Isle of Man FBO Offers ETS Loophole

 - November 3, 2012, 2:10 AM

The owner of a new $4 million FBO due to open on the Isle of Man by the middle of this month is promising substantial savings for aircraft operators using it as a transit point in and out of the European Union (EU). Private Jet Company (PJC) claims it can provide savings of up to 60 percent from reduced exposure to the cost of the EU emissions trading scheme (see box). The British Crown Dependency is outside the EU so its operators can also avoid value-added tax (typically around 20 percent in Europe) on aircraft importation, as well as on fuel and services such as handling.

Management Option

In addition to taking advantage of the benefits of an offshore tech stop, operators can achieve further savings by temporarily assigning their aircraft to the management of the company, according to PJC. It will help operators to meet ETS requirements for monitoring and reporting emissions, while allowing them to avoid having to set up their own carbon trading accounts. Furthermore, the arrangement provides an uncomplicated way of eliminating the need to reclaim VAT that need not have been paid. Additional savings are promised from the discounts that PJC has negotiated with suppliers around Europe.

PJC’s aircraft management division has been operating under Part 91 private rules for the past five years and is now preparing to undergo safety audits. Its managed fleet includes a Cessna Citation Sovereign, a pair of Citation XLSs, a CJ2, a CJ3 and a Bombardier Challenger 300.

According to PJC, operators can appoint the company as their “European operator” for an indefinite period simply by sending a letter to this effect and signing a contract. The company will accept only operators flying under Part 91 private rules with aircraft that comply with European certification requirements. Operators will also need to seek approval from their insurance company and any aircraft finance provider.

Flight operations manager John Bean told AIN that PJC will guard against possible illegal charter operations by requiring documentation to establish “the legal basis of the operation,” including details of who is on board and on what basis they are flying. It remains to be seen whether European Union authorities will accept the legality of operators designating PJC as their “European operator” on the basis proposed.

“Some U.S. companies in particular find it hard and expensive to operate in Europe, and we can help them a lot,” said Bean. He claimed that the support provided by PJC as “European operator” for non-European private operators will prove to be less expensive than using traditional flight planning and support services.

“We manage all aspects of your flight while you retain full control of your aircraft operation,” said PJC owner Tony Corlett. “We can either have one of our crews fly your aircraft or you have your crew at the controls. In essence, we serve as a flight operations department and manage the aircraft in the owner’s best interests with strict privacy and confidentiality.”

The new FBO itself is located to the north side of the main Isle of Man runway, which has ILS at both ends and was extended in recent years to 6,000 feet with a runway-end safety area on reclaimed land. The old control tower was demolished this year after a new modern tower came on line.

For 12 months starting on November 1, PJC is discounting handling charges by 25 percent for all prior bookings for tech stops. The company claims that its handling rates are already at least 10 percent lower than prices at rival Irish airport Shannon. The company, which has been providing ground handling for some time at the Isle of Man Airport, is also offering what it calls “aggressive fuel pricing.”

The FBO, which is close to the main terminal, is open from 6:30 a.m. to 8:45 p.m. and has 20,000 sq ft of hangar space plus office space available to lease. The FBO consists of a 2,100-sq-ft lower level with passenger lounge, reception area, flight-planning room and rest area for pilots, boardroom, security area, departure area and offices, as well as an upper level with dedicated office space for customers.

Various services are available to operators, including concierge, cabin cleaning, catering, power equipment, aircraft detailing, water and lavatory, flight planning and refreshments. Future plans include adding a maintenance operation in the hangar. “Private Jet also has the capability to assist worldwide aircraft registrations and importations and to provide support to aircraft manufacturers by managing [deliveries of] new aircraft,” said Corlett.


The Offshore Route to ETS Cost Savings

Private Jet Company (PJC) provided an example of how stopping in the Isle of Man would lead to savings in ETS charges. If, for example, an operator planned a flight from Houston Hobby Airport to London Luton in its Bombardier Global Express, the one-way estimated fuel burn would be 23,112 kg (50,961 pounds). The estimated carbon dioxide (CO2) emissions would be 72,803 kg (160,530 pounds) and the calculated ETS charge would be €1,456 (at €20 per metric ton)–approximately $1,870.

A second example the company gave is a Dassault Falcon 7X flying from Van Nuys, Calif., to Luton. It would burn an estimated 20,158 kg (44,448 pounds) of fuel, produce 63,498 kg of CO2, and the estimated ETS charge would be €1,269 or $1,650.

In both cases, claimed PJC owner Tony Corlett, “had these aircraft landed at Private Jet [they] would have saved more than two-thirds of the purported ETS invoice. In simpler terms, these U.S. aircraft would have been charged ETS carbon taxes only for the remaining 203 nautical miles needed to fly from the Isle of Man to Luton.”

Of course, similar savings would apply for aircraft arriving from the Middle East, although it may be less attractive as they would first have to cross a larger area of EU airspace to reach the Isle of Man. However, Corlett argued that the handling costs could tip the balance in favor of the island. Taking the above examples, he said, the average handling costs for each aircraft, respectively, would have been approximately $1,870, $1,425 and $3,470.


Whether stopping in the Isle of Man will lead to net savings will depend on the extra fuel and other costs versus ETS savings.
At current price levels for emissions allowances (€1.2 for a CER, €7.1 for a EUAA and €8.2 for a EUA) the ETS savings in the example of a Dassault Falcon 7X would be around €416 EUR or USD 532 (based on a mix of 15% CERs, 55% EUAAs and 50% EUAs). This is much lower than the USD 1,650 based on the assumption of €20 per metric ton of CO2.

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