The economic impact of business aviation in Europe*

PwC Economics Macro Consulting The economic impact of business aviation in Europe* European Business Aviation Association

Important notice This report has been prepared by ( PwC ) for European Business Aviation Association ("EBAA") under the terms of EBAA s engagement letter with PwC dated 29 May 2008 (the Engagement ). PwC neither accept any responsibility nor owe any duty of care to any person (except to EBAA under the relevant terms of the Engagement, including the provisions limiting PwC's liability) for the preparation of the report. Accordingly, regardless of the form of action, whether in contract, tort or otherwise, and to the extent permitted by applicable law, PwC neither accepts any liability or responsibility of any kind nor owes any duty of care for the consequences of any person (other than EBAA on the above basis) acting or refraining to act in reliance on the report or any part thereof or for any decisions made or not made which are based on such report or any part thereof. This report contains information obtained or derived from a variety of sources as indicated within the report. PwC has not sought to establish the reliability of those sources or verified the information so provided. Accordingly no representation or warranty of any kind (whether express or implied) is given by PwC to any person (except to EBAA under the relevant terms of the Engagement) as to the accuracy or completeness of the report. Moreover the report is not intended to form the basis of any investment decisions and does not absolve any third party from conducting its own due diligence in order to verify its contents. UK Copyright Notice 2008. All rights reserved. PricewaterhouseCoopers refers to PricewaterhouseCoopers LLP a limited liability partnership incorporated in England or, as the context requires, other member firms of PricewaterhouseCoopers International Limited, each of which is a separate legal entity. All images used in this report are owned and copyrights of NetJets, Dassault Aviation or Weller. Each image is used with its copyright owner s permission. This publication (and any extract from it) must not be copied, redistributed or placed on any website, without PricewaterhouseCoopers' prior written consent. 2

Contents 1. Key findings 4 2. Report background 6 3. The industry s economic impact across Europe 7 3.1. Introduction to economic impact analysis 7 3.2. Total economic impact of business aviation in Europe 7 3.3. Direct impact of business aviation in Europe 12 3.4. Indirect impact of business aviation in Europe 12 3.5. Induced impact of business aviation in Europe 12 4. The industry s impact on selected economies 14 4.1. European Union 14 4.2. Germany 15 4.3. UK 16 4.4. France 17 4.5. Italy 18 4.6. Austria 19 4.7. Switzerland 20 4.8. Portugal 21 5. Socio-economic benefits of business aviation 22 5.1. Flexibility and convenience 22 5.2. Time savings 22 5.3. Cost savings 23 5.4. Deal facilitation 23 5.5. Perceived safety advantages 24 6. Airport case studies 25 6.1. Milan Linate 26 6.2. Amsterdam Schiphol 27 6.3. London City 28 6.4. Zurich Kloten 29 6.5. Rotterdam Airport 30 6.6. Frankfurt area airports 31 6.7. Geneva Cointrin 32 6.8. Paris Le Bourget 33 6.9. Munich area airports 34 6.10. Madrid area airports 35 7. Methodology 36 7.1. General definitions 36 7.2. Data sources 37 7.3. Approach to quantifying business aviation s direct impact 37 7.4. Approach to quantifying business aviation s indirect and induced impact 42 8. Business aviation economic impact data tables 48 3

1. Key findings (PwC) carried out extensive research into the business aviation sector between May and November 2008, in order to estimate the impact the industry had in 2007 on the European economy 1. The study comprised desktop research and interviews with more than 40 representatives of the industry ranging from component manufacturers and aircraft assemblers to business aviation operators and airports. The analysis involved primary research interviews with companies accounting for about 45% of the economic activity of the business aviation sector in Europe, together with use of industry databases such as JetNet, Eurocontrol, and ProdCom, and data from 70 company reports of business aviation-related companies. The key findings of our analysis of the economic impact of business aviation in Europe are as follows: The business aviation sector contributed a total of 19.7bn in annual gross value added 2 (GVA) to the European economy in 2007, accounting for approximately 0.2% of the combined GDP of the European Union (EU), Norway and Switzerland. We were prudent in calculating the economic impact of the industry, subtracting profits from the output figures because we could not ascertain the share of the profits from European business aviation companies that would be distributed and spent within Europe. However, a large proportion of those profits would arguably contribute to the European economy, especially as all EU business aviation operators must be majority EU-owned. Had we counted profits, the industry s total impact on GVA would have been estimated at 24.8bn. The induced 3 impact, at 9.3bn, was the largest contributor to the economic impact of the sector, as shown in Figure 1 below. Figure 1. Total GVA impact of business aviation by type 4 Induced 9.3bn 48% Direct 5.6bn 28% Indirect 4.8bn 24% Considering business aviation s direct, indirect and induced impact, the industry accounted for more than 164k jobs across the continent and generated combined annual wages and salaries of around 5.7bn. The majority of the economic impacts associated with business aviation are generated in western Europe, with the GVA impact levels in different countries illustrated in Map 1 below. 1 For the purpose of this study, the European economy is defined as the 27 economies forming the European Union, plus Norway and Switzerland. 2 GVA is the difference between output and intermediate consumption for any given sector. It is the difference between the value of goods and services produced and the cost of primary materials and other inputs which are used up in production. 3 The total impact of the business aviation industry was divided into direct, indirect and induced impacts. The direct impact measures the direct benefits, the indirect impact measures the benefits occurring up the supply chain and the induced impact measures the benefits occurring as a result of the expenditure generated by employees related to the sector. 4 Economic impact estimates have been rounded for presentation in this and other figures and tables throughout the report. Due to this, the estimates may not always agree precisely between different tables and figures. 4

