AIN Special Reports

2015 FBO Survey: International

 - April 30, 2015, 10:44 AM
TAG Aviation at the UK’s Farnborough Airport once again earned top honors in the annual AIN International FBO Survey.

While business aviation traffic in North America has picked up over the past year, the story for the rest of the world isn’t as clear, with activity in many regions remaining mired. “We’ve become a delinked market,” noted Richard Aboulafia, vice president for analysis at Teal Group. “The U.S. is doing acceptably well, and elsewhere [activity is] disappointing.” Over the past year, usage of U.S.-registered business jets helped to bolster the international market, according to FAA statistics. While the U.S. business jet fleet saw approximately the same number of operations last year (4,285,910) as in 2003 (4,235,910) the percentage of international operations over that span went up by 37 percent, to a record 708,872 last year.

According to Aboulafia, the situation at present represents a nearly complete reversal from 2008 and the start of the global economic downturn. Back then, hope for industry recovery lay in large-cabin jets and emerging markets such as the BRIC nations (Brazil, Russia, India and China). This year, a North American-based recovery is fueling the industry, while each of the BRIC nations is experiencing conditions that hamper business aviation growth. 

The recent downturn in oil prices might be having some effect on that, in Brazil, Russia and China. According to analysis by Bank of America Merrill Lynch Global Research, one-fifth of the large-cabin business jet fleet worldwide may have been funded by the oil industry, with approximately half of the in-service fleet based outside the U.S. “In my view, utilization of big-cabin jets is just going to come down,” noted industry analyst Brian Foley, president of Brian Foley Associates, “particularly internationally, because that’s where all the activity was–in emerging markets going after these natural resources.”

That said, FBO operators in Brazil–home to the world’s second largest fleet of business aircraft–saw last summer’s hosting of the world’s largest sporting event as an opportunity to attract new customers. “The last year was atypical, thanks to FIFA World Cup,” said Cynthia de Oliveira, managing director of operations for Lider Aviação, the country’s largest business aviation services provider. “We noticed in general a decrease of 10 percent on domestic flights and an increase of 17 percent on international flights.”

Overall during the tournament, 2,839 aircraft from domestic locations were granted 21,537 slots; and 635 foreign aircraft were granted 1,518 slots, a tally that is not likely to be exceeded until next year’s Summer Olympic Games. Yet infrastructure–and other–challenges remain. “Look at Brazil and its problems right now. [They are] oil-related,” Foley told AIN. “As such I would expect FBOs in that country to be feeling the effects already, and it will certainly continue this year.”

By contrast, Foley expects traffic at Mexican FBOs to climb, as a result of their proximity to the U.S. “Even though Mexico has a strong oil component, it’s also a fact that the U.S. is Mexico’s strongest trading partner and as such it will be drawing on the coat tails of the U.S. and have a pretty good go at it this year.”

Traffic in Europe

In Europe, the industry has certainly been hampered by geopolitics. While Russia had been a growth area, business aviation traffic between it and Europe is down by 8 percent over the past year, according to statistics provided by Eurocontrol. That decline is attributed in part to the disagreements over the handling of the crisis in Ukraine. “The ones that will feel it the most in the business aviation world will be the charter operators that used to have a nice healthy business going back and forth between someplace in Europe and Russia and the FBOs,” Foley said. “Those were pretty long trips in pretty big airplanes that needed a lot of services.” Unlike at North American FBOs, at most international FBOs profits are tied not to fuel sales but to a la carte aircraft services, and a declining volume of aircraft handled takes a toll on the location’s bottom line.

Several factors are causing fluctuations in traffic levels at Italian airports, according to Carlo Panerai, president of Florence-based FBO and charter company Delta Aerotaxi and founder of the ItalyFBO group. “We have seen an 18- to 20-percent reduction in the number of Russian aircraft, but at the same time traffic from the U.S. is surging back,” he told AIN. He indicated that intra-European traffic levels have remained about the same overall.  

European business aviation traffic declined by half a percentage point over the past year, according to Eurocontrol, despite a fall-off of nearly 40 percent in 2014 in Ukraine, as operators give the nation a wide berth after the downing of a jetliner last summer. Among Europe’s top 50 business aviation airports, 26 saw departures decline year-over-year and 24 saw gains, according to data compiled by industry information provider WingX Advance. Indeed, even in a sample size as small as the top five airports, Le Bourget and London Luton saw slight gains in traffic, while Geneva and Moscow Vnukovo saw declines. Nice Cote d’Azur remained virtually static last year.

The Picture for China and Africa

For the remainder of the world, the picture varies depending on the source, as trip-support providers such as Universal Weather & Aviation and UAS note different regional strengths. “Traffic in the Americas is steady; Europe is steady, but travel to Africa and the Middle East is slightly elevated,” noted UAS executive vice president Jay Husary, who said his company’s customers seem to be flying more this year. “The biggest growth, however, is clearly in Southeast Asia.” While Asia is starting from a much lower level of activity, according to WingX all 10 of the busiest business aviation destinations logged gains in their international traffic, led in volume by Hong Kong International, up 17.8 percent year-over-year along with a 26-percent rise in fuel uptake.

While Universal reported handling 10 percent more flights to China, political concerns there have curtailed domestic use of private aircraft over the past year. “We’re seeing a bit of a quieting down with China at the moment,” said Jonathan Howells, Universal’s senior vice president, international. “There are some campaigns from the Chinese government at the moment that make ownership of business aircraft a bit challenging for some owners, so they are tending not to fly or to fly commercially.” The country is still seeing growth in its FBO infrastructure, with Deer Jet, the country’s largest private aviation company, adding several locations over the past year.

 For Universal, it is Africa that is seeing strength. “We’ve seen at least 10 percent more traffic into the African continent,” Howells told AIN. “A lot of the oil companies were driving that; obviously… the price of oil will really have impacted some of that traffic and some of those locations, but Africa has been a positive growth area.” Howells added that proper ground handling on the continent remains a challenge.

“Customers based in the U.S. are often surprised by how little FBO infrastructure exists in developing countries,” said UAS’s Husary. “However, we keep seeing new, bigger and more beautiful FBOs being built around the globe, a trend that will continue.”

While no Middle Eastern FBOs received enough evaluations for consideration in this year’s survey, traffic to the region remained steady, with Israel’s Ben Gurion Airport seeing the most international departures (nearly 3,000, according to WingX). Dubai International Airport’s approximately 800 departures to Europe and North America last year represented a gain of 130 percent over 2013 numbers. “I don’t think there is any rapid growth going on,” said Howells of the region. “I don’t think there is any rapid decline there at the moment. Flat is the new growth, right?”

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2015 AIN FBO Survey: Europe, the Middle East, Asia and Africa (527K)

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