Europe's fractional ownership fleet is less than 6% that of the USA. So why is the market stubbornly refusing to grow?
Lumped in as it often is with the chairman's chauffeur-driven Bentley, silver-service executive dining rooms and other emblems of "fat cat" excess, corporate aviation is likely to remain a harder concept to sell to staff and shareholders in Europe's "stakeholder" business environment than on the other side of the Atlantic. In the USA, dress-down informality may mean the janitor gets to call the chief executive by his first name, but it's a culture in which individuals and corporations that have made it to the top of the heap have few hang-ups about flaunting their status.
It is partly this pursuit of the American dream - embodied in the company Learjet waiting to zip the successful entrepreneur from board meeting to Caribbean golf course - that has fuelled the growth in US business aviation since the 1960s. Lately, however, the sector has grown up, treating private aviation as a business tool positively affecting the bottom line rather than a corporate perk. This change of emphasis is behind the surge in fractional ownership in the USA.
The benefits are clear for all to see. Corporations have access at short notice to fast, secure and comfortable air transport for their staff and clients without the burden of a multi-million dollar asset depreciating on their balance sheet. What's more, their travel bill is often less than paying for airline tickets - and that is before the time-savings (parking the car, checking in and waiting for the security checks and baggage at the other end) are taken into account. Despite the collapse of United Airlines' Avolar venture in March (Comment, 2-8 April), the sector's prospects are bright, with 700 aircraft in fractional programmes in the USA, with 4,000 share owners and nine in 10 users stating they are satisfied with the service and will renew their contracts.
So why isn't fractional ownership taking off in Europe? The region has a similar GDP and roughly the same number of people as the USA, and yet only 40 aircraft in fractional schemes. It could be argued that the concept was introduced a lot later than on the other side of the Atlantic - the two biggest operators are offshoots of North American companies, NetJets and Bombardier's Flexjet, and hasn't had time to become established.
But this is only part of the answer. There are a number of hurdles to be overcome before the market can reach any sort of critical mass, as European Business Aviation Association chairman Brian Humphries noted at last week's European Business Aviation Conference and Exhibition in Geneva. Aside from the business culture prejudice referred to above, there are difficulties over access to airports, tougher safety standards governing where aircraft can operate, and crucial taxation differences.
In Europe, most businesses are located in or near large population centres. Airports are congested and private aviation operators, if they are allowed to use major airports at all, often face exorbitant charges. Access to local airports is also tricky. In the USA, landing safety rules are much looser than in Europe, opening a bigger network of destinations to the user. Unlike in the USA, 11 September has not created the same sea-change in airport security that has pushed even more businesses into joining fractional ownership programmes. Finally, there is the issue of taxation. European tax laws tend to view a fractional share in an aircraft as a capital asset, on which tax must be paid. In the USA, buying a stake in an aircraft is tax-deductable, making the move even more attractive.
These are issues Europe's legislators have to seriously consider. Without compromising safety, governments must move towards regarding a business aviation-friendly airport infrastructure as crucial to economic growth, and bring the rules on taxation and safety closer into line with those of the USA.
Europe's fractional sector will never match the USA's for size: its geography, single language and common laws mean its executives do a lot more flying for business, whether it is on domestic airlines, personal aircraft or corporate jets. However, fractional ownership represents a real opportunity to revolutionise the way companies conduct their business in Europe. With only a handful of aircraft in service, manufacturers ought to be hopeful about prospects and - after the likes of Flexjet and NetJets have begun to make in-roads - expect more providers to pour into the marketplace, as they have in the USA.
Neither backward-looking business customs, nor legislators must be allowed to stunt this burgeoning market.
Source: Flight International
