpful and all of that stems from visits [by Eurocontrol officials] to EBACE over the years and their acceptance that they needed to know more about business aviation.
The 2010 report showed that growth last year was 5.5 percent in business aviation and this took us back to being the fastest growing sector after the low-cost carriers. Business aviation is now 7.3 percent of IFR traffic in Europe, which is not that far short of where we were in 2008 when we were 7.8 percent. We had fallen to 5.9 percent since then.
So people are flying again, but behind these traffic figures what can we say about the top end of the market?
It is the top end of the market that is doing most of the flying, with the Gulfstreams and the Falcons, and aircraft like this that are busiest. They saw less of a downturn anyway during the recession. The fastest growing sector is the VLJs, so at last they are starting to do some business. It is the middle of the market that has suffered the most. But even with these activity levels going up, there is no doubt that charter margins are still very tight, so our members are still suffering.
It’s good to get the aircraft flying again but they are certainly not making the sort of return on capital as they did in the boom years. The evidence is that we are in sustained recovery but let’s not pretend there will a quick return to how things were in the heydays of 2005 to 2008, because the national economies are still suffering. Aircraft at the top end, like Gulfstreams, are now back with long lead times for deliveries. In the midsized category it is probably the Citations and the Hawkers that have suffered the most.
We’ve still got an overhang of used aircraft for sale, so prices are very competitive. If you are buying, there are some great deals to be had out there. But, quite understandably, if people have a loss on their books they don’t realize this until they sell the aircraft. So, they don’t particularly want to sell the aircraft and make a thumping loss against the book value. Sales are going through. Values are definitely better at the top end but it’s at the bottom end where there is still a big overhang of aircraft for sale.
Given what happened in the boom years–with high-octane growth fueled in part by easy credit and speculation over aircraft prices–maybe the industry now has an opportunity to grow in a more sustainable way this time?
People were buying aircraft with no intention of using them but hoping to make $1 million or more on the deal by selling them on. If you look at the business aviation sector over the last few decades there have always been peaks and troughs. When I was with Shell [the Shell Aircraft flight department] in 2003 we were able to buy some white-tail aircraft at incredibly attractive prices because we were in a slump then.
You could go back to the mid-1990s and there were very competitive prices back then too. But in fact, probably for reasons that are beyond our control–such as the state of national economies–we are not going to see that sort of silly boom this time. I am very encouraged by these traffic figures. Growth of five percent a year is fine and it is sustainable. It shows that it is not going to start getting politicians worried that we are booming and ballooning.
At EBAA you are now trying to focus on this whole issue of the lack of harmonization for rules impacting business aviation. So what are the core factors? In what areas do we see the most serious lack of harmonization of rules?
Let’s start with operations. Here flight-time limitations are a big issue because we have had huge variations in what is allowed. One of things we did was to set up a flight time limitations working group led by Dannys Famin of Unijet. We’ve looked at all the rules in the six main European countries and found huge variations. What we then did was to assemble what we thought were the best-practice rules for business aviation from these various regulations and we have been working with EASA on this.
They said that if we want variations in rules we will have to come up with scientific evidence. So we asked Alertness Solutions to do a study for us. We were delighted with the response, with 770 pilots responding, and we are now just finalizing the findings and pointing out where we think variations should apply.
The good news is that EASA listened to us and they have agreed to form a separate working group, called 071, to develop specific rules for business aviation, night cargo flights and helicopters. This will not work to the frenetic timetable for other categories of traffic, so there is now more time to get this right. That was very encouraging because it was the regulator accepting that one size does not fit all and that we need our own regulations.
Our immediate concern was that the hard rules mainly being developed for airlines did not upset what we wanted to achieve downstream. Probably the biggest concern was the issue of “standby at home,” because if this were to be defined as duty time it would be crippling for business aviation. Standby in the context of business aviation is very different from what it means to the airlines.
Split duty is another big issue. A typical business aircraft pilot is out in the morning and back in the evening, with most of the day off. They need proper rest but they don’t need the next day off to compensate them for much of the day off they’ve had the day before.
And what about the inconsistency in rules relating to how much runway length is available to different categories of aircraft?
