Business Aviation to Grow 4% Annually in Europe

European business aviation traffic is expected to grow four percent annually and could reach a seven percent increase if the predicted strong growth of very light jets comes to fruition, according to a new report published by Eurocontrol. The report also predicts that the business aviation fleet will increase from about 2,000 aircraft today to 3,000 aircraft , by 2015. The increased aircraft means such flights could increase as much as 1,800 daily by the end of the forecast period

Getting to the Point: Business Aviation in Europe noted that business aviation accounted for 6.9 percent of the 9.2 million annual flights in 2005. That constitutes an 8.9 percent increase in business jet traffic over 2004, compared to a 2.4% growth in business turboprop flights.

Eurocontrol cited several reasons for the increasing growth, not the least of which was new business models such as the advent of the very light jet (VLJ), which gave a new accessibility to this segment of the aviation industry. In addition, the perceived delay and security problems of the airlines were also cited along with growing prosperity of both companies and individuals.

"Growth on these levels presents a number of challenges for air traffic management," said Bo Redeborn, director of air traffic management (ATM) strategies at Eurocontrol. "European social perspectives recognize the value of business aviation rather than seeing it as a luxury," said the agency, adding a stronger euro is making dollar-priced aircraft cheaper. Although there is relatively little business aviation traffic, it generates more and bigger unanticipated peaks of demand at airports than does scheduled traffic of airports of similar size. This consumes a disproportionate amount of flow management resources."

While much has been said about hub congestion creating a new level of point-to-point commercial service, the report said that instead, business aviation has become the real point-to-point form of travel. "Business aviation is not about taking passengers from the front cabin of a scheduled flight and flying them in their own aircraft," said the report. "Business aviation fills a gap in scheduled services: most business flights are between cities not served by scheduled flights."

Indeed, the network of airport pairs linked by business aviation - at 100,000 - is three times the number of airport pairs developed for the scheduled flight network with its 30,000 airport pairs. The report indicated that 40% of business aviation flights are for positioning aircraft and are thus flying empty. Currently, only nine percent of business flights are over 2,200 km and nearly half are under 500 km, most in the 300-to-400 km range, compared to only 30% of scheduled flights serving routes of the same length. It also noted that 3,000 scheduled airline airport pairs are served one to two times per week and 1,000 are connected seven times per week. For business aircraft, however, despite the large number of airport pairs, most are flown less than once a week, and, because of the number of positioning flights, served in only one direction.

While this generates time savings for the travelers, for controllers, it spreads already small volumes of traffic amongst a large number of small airports. The study indicated that, currently, only 30% of business aviation departures are from airports with more than 100 instrument flight rules (IFR) departures per day. As a result, business aviation could provide the much- needed safety valve to relieve the growing congestion at the region's largest airports but only if the basic infrastructure can be provided to serve smaller airports.

Only 11 percent of the 1,100 airfields in Europe, able to accept business aviation, have fixed-base operations providing specialist ground handling, servicing and other support for business aviation including ground transport, fuel, maintenance, catering and customs facilities.

Business aviation in Europe is concentrated in six states which accounted for 69% of all business departures in 2005. Five of these states have a five percent or larger share of total departures. Between them, Germany and France account for one third of all business aviation departures, compared to less than a quarter for other traffic.

The report also compared the scheduled and business sectors, saying they both had 700 operators. However, owing to the fact that business aviation is 10 times smaller, it is clear most operators have only one or two aircraft - 85% have fewer than five aircraft - and limited resources to keep up with changes in equipment requirements or other resources needed to serve the business.

The forecast compared seven published forecasts from engine manufacturers to consultants. The jet fleet will grow the fastest, with about 1,100 flights per day by 2015 although many high-growth predictions, especially those for VLJs could mean an additional 1,800 more daily flights by the end of the forecast period.

Turboprops and Supersonics

Eurocontrol cited a Forecast International report saying civil turboprops are expected to remain stable over the next 10 years. It adds that yearly deliveries will increase by around 10 percent until 2008, the vast majority in single-engine aircraft. Corporate flight departments will favor twin-engine aircraft, ensuring stable sales. Beyond 2008, turboprop deliveries will slow as VLJs come on line.

In conclusion, Eurocontrol predicted a 15 percent growth in turboprops over the 10 years from the current 567 to about 650 in 2014. The report also pointed to the development of supersonic jets - including ones planned by Aerion and SAI which are expected to launch in 2012-2013 - as being a small factor in the growth in the out years of the forecast. Aerion expects a market for 250- 300 aircraft worldwide over 10 years even with an $80 million price tag.