Map 1. Total GVA impact of business aviation in individual countries France, Germany and the UK are the countries most impacted by the business aviation industry. Total impact of business aviation in these three countries is 12.6bn, which represents 64% of the total industry GVA in Europe. Their share of employment and of wages and salaries are 75% and 73% respectively. These three countries are leaders in the sector because they combine extensive business aviation aircraft assembly and component manufacturing operations with high numbers of business aviation aircraft movements and registered fleets. Italy is the other country that hosts business aviation aircraft manufacturing facilities, but the scale of that industry is modest relative to France, Germany and the UK. Austria, Switzerland and Portugal are the other main European countries in terms of business aviation economic impact. Their positions as leaders in the industry are largely due to extensive operations and/or maintenance activity. In this report we quantify the impact of the business aviation sector on the European economy in terms of output, income and employment. We have also investigated user benefits associated with business aviation, such as easier access and reduced travel times, but we have not quantified the impact of those benefits in this report. 5

2. Report background The results presented in this report quantify the direct, indirect and induced impact on the European economy of the operations and maintenance of the Europe-based business aviation aircraft fleet, as well as the new aircraft and major component manufacturing related to business aviation that is carried out in Europe. European companies are present in all stages of the business aviation industry s value chain, from manufacturing to operations. It is a diverse industry that spans the continent. The European business aviation sector includes major aircraft manufacturers like Airbus and Dassault, component manufacturers such as Rolls Royce, operators like DC Aviation and NetJets, and maintenance companies such as RUAG. The industry comprised around 2,300 aircraft across just over 1,000 operators making around 750k flights in 2007. Business aviation is a dynamic industry in Europe. Some of the factors behind its growth are: Rising demand for instantly accessible point-to-point air links that eliminate the need for onward connections and reduce access times to and from airports Time savings available to users of business aviation by avoiding major commercial aviation airports The development of new business models such as fractional ownership 5 which lowers the user costs of business aviation The introduction of lighter jets which allows the industry to target a new customer segment The use of business aviation allows new business connections to be made quickly and efficiently, which accelerates the process of investment and the conduct of business relationships. The ability to do business quicker and farther afield from a company s home base is the main benefit of business aviation to European enterprises and ultimately European economies. In addition to the advantages for customers discussed above, the business aviation industry also contributes to the economic output of the European economies more directly in the process of generating benefits to its users. These impacts occur at all stages of the industry s value chain, from the manufacture of aircraft, to the provision of in-flight service and the overhaul of fleets. This report focuses on the European output, income and employment generated by business aviation, directly and in total, and touches briefly on the user benefits associated with the industry. The user benefits are not included in the headline impact figures presented in the report. It is intended that the analysis in this report will assist in the evaluation of the impact of business aviation across Europe. The remainder of this report is structured as follows: In section 3 we outline the industry s impact on the European economy as a whole In section 4 we discuss business aviation s impact on individual European economies, namely Germany, the UK, France, Italy, Austria and Switzerland, as well as the European Union as a whole A brief overview of the main benefits of business aviation for its users is provided in section 5 Section 6 comprises brief case studies of selected airports designed to provide an understanding of the local impacts of business aviation, as well as outline some of the socio-economic benefits of the industry in specific regions Finally, the methodology we employed and the detailed quantitative outputs are presented in sections 7 and 8, respectively 5 Fractional ownership represents a part-share in an aircraft that entitles the holder to use the aircraft for a designated amount of time over a year. 6

