Posts Tagged ‘Business Aviation’

European support for business aviation?

Sunday, August 23rd, 2009

From the Editor:
Earlier this month Brian Humphries, president of the Eurpean Business Aviation Association, published the following article highlighting the plight of SMEs in the business aviation market during this recession particularly when compared to government approaches to legacy industries such as car manufacturing. I will let the article speak for itself – as a broker in the business aviation market Aviastra soundly echoes all the points raised.

The European Business Aviation Association was founded in 1977 to [quote from www.ebaa.org]
“….. promote excellence and professionalism amongst our Members to enable them to deliver best-in-class safety and operational efficiency, whilst representing their interests at all levels in Europe, to ensure the proper recognition of business aviation as a vital part of the aviation infrastructure, supporting local and national economies.”

Their website is at www.ebaa.org

The Article [by Brian Humphries of EBAA]:

I am writing this column in both my EBAA and British Helicopter Association (previously BHAB) roles when I address the plight of the backbone of business aviation in Europe, the small operator, and ask:

Why it is that in the depth of this recession they seem to be the focus of attack by authorities and governments rather than receiving the sort of support the large “has been” industries such as motor manufacturing have been enjoying?

After EBACE I wrote that a number of indicators suggested EBACE may have coincided with the market bottoming out and perhaps a sign of better times to come. However, looking at the traffic figures since and talking to our members, there is no doubt we are still bumping along the bottom and times will continue to be very tough for many of them for some time yet. While we wait with some trepidation for the July Eurocontrol figures, informal indications suggest these may be down again and there is no doubt that if, overall, we end the year around 15% down on last year, we shall have done very well. But some countries and some market segments, especially some elements of charter, are faring much worse than this. As a result, from the largest operators, where the furloughs and job losses are very large indeed, to the smallest with relatively few employees, all are having to make severe economies and let valued employees go just to stay in business. In recognition of all this and with their formally stated commitment to Small and Medium size Enterprises (SMEs), would you not think that European and national governments would be sympathetic to helping them stay in business – remembering that Eurocontrol figures show that 40% of operators in Europe have only one aircraft and 80% less than four. Indeed, EU policy, to which the UK government is a signatory, says: “Being SME-friendly should become mainstream policy. To achieve this, the ‘think small first’ principle should be irreversibly anchored in policy-making from regulation to public service thus ensuring that rules reflect the majority of those who will use them. SMEs must be helped to thrive. When the setting up of businesses and their growth is hampered by unnecessary obstacles, these must be removed.”

Sadly in practice things are very different. In the UK, the general aviation sector will have seen its regulatory charges rise by an average of 60% in five years and small aircraft operators will have seen their regulatory charges increased by several hundred percent with further increases planned until all cross-subsidies are abolished in 2010. A small company that employs one pilot to fly their sole aircraft will have suffered an increase in AOC charges from £834 in 2005 to £10,030 in 2010. Another company that operates, maintains and manages helicopters on behalf of their owners will have seen its charges rise from £11,664 in 2008/09 to £18,618 (+59.6%) in 2009/10 and £31,030 (+66.6%) in 2010/11!

So, far from helping SMEs in line with policy commitments, govern-ments are just making things a great deal worse. The mounting costs of regulatory compliance with EU directives, the cost of oversight by the CAA, the growing cost of environmental compliance are all conspiring to drive our SMEs out of business. Added to this, we know of at least one case where the CAA has been highly unsympathetic to a basically sound very small operator under temporary financial pressure. Instead of showing sympathy and allowing them time to pay in stages to allow the business to survive an especially difficult time, they threatened early redress to the Courts to recover non-material amounts of money.

Higher up the scale, we have similarly unsympathetic treatment of mid size operators by the EC, who despite pleas to the contrary, will require any operator emitting more than 10,000 tonnes of CO2 per year to follow the whole panoply of ETS reporting. We did a trial with one such operator and found it would cost them ?70,000 to comply in the first year; funds that just aren’t available in the current market. And as if that were not enough, we now face pressure from the EC to raise the UK’s zero rate of VAT rate on aircraft above 8,000 kg. As one commentator noted, the addition of VAT to the cost of buying and flying private jets is likely to sound the death knell for a significant number of owners, operators and manufacturers.

What is so worrying is that all this comes against a background of great progress in getting the importance of business and general aviation recognised in Europe. For example, the European parliament noted in February that business aviation “provides specific social and econ-omic benefits such as increasing the mobility of citizens, the productivity of businesses and regional cohesion”. It also noted the sector’s “growing economic importance” as vividly illustrated in the recent PriceWaterhouseCoopers report showing that business aviation was worth some ?20bn to the European economy in 2007, around 0.2% of GDP and generating 164k jobs.

So come on governments. Please can we have the hard nosed financiers talking to the policy makers and showing a bit of sympathy to these SMEs who fulfill such a vital role in European mobility? We are not looking for handouts. Just the same sort of sympathy being shown to other businesses with the avoidance of yet more costs, a pause in already planned cost increases until the economy recovers, and time to pay when businesses are struggling. Is this really too much to ask after what you have given the banks and other legacy industries?

Brian Humphries, EBAA president