Gates And Partners Reviews Business Aviation In Europe
UK aviation law firm Gates and Partners, G&P, has seen
a positive start for the European business aviation market in 2011.
The London-based law firm is seeing a more robust market and notes
that sources of aviation finance are becoming more enthusiastic.
"(While) there is still a long way to go to achieve previous
activity, we have certainly seen an increase in business jet
transactions. Demand for the mid to heavy jets is still high, but
the lighter end of the market is also picking up pace," said Aoife
O'Sullivan (pictured), a partner at the firm.
She attributes this to the increasing openness of banks who are
returning to the table to finance deals. "Financiers remain quite
strict about the calibre of their buyers, but they are now eyeing
up deals that six months ago they would not have considered," says
O'Sullivan. "Terms may be stricter considering factors such as age
of aircraft, stability of purchaser's finances, origin of buyer,
etc, but there is general acceptance that the industry is
regaining value."
There is no typical buyer right now, O'Sullivan notes with
high-net worth individuals and corporations both approaching the
market. "The split of our case load is currently about 50/50 which
reflects a market in recovery mode. The stigma of corporates buying
jets for their executives is diminishing as the market realises
that jets are not luxury items, but business tools which stimulate
economic growth and increase business productivity. We
believe that less than 3% of business aviation activity is
leisure-led and our deal roster reflects this."
Corporates are renewing fleets, first time buyers are entering
the market while prices are still competitive and cash buyers from
the Middle East, Asia and Russia continue to boost their
assets. "The pre-owned market is doing well and we're seeing
certain patterns across Europe. Milestone are offering interesting
leasing options through Ireland, Germany remains big on leasing,
and the UK is beginning to pick up again. Buyers are going to where
the best deal is and are making sensible offers which sellers are
accepting. Europe is definitely a more steady market than this time
last year," she concludes.
However Gates and Partners warns that looking to the year ahead,
growth may slow down owing to the lack of uniform treatment of tax
across the region. "January saw a change in regulations whereby
newly registered aircraft that import to Europe via the UK could
incur a 20% VAT charge. There is still a lack of clarity on
application and interpretation of the new UK VAT rules which is
slowing transaction progress." Other regions such as Denmark,
the Isle of Man and Malta are offering their own "solutions" to the
VAT problem which may see deals move to those regions in an effort
by sellers and buyers to achieve clarity on VAT application to
their transaction."
O'Sullivan believes this lack of uniformity will skew the
aviation figures across Europe and will drive business away from
the UK, a country that has traditionally been a significant player.
"New aircraft sales in the UK are gradually halting, which puts
business operators, charter brokers and aircraft brokers in an
invidious position. Not only are they dealing with the issue of
illegal charters, they have to now work with a playing field that
is far from level. Bearing in mind that, according to the EBAA the
total impact of Business Aviation in France, UK & Germany is
$18.4 billion, which represents 64% of the total gross value added
to the economies, the tax implications will have a much wider
effect on the economy as a whole,"
Gates and Partners is already in talks with industry leaders to
establish how the tax rule can be addressed and amended. "It's a
major issue for business aviation in the UK and further afield, and
it's not something we can ignore. Business jets are exactly that -
a tool for effective business, it's not about luxury, and this tax
regulation is stifling not just for the aviation business directly
but for the greater GDP figures within Europe," says O'Sullivan.
Gates and Partners will be attending EBACE later this month and
will be discussing this topic, amongst others, with the EBAA and
exhibitors at the show to stimulate interest in lobbying for a
change.