3. The industry s economic impact across Europe 3.1. Introduction to economic impact analysis Due to the complexity of the analysis behind the results presented in this report we outline below a summary of the approach used in evaluating business aviation s European economic impact. Section 7 presents the methodology we used. Our approach considered the impact of business aviation on three indicators of economic activity of 29 6 European countries. We estimated the GVA of the industry, being the monetary worth of the production generated by business aviation-related activities. We also considered the total wages and salaries linked to the industry s economic activity. Finally, we estimated the total number of jobs that are supported by the output and related to the wages and salaries identified. The impact on each of these three indicators is divided into types: direct, indirect and induced impacts. Such a division reflects the large network of interdependencies between industries in modern economies. This allows us to capture the full effect business aviation has across the economic value chain, namely: Direct impact corresponds to the contribution to the European economy created by business aviation aircraft-related manufacturing, operations and maintenance. This reflects the industry s visible presence in Europe Indirect impact on the European economy is created by the purchase of goods and services by firms directly involved in the business aviation industry. These are the benefits that accrue up-stream in the business aviation supply chain, such as when aircraft manufacturers buy metal and plastic for their product Induced impact is the additional contribution to the economy resulting from increased expenditure by the workforce employed directly and indirectly by the business aviation industry. The income earned by these employees is spent on various goods and services, leading to further economic activity and employment In addition to the above, our model allowed us to estimate, where applicable, the way in which the economic impact is distributed along different stages of the industry s value chain. In our analysis we have taken into consideration two major segments of the industry s value chain. These are manufacturing on the one hand and operations on the other, which includes maintenance, repair and overhaul (MRO). Our research was carried out in 2008 using 2007 data on the level of economic activity in the business aviation industry. All data presented in this study relate to 2007, and all money figures are at average 2007 prices. 3.2. Total economic impact of business aviation in Europe Business aviation makes a significant contribution to the European economy as a result of the number and scale of companies that are directly and indirectly linked to the manufacture, operation and maintenance of business aviation aircraft across Europe. As shown in Table 1 below, the business aviation sector contributes a total of around 19.7bn in GVA to the European economy 7. This level of output is associated with 164k jobs that in total generate wages and salaries of around 5.7bn. 6 The 27 member states of the EU, namely Austria, Belgium, Bulgaria, the Czech Republic, Denmark, Germany, Estonia, Ireland, Greece, Spain, France, Italy, Cyprus, Latvia, Lithuania, Luxembourg, Hungary, Malta, the Netherlands, Poland, Portugal, Romania, Slovenia, Slovakia, Finland, Sweden, and the UK, plus Norway and Switzerland. 7 Business aviation s total contribution to the European economy, as measured by GVA, is the combination of direct, indirect and induced contributions. 7

Table 1. Total economic impact of business aviation by value chain segment Indicator Aircraft manufacturing Operations and maintenance GVA ( bn) 9.3 10.4 19.7 Wages and salaries ( bn) 3.7 2.0 5.7 Employment (thousands) 109 55 164 Total All European economies are impacted by the business aviation sector, but a large proportion of the economic contribution is concentrated in the three largest economies, namely Germany, France and the UK. These three countries combined shares of the economic impact of business aviation on Europe are: 64% in terms of GVA 73% in terms of wages and salaries 75% in terms of employment, as shown in Figure 2 below. Figure 2. Total impact of business aviation on employment by country 30.3% 24.2% 20.9% 7.2% 4.4% 3.3% 1.8% 1.7% 1.0% 0.7% UK France Germany Italy Switzerland Austria Portugal Spain Netherlands Greece Their large combined share reflects the concentration of major manufacturing operations and the registered business aviation active fleet in Germany, France and the UK. This is shown in Figure 3 below. France and Germany have significant manufacturing operations, including aircraft assembly and finishing, as well as high value-adding component manufacturing, of components such as engines, avionics and interiors. The UK specialises in the manufacturing of airframes and avionic components. 8

Figure 3. Total economic impact of business aviation by country Also, these three countries together accounted for more than 40% of the European business aviation active fleet in 2007. The shares in 2007 of the European business aviation active fleet held by the top ten countries are shown in Figure 4 below. Figure 4. Share of European business aviation active fleet in 2007 16.8% 16.5% 9.4% 9.1% 8.4% 7.5% 6.1% 5.6% 2.8% 2.4% Germany UK Switzerland France Austria Portugal Italy Spain Denmark Belgium Source: JetNet 9

Around 85% of the business aviation active fleet was registered in a third of the European countries in 2007. The proportion of business aviation aircraft movements were similarly concentrated, with almost 90% of the traffic flowing between, or within, roughly a third of European countries. Germany, the UK and France again led the way, as shown in Figure 5 below. Figure 5. Share of European business aviation aircraft movements in 2007 21.1% 18.4% 14.6% 11.3% 6.5% 5.5% 3.7% 2.8% 2.8% 2.7% Germany UK France Spain Norway Netherlands Switzerland Italy Ireland Austria Source: Eurocontrol This is consistent with our finding that the two countries most impacted by the operations and maintenance segment of the European business aviation industry s value chain are the UK and Germany, as shown in Figure 6 below. In addition to having the biggest fleets and largest shares of aircraft movements, the two countries are also home to 20 of the top 50 most active airports in terms of business aviation departures in 2007. 10

Figure 6. Economic impact of the operations and maintenance of business aviation aircraft by country The impact on France of the operations and maintenance of business aviation aircraft may appear surprisingly low given the country s prominence in the fleet and aircraft movements league tables discussed above. One of the reasons for this is that aircraft maintenance activity in France is low relative to the operations intensity of the industry. The opposite is true for Switzerland, as its business aviation industry s maintenance specialisation places it in third place in terms of economic impact in Figure 6 above. The relationship between aircraft movements, maintenance and economic impact is explored in more detail in section 3.3 below. Figure 7 below shows the relative weights of the three types of impact. For GVA and employment, the impact directly generated by the business aviation industry is small compared to its follow-on effects on other industries across the European economy. For instance, for every person employed in the business aviation industry, more than one other job is created elsewhere in the economy. This extent of linkages amongst industries suggests that changes in the market conditions within business aviation have far-reaching implications across Europe. Figure 7. Total economic impact of business aviation by type GVA Wages and salaries Direct 5.6bn 28% Induced 9.3bn 48% Indirect 4.8bn 24% Induced 1.8bn 33% Indirect 0.8bn 15% Direct 3.0bn 52% Employment Direct 67k 41% Induced 65k 39% Indirect 33k 20% 11

