The Bombardier Business Aircraft 2015-24 outlook has indicated that Europe will continue to be the second largest market for business jet deliveries after North America. The report said with average economic growth of 1.8 per cent per year and fleet compound annual growth rate of seven per cent, Europe will remain the second largest market for business jet deliveries. The report forecast that Europe will receive 1,525 deliveries valued at $50 billion during this period and that medium and large category aircraft would account for almost 70 per cent of the deliveries.

Europe continues to be on the radar of business jet manufacturers, even while emerging markets are making steady inroads. Despite several challenges, including saturation of some markets, European business aviation market is very much alive and kicking. The European Business Aviation Association (EBAA) has stated that business aviation continues to climb. In 2001 the European fleet consisted of 1,517 aircraft and by 2014, the number had more than doubled at 3,301, demonstrating that this growth has been relatively incremental over the past decade.

Growth Indicators

The Association’s 2015 review of business aviation in Europe has several indicators of growth. The report includes a composite indicator aimed at capturing some of the gains made by the industry. The Revenue per Flight Indicator (RpF) takes operational costs and hourly rates into account over time. This is being done to indicate how profitability of business aviation has a positive impact on the economy.

“The Annual Review of Business Aviation in Europe provides valuable information to better understand the industry,” said EBAA CEO Fabio Gamba. “However, the indicators available don’t account for the fact that business aviation is defined by the gains made by business people in terms of tailored approaches, flexibility, time-saving and access. When indicators exist that can measure these benefits, we will have a more rounded and truer view of the state of the industry.”

Flight Activity

The EBAA report has pointed out that there would be conservative growth, pointing out that there was 0.7 per cent flight activity growth rate and that business aviation fared better than other segments of air transportation sector. Gamba attributed this to external influences, including economic and political pressures.

EUROPE IS EXPECTED TO REMAIN ONE OF THE MAIN MARKETS FOR NEW BUSINESS JET DELIVERIES BETWEEN 2014 AND 2033

Gamba mentioned that the European fleet of business aircraft remains one of the world’s youngest, with 50 per cent of all aircraft being less than 10 years old. “In terms of aircraft type, the trend from 2005 to 2014 has been high growth in ultra-long range and very light jets, with a decline in entry level and midsize jets and, significantly, a decline in turboprops, which has traditionally been the segment’s workhorse. This suggests that we may be shifting towards long-haul, heavy aircraft operations becoming the industry’s bread and butter.”

Consolidation

The report speaks of consolidation in the business aviation segment. “Consolidation although not a standalone indicator in the report, is happening as we speak. There were major announcements last year, there have been major announcements already this year, and there will be more.” The EBAA report indicates a shift from small and fragmented to large and organised, a movement that will have a significant effect on the future of the industry.

Airports

The EBAA report said that airport activity with regard to business aviation movement is seeing some shift from one airport to another. While Geneva, Zurich and a few Italian airports are witnessing decline in aviation activity, airports such as Farnborough, Luton in UK and Nice in France are witnessing more flight movements. Geneva is Europe’s second busiest European airport for business aviation but there is a downward trend in activity. The busiest European airports are Le Bourget, Geneva, Nice, Luton, Linate, Zurich, Farnborough, Ciampino, Munich and Vienna.

The EBAA report mentions how declining fuel costs are impacting business aviation movements. It said it was stimulating growth. The report also mentioned that taxes continued to affect operating costs which in 2014 increased by 9.3 per cent.

Strong Rebound

In a similar kind of report, Honeywell Global Business Aviation Outlook said that economic indicators point to stabilisation – if not growth – in Europe. In 2015, Europe’s purchase expectations jumped to 31 per cent, bringing it back in line with the 30 to 33 per cent levels seen in the three surveys before 2013. Honeywell said there would be a strong rebound in 2017.

Within the current setting, Honeywell notes that the “buoyancy of operator attitudes is surprising.” This is particularly true as Russia, which supported the region before 2013 with strong local purchasing ambitions, has slipped in reported purchase plans due primarily to Western sanctions. According to the report, the comparison of the planned timing for European purchases indicates uneven proportions of demand in the next three years of the five-year window, with about 20 per cent allocated through 2015 followed by a 13 per cent dip in 2016 and a strong rebound to over 30 per cent in 2017.

The Bombardier forecast notes that economic growth in Northern Europe remains stronger than that of Southern Europe. “The economies of Germany and the United Kingdom, two of Europe’s largest, are expected to experience greater GDP growth,” says the report. “France, Italy and Spain, however, will see below average growth.”

Bombardier notes that Europe received 14 per cent of the world’s business jet deliveries in 2013, at approximately 77 units, up when compared to 65 deliveries in 2012 but consistent with deliveries received in 2010 and 2011. Within the region, the two largest countries in terms of installed base, Germany and the United Kingdom, received almost 50 per cent of the region’s deliveries, a significant increase from 2012. The fleets of these two countries, along with those of Austria, France and Spain, make up 47 per cent of the entire European business jet fleet.

Bombardier said that Europe is expected to remain one of the main markets for new business jet deliveries between 2014 and 2033, at 3,575 unit deliveries, seeing significant fleet growth equivalent to a CAGR of six per cent over the forecast period.

March Slowdown

Meanwhile, a report on business aviation departures in Europe in March this year saw a 4.1 per cent decline in year-on-year activity. There were 61,746 business aviation departures in March 2016, fewer than in March 2015. After the first quarter of 2016, activity is back by 2.2 per cent compared to last year. The biggest drop came in turboprop activity in March, down five per cent. Business jet activity declined by three per cent with charter flights most affected. In the last 12 months, business jet flights are trailing by one per cent and turboprops maintaining four per cent growth level.

The slowdown in March came mainly in Western Europe with all major markets apart from Italy witnessing decline. Germany had the largest drop in activity with year on year activity down eight per cent. In Germany for first quarter, it was down at five per cent, equivalent to 460 few flights a month. Flights within Europe were down four per cent in March and were at minus two per cent for the first quarter. Business aviation flight connections were up from the Middle East with inbound arrivals up 11 per cent in March and for first quarter it was plus five per cent.

However, the long-term prospects are bright considering that the number of billionaires grow by 41 per cent in 2013, up to 347 individuals, a figure close to North America which has 524 individuals. Almost one in five of all expected demand for new jets in the next five years will be from Europe. In the first three quarter of 2014, Europe accounted for 388 new aircraft deliveries.

The potential has to be tapped and this would be discussed at the upcoming European Business Aviation Convention and Exhibition (EBACE) event which has drawn a good number of exhibitors.