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Focus on Europe

EU Business Aviation Facing Challenges

“It’s going to be a rough year.”

Fabio Gamba, the European Business Aviation Association’s (EBAA’s) new chief executive officer, pulled no punches when he looked ahead to the remainder of 2012. With implementation of the European Union Emissions Trading Scheme (EU-ETS), new regulations governing the slots afforded aircraft at airports across the continent and other anticipated challenges, Gamba called the current situation in Europe “the toughest business operating environment that we have ever seen.”

“We are very concerned about the addition of operating costs,” concurred EBAA President Brian Humphries. First and foremost, he said, are concerns about the effect of the January 1 implementation of EU-ETS.

The New Taxes

The European Union now taxes carbon emissions by aviation operators, both general aviation and commercial. The EU also offers tax credits on emissions, which are bought and sold on the open market. But Humphries said that presents several problems for European business aircraft operators. While airlines are given generous credits, paying only approximately 15 percent of their emission fees, Humphries said business operators must pay up to 96 percent of the tax on their emissions.

Worse, Humphries said, the single-point system imposed by the EU for monitoring, reporting and verifying carbon emissions is far too cumbersome and expensive for business operators.

“In many cases, for smaller emitters the costs for monitoring and reporting, and particularly verification (MRV), far outweigh the costs linked to acquiring CO2 permits. As such, the MRV procedure threatens to weaken the competitiveness of European business aircraft operators vis-à-vis non-EU competitors and other modes of transport, such as the airlines,” he stated.

Slot Reallocation

Perhaps as onerous to European business operators is the plan for reallocating landing and takeoff slots at the continent’s biggest airports.

“The association is hugely disappointed that the European Commission, despite robust arguments against, has maintained a recast of its slot regulation based on the Steer Davies Gleave (SDG) study, which predicates the future allocation of slots based solely on the number of passengers carried, thus rejecting other fundamental criteria,” Humphries said. “As such, this proposal will have an adverse impact on demand by failing to recognize the pivotal role of regional and business aviation in connecting the diverse regions of Europe, increasing mobility and the productivity of businesses, and supporting regional cohesion.”

Operators that use their slot less than 85 percent of the time will be in danger of losing their slot altogether.

Another study commissioned by the European Regions Airline Association refuted the SDG report, saying it was based on incomplete information. The second study, conducted by Mott MacDonald, also confirmed EBAA’s contention that the primary beneficiaries of slot revisions would likely be foreign airlines, costing jobs and isolating remote regions of Europe.

“The impact of the European Commission’s decision to follow the SDG study will be incalculable for business and regional aviation,” agreed Gamba.

If implemented as currently conceived, the use-it-or-lose-it slot allocation plan will favor scheduled carriers, Gamba said. Operators that use their slots less than 85 percent of the time will be in danger of losing the slot altogether.

“It’s sad that the number of passengers is what determines ‘efficiency,’” Humphries lamented. “It doesn’t take into account the regions that airports are supposed to serve.”

“We were expecting more comprehension by decision-makers and lawmakers,” Gamba said. “Instead, we feel we’re being targeted.”

Put it all together and both EBAA leaders said they are worried that business operations will decline sharply in 2012. For the first six months of 2011, Humphries said business aviation operations rose between 4 and 5 percent. But the number of business flight operations began to drop in late summer.

By last November, Humphries said traffic had dropped 4.5 percent compared to the previous year. Gamba predicted business aviation traffic would decline 2 percent in 2012 compared to 2011.

“This is a pivotal year,” Gamba concluded.

Review more stories from the Business Aviation Insider special section, "Focus on Europe."

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