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The European Business Aviation Conference & Exposition (EBACE) taking place in Geneva is the most important Business Aviation Expo in Europe. BusinessWeek, in cooperation with our sister publication Business & Commercial Aviation, marks this important industry event with an overview of the industry in Europe. This report was published on Business Week online in 2002 - see details here.

Every working weekday morning a Boeing 737 departs London's Stansted Airport, heading for Cologne, Germany. At around the same time, another 737 leaves Cologne bound for London. The sequence is repeated later in the day.

Routine? Yes. But this is no ordinary airline. It doesn't advertise. You can't buy a ticket. And the 737s carry no airline livery. In fact, they are not regular 737s, but Boeing Business Jets, BBJs, and they are operated by Ford Europe on a company shuttle that, day-in, day-out, takes key workers to the blue oval's plants in Germany and Valencia, Spain.

A BBJ sells for around $45 million, equipped. So is the two-airplane Ford Europe fleet a corporate extravagance? Not at all. Ford estimates that on its typically high load factor Cologne flights (the BBJs carry 120 passengers in Business Class comfort and frequently are full) the per-seat cost of these trips is equivalent to a ticket on one of the cut-price airlines that now proliferate in Europe. That's cheap, even before you factor-in direct savings in man-hours and the off-balance sheet benefits of security, avoiding check-in queues and missed connections and getting employees back to their families each night. "What's more," says Ford flight operations manager Roger Hale, "the money stays within the company."

The Ford Europe operation is but one example of how corporate jets are facilitating business both within the European Union and in its global trade. It's a trend that's burgeoning. A survey conducted by Bombardier Aerospace shows strong growth in the European business jet market. In December 2001 the European-registered corporate jet fleet numbered 1,092 airplanes, representing nearly 10% of the worldwide total. That number is likely to be a conservative reflection of the actual total of business jets based in Europe, because many European businesses operate aircraft that are registered outside of the EU, for example in Bermuda, the Cayman Islands or the United States. More tellingly, the European fleet has grown in numbers by 22% since December 1996, making Europe the second largest growth region for business jet sales after the USA, which recorded 27% growth over the same period.

"While European fleet numbers were relatively flat for many years, the fleet has not been stagnant," says European Business Aviation Association (EBAA) CEO, Fernand Francois. "In fact, it has been renewed. What has disguised this (in numerical terms) is that a lot of companies have sold two or three older aircraft to replace them with one larger and more capable aircraft. The European business aviation fleet is one of the most modern in the world now. Since 1999 we've seen an increase in total numbers from 1,997 turbine aircraft (turboprops and jets) in the fleet to 2,160 in 2001.

Flight hours have increased as well. We estimate the average annual utilization for a corporate jet in Europe is between 400 and 1,000 hours. Not very long ago 400 hours per year was a break-even goal for many operators."

As of early May, the EBAA had 160 members in 26 countries operating more than 500 airplanes, 441 of them jets. It estimates that more than 600 European corporations have their own flight departments, directly employing 3,750 people in support of corporation aircraft operations.

Inevitably, any study of business travel must turn to the aftermath of the terrorist attacks on September 11.

"Some of the after-effects of the terrorist attacks were positive, and some were negative," says Fernand Francois. "By positive, I mean that as a result some companies that were used to making business trips on the airlines discovered business aviation. Immediately after the attacks we had a lot of inquiries regarding the safety of business aviation from people that had never used that mode of transportation. On the negative side, we have been penalized by the US Department of Justice's requirement for 45 days' notice for crews operating into the United States. It is not a problem for a senior pilot who has already traveled to the U.S., but for a new pilot it is a problem because it seems the Department of Justice has not yet found out how best to deal with it."

DaimlerChrysler's Transatlantic Shuttle

DaimlerChrysler operates an Airbus Corporate Jetliner on a corporate shuttle service that typically makes four roundtrips per week between its base in Stuttgart, Germany to the company's U.S. headquarters at Auburn Hills, Michigan, and another four trips per week to its facility in Vittoria, Spain.

In its first two years of operation, the appropriately named Transatlantic Star made over 300 transatlantic roundtrips with an average daily utilization around 11 hours. On a roundtrip between Europe and USA the airplane can be in the air for 18 hours out of 24.The jet is configured to carry up to 44 passengers in First Class seats. With an average load of 20 executives on each flight, DaimlerChrysler says its transatlantic travel costs are less than for Business Class tickets on commercial carriers. Company executives also benefit from the convenient timings of the nonstop flights to Michigan, and the greater security, comfort and confidentiality on board.

Another of the after-effects of the terrorist attacks has been an increase in insurance premiums. The European Commission has imposed new legislation setting minimum levels of insurance cover, but it was drawn up with the airlines in mind, overlooking -- but still applying to -- business aviation. An EBAA survey of its members suggests that corporate flight departments are already very well covered, but air taxi operators and smaller charter companies will face a serious increase in insurance costs in the future.

Travel between Europe and the U.S. makes up a significant and increasing proportion of European business aviation activity, fueled by globalization of business and the availability of ultra-long-range aircraft such as the Bombardier Global Express, Gulfstream V, Boeing Business Jet and Airbus Corporate Jet.

