For many, Ireland is considered the birthplace of aircraft leasing. It began in the 1970s with Guinness Peat Aviation (GPA) and the late Tony Ryan, Ireland’s first truly global Irish entrepreneur.Today, it’s one of the country’s greatest economic success stories and an important pillar of the Irish economy. The numbers speak for themselves.
Aircraft leasing – big numbers
PwC’s “Taking flight 2018: An economic & employment analysis of the aviation leasing industry in Ireland” report showed that aircraft leasing currently contributes €580 million to the Irish economy. It supports nearly 5,000 jobs, which leads to an extra €98 million annually in payroll tax for the exchequer.
Over 50 leasing companies are now based here – split between Dublin and Shannon. Between them they own and manage 60% of the world’s leased aircraft with more than 4,000 aircraft under Irish management. Irish-based lessors account for a staggering €110bn in aircraft assets.
But nothing in business is guaranteed.
In July, IBEC, through Financial Services Ireland, announced the establishment of a new representative body for the aircraft leasing industry – Aircraft Leasing Ireland (ALI). Its purpose is to ensure that the country retains its number one position globally in aircraft leasing.
An industry united
ALI is the first representative body specific to aircraft leasing.
It includes all the major Irish-based companies including – Aercap, Avolon, GECAS and SMBC Aviation Capital. Professional services firms such as KPMG and PwC along with law firms like McCann FitzGerald – that have developed specialisms in the sector – will also play an important role in the group. Key individuals in the industry such as former GPA chief Patrick Blaney, who now heads UCD’s aircraft leasing, finance and law programme, are also members.
Key focus areas
The new industry body has outlined a work programme which includes:
- Ensuring the sector has a coordinated voice, including when it engages with Government
- Expanding and updating of Ireland’s Double Taxation Treaty Network
- Maintenance of a competitive tax, legislative and regulatory environment in Ireland
- Development of new and existing education and skills initiatives
- Initiatives to attract and retain talent to the industry
- Advocating for better social infrastructure to support inward investment
- Competitive global flight connectivity between Ireland and emerging markets
- Recognition of associated industries, including Maintenance, Repair, and Overhaul (MRO) and aviation finance.
- To proactively respond in business and industry media where appropriate.
MRO – A jewel in the crown
ALI are also looking to develop the key industries associated with aircraft leasing. These include the MRO industry, which has been fundamental to the success of Ireland as a global leader in aviation.
Personnel from the MRO industry have been instrumental in developing Ireland’s dominant position in aviation leasing globally. ALI see this homegrown expertise as crucial in continuing to attract leasing companies, airlines, and technical service companies to Ireland.
Education is also high on the agenda for the new industry body. ALI will support new and existing educational programmes to help underpin the industry’s skills base. It will push for more education to produce graduates with the skills needed by leasing companies, and apprenticeships for the MRO sector.
Tax Treaties – A crucial cog in a big wheel
The depth of Ireland’s double tax treaty network – a system that enables firms to avoid or mitigate double taxation – plays a key role in Ireland’s aviation leasing success story. We currently have 74 existing tax treaties with countries around the globe, which help make us an attractive centre for aircraft leasing. The ALI wants to see the government extend this treaty network, establishing agreements with countries such as Argentina, Indonesia, and Japan, where demand for new aircraft is high.
In the PwC report, 58% of respondents in the industry cited this as the most important policy area contributing to the sector’s growth – making it another key area for ALI’s remit.
Some turbulence ahead?
Competition in the industry has certainly stiffened in recent years. Aviation finance focused regimes like Hong Kong, Abu Dhabi and Singapore are looking to attract business away from these shores.
The Asian market is expanding rapidly and is expected to have surpassed Europe by 2018 according to projected estimates.
ALI’s chairman, David Swan, an executive with SMBC Aviation Capital in Dublin, believes China’s national leadership has identified aircraft leasing as a strategically important industry, and is keen to develop the sector further in Hong Kong. Among the world’s top 12 lessors, four are Chinese-owned. As Mr. Swan points out, “We’re number one but we can’t be complacent.”
The future – in safe hands.
Despite highly competitive global market, the sector’s growth here is far from over with the industry expected to expand a further 22% in the four years to 2021.
The growth of the middle class in the Asia-Pacific region and the yearly increase in demand for air travel means the opportunities for Irish based lessors look set to continue.
The ALI will need to ensure that Ireland remains an attractive and efficient location from which to base their operations. Ireland will have to box clever if it is to maintain itself as a global hub for aircraft financing but with the ALI at the helm it’s future looks to be in safe hands.
Cafico International have a range of services related to the aircraft leasing sector, you can find out more here.