Another issue where we don’t yet have a result but that EASA has agreed to look at it is runway performance. It can’t be right that a private Falcon 900 can use 100 percent of the runway and the same aircraft operated under commercial rules gets just 60 percent. Nor can it be right that an N-registered aircraft can use 80 percent of the runway and we [in Europe] have to use 60 percent.
We probably don’t need 100 percent, but having 80 percent of the runway subject to risk assessment would be a better rule. There should be an EASA working group formed to look at this after 2012. At one stage EASA was very keen to achieve harmonization with FAA rules and now gradually this seems to have slipped down the order of priority.
The EBAA goal here is that we want to promote best-in-class standards with safety as our key and final goal. But we also want fair competition and it can’t be right that some countries in Europe can use their pilots for longer hours and can operate to different rules than others. We want performance-based rules rather than prescription.
Aren’t there also problems stemming from the inconsistencies in the rules governing private and commercial operation of business aircraft?
The other issue to be tackled is so-called “flip-flopping.” Does it really matter who is operating the aircraft? What it comes down to is whether an owner who has chosen to have the aircraft professionally managed [under a commercial AOC] should be penalized compared with someone who has the aircraft flown by a couple of pilots on their own payroll [under private rules].
We want to see a common interpretation for commercial and non-commercial and recognition that an aircraft being operated professionally should not be penalized by having constraints such as flight-time limits, runway length and rights of access. We are waiting for a paper being prepared by Clark Ricketts [the UK aviation law firm] to clarify these issues.
In the end it should be quite simple in terms of who is on the aircraft and whether it is being put out for charter or used by the owner. Does it really matter if the aircraft is operated by some company created by the owner [for reasons that might include tax considerations] or whether it is being operated professionally by an operator with a commercial AOC? It’s who is on board that counts and whether the aircraft is being used for hire and reward.
We are less than a year away from full implementation of ETS. Despite the ETS support facility, this seems to be as burdensome as expected for business aviation operators. What is your assessment of the situation? How can business aviation make the best of a bad situation?
In principle, we support the need for the aviation industry to participate in measures, including ETS, which help us meet our environmental responsibilities. However, EU ETS as it is currently legislated needs numerous critical improvements. We are therefore tackling this issue in several phases and the first is to make sure that thousands of operators are meeting legal compliance.
There is now a clearer understanding among operators that they will have to comply. Clearly the list [assigning specific operators to different EU national authorities for ETS compliance] has been incredibly inaccurate. The UK alone now has over 1,000 operators on its list, and it had expected to oversee only about 30 airlines. There are nearly 3,500 operators subject to ETS in Europe and it’s a massive problem.
In fact, it’s a classic case of a huge bureaucracy being required to deliver very little. This is probably one of the worst laws we have ever seen. If there had been a de minimis threshold of 10,000 tons [of carbon emissions] across the sector, then the ETS would have been much more manageable. But, for now, thousands of flight departments making very occasional flights to Europe are brought into the system.
The second phase has been to work with Eurocontrol to develop the ETS Support Facility. There have been political and technical problems but it has now launched and has been designed for small operators almost as a one-stop shop. Eurocontrol, for a small fee of €400, will deliver all the data you need to submit. But there have been some serious problems. For aircraft for which they have good data it is pretty accurate to the extent that over 100 flights it is accurate to within one percent [in terms of calculating emissions].
But where there is bad data, and this has mainly been the case for Bombardier aircraft, it is accurate only within 20 percent, which is no good at all. Also, it all got very behind and wasn’t launched until February, when it should have been launched a lot earlier. We are now encouraging as many people as possible to sign up to the ETS Support Facility for €400 and play with the system this year to see how it works. If it doesn’t work well, then they can, in future, submit actual fuel-burn data for their aircraft, although operators tell us that the collection of such data costs at least twice as much as the carbon generated!
We continue to meet with Eurocontrol to give them more accurate data, and service providers have agreed to give them more of this. So over the course of this year we will be improving the performance of the model. We also had hoped that the ETS Support Facility would provide verified data. It is independently sourced data, so why would operators have to use a verifier?
