Thought leadership from our experts

Switzerland’s Aviation Industry

As a highly export-oriented country and famous tourist destination, host of the United Nations and headquarter to many multinational organisations and NGOs, Switzerland attaches a great importance to its connections around the world. Aviation is thus an important sector for Switzerland's economy, integrating airlines, business jet operators, airports, maintenance and completion centres but also highly professional and experienced financial institutions rendering worldwide services from their Swiss base. In summary, due to its geographical position in the heart of Europe, its strong and healthy economy, its sophisticated financial markets and high quality standards, and, last but not least, its most reliable and efficient legal system, Switzerland has been and still is, one of the leading jurisdictions for aviation worldwide.

Infrastructure

International air carriers operating to or from Switzerland do not face any limitations as airport concession holders are obliged to grant access to all aircraft flying on international routes. The five international airports of Switzerland are located nearby the cities of Zürich, Geneva, Basel, Berne and Lugano whereby the latter two airports have a reduced role compared to the other three.

The airport of Zürich, Switzerland's financial hub, is the largest international airport with the highest passenger volume, currently hosting 77 airlines serving 206 destinations in 68 countries. In 2018, the airport of Zürich was host to more than 31 million passengers – which represents a year-on-year increase in growth of 5.8%. Especially during the annual World Economic Forum held in Davos, the airport of Zürich is host to numerous personalities from the worlds of business and politics and an increased number of up to 1,000 movements during that certain week due to business jets and helicopters. Zürich Airport has been awarded the "Skytrax World Airport Award for passengers of 20-30 million 2017", the ACI-ASQ Award – 1st in Europe in the „25-40 million passengers" category and, most importantly, the renowned "World Travel Award 2018 as Europe's Leading Airport", which it now holds for the fifteenth consecutive time. Zürich Airport has recently introduced a state-of-the-art automatic passport control in order to increase its capacity but also the traveller's experience and was 2018 awarded No. 1 in "World Best Airport Security Processing" category.

Basel-Mulhouse Airport, Switzerland's third largest airport which is divided into a Swiss and a French sector, AMAC Aerospace, has experienced steady growth over the past years and the local Air Service Basel as well as Jet Aviation are competing to provide international VIP customers with high quality handling, maintenance and completion services for corporate aircraft. Last but not least, Switzerland's second largest airport, Geneva International Airport, also known as home of EBAA's annual European Business Aviation Convention & Exhibition (EBACE), regularly ranks within the top five of the most popular business aviation departure airports in Europe.

Carriers

In 1998 the internal Swiss market has been deregulated by the fall of the monopoly of Swissair and the Swiss Confederation ceased its support of the national airline. The crisis of the Swiss aviation sector ended with the fall of the Swissair group and the grounding of the airline in early 2002. The Swiss government provided financial aid and got involved in the creation of a new international airline – SWISS. After years of struggling, Switzerland's "national" carrier, being since 2007 entirely part of the Lufthansa Group, is doing well compared to its European competitors and its affiliates and lost its biggest competitor at Zürich Airport with the insolvency of Air Berlin. However, and like its 'legacy' competitors in Europe, SWISS is faced with a strong competition, especially by the Mid East carriers. Carriers from the gulf region benefit from better surrounding conditions, such as the geostrategic location of their home bases and the financial power of the states, which partly or comprehensively own them. They may also exploit mostly unrestricted operating hours and favourable fuel prices, which results in very competitive ticket prices.

SWISS, a wholly owned subsidiary of Lufthansa Group, is operating a fleet of currently 89 aircraft; 29 for long haul and 60 for medium- and short haul routes. The thirty orders of the all new Bombardier C-Series (CS100s and CS300s), regarded as the most innovative aircraft of its time, have replaced SWISS' Avro RJ100 Aircraft. So far eight CS100 and twenty CS300 have been delivered. Also, the Airbus A340 fleet continues to be replaced by Boeing 777-300ER aircraft, ten of which are already in operation. With regard to the Bombardier aircraft, SWISS predicts savings of at least 25% per seat, also due to a reduction in fuel consumption of 20%.This rejuvenation of the fleet is thus an important step towards more efficient aviation. Another national carrier is Helvetic Airways, which is held by Swiss nationals, currently operates 11 Embraer 190s, which will (partially) be replaced with 12 new Embraer E190-E2. Edelweiss Air (since 2008 a subsidiary of Lufthansa Group), is operating a fleet of currently sixteen aircraft, consisting of four Airbus A340 and two Airbus A330s for long-haul routes and ten Airbus A320s for short and medium haul routes.

