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Sun, May 15, 2011

Foley: Europeans Can Expect Moderated Growth For GA In Current Climate

High Fuel Prices, Carbon Taxes, User Fees All Part Of The Equation

While conditions in other areas of the world slowly become more favorable for a general aviation rebound, the European environment keeps getting more complex.

Against the backdrop of the EBACE conference getting set to kick off Tuesday, industry consultant and investor Brian Foley (pictured) notes that the combined effects of Europe's high fuel prices, user fees, carbon taxes, airspace issues, new regulations, and airport slot restrictions are themselves enough to limit general aviation growth. "And when you factor in sustained economic weakness, a near-term robust market outlook just isn't a reasonable expectation."

But Foley is not totally pessimistic. "Europe will remain a significant market and account for roughly 20% of all worldwide deliveries over the next decade, down slightly from the historical average of 25%. And we see an interesting opportunity in that a disproportionate share of deliveries will go to new customers in Eastern Europe, while Western Europe becomes more of a replacement market for aging aircraft."

European economic factors will gradually force a downward shift in cabin-size mix towards small and midsize jets. "Today, 38% of Europe's business jet population is large cabin," Foley says. "Over time, that should normalize to the worldwide average of 33%. Buying behavior will continue to change as operators embrace the benefits of smaller aircraft, from fuel savings to lower user fees and other taxes. Carbon footprint is important, too. This will encourage Europeans to be even more practical. They'll buy the business tool they need as opposed to the more capable jet they might want, and be content to make that extra fuel stop once or twice a year if it means saving money."

FMI: www.brifo.com

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