European business aviation takes off after decade in the doldrums

Elizabeth Eyre
By Elizabeth Eyre September 8, 2017 14:13

European business aviation takes off after decade in the doldrums

August 2017 has been the biggest month for European business aviation since the 2008 financial crash, according to the latest data.

The news is cheering for the sector, which has struggled to return to the levels of activity it enjoyed before the global collapse.

But according to research company WINGX Advance, last month was “the busiest ever August for flight activity, exceeding August 2008 by 1.3%”.

WINGX Advance attributes the landmark month to cheaper charter rates available on older aircraft and the price-transparency and speed offered by innovative new booking platforms.

MD Richard Koe (pictured) said: “Business aviation activity in Europe is finally overhauling its pre-crisis peak, with flight volumes this month exceeding August 2008 by 1.3%. This is very encouraging.”

In its latest Business Aviation Monitor report, WINGX Advance describes August as the “peak month so far” in 2017, with 78,785 departures. This is up 5.5% year-on-year and takes the year-to-date trend to 3.3% – an extra 18,047 flights compared to 2016.

It identifies charter demand as the main catalyst for growth, with jet charters up more than 10% year-on-year.

France, the UK, Italy and Spain added most growth during August. France, for example, enjoyed a 7.7% year-on-year growth in departures and is now trending at +1% year-to-date – an average increase of 147 flights per month.

Activity in the UK, France, Spain and Switzerland grew courtesy of double-digit increases in Aircraft Operating Certificate flights, although the number of private flights fell in the UK and Switzerland. Germany was Europe’s second busiest market during August, with the strongest growth coming from private flights.

South-east Europe saw “significant” growth during August, says WINGX Advance. Flights from Turkey were up by 14% and flights from Greece were up by 19%. Business aviation activity in Greece in the year to date increased by 15% and AOC activity in the country increased by a quarter year-on-year.

Southern Europe also saw increased activity, with the number of flights growing by more than 10%. Activity in Eastern Europe increased by 6%, and flights from Russia into the rest of Europe increased by 5% year-on-year.

Nice was the busiest single airport during August, with more than 9% year-on-year growth. London was the busiest city for business aviation activity, with medium size jets making up 15% of flights from 13 different airports.

Koe said: “The growth [in August] is clearly focused around the high-summer leisure market in Southern Europe, with flights to and from this region up by more than 10% year-on-year. Heavy jets such as the Legacy 600 and light jets such as the Phenom 300 and the Citation Mustang are doing the hard work, with most of the growth coming in demand from charter customers.”

He had seen the increase building up in previous months but the performance in August was “quite remarkable” because it had been so long since the European – and global – market had been in a rut for almost a decade.

Koe described business aviation as a “cyclical business” that is tied to economic performance. “We’ve seen economic growth in the European area – the economy has definitely picked up and confidence levels are much higher – so I’m not surprised to see business aviation activity follow that lead.”

He also attributed the increase in activity to more aircraft in the field: “More aircraft is more flying.

“A definite characteristic of the growth is charter activity. Individuals and companies are leasing aircraft for their travel needs rather than owning a part or all of the aircraft. This is obviously a low risk way of access to aircraft – you’re not paying for the aircraft’s depreciation. I think the reason we’ve seen much stronger recovery in the charter market is that people are weary of having to pay down for owning a fraction of the aircraft or the whole aircraft, especially as market depreciation has picked up.”

The proliferation of digital booking services was making it much easier for people to see what flights were available and book them, which, in turn, was making the sector more transparent and competitive.

“It’s extremely competitive,” said Koe. “A lot of operators tell us that prices are being driven down. This digitisation of the broker market in particular is facilitating price comparison for end users. It’s also forcing the prices down. But, overall, the increase in demand has to be good news for operators.”

The market was also showing signs of rationalising, he said, after having been over-supplied for some time. There were very high levels of activity for aircraft that were ten to 15 years old, which suggested that the market demand was for aircraft to get people from A to B without the “concerns” of a new model.

“This is probably the right direction for the market to go,” he said. “It’s going to be at its most efficient when aircraft are seen just as a mode of transport. We might be seeing existing fleets being used much much more. As utilisation goes up, fleets are used more efficiently.”

This wasn’t good news for manufacturers of new aircraft but presented a great opportunity for “the aftermarket”.

“If more efficient asset allocation stokes more demand,” said Koe, “the OEMs will find there are more potential business jet owners down the line. And in the meantime, everyone in the aftermarket has a chance to benefit from more activity.

“It’s a tremendous buyers’ market. It’s been a hugely over-supplied market in the past and is finally responding to some stimulus from the European economy and innovations in digital platforms.

“The question is, what happens in the longer term.”

And WINGX Advance’s findings are being echoed by operators. Clive Jackson, CEO and co-founder of charter marketplace Victor, says his company saw increased activity during August.

He told Corporate Jet Investor: “We’ve experienced increased demand for jet charter, not only throughout August but through the summer months. Hotspots such as Palma de Mallorca, Mykonos and Ibiza remain hugely popular – for example, we saw a 70% uptick on charter to Ibiza this summer compared to last. More unusual destinations have also been on the rise – on-demand travel to Cornwall through Victor has risen 378% since H1 2016, with this summer playing a key part in that increase; elsewhere, destinations like Costa Rica and Madagascar have surged in popularity.

“The private jet charter market in the UK is definitely booming, and there are various reasons for this. The current economic climate is unstable; as a result we’re seeing a shift away from jet ownership, which is costly and inflexible, towards transparent, pay-as-you-go charter which allows customers to fly when and how they want without the need for membership. Business owners are realising that charter provides quicker, more cost-effective travel to the meetings and commitments of critical importance to their companies. Meanwhile, elite leisure travellers are seeing the attraction of tailoring stress-free summer escapes, particularly to new and exciting places.”

Andy Christie, group executive jets director at Air Charter Services, said the WINGX Advance findings were “very much mirrored” in the company’s performance, especially in Europe. Its Geneva had had “substantially” its largest revenue month highest number of flights ever recorded during August, for example, with five of its brokers doing the maximum number of bookings they’d ever taken.

“All of our European offices – France, Germany, Switzerland and Spain – are up on the prior year. Combined, they are up 120% on the previous year. London was up 23% on last year, which is a big increase,” he said. “We’re very much in the same situation [as the WINGX Advance findings], which is quite reassuring to see.”

He felt that the concerns people felt last year about Brexit, which stopped them spending money, had reduced this year, allowing people to relax and “open up a bit more”. A strengthening European economy also helped.

“It’s very encouraging to see all the discussion we’ve had about pre-2008 is being reflected in the data – it’s good to see facts as well as opinions,” he added.

Elizabeth Eyre
By Elizabeth Eyre September 8, 2017 14:13