3.3. Direct impact of business aviation in Europe As shown in Table 2 below, the direct economic impact of business aviation in Europe amounts to approximately 5.6bn of GVA, with over 60% of that being generated by operations and maintenance activity. The operations and maintenance segment directly employs around 24k workers and pays close to 1bn in wages and salaries. The impact on GVA of aircraft manufacturing is smaller and, as outlined below, is limited to those countries with substantial aircraft manufacturing sectors, namely France, Italy, Germany and the UK. Nevertheless, the manufacturing segment is an important employer, with some 42k European workers producing components for business aviation aircraft and assembling them. Table 2. Direct economic impact of business aviation by value chain segment Aircraft manufacturing Operations and maintenance Total GVA ( bn) 2.2 3.4 5.6 Wages and salaries ( bn) 2.0 1.0 3.0 Employment (thousands) 42 24 66 Indicator The locations of aircraft manufacturing facilities are fixed in the short term and the countries that traditionally specialise in that sector benefit the most. Business aviation operators and maintenance providers, on the other hand, are more mobile and so the impact from that segment of the industry s value chain is driven in part by the level of activity in individual countries. 3.4. Indirect impact of business aviation in Europe Table 3 below shows that the total impact generated indirectly by the business aviation sector on the European economy is around 4.8bn in terms of GVA. This is slightly below the industry s direct impact discussed above. The indirect impact is in the most part generated by operations and maintenance, with around 37% of the total, or 1.8bn of the GVA attributed to manufacturing. The business aviation sector indirectly accounts for around 33k jobs, of which 15k relates to operations and maintenance and 18k are in manufacturing. The salaries and wages paid out to these workers amount to approximately 0.8bn. Table 3. Indirect economic impact of business aviation by value chain segment Aircraft manufacturing Operations and maintenance Total GVA ( bn) 1.8 3.0 4.8 Wages and salaries ( bn) 0.4 0.4 0.8 Employment (thousands) 18 15 33 Indicator 3.5. Induced impact of business aviation in Europe As show in Table 4 below, the total induced impact of business aviation in Europe amounts to around 9.3bn of GVA, of which 5.3bn is created by the manufacturing sector and 4.0bn relates to operations and maintenance. Induced impact is generated by the spending of those employed directly and indirectly by the business aviation industry. The induced GVA generated by manufacturing is higher than that generated by operations and maintenance because the combined direct and indirect wages and salaries of operations and maintenance employees are lower than those of manufacturing. 12

Table 4. Induced economic impact of business aviation by value chain segment Aircraft manufacturing Operations and maintenance Total GVA ( bn) 5.3 4.0 9.3 Wages and salaries ( bn) 1.3 0.6 1.9 Employment (thousands) 48 17 65 Indicator The number of jobs induced by business aviation in Europe is around 65k, with the majority being generated by the manufacturing segment. The total wages and salaries bill is around 1.9bn. 13

4. The industry s impact on selected economies 4.1. European Union The vast majority of the economic impact generated by the business aviation industry in the EU occurs in the EU158 countries, as shown in Figure 8 below. These west European countries generate more than 97% of the GVA associated with business aviation. The EU129 economies are smaller and have less developed business aviation sectors. Figure 8. Total economic impact of business aviation in EU15 and EU12 GVA EU12 0.5bn 3% EU15 17.9bn 97% Wages and salaries EU12 0.05bn 1% EU15 5.3bn 99% Employment EU12 3k 2% EU15 154k 98% The below-5% average share of the EU12 economies is somewhat lower than their combined 7% share of the EU s economy in 2007. However, we understand that the industry has had a late start in eastern Europe relative to western Europe, especially in the business aviation aircraft manufacturing sector. This is unlikely to be reversed as the labourcost advantage that could have led to a large transfer of manufacturing capacity from west to east is eroding, as incomes in the EU12 countries are growing faster than in the EU15. Nonetheless, increasing business aviation usage in the region, driven by the need for point-to-point connections between business locations that are not always adequately served by commercial aviation, is likely to lead to an increase in the EU12 countries combined share of the industry s economic impact. Most of the economic impact of the EU industry occurs in the Euroland10 economies, with around 72% of the total business aviation impact on GVA being generated in those countries. The impact on wages and salaries and jobs is similarly prominent with 69% and 66% respectively occurring in Euroland economies. The large difference between the shares of impact accounted for by the EU15 and the Euroland groups reflect the significant contribution the UK makes to the business aviation sector. Below we discuss the impact of business aviation on seven European economies that are central to the business aviation industry. 8 Refers to the 15 EU member states between 1995 and 2004, namely Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, Sweden, UK 9 Refers to the 12 countries acceding to the EU since 2004, namely Bulgaria, Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Romania, Slovakia, Slovenia 10 Refers to the 15 countries that have adopted euro as their sole official currency, namely Austria, Belgium, Cyprus, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovenia, Spain 14

