European Business Aviation Weathers Tough Times

EBACE Convention News » 2012
The European business aviation community gathers in Geneva this week for EBACE. (Photo David McIntosh)
May 12, 2012, 4:30 PM

For the most part, Europe’s business aviation community has had a rough time since it last gathered in Geneva 12 months ago for its annual EBACE gathering. While 2011, as a whole, saw modest bizav traffic growth in Europe of 1.9 percent, the second half of last year saw the number of movements decline compared with the same period in 2010. The negative growth continued in January and February, before March brought what Fabio Gamba, chief executive of the European Business Aviation Association (EBAA), called “light at the end of the tunnel” in the form of stabilizing traffic levels.

Speaking to AIN last month, Gamba acknowledged that this big picture view conceals the fact that some industry players–generally those at the upper end of the market–have enjoyed some sustained recovery from Europe’s prolonged downturn. But he concluded that there is little doubt that demand for business aviation has been directly hit by the climate of austerity now gripping several of the continent’s economies. “The numbers are not as good as we were hoping and [the industry’s] feelings have been mixed because the last three months were worryingly negative,” he commented.

At the same time, the industry has continued to face new government-initiated threats to its viability. EBAA has never been busier in its lobbying efforts, with Gamba identifying the main battleground issues as follows: changes to rules governing airports slots; new taxes on business aircraft users; illegal charter operations; and the emissions trading scheme (ETS).

Revised proposals for airport slot allocation rules are expected to be put to a vote by the European Parliament’s transportation committee in September, with EBAA hopeful that it may get word in June–officially or unofficially–about what amendments to an earlier draft are being proposed. Legislation drafted last year would have posed a long-term threat to bizav’s access to many important European airports by heavily slanting so-called “grandfather rights” heavily in favor of major airlines.

Airport Slots

Gamba believes his association has had been able to convince some European lawmakers that such as structure discriminates against business aviation’s interests because its operators could never hope to meet the “use them or lose them” approach to slot management. Broadly speaking, what EBAA seeks is a situation in which its members can retain a collective right to a portion of slots as a group of unscheduled operators.

“Although the [original] slot proposals wouldn’t have too much impact on current operations, the prospects for the future would be grim,” said Gamba. “This is probably our number-one [lobbying] item and we have been putting a lot of resources into dealing with it.”

EBAA’s proposed amendments envision a situation that would allow bizav operators to get and retain slots. “The slot coordination system would have parallel tracks for scheduled and nonscheduled operators and the slots would be allocated on a purely first-come/first-served,” Gamba explained. “We want to be granted a percentage of slots per hour based on our historic usage.”

Meanwhile, EBAA is working on a new code of conduct spelling out ground-handling standards and expectations for FBOs. The inspiration for this is that new EC rules on handling will apply only at airports serving more than two million passenger per year, and the association wants greater clarity at the smaller airports used by many of its members. It will be proposing the guidelines to FBO members of EBAA in the coming weeks and is looking to introduce some form of audit to check that standards are being met.

Illegal Charter

The Brussels-based association also is stepping up efforts to combat illegal charter activity, which it believes may constitute as much as 12 percent of all flights in Europe. “We need to signal to those doing the illegal flights that the environment has changed [to one in which this activity is punished],” Gamba told AIN. EBAA wants governments to accept that illegal charter grossly distorts competition because providers flying without commercial air operator’s certificates (AOCs) can do so far more flexibly and with lower costs.

One EBAA proposal is that the European Commission and/or the European Aviation Safety Agency could maintain a central record of illegal flights with a view to publishing a Black List of offending operators, as well as a complimentary White List of legal operators. At the same time, it is urging European officials to focus on raising awareness among charter customers as to the legal consequences of taking illegal flights, such as nullifying insurance coverage. EBAA has suggested that there might even be a case for passengers to face legal penalties for their part in booking illegal flights.

Meanwhile, the industry group is preparing a new code of conduct for charter operators and will require its members to abide by it. It has also started to contact individual national authorities to demand more aggressive enforcement of existing laws.

New Taxes

While governments in Europe seem to lack the will or initiative to crack down on illegal business aircraft use, they appear to have limitless appetite for finding new ways to tax legal operations.

Last month, the Italian parliament revised the government’s controversial plans to tax business aircraft. On the one hand, it has extended to 45 days (consecutive, not cumulative over a year) the time a privately operated aircraft can stay in the country before being liable to punitive taxes that can total as much as $393,630 for aircraft weighing more than 10,000 kg (22,056 pounds).

On the other hand, the Italian lawmakers–aware that the original law excluded commercial operators–then introduced a separate tax on flights operated by AOC holders. Passengers will pay €100 each on legs of up to 1,500 miles and €200 for longer flights.

In the UK, beginning in April 2013, business aircraft flights will be subject to air passenger duty at rates comparable to those already levied on first-class airline passengers for long-haul flights. Lobbying by EBAA did succeed in persuading UK authorities to allow some exemptions. Gamba pointed to countries, including Belgium, the Netherlands, Denmark, Sweden and Ireland, that have sought to impose new direct taxes on business aviation, but that have since abandoned the move as being counterproductive. But in a climate of European governments battling to balance their books, it seems highly likely that this issue will rear its head once more.

Emissions Trading

ETS has now reached the global political agenda, with major states such as the U.S., Russia, China and India uniting in revolt over the European Union’s imposition of the cap-and-trade program on non-European airlines. But Gamba indicated that the business aviation lobby isn’t even contemplating the possibility that ETS might be scrapped to avoid a full-blown trade war.

“The political situation is the Commission’s problem and we always told them that this could happen,” said Gamba. “We are trying to work with the Commission and with Eurocontrol to lessen the discriminatory effect of how ETS is implemented and we are hoping for some further revisions by 2014.”

What EBAA seeks are ways to reduce the cost of complying with ETS, such as a centralized methodology for the process of monitoring, reporting and verifying carbon dioxide (CO2) emissions. This could ease the burden, but it does nothing to mollify the association’s core objection to ETS that by calculating emissions simply on a per-metric-ton/per-kilometer basis, it inherently means that bizav operators, which fly far fewer passengers than airlines and with much lower numbers of flights, necessarily pay far more on a pro-rata basis.

Also, business aviation stands to get no more than around 4 percent of its CO2 emissions covered by free carbon credits issued to those operators who took part in last year’s benchmarking exercise. By comparison, airlines are likely to have 85 percent of their emissions covered by free credits.

Single European Sky

Finally, EBAA has expressed concern about what it sees a lack of progress in efforts to create the long-awaited Single European Sky structure for air traffic management. “Progress is simply not happening [with SES implementation] and we are seeing unit costs increasing [for ATM services],” said Gamba.

EBAA now fears the SESAR implementation plan is falling behind due to political obstructionism over key aspects of the program, such as the formation of the functional airspace blocks (through which EU neighbors agree to work together to provide ATM cover).

SES II [the most recent version of the Single European Sky plan] may have been overly ambitious and so now the EC is mulling over a possible SES III,” said Gamba. There are also concerns about a possible escalation of strike action by air traffic controllers, who object to some aspects and consequences of the SES reforms.

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