European companies that use business aviation argue that it is an important tool for them, and that without it the continent's business life would be disadvantaged compared with other world regions. But can that argument be backed up with economic figures?
The answer, apparently, is "yes".
The European Business Aviation Association wanted to find out just how much business aviation contributes to Europe's economy - and to the economies of individual states. So the EBAA commissioned PricewaterhouseCoopers' analysts to research the hard figures. PWC, carrying out industry research between May and November in 2008, found that in the calendar year 2007 the business aviation sector "contributed a total of €19.7 billion [$25.7 billion] in annual gross value added (GVA) to the European economy in 2007, accounting for approximately 0.2% of the combined gross domestic product of the European Union, Norway and Switzerland." PWC says that, in 2008, using external indicators, it was probably higher than that.
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GVA is defined as "the difference between...the value of goods and services produced and the cost of primary materials and other inputs which are used up in production". In other words, the business aviation sector's net output. The number of jobs across the continent generated by business aviation is 164,000, says the study.
PWC says its analysis is conservative, and business aviation's contribution to Europe's whole economy is probably higher than that: "[We subtracted] profits from the output figures as we could not ascertain the share of the profits from European business aviation companies that would be distributed and spent within Europe. However, a large proportion of those profits would arguably contribute to the European economy, especially as all EU business aviation operators must be majority EU-owned. Had we included profits, the industry's total impact on GVA would have been €24.8 billion."
PWC divided the total impact of the business aviation industry into direct, indirect and induced impacts (see pie chart). "The direct impact measures the impact of the sector itself, the indirect measures the impact occurring up the supply chain, and the induced impact is the result of the expenditure generated by employees related to the sector and its supply chain." The sector's induced impact, at €9.3 billion, is estimated to be the largest single component in its total European economic impact.
Business aviation's GVA in the three biggest European economies - Germany, France and the UK - is larger as a proportion of those states' GDPs than it is of the smaller ones (see map diagram), begging the question about the chicken or the egg: did a healthy economy naturally spawn a sizeable business aviation sector, or did a greater use of business aviation boost productivity in a healthy economy?
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PWC does not answer that specifically, but it says: "These three countries are leaders in the sector because they combine extensive business aviation aircraft assembly and component manufacturing operations with high numbers of business aviation aircraft movements and registered fleets." Italy can claim the same, notes PWC, but on a smaller scale.
The UK is home to 30% of the business aviation sector employees in Europe, France to 24%, Germany 21%, and Italy follows with 7%.
But while business aviation's economic footprint in Europe may be significant, how has the sector reacted to the credit crunch? According to same-month traffic figures from Eurocontrol comparing 2008 with 2009 (see bar chart), activity has reduced by about 20%. But, the EBAA's president and chief executive Brian Humphries notes with relief, March saw not only the hoped-for seasonal upturn in activity, but also a smaller negative figure in the same-month comparisons.
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Humphries sees the March figures as real improvement, not as a random spike. He says that activity in the corporate sector and the "high end" charter companies has not been as badly affected as other parts of the industry. This is fortuitous for the timing of EBACE 2009, he says, and it tends to confirm the industry response to the show.
Exhibitor bookings have been good, says Humphries, but he expects fewer visitors because companies are sending smaller teams. Delegations, too, are expected to be smaller. But the quality of visitors is predicted to be high, says Humphries.
European business aviation has not seen the seriously unfavourable knee-jerk reaction the US industry suffered following the banking sector bail-out and the - under the circumstances - miscalculated decision by the Detroit motor industry chiefs to use corporate jets to fly to Washington DC to plead for government cash.
Humphries says the difference is explained by the fact that the European industry has always intentionally maintained a discreet profile because "we've always had a bad press". Companies and the public sector are scrutinised by the media for any use of private aviation on the premise that it is an extravagance, whether that is true or not. The PWC study looked at the benefits of business aviation to its users and, although it has not quantified the direct financial benefits to individual companies, it says the two clear advantages are time saved and the ease of connecting directly to "relatively remote regions".
PWC suggests that, to quantify precisely the fiscal benefits of business aviation to each company would entail providing an analyst to guide them through the quantification methodology, and this was not feasible in the time available. Companies were emphatic, however, about the benefits, the implication being that the flexibility business aviation confers allows them to do business in a way that would not otherwise be possible, PWC researchers learned.
Examples include the need for multiple-destination trips that would be impossible to schedule efficiently using airlines, and the ability to plan trips according to the business objectives rather than moulding the work schedule to fit airline timetables. It can also provide, if an opportunity to quote for a globally competitive contract arises, the ability to beat the competition to the negotiating table.
These benefits, Humphries points out, can be negated by a regulatory environment that treats business aviation operators as if they were airlines for the purposes of emissions trading, security and flight time limitations. The EBAA is working with the European Commission to try to ensure that measures applied are proportionate, he says, but this is going to be a long job.
Source: Flight Daily News