4.2. Germany In Germany, the business aviation sector is associated with over 34k jobs and generates around 1.2bn of wages and salaries. Overall, it creates approximately 3.3bn of GVA in Germany, which represents more than 0.1% of the country s GDP. Business aviation has a greater share of GDP than Germany s fishing industry, while business aviation is similar in size to the country s leather and footwear manufacturing sector, based on 2005 estimates11. As shown in Figure 9 below, a substantial proportion of the economic impact in Germany associated with business aviation is due to aircraft manufacturing, which accounted for around 58% of GVA, 74% of wages and salaries and around 75% of total employment associated with business aviation in Germany. Figure 9. Total economic impact of business aviation in Germany by value chain segment 1.5 Bubble size and value represent the total number of jobs related to business aviation Impact of aircraft manufacturing Wages and salaries ( bn) 1.0 26k Impact of operations and maintenance 0.5 9k 0.0 0.0 0.5 1.0 1.5 2.0 2.5 GVA ( bn) The significant level of business aviation-related economic impact in Germany is related to the following business aviation market factors: Germany is home to the largest fleet of business aviation aircraft in Europe, with almost 400 aircraft having a registered base in Germany, which represents almost 17% of the total European business aviation active fleet In terms of business aviation aircraft movements, nine German airports appear in the list of the top 50 busiest European airports in terms of business aviation traffic in 2007 Germany has the second-highest number of manufacturer-affiliated MRO bases in Europe Germany has significant business aviation aircraft final assembly and finishing activities, particularly in the executive airliner market, as well as major manufacturing facilities for components such as engines, avionics and interiors 11 The 2005 estimates of other industry s sizes referred to in this report are sourced from the EU KLEMS Project database 15

4.3. UK The business aviation industry generates over 4.2bn of GVA in the UK, representing slightly over 0.2% of the country s economy. The industry is larger than the UK s coal mining sector, while it is similar in size to the country s telecommunications equipment manufacturing industry, according to 2005 estimates. There are almost 50k UK jobs linked to the industry and together they generate approximately 1.5bn in wages and salaries. The aircraft manufacturing sector is the driver of the industry s impact in the UK, as shown in Figure 10 below. Hawker Beechcraft and Bombardier are the leading manufacturers of components for business aviation aircraft operating in the UK, making airframes for the business aviation industry globally. Figure 10. Total economic impact of business aviation in the UK by value chain segment 1.5 Bubble size and value represent the total number of jobs related to business aviation 38k Wages and salaries ( bn) 1.0 Impact of aircraft manufacturing Impact of operations and maintenance 0.5 12k 0.0 0.0 0.5 1.0 1.5 2.0 2.5 3.0 GVA ( bn) In addition to manufacturing, the UK is also a leading European market in terms of operations and maintenance. The following observations reflect the strength of the business aviation industry in the UK: The UK has the second-largest market in terms of the number of registered business aviation aircraft, with the locallyregistered business aviation active fleet numbering 385 aircraft The UK also has the highest number of large jet models in the EU, which increases the passenger capacity of the UK industry In terms of business aviation traffic, 11 UK airports appeared in the list of the top 50 busiest European airports in 2007 as measured by business aviation departures The UK has the highest number of manufacturer-affiliated MRO bases in Europe 16

4.4. France The business aviation sector is linked to just over 5bn of GVA in the French economy, accounting for almost 0.3% of the country s GDP. The business aviation industry s GVA is greater than that of France s office machinery sector and comparable in size to the GVA of its shipbuilding industry, as per 2005 estimates. The business aviation sector is responsible for almost 40k jobs and generates around 1.5bn in wages and salaries. Aircraft manufacturing accounts for between 80% and 90% of the economic impact of business aviation in France, depending on which indicator is considered. The relative weight of aircraft manufacturing vis-à-vis operations and maintenance in France is illustrated by Figure 11 below. It is largely due to the two main business aviation aircraft manufacturers Airbus and Dassault having significant manufacturing facilities in France, and other business aviation aircraft components, such as avionics, being produced in France. Figure 11. Total economic impact of business aviation in France by value chain segment 1.5 Bubble size and value represent the total number of jobs related to business aviation 35k Impact of aircraft manufacturing Wages and salaries ( bn) 1.0 0.5 Impact of operations and maintenance 4k 0.0 0 1 2 3 4 5 GVA ( bn) Key points regarding the economic impact of the French business aviation industry are: The very prominent role France plays in business aviation aircraft manufacturing, including both aircraft assembly and component production The French registered fleet of 211 aircraft represents 9% of the European total, which is only slightly more than half the size of the German and UK registered fleets The majority of French registered aircraft fall into the light or mid-size categories, which would require fewer on-board and maintenance staff than the larger jets more commonly found in the UK In terms of business aviation traffic, only six of France s airports appear in the list of the top 50 busiest European airports in 2007 as measured by business aviation departures France has far fewer manufacturer-affiliated MRO bases than the UK or Germany 17