At the moment this doesn’t happen, but what Eurocontrol has said is, if we can get 800 to 1,000 people to sign up for the ETS Support Facility then it is optimistic that it can get the Commission to agree to single-point verification. That would be a huge benefit, because we are finding among our members that even small operators have to pay fees of $1,500 or more. In some cases the fees are as high as $5,000, which is outrageous because all we are doing is lining the pockets of verifiers for doing very little.
If we can get a more accurate tool and single-point verification by April 1 next year then we think we will have done a huge amount to help the small operator. All they will then have to do is pay Eurocontrol €400 to get the data, submit the reports and then buy the carbon.
This year we are pushing Eurocontrol to make progress in getting operators signed up. My message to operators is, ‘Sign up for the ETS Support Facility and try to make the tool work for you so that by next year we have a system that works without, we hope, the need for verification.’
It is disappointing that the Commission hasn’t approved other tools, but even if it did there would still be a need for a verifier [since the data for these wouldn’t come direct from Eurocontrol]. If you can get a tool that works to within five-percent accuracy, then that is a good deal. We feel that the ETS Support Facility is the best chance the industry has of avoiding nugatory and unreasonable verification costs.
In the UK, there is now the threat of a new tax on private aviation? What is the right response to this? Is there concern that other states might follow suit?
This is very worrying. The first thing to point out is that it goes against ICAO policy because a member state should not introduce a new tax without at least informing ICAO. The UK government’s consultation document is very poor and has been produced from meetings with stakeholders that only included the airlines and not all those (for example, business aviation and helicopters) who will be affected by it.
Not surprisingly, therefore, it includes a lot of incorrect information and false conclusions. The BBGA [British Business and General Aviation Association and BHA [British Helicopter Association] are having meetings with the UK Treasury to set the record straight and we are optimistic that we should be able to work together to deliver a result acceptable to all.
As currently proposed, the tax would impose a rate of £186 per flight in any aircraft weighing more than 5,700 kg. That’s equivalent to the top rate for the current airline passenger duty for a first-class seat on a long-haul flight from London to Hong Kong. So you could pay a tax of £186 per passenger for a 20-minute helicopter flight from Farnborough to the London heliport in Battersea. It could also apply to flights carrying workers to offshore oil platforms or to flights connecting the UK’s Scilly Islands to the mainland at rates that would kill these services dead. In fact, technically, the tax could apply even to people being rescued at sea by helicopters.
The government has said it wants to apply the tax in a way that will not impact economic growth, but if it’s going to apply to 100,000 offshore workers how is that not going to hit growth in that sector? We recognize that passengers on business aircraft should not be exempt from the airline passenger duty at the point of sale [that is, for commercial flights] but the rates need to be equitable and we need to clearly identify those flights that should not be subject to the tax.
Another issue is that the consultation document openly says it expects the tax to induce passengers to transfer from business aviation to the airlines, so that is clearly anticompetitive [in favoring one category of air transport over another]. Yet, in reality, the great majority of business aviation flights involve flights between city pairs that are not served by airlines.
So we will be very busy between now and June 17 in getting our message across. One part of this message is that we are committed to playing our part [in reducing aviation’s impact on the environment]. In Europe, business aviation accounts for more than seven percent of all air traffic and yet accounts for just one percent of emissions, and we are already working through an ambitious program to reduce this further.
What is the latest on the implementation of new security regulations (EC300) in Europe?
We were very pleased that when we got the EC1254 derogation for business aviation, which said that aircraft in our sector weighing up to 15 tons, or up to 45 tons if carrying company employees, can derogate where appropriate from the airline rules. However, because this is a directive rather than a law it has to be implemented through the 27 member states and so far we have really had any progress on this only with Germany.
We got off to a good start with the UK but there has been no progress in the past year, mainly because there have been changes in the personnel involved. The derogations are very important and we want to see them implemented across the 27 member states. This will have to be pushed harder and harder by the national [business aviation] associations. Without the derogations the way the rules have to be applied is just completely impractical for smaller FBOs.
Security is a prime reason for using business aviation but, as the Commission has recognized, it is best achieved in a way that is different from the airlines. To this end, we have developed EBAA guidelines on best practice for security which we share with members. We have to show we deliver at least equivalent security through risk assessment and the application of best practices tailored to our sector and that’s what we have done.