Signature Flight Support, which operates a fixed-base operation at London-Luton Airport to the north of the British capital, reports that 20% of its bizjet traffic is directly transatlantic, and fully 50% of the flights it handles are generated by North American business. "We've seen no significant effects from September 11," reports Signature's Director of Flight Support Services, Trevor King. "Traffic is comparable with last year, but one thing we have noticed is that the aircraft are getting bigger. We're getting more heavy metal."

Metro Business Aviation, part of London department store Harrods' owner Mohamed Al Fayed's empire, runs fixed-base operations at three London airports -- Heathrow, Stansted and Luton -- in addition to the city's only public heliport. Metro is already used to handling the very biggest corporate/VVIP airplanes at Stansted, where Boeing 747s, 767s and 777s of Middle Eastern rulers, and aircraft from the U.S. Presidential fleet, are frequent visitors. "Since we started at Luton in 1998, our business there has grown by 350-400%," reports Metro Business Aviation's Sales and Marketing Director, Alan George. "We have doubled the size of our facilities two years ago and now we are having to more than double again. We started with 47,000 square feet of ramp area, have just taken on another 47,000 square feet, and have plans to take up to 167,000 square feet by end of year."

Europe also contributes substantially to the manufacture of business aircraft. France's Dassault Aviation builds the Falcon Jet series of twin- and triple-turbofan bizjets. Bombardier Aerospace, which has a broad range of jets that stretches from the entry-level Learjet 31A to the $45 million Global Express, designs and manufactures major sub-sections of its airplanes at its Belfast, Northern Ireland Plant. Airbus Industrie, as in the airliner market, has gone head-to-head with Boeing, pitting its Airbus Corporate Jet (ACJ) against the Boeing Business Jet. ACJ operators include DaimlerChrysler, Volkswagen and the governments of France, Italy and Venezuela. And Italy's Piaggio Aero Industries, under the chairmanship of Piero Ferrari, son of the eponymous car manufacturer and Grand Prix team founder Enzo, has relaunched its Avanti twin turboprop and is promoting the airplane strongly in the U.S. market, with plans to double production output by 2003.

More than 90% of European business aircraft production is exported, particularly to the United States and Middle East. The EBAA estimates that the manufacture, operation and maintenance of business aircraft generates a 5.4 billion euro (US$6 billion) turnover and a strongly positive balance of payments for the European economy.

One area in which European business aviation has not matched growth in the U.S. is in fractional ownership programs. 'Fractionals' offer companies and individuals who do not wish to own an airplane outright (or who may need additional travel capacity) the opportunity to purchase a share, typically one-sixteenth, one-eighth or one quarter. The share purchase, plus a monthly management fee and an hourly charge, secures a minimum number of 'occupied hours' per year, with guaranteed airplane availability within an agreed timescale whenever the part-owner wants to travel.

Fractional operators such as Berkshire Hathaway's NetJets have been the market drivers for business aviation manufacturers in recent years, racking up record order backlogs among all the major airframers. NetJets plans to expand its current fleet of around 400 business jets to 1,000 by 2005 and sees a potential market for 125,000 customers by then. In the last six years it has ordered over 990 aircraft valued at over $18 billion and expects to make over 200,000 flights to more than 90 different countries this year. The company is active in the EU with NetJets Europe.

Bombardier also has a European fractional operation, Flexjet Europe, launched in 1999. It has recently added new programs that its London-based Managing Director, James Hoblyn, believes are more closely attuned to the European market.

"We realized quite early on that there were a number of things about the model that we and our competitor had imported from the U.S. that just weren't appropriate for the European market," he says. "While we were moderately successful, we just didn't think that this was what the European customer was looking for. We went out and did some market research, talked to customers and discovered things that led to the design of the new programs.

"First, there's really no such thing as Europe. It's a mosaic, a collection of different countries, each of which has different requirements, and they are certainly different from the U.S. owners. Then there's the issue of balance sheet. The U.S. has gone through a fairly dramatic transition over the last ten years. Whereas business jets were reserved for pop stars, luxury barges for the rich and famous, people in the U.S. are now seeing them much more as a business and productivity tool. In Europe we haven't yet gone through that transition. Companies are still concerned about the perception of owning a business jet. Our customers told us loud and clear that they don't want anything to do with owning a piece of the aeroplane, even it it¹s a fraction or a lease."

Bombardier Flexjet's answer is Jet Membership, which offers subscribers 24/7 short-notice access to three models of Learjet or a Challenger 604 in return for a yearly contract to take up a minimum 50 hours of chartered flight time. There is no capital investment, no management charge. Flexjet Jet Membership operates through a European Partnership of charter operators who are customers for Bombardier's business jets, based in Denmark, Germany, Ireland, Switzerland and the UK. All aircraft are less than five years old, meet European public transport airworthiness requirements and are flown by experienced crew.

Burgeoning though it may be, European business aviation is not free of turbulence. "The problems are always the same," declares EBAA's Fernand Francois. "Gaining access to major airports, and environmental issues at secondary airports."


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