4.5. Italy Business aviation generates around 0.9bn of GVA in Italy, which represents less than 0.1% of Italian GDP. It is linked to almost 12k jobs with a collective wages and salaries bill of approximately 0.5bn. As shown in Figure 12 below, around half of the GVA generated by the business aviation industry is due to activities associated with aircraft manufacturing. However, the manufacturing segment s shares of employment and wages and salaries are both above 80%, suggesting that Italian business aviation operations and maintenance are relatively less labour-intensive than aircraft manufacturing. Figure 12. The contribution of business aviation to employment, income and gross output in Italy 0.6 Bubble size and value represent the total number of jobs related to business aviation Impact of aircraft manufacturing 10k Wages and salaries ( bn) 0.4 0.2 Impact of operations and maintenance 2k 0.0 0.0 0.2 0.4 0.6 GVA ( bn) The key factors affecting the level of economic impact of the business aviation industry in Italy are: Italy is home to PiaggioAero, one of Europe s three business aviation aircraft assemblers It accounts for 142 registered business aviation aircraft, or 6% of the active fleet in Europe Italy has seven manufacturer-affiliated MRO companies, behind only Germany, the UK and Switzerland The Rome-Milan corridor is one of Europe s busiest, with the two airports being respectively the third- and fourthbusiest business aviation airports in Europe in 2005 18

4.6. Austria The business aviation industry generates more than 1.1bn of GVA in the Austrian economy, or around 0.4% of GDP. The Austrian business aviation industry is bigger than the country s recycling sector and similar in size to its tobacco industry, according to 2005 estimates. The sector is responsible for more than 5k Austrian jobs that together are paid over 0.2bn in wages and salaries. The economic impact of business aviation is driven primarily by the economic activities associated with the operations of aircraft. The split of the industry s impact on Austrian GVA, shown in Figure 13 below, is comparable to that for Europe as a whole in relation to the relative weights of direct, indirect and induced impact. This suggests that the Austrian business aviation industry is representative of the overall European sector, namely that it is an enthusiastic user of business aviation, with limited manufacturing output and an economy with sectors that are deeply integrated with each other. This last point stems from the high share of the total impact that is accounted for by the induced type of impact. Figure 13. Total economic impact of business aviation in Austria by type Direct 0.3bn 25% Induced 0.6bn 50% Indirect 0.3bn 25% Austria s position as one of the leading countries in Europe in terms of the level of economic impact of the business aviation industry is disproportionate to the relatively small size of its economy. Key factors influencing Austria s level of business aviation economic output are: Austria is home to 195 aircraft, or 8% of Europe s registered business aviation active fleet. This is the fifth-largest fleet of business aviation related aircraft on the continent A significant share of Austria s fleet is made up of large business aviation aircraft, increasing further its passenger capacity 19

4.7. Switzerland The total impact of business aviation on GVA in Switzerland is 1.1bn, which wholly relates to operations and maintenance. This represents less than 0.1% of Swiss GDP. More than 7k jobs are linked to the business aviation industry and their combined wages and salaries bill is around 0.3bn. Some of the drivers behind the industry s impact on the Swiss economy are: Switzerland has the third-largest fleet of registered business aviation aircraft in Europe, with its 220 aircraft representing over 9% of the European total It has the third-largest number of manufacturer-affiliated MRO companies in Europe In 2005, Geneva was the second-busiest European airport as measures by the absolute number of business aviation departures, while Zurich was in seventh place As shown in Figure 14 below, Switzerland has an unusually high proportion of GVA impact attributable to direct activity in the domestic industry. At 46%, the direct impact share is considerably higher than the 28% share for Europe as a whole and the 25% share for Austria, which is a comparable economy to Switzerland. This suggests that a relatively large proportion of business aviation activity is related to flights that originate outside the country by aircraft that are registered abroad. Those aircraft generate direct impact by flying to Switzerland through such activities as ground handling at airports and flight control, but these activities are not very labour-intensive. Additional activities that are more labour intensive such as maintenance are more likely to be done elsewhere. Therefore, the induced element as a share of total impact the effect of business aviation employees spending their wages and salaries in the domestic economy is consequently lower proportionately than in Europe as a whole. Figure 14. Total economic impact of business aviation in Switzerland by type Induced 0.3bn 24% Direct 0.5bn 46% Indirect 0.3bn 30% 20

4.8. Portugal The business aviation industry in Portugal is centred on aircraft operations and creates almost 1.1bn of GVA. The sector accounts for a wages and salaries bill of around 35mn directly, from almost 3k jobs. The economic impact of business aviation as measured by GVA represents around 0.7% of Portuguese GDP. This is the highest proportion in Europe and is considerably greater than the EU average. The business aviation sector accounts a greater share of Portuguese GDP than the country s gas supply and medical instrument manufacturing industries. The drivers behind the strong economic impact of the business aviation industry in Portugal include: Portugal is home to the sixth-largest business aviation fleet in Europe, totalling 174 aircraft in 2007, which represented almost 8% of the European total There are 16 business aviation operators based in Portugal NetJets, a leading business aviation operator, has its main European operations base in Lisbon and accounts for almost 90% of the Portuguese fleet The direct share of total economic impact, shown in Figure 15 below at 25%, is comparable to the European average. However, the 40% share accounted for by the indirect impact is relatively large. This may reflect the far-reaching impact that purchases from the NetJets operations base are having on its Portuguese suppliers. Figure 15. Total economic impact of business aviation in Portugal by type Induced 0.4 35% Direct 0.3 25% Indirect 0.4 40% 21

