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Tuesday, August 1, 2006

At the Crossroads

Giovanni de Briganti

Are increasing security measures good news or bad news for high-end operators in Europe?

Security measures being implemented across Europe to prevent terrorist attacks could clip the wings of European corporate helicopter operations just as they begin to take off on the back of lower costs and increasing acceptance, industry executives say.

Recent restrictions on helicopter operations--such as mandatory metal-detector checks before boarding, ID and security checks on customers, longer lead times for flight-plan filings, restrictions on landings outside licensed heli-pads--add new layers of red tape, translate into delays and make helicopter operations less attractive, according to the executives.

The timing of this administrative crackdown is especially galling as corporate and VIP helicopters are just beginning to attract new customers, who more often see them as a cost-effective way of managing top executives' time.

"Nowadays, there is less of a problem in attracting European customers than in the past," said Dominique Orbec, vice president of marketing at Eurocopter. "But there is a real danger that new, restrictive procedures will eat into the advantages that helicopters offer over competing modes of transport."

Others take the opposite tack, however, and say that the growing threat of possible terrorist attack on airports and other crowded transport nodes will highlight the helicopter's relative immunity. One executive pointed to Brazil, where the use of corporate helicopters for commuting and for relatively short journeys has grown in step with the growth in kidnappings and robberies targeting cars and their occupants.

"A helicopter is not only faster, it is also safer, and protecting top executives from both terrorists and criminals makes their cost far less of a factor," said a marketer from another helicopter, although he conceded that European crime levels are still far lower than Brazil's.

In theory, corporate helicopters seem well suited to Europe, where the great majority of airlines and railways run "hub-and-spoke" networks that make for longer journey times, and where road transport is subject to greater speed checks and relatively high risk of accidents. And it is no coincidence that the countries where corporate helicopters have the best prospects for growth--the United Kingdom, France, Germany and Italy--are also the ones whose size roughly matches the helicopter's optimum range of about 215 nm (400 km).

Yet corporate helicopters have not caught on in any meaningful way, as they remain hobbled by tight restrictions on off-airport landings and by the "fat cat" public image that long constrained the use of business jets. Corporations, especially publicly traded ones, do not want to expose themselves to public criticism of this kind, so they still avoid buying or operating helicopters for their management.

This is why so few European corporations have their own helicopter operations, and instead prefer to charter wet aircraft from outside firms even when it would make economic sense to own them outright. "Not one of the top 40 companies on the Paris stock exchange index owns a helicopter, even though they are among the top users of corporate helicopters in the country," notes an industry executive.

This is one reason for the relatively small size of European corporate helicopter fleets. There are anywhere from 300 to 400 corporate helicopters in the 25 countries belonging to the European Union, compared to well over 1,200 in the United States, which has a smaller economy. Whereas corporate buyers account for less than 20 percent of civil sales in Europe, they account for almost 30 percent in the United States, according to Eurocopter estimates.

Another estimate is that, in Europe, about 300 single-engine and light twin turbines can be described as having a "corporate" role, but fewer than 100 are actually owned and operated by corporations. Another 100 belong to individuals who occasionally charter them out, and a final 100 belong to commercial operators who make them available, on request, for corporate missions.

More accurate figures are hard to find, as many European helicopters are owned and registered to individuals or small companies that charter them out to amortize their cost of ownership. Consequently, many helicopters counted as owned by private owners are, in fact, used for corporate missions. Estimating corporate helicopter fleets is further complicated by the fact that many helicopters owned by commercial operators are available both for aerial work and for corporate/VIP charter.

Despite looming security restrictions, there are some reasons for optimism about the future of corporate helicopters in Europe. One growth area is the "last leg," where users of business jets increasingly use helicopters instead of cars to complete their journeys from airport to city center. This type of air-taxi operation has long been available in some European centers, such as Nice/Monaco and Nice/Cannes on the French Riviera, and could proliferate in large urban centers as long as there are city helipads where helicopters can pick up and drop off their customers.

Constant pressure from real estate promoters, however, and stubborn hostility from residents who complain against noise nuisances, limit the number of helipads in Europe, and thus the spread of corporate services. Paris and London, for example, each have a single heliport, compared to four in New York City and about 20 in the Greater Tokyo area. In Sao Paulo, Brazil's economic capital, countless buildings have rooftop helipads.

European flight procedures also limit the spread of corporate helicopters. In most of Europe, there are no special flight control procedures for helicopters, which have to follow the same flight paths and approaches as fixed-wing aircraft unless they can wheedle preferential treatment from air traffic controllers. This obviously restricts their flexibility and usefulness.

And, even before the latest round of anti-terrorist security procedures, helicopters were already subjected to tight controls. In France, for example, depending on the size of the town, helicopters had to obtain permission from the land owner, from the local mayor and/or from the police, if not the local government authority, before landing outside of a designated landing pad. Furthermore, firefighting equipment and personnel generally have to be present, all of which turns an unscheduled stop into a time-consuming administrative nightmare that holds little attraction for a businessman in a hurry.

Unregulated landings are likely to become even more difficult in the future, so corporate helicopters will depend even more on fast, efficient access to infrastructure for future growth. Since European airports are increasingly approaching saturation point, one solution is to further develop specialized business aviation centers, such as London's Luton or Le Bourget airport in Paris, from where helicopters can operate either for the "last leg" into the city or on "short leg" flights direct to final destination.

"The problem is how to seamlessly integrate corporate helicopters into existing air traffic flows, while developing specific ground infrastructures to capitalize on their unique capabilities," said an industry executive. However, he noted wistfully, there is as yet no real evidence of government or public support for the investments this would require.

Nonetheless, there are some encouraging signs. One is the recent announcement of a new trade show, Heli Jet Show Cannes, whose inaugural event is scheduled for September in Cannes.

"The increasing need of the major heads of industry to make their travels more cost-effective in an international context where time is of the essence has incited us to organize this private trade show," explained Alain Inard, president of NLC Events and the new show's general manager.

Another is the March launch of the first European helicopter time-share program, which will offer subscribers an annual block of 25-50 flight hours at a fixed price valid throughout Europe that, the company claims, will allow savings of up to 50 percent. This service is offered by Paris-based Aviaxess, which already markets time-share solutions for helicopters and business jets. It promises access to a fleet of 35 helicopters based in the main European capitals.

Whether or not these initiatives prove successful, the mere fact that they have been announced shows that there is optimism in the industry about the long-term potential for corporate helicopters in Europe.

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