Fractional ownership will not see the popularity it has seen in the U.S., said Eurocontrol. Instead, the agency affords greater importance to card programs in which clients buy flight hours instead of actual share in an aircraft. Currently, fractionals account for 10-15 percent of the global business jet production topping out at 20-30 percent over the next 10 years, according to some forecasters, and 10-15 percent according to others.

Bo Redeborn, +32-2-729-34-20

Main European Business Fleets Company: NetJets Country: Portugal* # of Aircraft: 91 Primary Fleet Operations in Europe: Fractional Shares Operator; Card Programme Operator Company: Grupo Gestair Country: Spain # of Aircraft: 31 Primary Fleet Operations in Europe: Charter, Fleet management Company: Jetalliance Flugbetriebs Country: Austria # of Aircraft: 28 Primary Fleet Operations in Europe: Charter, Fleet management Company: London Executive Aviation Country: United Kingdom # of Aircraft: 22 Primary Fleet Operations in Europe: Charter, Fleet management Company: TAG Aviation Country: United Kingdom, Switzerland # of Aircraft: 20 Primary Fleet Operations in Europe: Charter, Fleet management Company: Zimex Aviation Country: Switzerland # of Aircraft: 20 Primary Fleet Operations in Europe: Charter Company: Aero Services Executive Country: France # of Aircraft: 16 Primary Fleet Operations in Europe: Charter, Fleet management Company: DaimlerChrysler Aviation Country: Germany # of Aircraft: 14 Primary Fleet Operations in Europe: Corporate, Charter, Fleet Mgmt. 17 Operators 639 Operators * NetJets entire fleet is registered in Portugal, but there aircraft operate throughout Europe with no set base Source: PRISME-Fleet and ALG analysis

Summary of traffic by distance and type Airport Pairs Median Distance (km) Mean Distance (km) Business Jet 73045 601.5 1100.8 Piston 14499 196.6 284 Turboprop 36401 332.5 420.9 Other 108535 1024.3 1553.9 Scheduled 29614 672.5 1423.3

Forecasted Business Jet Aircraft Deliveries : Pratt & Whitney Worldwide Forecasted Deliveries: 12,200 Forecast Period: 2004 - 2013 Yearly Deliveries: 1,220 Total Value billions US$: Replacement Rate for Period: Europe % of New Deliveries: : Rolls-Royce Worldwide Forecasted Deliveries: 22,500 Forecast Period: 2005 - 2024 Yearly Deliveries: 1,125 Total Value billions US$: 300 Replacement Rate for Period: 33% Europe % of New Deliveries: : Forecast International Worldwide Forecasted Deliveries: 10,900 Forecast Period: 2004 - 2013 Yearly Deliveries: 1,090 Total Value billions US$: 135 Replacement Rate for Period: Europe % of New Deliveries: : Embraer Worldwide Forecasted Deliveries: 9,680 Forecast Period: 2006 - 2015 Yearly Deliveries: 968 Total Value billions US$: 144 Replacement Rate for Period: Europe % of New Deliveries: 18.40% : Honeywell Worldwide Forecasted Deliveries: 9,900 Forecast Period: 2005 - 2015 Yearly Deliveries: 900 Total Value billions US$: 156 Replacement Rate for Period: 25% Europe % of New Deliveries: 15% : Teal Group Worldwide Forecasted Deliveries: 7,417 Forecast Period: 2005 - 2014 Yearly Deliveries: 742 Total Value billions US$: 107 Replacement Rate for Period: 26% Europe % of New Deliveries: 12% : Walsh International Worldwide Forecasted Deliveries: 6,356 Forecast Period: 2005 - 2014 Yearly Deliveries: 636 Total Value billions US$: Replacement Rate for Period: Europe % of New Deliveries: Source: Company published forecasts

Forecast Scenarios for Europe 2006-2015 Jet Scenario Worldwide Europe % of European Deliveries Yearly Deliveries New Deliveries Over Ten years High Growth 1,220 15% 1,830 Central Forecast 928 13.50% 1,253 Low Growth 636 12% 763 Jet Total European Business Scenario Yearly Jet Turboprop Replacement rate High Growth 1.70% 2,620 700 Central Forecast 2.30% 2,060 650 Low Growth 2.90% 1,630 600 Jet Fleet 2015 Scenario Piston High Growth 400 Central Forecast 300 Low Growth 250 Source: Published forecasts and ALG analysis

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