Manufacturers

World known Swiss aircraft manufacturer Pilatus has been famous for its single turboprop engine-powered aircraft such as the PC-12. In 2013, Pilatus' first twin-engine business jet PC-24 was revealed to the public as the Super Versatile Jet, which has been developed entirely in Switzerland. According to the manufacturer, the aircraft is capable of operation from paved and unpaved runways as short as 2'930 feet (893m). These unique capabilities for a business jet give it access to more than 10,000 additional airports worldwide, which other business jets cannot use. During the 2014 European Business Aviation Convention & Exhibition (EBACE), Pilatus actually sold off 84 PC-24s, which covers its planned production volume. After its certification by the EASA and the FAA deliveries started in 2017 with one very recent delivery to the Swiss Air Force for use as executive transport for the Swiss Federal Council.

In 2016, the Swiss helicopter manufacturer Marenco (rebranded in 2018 to Kopter) tested its prototype of the first helicopter built in Switzerland. Launch customers include Brazil's Helisul Táxi Aéreo, clients in South Africa and renowned Swiss Air Zermatt, with which it collaborates closely in developing its SH09, so that it will meet the expectations not only regarding in and out of cabin transport flights but also regarding rescue missions. Kopter's SH09 third prototype (P3) just recently successfully completed initial flight tests in Switzerland.

Business Aviation

Business aviation is seen by many people outside the industry as a luxury. However, the advantages for business purposes are evident when it comes to scheduling a flight on short notice, the flexibility when trying to reach a remote airport and the discretion it offers to its client, allowing also for confidential conversations aboard. Over the last couple of years the demand in Switzerland for the charter of, and ownership in, business aircraft could not match the boom of the former years. Still, Swiss business aviation is of global importance and a significant pillar of its economy in order to meet the needs of business aviation, the Swiss Federal Council intends to transform the former military airport of Dübendorf in the suburb of Zürich into an additional civil airport and is looking for similar opportunities around Geneva. There are currently more than 3000 aircraft of all kind registered in the Swiss aircraft registry, many of them corporate and private jets. Switzerland is home base of numerous high-quality business and private jet operators, such as Jet Aviation, Comlux Aviation, ExecuJet (a subsidiary of Luxaviation, Luxemburg), Premium Jet, DC Aviation Switzerland AG and Cat Aviation – just to mention a few. However, contemplating the competitive environment and the density of regulation, we are observing a trend towards further consolidation.

Financing

The financing situation not only in Switzerland but also across the world has changed in the past decade. The deterioration of aircraft values over the last years has had significant impact on financiers worldwide. As a result it can be observed, that purely asset based aircraft financing has almost disappeared. Financiers do nowadays require additional securities in form of guarantees and other assets, because aircraft values have proven not to be sustainable and reliable collateral. As a further consequence, borrowers or lessees sometimes find themselves unable to pay back their lenders or lessors in case of margin calls due to the deterioration of the aircraft's value, leading to default scenarios and recoveries. However, even in these circumstances Swiss based financiers such as UBS, Credit Suisse, SG Equipment Finance, J.P. Morgan (Suisse) and others remain strong players and reliable partners, even if faced with new competitors abroad.

Legal Framework

The Swiss Federal Office of Civil Aviation (FOCA), as regulating authority, is responsible for the safety and the general aviation matters in Switzerland. The FOCA provides for a well proven, reliable and efficient civil aviation authority which was attested by the last ICAO audit report to provide for an appropriate organisation, well operating procedures and well qualified personnel to secure supervision of safety. With regards to aviation's legal aspect, even though Switzerland is not a member of the European Union, aviation legislation derives from two sources: on the one hand, Swiss national law and on the other hand, the EU legislation according to the bilateral treaty between the European Community and the Swiss Confederation on Air Transport. The latter provides for the formal adoption of the regulation which shall be binding for Switzerland. As a result, Swiss law offers significant advantages, not only from a corporate, contractual or aviation law perspective, but also regarding tax law. The administrative registration of aircraft (certificates of registration etc.) is effected in the Aircraft Register ("Luftfahrzeugregister"). Furthermore, Swiss law does not only recognise foreign mortgages (as Switzerland is a member state of the Geneva Convention on the Recognition of Rights in Aircraft) but also allows the registration and protection of ownership, mortgages, certain leases and other encumbrances in the Swiss Aircraft Record ("Luftfahrzeugbuch"). As a result a registered right can only be altered or deleted by amending the respective registration in the Aircraft Record. Further, the promoted self-help remedies allowed under common law jurisdictions have repeatedly proven not to be as reliable as advocated. Recent recovery cases revealed that enforcing rights privately in most cases leads rather to more liability than offering fast relief to creditors. In comparison, the well established and straight forward enforcement regime under the Swiss legal system covers not only the needs of aviation financiers but also addresses debtor's and operator's concerns, which results in a more efficient enforcement than in many other jurisdictions. With regard to tax, Switzerland, with an import VAT of only 7.7% as of 2018 (formerly 8%), has become a viable option in the centre of Europe.

Bottom Line

The well established aviation sector in Switzerland has been experiencing steady growth within the last years and passenger frequencies in the largest Swiss airports are rising. Being located in the centre of Europe and home to several well-known aircraft financiers and a stable political and legal environment, Switzerland provides for various advantages and a level playing field for many participants involved in the aviation industry.