1. The Role of Business Aviation in the European Economy Philip Thomas Oxford Economics 13 March 2013

2. Business Aviation in the European Economy Perhaps the best place to start is near to where Brian left off – the PwC study of 2007. PwC used Economic Impact Analysis – using Supply and Use tables to trace out industry supply-chains – to estimate how much GDP and employment is linked to business aviation at the national level. Its main finding – that the sector directly employs 63,000 people in the EU. Including supply-chain linkages, brings the total to 157,000. They stopped short of quantifying the value to the direct passenger benefits. Did not look how business aviation airports benefit the local economy.

3. Business Aviation in the European Economy Based on discussions with users, PwC did identify the following key user benefits ■Flexibility and convenience ■Time savings ■Cost savings ■Deal facilitation ■Perceived safety advantages

4. Business Aviation in the European Economy Source: Business Jet Travelers’ Reader’s Choice Survey 2011 More recent surveys of business aviation passengers identify a similar set of preferences

5. Business Aviation in the European Economy Even through the economic crisis the business aviation network has continued to widen, reaching 88,000 airport pairs by 2011. In 2011, there were over 1,400 flights between Europe and India using business aviation. Over a quarter of on major operator’s revenues in 2011 were derived from multiple destination itineraries as opposed to one way or return trips. 80% of business aviation users are believed to be business executives.

6. Business Aviation in the European Economy The proportion of flights using regional airports ■70% of business aviation flights take off and land at airports handling fewer than 100 departures per day. Business Aviation is concentrated at regional airports Source: Eurocontrol, 2011

7. Business Aviation in the European Economy Business Aviation complements the scheduled network Source: Eurocontrol, 2011 ■96% - the proportion of city pairs served by business aviation in 2011 that had NO daily scheduled connection.

8. Business Aviation in the European Economy Source: Eurocontrol, 2011 Business Aviation complements the scheduled network ■66% - the proportion of business aviation flights in 2011 that served city pairs with NO daily scheduled connection.

9. Business Aviation in the European Economy Passenger surveys identify value of time as a key reason for using business aviation. The value that passengers place on time savings is frequently used in aviation studies to place a value of expanding passenger choice. We used regression analysis to estimate a value of time for the users of business aviation. Business aviation is often associated with high-value trips (“deal making”). Can we place a market-based valuation of an hour saved during such important trips? We were given access to a detailed dataset on business aviation flights. The dataset covered: ■3,400 flights ■110 routes ■All flights took place during 2011

10. Business Aviation in the European Economy We used a regression model to explain how a number of key factors determine the cost of business aviation flights. The explanatory variables included: ■the route, ■passenger numbers, ■distance flown, ■distance of delivery legs, ■the type of aircraft, ■flight time with passengers on board, All these factors might contribute to the overall cost of the flight. Our aim is to isolate the contribution made by passengers’ flight time. How much were users willing-to-pay to cut an hour off a business aviation flight? The model suggests €510/hour. This is over 8 times the upper valuation of €63/hour reported in Eurocontrol’s “Standard Inputs for Cost Benefit Analyses’.

11. Business Aviation in the European Economy This relative value of time captures how much users are willing-to-pay for the much greater flexibility offered by business aviation. We might expect this higher relative valuation to be reflected in the average price (yield) for business aviation and scheduled business flights. We estimated an “adjusted yield” for business aviation by dividing total revenue by total passenger kilometres. Using data from IATA, we did likewise for scheduled business flights. The adjusted yield was ■around €4 per passenger kilometre for business aviation ■43 cents per passenger kilometre for scheduled business flights The ratio of the two adjusted yields is around nine. (Similar to the ratio of value of time.) These estimates imply that whereas business aviation accounts for ■under 1% of business passenger kilometres flown. ■It’s market share of the overall aviation business market is close to 9%.

12. Business aviation in the local economy In the second part of our study we looked the impact of business aviation on local economies. In particular we considered - ■The role that business aviation plays in creating business “clusters” ■Investment in people and infrastructure

13. Examples of business aviation clusters ■At its main centres, business aviation can support a significant number of jobs. Studies at Paris and Farnborough show that business aviation directly employs 4,000 and 1,000 jobs respectively. (Source: Paris Chambers of Commerce, TAG Farnborough). ■Business aviation “purpose” is to enable clients to fly wherever and whenever they need to. To meet this need the sector spreads its ground operations across a large number airports. ■This geographical spread means that many regional airports benefit from the direct and indirect business that business aviation brings with it.

14. Business aviation in the local economy ■Airports with business aviation connections benefit local economies in a number of ways ■From local employment - the majority of employees live within a ten mile radius (TAG Farnborough)… ■and from additional investment at the airport. Examples include ●£100m at TAG Farnborough since 2002 ●€10-15 million by PrivatAir at Geneva-Cointrin over the past decade ●€70 million at Paris Le Bourget since 2004… ●…and a further €120million expected over the next decade.

15. Business aviation in the local economy ■Airshows showcase the locality and bring in significant business ■2010 Farnborough Airshow generated £17million for local economy ■Manufacturing companies also benefit from the continuing demand for new business aviation aircraft ■PwC estimated that the manufacture of business aviation aircraft generates €9 billion in 2007 ■The sector continues to place orders, e.g., NetJets recent order for 100 new jets ■Despite the recession, employment in the sector appears to be growing in the sector ■PwC estimates that business aviation operators directly employed 24,000 people in 2007 (with a further 42,000 directly employed in manufacturing) ■We canvassed 17 leading operators. All but 2 reported employment growth of between 50% to 100% over the past decade.