How have EBAA initiatives, such as the response planning manual and work on safety management systems, strengthened the industry’s hand in raising safety standards?
We have been working very closely with IBAC on the role of industry standards. In this age of performance-based rules we believe industry standards have an increasingly important role to play and we in the business aviation associations have an important role to play in ensuring the highest industry standards for safety. This is our number-one commitment at EBAA–to help our members operate safely.
We have always been strong supporters of IS-BAO and this is available at cost to our members. We have pioneered safety management systems working with IBAC, and have produced an SMS plan for those who don’t want to run the full gamut of IS-BAO. In parallel, we have been running SMS training courses.
We did an emergency response plan survey two years ago. Of the 70 operators who responded, 30 had no emergency response plan at all and more than 50 percent of those who did have one had never had a training exercise for this. We decided that this is clearly an anomaly. An SMS requires you to have an emergency response plan. So we worked with Gates & Partners to develop emergency response plan documents, which give operators a specimen plan that they can populate with their own information.
It costs just €300 for EBAA members and we run training courses to help them with this. In short, a small operator can put together a basic SMS in two days, although they then need to populate it for their own circumstances. When operators join EBAA they get help to operate more safely at an affordable cost.
Another new development is that we have been sponsoring the creation of an IS-BAO for helicopters. The first draft has already been produced. This will raise the safety bar for helicopters.
Finally, at EBACE, this year EBAA and NBAA are running our own Safety Standdown event, which is more specifically focused on big issues in Europe, such as level busts, SMS, tire safety, runway incursions and fatigue.
Illegal charter has emerged as a big concern over the past year or so. What needs to be done to confront this problem and ensure more effective policing?
Firstly, we are not setting up EBAA as policemen. We know that illegal charter happens and indeed there have been some quite high profile accidents that clearly involved illegal charter. It is not fair that our members who hold commercial AOCs and operate to best-in-class standards are competing with someone who does not have the expense of the same regulatory oversight and doesn’t need to meet all the same requirements.
When we look around we have seen in some countries a high proportion of illegal operations. We got together with our members and we’ve produced leaflets that get the information out to passengers so that they can make an informed choice. We’ve had requests for more than 5,000 leaflets already. A lot of people just assume that all aircraft are well regulated to a high standard. Well, most are, but it’s important for charter customers to check that their aircraft is cleared to operate for charter in every respect, including insurance.
Also Avinode [the online charter portal] is very strongly on board and hopes soon to be able to flag up on its site where a permit is required and hasn’t been granted so that buyers can make an informed choice. Avinode will also be more active in monitoring whether or not the AOCs are current.
We are also working with some authorities like Isle of Man so that if we do have information on a particular aircraft that might be suspect, we feed it in for investigation. We have had a very positive response from the Isle of Man. We leave it to the authorities to do the policing.
At the same time, the fact is that it is difficult to get permits because of complex rules on fifth- or seventh-freedom rules, drives people to switch to private operations. This is another reason common standards of safety and regulation are so important. The new issues further complicate the issue with confused VAT ratings in the UK. We are working with BBGA to help the authorities to define this.
What is the latest in your work with the Single European Sky program?
Through our EBAA consortium, we are very active in the Single European Sky work, and had about 300 man-days of work on this last year. In April, we agreed to second two helicopter experts to the SESAR consortium because previously there had been no helicopter input because no one from that sector had bid for work.
So we will soon have not only two EBAA experts involved–one from Dassault, one from NetJets–but also one from Eurocopter and one from CHC. We need to ensure that the technology, such as all-weather operations and steep approaches, can be exploited by business aviation so that we can take advantage of all the opportunities presented by Single European Sky.
And is it true that access to airports continues to pose a challenge to business aviation?
On airport capacity, it is still important to get the status of business aviation recognized by the Commission because we have to get our historical rights to access slot-controlled airports established.
We want grandfather rights at places such as Luton, where business aviation should be able to have collective rights. We would manage this within the industry and it has been favorably received by the Commission.
Business aviation should enjoy fair and equitable rights, because as things stand, we can invest millions in an airport and have no right of tenure. That clearly is neither fair nor equitable.