BlueSky: Might the European market recover quicker than forecasters think?
As NBAA closes, Patrick Margetson-Rushmore, CEO of London Executive Aviation, wonders if industry forecasters are correct in their market projections for Europe and the US
Although last week’s NBAA show in Las Vegas had a couple of notable aircraft launches, in the Falcon 5X and Lineage 1000E, there was little exciting order news to indicate a thriving industry. Honeywell’s Business Aviation Outlook, released just prior to the show, predicts modest annual growth of 4-5% in aircraft deliveries until 2023, with demand in regions including North America and the BRICs making up for weakness in Europe, the Middle East and Africa. However, based on some recent economic developments, I wonder if Honeywell is too bleak about prospects for Europe and, perhaps, too bullish about recovery in the United States.
The malaise that has afflicted the Eurozone since the credit crunch has seen some pundits talk of a lost decade, with growth unlikely to return to the region for years. The financial crises in the ‘PIGS’ economies, backsliding on reforms in France and stereotypically bureaucratic behaviour in EU institutions have certainly painted a gloomy outlook for our industry. However, while no politician is these days brave enough to talk of ‘green shoots of recovery’, we have recently witnessed a few events that make greater optimism seem justified for European operators as they fine-tune their 2014 business plans.
Firstly, despite all the factors mentioned above, no EU economy has gone to the wall and, at this point, such a disaster seems highly unlikely. While the situation in Greece, for example, remains extremely serious, Europe’s leaders seem to have developed sufficient consensus on policy to enable effective containment action to be taken.
Secondly, advocates for ‘austerity medicine’ now have a welcome case study in Spain, which has just emerged from recession, according to the country’s central bank, thanks to a strong export-led recovery. Similarly, the UK is now seeing unemployment and economic output figures improving at a faster pace than expected, according to the Bank of England last week.
Thirdly, the ability for Europe to coalesce around economic policy – vital to hold the single currency together – was given a major boost recently with the resounding election victory of German Chancellor Angela Merkel. ‘Mutti’, as German voters call her, has overseen economic resilience at home and is consequently in a stronger position now to influence the direction of the Eurozone. While not everyone will be equally thrilled by this prospect, such certainty on policy is sure to benefit business confidence across the region.
I am no economist, but I believe positive developments are now coming thicker and faster in Europe than Honeywell’s forecast suggests. This is no criticism of Honeywell, which goes to great lengths to sample opinion across the industry, but instead reflects the rapid pace with which the economic outlook can change, particularly when national growth statistics are subject to revision.
Conversely, I do wonder if the growth outlook for North America remains quite as rosy now as when survey respondents were interviewed. The US, thankfully, remains a dependable engine room for our industry’s growth and will do so for decades. However, the economic shock of the recent federal government shutdown, and the short-term nature of the political fix agreed to restore the government’s borrowing authority, can do little good for confidence and, therefore, business aviation. For example, Honeywell talks of the mid-size aircraft segment looking stronger now than in recent years, but I wonder how sustainable that situation can remain if business owners no longer trust their own forecasts.
We should all, therefore, keep a close eye on the pace of growth in Europe while firmly hoping a more lasting funding solution is agreed in Washington.
Published in: BlueSky 29 October 2013
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