Press Release

Issued by CEPA (Central Europe Private Aviation).

December 13, 2011

Marking the second anniversary of Central Europe Private Aviation Association (CEPA) at the recent CEPA Expo, founder Dagmar Grossmann said the Group had made a very encouraging start. "Our goal since inception has been all about connecting the East and West - younger brother meets older brother – because this is key to our success and integration into one sky." There is a strong emerging market here, echoed Dr Nikolaus Seiwald, Commercial Counsellor of Austria in the Czech Republic, who formally opened the first annual CEPA Expo. Private aviation is important too, because wealthy people want to expand their businesses here and business jets are valuable business tools.

Expanding horizons was the overriding theme of the conference, attended by some 120 delegates from East and West. On trend was guest speaker Radek Spicar, VP of the Czech Industry Association, whose own company Skoda (now owned by Volkswagen) has opened plants in India, China, Russia, Ukraine, and Kazakhstan. "We have had to learn global thinking at Skoda," he said. We are keeping competitive by going overseas, which has also shielded us from the Eurozone crisis. He highlighted too, that despite 50 years of communist rule, there is an excellent quality of staff in this region. There is good tertiary education, good universities, good engineers and technicians.

CEPA Expo also focused on education and the need for collaboration. Educating decision makers about the value of our industry is vitally important, said the European Business Aviation Association's new Chief Executive Fabio Gamba, who highlighted EBAA members will show a 3.5 % growth this year, driven by the benefits of point to point aviation. "This region suffers from the same misconception as we do and is under pressure from the same political monsters," he said, with the imposition of new regulations and hefty taxes. There are many challenges to overcome –including ETS, slot allocation rules, and access to European airports, he advised.

No longer a destination

The CEE region is no longer just a 'destination' for corporate clients flying in but a destination in its own right, said Air Partner plc Director Private Jets David Macdonald. It is well placed right in the middle to serve East and West and there are considerable opportunities for operators in the region to grow their fleets, he opined. CEPA Expo heard that the region already has a good supply of base operators. Air Partner was participating on the Western panel with Martin Lener, CEO of established Austrian operator Tyrolean Jets and Jonathan Sumner of new 'seat only' business jet company Fly Victor. While Air Partner talked up the importance of client care and having that personal touch, Sumner talked up creativity in charter channels and using the power of the internet to drive business jet travel. Victor, which now has nearly 600 'members,' launches a German website next month. "There will always be a segment that wants the full telephone service, but considering the younger demographic in Eastern Europe, online booking, coupled with the opportunity to buy on a per seat basis has huge growth opportunities in the region," said Sumner.

The CEPA conference explored many pressing challenges in the region – illegal charter is a concern, the perception of corruption and the importance of instilling proper codes of conduct as there is no law enforcement for foreign investors.

There is a good supply of business jets in the region, delegates heard, but the majority of companies are running micro operations with two aircraft and just seven or eight staff, which wouldn't be possible in Western Europe.

How big is the market in terms of business jets

According to Ascend, part of the FlightGlobal Group, there are a total of 1,422 business jet and turboprop aircraft in the Central European Union, which includes Germany (685), Switzerland (300) and Austria 270. There are 58 aircraft in the Czech Republic, 42 in Poland, 25 in Slovenia, 19 in Slovakia and 15 in Hungary. The market is also dominated more by light jets and turboprops where operators have an average of three aircraft, according to Phil Davies, Director of Operations, who highlighted that Russia is a completely different market. "The light jet market is much more dynamic here," said Business Development Director Brendan Lodge from JetBrokers Europe. Russia's HNWIs favour wide-bodied, large cabin jets, however, Cessna Director Sales David C. Glassner stressed that Russians regularly charter light jets.

Lack of finance for buying jets, particularly for deals under $10 million (where most of the activity is here) is a significant issue. Katerina Barilov, head of EMEA structured finance at Hawker Beechcraft, said that there were opportunities to use US Export-Import Bank guarantees.

Werner Slavik, Head of Aircraft Finance at HYPO Luftfahrzeuge Leasing, said that buyers need to allow more time to get finance than in the past. Some lenders are also preoccupied with managing existing portfolios. Dr Daniel Luetolf, CEO, Swiss Aviation Consultants, stressed the importance of monitoring aircraft and – in particular – aircraft records. He also said that the worst is not over. "Business jet values will be hammered in 2012," he predicted.

JetBrokers Europe Brendan Lodge agreed that values for some types may fall, but he also advised now is a good time to buy. "No one can predict the value of an aircraft in six months but aircraft are trading at a big discount to three years ago," he said.

Aircraft purchasing these days has become more and more complex. "A contract is only as good as the person that is going to sign it," said Oliver Stone, Managing Director of Colibri Aircraft, "but when an aircraft is registered in the Isle of Man, owned by a Trust in Bermuda, whose shares are owned by a holding company in Cayman Islands, who is selling and who are you buying for?" "No one, unless there's a deposit, and until then there's no deal," said DLA Piper Partner Alan Cunningham, who together with Clyde and Co Partner Mark Bisset gave some valuable insight into avoiding paying VAT on business jets.

Other topics debated at CEPA included fractional ownership. Delegates heard it would be hard to make it work in the region, because the market is so price conscious, everyone wants discounts. Dagmar Grossmann CEO of Grossmann Jet Service talked about the value of pilots, their salaries and the factors to keep loyalty among personnel drawing on her long career in the CEE region. She observed that retention management in HR needs to be considered in order to keep staff motivated and skilled.

Airports Vodochody Prague and Gdansk talked about their commitment to business aviation, the former disclosing it would most likely turn to a third party to help it build a dedicated FBO it was planning for 2014, dependent on completion of a successful environmental study. Bratislava, Slovakia based operators VRJet and Opera Jet talked about how they were both experimenting in new markets – Opera Jet basing one of their Cessna CJ3s in Russia and VRJet, basing one in Prague.

After a successful two-day event at the Prague City Congress Centre and a gala dinner at Corinthia Towers hosted by Grossmann Jet, delegates had some very positive things to say about CEPA Expo. David C. Glassner at Cessna complimented the organisation on attracting both 'quantity and quality' of delegates. Byron Severson, Regional Sales Director Hawker Beechcraft and lead sponsor said it was a very interesting conference with some excellent topics. "CEPA is going to be a very important organisation in the future," he concluded.

The event was moderated by Ji?í Matou?ek, Chairman of CEPA since January 2011, whose experience of over 17 years in the European aviation industry provided valuable insight to the panel discussions.

CEPA would like to thank its sponsors

Hawker Beechcraft, Grossmann Jet Service, Swiss Aviation Consulting, Cessna Aircraft Company, Hayward Aviation, ARINC Direct and Nexus Flight Operations Services.