5. Socio-economic benefits of business aviation In addition to quantifying the impact of business aviation on the European economy in terms of output, income and employment, we investigated the benefits associated with using the industry s services. It became apparent that some users feel very strongly about the positive role of business aviation in their enterprise. George Davis, a prominent British entrepreneur, set the scene, as quoted in the European Business Air News magazine: I would go as far as saying that business aviation has played an immensely important part in my life and without it, it would have been impossible to have built George and now Per Una to the size they are today. As well as gathering anecdotal evidence of the industry s user benefits, the programme of questionnaires we prepared included three approaches to quantifying those benefits, namely: quantification of the total benefit by the user; quantification of benefit components by the user; and quantification by PwC of the implied willingness to pay for the benefits through conjoint analysis. Unfortunately, the terms of this study did not permit a sufficient number of user specific interviews to test the latter two methods listed above. The responses to those interviews conducted did not yield an estimate of the monetary value of the user benefits of business aviation, suggesting that the users would need to be guided through the quantification by using one of the latter two methods. A more comprehensive program of interviews would be needed to test the suitability of the other two methods and would need additional work in a future study. Below we present the highlights from our discussions with business aviation users and operators, including quotations from some of the interviewees. 5.1. Flexibility and convenience According to the respondents to our research program, one of the most significant benefits of business aviation is the flexibility it provides to users. For some of the larger multinational companies, a significant proportion of their staff business-related journeys involve travelling to multiple destinations as part of one trip, which are not always serviced by the commercial aviation sector. Often these business aviation users are able to structure complicated multi-destination trips which otherwise would not have been possible. Business aviation allows the users to fit their travel around their schedule and immediate needs, as opposed to having to fit their schedule around travel: Our utilisation [of business aviation] is also much more short notice. For instance, there are problems in Russia and someone needs to deal with it tomorrow. Business aviation also benefits enterprises at the other end of the scale from large multinationals. It helps businesses in relatively isolated areas to become more accessible to their clients and potential business partners, boosting the competitiveness of Europe s less well-connected regions: The advantage of business aviation is the speed at which it can move people point to point, and this really helps businesses in regions which are not particularly easy to get to, such as Wales. This means that I think the business aviation impact on regional economies in particular is large. 5.2. Time savings For many of the respondents, it is the reduced travelling time relative to commercial aviation that is the single most important benefit of business aviation. Many of the operators whom we interviewed felt that it was the relatively greater efficiency that makes business aviation attractive to its users. In some cases, the time savings can be substantial: 22

If you take the example of a short European flight, then it s quite possible that with business aviation you have arrived at your destination before you would have even gotten onto the plane had you taken a commercial flight. The relatively low levels of congestion at many business aviation airports and the less time it takes to complete the required security procedures contribute to making business aviation a mode of travel that many of its users believe saves them time. Some respondents also mentioned that they often find commercial aviation airports to be slow, disruptive and difficult. Business aviation was consistently cited as a more efficient means of travel whose benefits outweigh the costs. It was also argued that the reduced travel times allow business people to be more reactive to market developments: Business aviation is a tool which can increase efficiency of people who use it. The reduction in time taken to get anywhere means that business leaders are much more reactive. This is the real contribution to the economy. 5.3. Cost savings One of the respondents stated that her company experienced cost savings when using business aviation compared to commercial aviation. For them, the alternative to business aviation usage would be to fly their staff on commercial aviation business class. However, depending on the number of people travelling at a time, that option can be substantially more expensive than using business aviation. Commercial aviation can be a particularly expensive mode of travel for companies in eastern Europe, where, in recent years, relatively high rates of economic growth reflected a frenetic pace of business relationship formation, but commercial aviation links are not as abundant as in western Europe. A Bulgarian executive illustrated the rationale for business aviation for his company: The company is going through an expansion phase at the moment [and] the quality of the commercial [aviation] links is not always sufficient. For instance, there is no direct flight to Serbia and one is obliged to go via Vienna. 5.4. Deal facilitation Another important benefit of business aviation mentioned by respondents is the important role the industry plays in modern business deal-making. Many users operate in an environment where there is an expectation that noteworthy staff will travel to sign investment, merger or alliance deals personally rather than getting local representatives to do so. Business aviation allows business leaders to meet such expectations with relatively little disruption to their schedules. In many cases, the cost associated with using business aviation is insignificant to the deal generated: In the grand scheme of things, you have to look at what the business jet can do for you, so in light of a multi-million pound deal, it s a pretty small price. Our interviews revealed that, in the absence of business aviation, there would be a significant loss of opportunities and potential deals. In many cases, users are competing for business deals with businesses from around the world and having an early presence can ensure success: When you get to the stage when you re competing for a contract, and the contract will go with whomever walks through the door first, and you can arrive quickly, efficiently and give your client the time of day and the attention he needs which eventually gets you the million-dollar contract, how can you value that? 23

