Chris Yates/MANCHESTER
FOR THE MOST PART, fixed-based operators (FBOs) have been hit hard in the UK. Here, a combination of significantly deeper recession, shutdown of company aviation departments, pressure of business-aircraft slots at major airports and restricted access, or outright closure, at smaller fields has hurt the industry badly.
Pessimism pervades the industry, therefore, with operators worried that the momentum of recovery may not be maintained. Some are reluctant to use cash reserves, already plundered to stay afloat during the recession, to gear up to meet increased demand.
"During the worst of it, we found there was a marked and steady drop-off in trade as our corporate customers either sold their aircraft or stopped flying," says David Antrobus, managing director of Northern Executive Aircraft. "Consequently, and reluctantly, we had to cut back staff. We lost a lot of money in that time - in the region of hundreds of thousands [of pounds] - and that has eaten into our reserves," he says.
Commenting on whether this has affected his company's ability to expand to meet increased demand, he adds: "I think there has got to be an element of that. If you haven't got the reserves and strength of balance sheet, you have more difficulties in raising capital, and so on. One has to be cautious. There is always a happy medium in trying to tread the path between being overly cautious or rash in rapid expansion. We're trying to get it somewhere in between, and certainly, at the moment, we have to be very careful."
Graham Forbes, chief executive of the UK General Aviation Manufacturers and Traders Association (GAMTA), says: "I think that is a sensible point of view. Our industry tends to work in a seven- to ten-year cycle, but people do worry that there are going to be more frequent fluctuations, and they have to be sure that, if they ramp up to meet demand they are flexible enough to downscale again, if necessary."
Antrobus believes that trade is undoubtedly better, but he thinks the recovery is fragile. "I wouldn't be surprised if there's a drop-off again in a couple of years' time," he says.
This concern is based on worries that a change of government may prompt upheaval in the economy. There are, however, other factors at play that have had far-reaching consequences for FBOs, particularly in southern England. "We've lost one operator for sure - the London Flight Centre - which went after Hatfield shut down," says Forbes. "Leavesdon Airport has gone, and we have had quite a threat to the business-aviation market at Heathrow Airport. Also, there have been various problems at Farnborough, Northolt and Biggin Hill."
He says, however, that the Government has taken an interest, and "...there's now a slim chance we will be able to secure continued use for Farnborough. Things are looking better at Northolt, and there doesn't appear to be any other major airport under threat, although, if you happen to be at somewhere like Manchester, there's always difficulty sustaining the business access when the inclusive tour and scheduled traffic is grabbing all the slots."
Away from London, slot pressure is not an issue. Osprey Aviation, based at Southampton Airport, is beginning to see considerable growth in business. "There are definite signs of improvement, but perhaps we are slightly an artificial case in that our improvement seems to have coincided with the development of the airport," says chief executive Adrian Barallet.
With a staff of 40, Osprey manages executive jets. Its input is mainly engineering, although it does run an operations division and provide crews. "We are the only FBO on the airport, and operational assistance includes a fairly comprehensive passenger-handling capability," says Barallet. He agrees that the company may see recovery through "rose-tinted glasses", but adds: "I do feel that there is a general increase in corporate aircraft activity in the country."
THE DOWNSIDE
There is a downside, however. "Always, when we come out of recession, other companies jump on the bandwagon and competition is tighter now than it was two or three years ago," he says. "Labour rates haven't gone up in that time and, in some instances, have fallen. The only way to counter competition is to cut our rates substantially - which we are not prepared to do - or to be better than everyone else. That is what we are intending to do."
Elsewhere there is not much sign of the "green shoots of recovery". For example, the general manager of Glasgow-based Execair, Eddie Allison, says: "In line with many companies in Scotland, we tended not to suffer from the recession while it gripped the rest of the UK. Last year, trade did take a nose dive, and several companies which used Glasgow [Airport] regularly either got rid of their corporate aircraft or began to concentrate more on Eastern European markets and the opportunities over there."
Execair operates at Glasgow, Edinburgh and Birmingham and, sensing a market upturn, the company has also recently bought Cumbernauld Airport, with the intention of developing it specifically for business aviation. "Birmingham is a fairly embryonic station in that it has only been operating for a year, but what we have done there already takes into account the fact that the recession is over. At the Scottish stations we have seen a marked reduction in traffic, and Glasgow, in particular, has rationalised by cutting costs, but not staff."
Like other UK FBOs, much of Execair's trade is from Western Europe, indicating, perhaps, a much stronger recovery overseas. Certainly the industry is healthier in countries such as Germany, the Netherlands, Belgium and to a lesser extent, France. Despite being largely immune to the ravages of the recession, Swiss FBOs have also suffered.
"Since 1990, Jet Aviation's Zurich FBO has seen a decrease in traffic of some 30%" says press and marketing director Lorenz Koehler. "The primary reasons for that downturn were slot restrictions, imposition of an Italian luxury tax and a fuel tax in private aviation. At our Geneva station, however, we saw a decrease in traffic during the first five months of 1992, but since then traffic has strongly increased."
With both the Italian luxury tax, and private- aviation fuel tax now no longer in force, Jet Aviation hopes that business will start to pick up once again.
In the UK, meanwhile, much of the increase in trade is in the area of turbine-powered aircraft. GAMTA's Forbes says: "We believe that the small end of the business-aviation market - the light piston twins such as the Islander doing difficult jobs into different places - will be slow to recover. That is true until you look at the turboprop and, most definitely, the business-jet side, where there is a marked improvement."
Northern Executive's Antrobus goes further, believing that there is little, if any, market in operating other than jet-powered aircraft. "We got rid of everything that was marginal in terms of flying hours. That included all of our [Beech] King Airs, and we have gone over exclusively to jet operation. Presently, we're operating a couple of Lears and looking at the possibility of expanding in the near future."
Forbes forecasts that, in the near future: "The top end of the business-aviation market will show a certain steadiness. The UK Department of Trade and Industry has forecast something in the region of 800 business-jet deliveries globally over the next 20 years. At worst, that is fleet replacement, at best it is an increase in the holdings of business-jets worldwide. That must be good news for the industry."
Source: Flight International