5.5. Perceived safety advantages Another benefit of business aviation raised by the respondents was that of safety. Several of the business people we interviewed commented that they feel safer travelling on private jet than they do on commercial aircraft. This became a major factor for some users as they considered the risk posed by terrorism to their staff. Some respondents also expressed unease about commercial aviation travel in some territories where they perceive local safety standards to be unsatisfactory: Then there s the fact that it presents a safer way to travel. It s much safer than using scheduled flights in say Russia or China. And from a security perspective, we know who s on board and who they are. 24

6. Airport case studies In this section we examine some of the links between the business aviation sector and the regional economies within Europe. In particular, we look at a selection of airports in different parts of Europe which operate business aviation services and examine the contribution business aviation makes to their operations and to the metropolitan areas served by these airports. The ten metropolitan areas selected for the case studies are listed in Table 5 below. The ranks shown in the table relate to each airport s position among the top 25 European airports by number of business departures12. Table 5. List of airport case studies Report section Metropolitan area Airport analysed Rank 6.1 Milan Milan Linate Airport 4 6.2 Amsterdam Amsterdam Airport Schiphol 20 6.3 London London City Airport 21 6.4 Zurich Zurich Kloten Airport 7 6.5 Rotterdam Rotterdam Airport 6.6 Frankfurt Frankfurt Airport 22 Egelsbach Airport 6.7 Geneva Geneva Cointrin Airport 2 6.8 Paris Paris Le Bourget Airport 1 6.9 Munich Munich Airport 10 Allgäu Airport Oberpfaffenhoffen Airport Augsburg Airport 6.10 Madrid Torrejón Airport 11 A new airport planned for the southwest of the Madrid region As part of each case study, we undertook desktop research into the role of business aviation within the wider aviation industry in these regions. This was supplemented by interviews with representatives of the relevant airports. The case studies presented over the following pages discuss basic economic impact metrics, such as employment and revenues generated by the airports. They also consider some wider socio-economic impacts attributed to the presence of business aviation in each region. 12 Eurocontrol 2005 data 25

6.1. Milan Linate Milan Linate Airport was built in the 1930s to replace an older airport that had reached its capacity. Today, it is one of the two main airports serving the Lombardy region. The other airport is Milan Malpensa. In 2007, business aviation accounted for 23% of all departures from Linate, as shown in Figure 16 below. Business aviation s share of activity has been increasing, with the share of departures rising from 21% in 2003. Figure 16. Business aviation share of Milan Linate departures 23% However, business aviation traffic is subject to seasonal fluctuations. Linate is at its busiest, in terms of business aviation activity, during the Formula 1 Italian Grand Prix at nearby Monza, at peak times in the fashion industry calendar, or when other important trade fairs are taking place, such as the Salone del Mobile. Despite the relatively low volumes of business aviation traffic, airport representatives confirmed that this segment is important to Linate. To reflect this, business aviation has a separate terminal operated by a sub-contractor, a dedicated maintenance hangar and a short runway. The only non-aviation commercial activity at the business aviation terminal is a small restaurant and bar. As a result, the business aviation business at Linate is not as labour-intensive as the commercial aviation side, which has a lot more airside content. Nonetheless, business aviation still accounts for 15% of aviation-related employment at the airport, with approximately 200 employees. The only other airport that offers business aviation facilities in the region is Milan Malpensa, which has the same owner as Linate. Malpensa has little business aviation activity due to its slot capacity constraints and limited business aviation infrastructure. Greater slot availability allows Linate to offer business aviation operators more flexibility, such as the use of the airport within a day s notice. Bergamo, another regional airport, is not currently seen as a major alternative airport for business aviation passengers. Given that Rome is the most popular business aviation destination from Linate, an improved high-speed rail link could become a credible alternative, at least on the domestic route. Although business aviation promotes high-end tourism in northern Italy, its primary purpose is the facilitation of business deals. Airport representatives stressed that intercontinental business aviation flights could be of particular benefit to Milanese businesses with operations in Asia. Expansion of the sector could also stand to benefit the local business aviation operating and maintenance companies. However, it was conceded that the local economy is not dependent on business aviation. Given that the Milan region is an economic area with global weight, business aviation cannot claim a pivotal role in its economic development. Currently, Linate does not have any investment plans for business aviation-specific infrastructure in the short term. Finally, Linate has adopted a variety of corporate responsibility policies. For instance, it has a new environmental management system and a noise monitoring system. Map 2. Top 10 European business aviation destinations from Milan Linate in 2007 The main destinations were Rome, London, Frankfurt, Paris, Brussels, Olbia, Vienna, Amsterdam and Bari At around 1%, business aviation generates a relatively small share of the airport s overall revenue. This equated to 0.8 million in 2007. Since business aviation planes carry fewer passengers and there is little commercial activity at the terminal, this segment is less profitable than commercial aviation. As a result, Linate is unlikely to increase business aviation activity at the cost of reducing capacity for commercial flights. The main sources used for this case study were the representatives of Milan Linate, Eurocontrol and the SEA Aeroporti Milano website. 26