Aircraft Finance: Ireland’s Charm, Challenged

Since the establishment of Guinness Peat Aviation (GPA) in 1975, Ireland has become a leading jurisdiction for aircraft finance. Though GPA ceased operations due to economic pressures in the 1990s, leading lessors such as GECAS, SMBC, and AerCap have thrived from their HQ’s across Ireland.

Aer Lingus Nice Inaugural Flight
Aer Lingus A320 at Nice Airport. Photo: Aer Lingus

Today, Ireland’s competitive tax and regulatory framework has attracted over 50 aviation finance firms who manage over 60% of the world’s leased aircraft fleet and contribute to over €660m to the local economy. Ireland’s dominant position however is challenged from both within and abroad.

A growing sector

According to Boeing, over 40% of the global commercial aircraft fleet is leased rather than traditionally owned. This has attracted a significant number of new entrants to the market over the past 15 years (96 lessors in 2002 vs. 153 in 2018).

The availability of finance and sheer number of lessors is at least in part responsible for what GECAS CEO, Alec Burger, says, “could almost be the golden era of aviation growth“. This growth has been epitomized by the 17,000 aircraft destined to arrive in Ireland over the next 10 years. The sector is forecast to maintain growth; orders at the Paris Air Show in June should solidify these projections.

Avalon A321neo
Avolon A321neo Photo: Avolon

Irish charm

Core to Ireland’s attractiveness is it’s 12.5% corporate tax rate, 72+ double taxation treaties, and the country’s highly educated workforce. In 2016, University College Dublin (UCD) began offering Europe’s first master’s in aviation finance and is accompanied by other Irish universities, each proposing courses in aviation management, law, finance and accountancy.

Similarly, Ireland’s ease of doing business (ranked 23rd globally), well established support services, EU membership, and party to the Cape Town Convention, have ensured that Ireland has become an alluring destination for the industry.

SMBC A320neo
SMBC A320neo Photo: SMBC Aviation Capital

Domestic and EU pressures

Some of the very same factors that have attracted the industry have, however, also become sources of contention and complication. Domestically, pundits note that Ireland’s low-tax ‘open’ economy is challenged by a narrow base and rising cost environment. This is particularly evident in the property and credit services sectors.

On the EU level, Ireland has been likened to a tax haven and previously scrutinized for its possible breach of illegal state-aid regulations in other economic sectors.

Boycott The Household Tax - Dublin
Boycott The Household Tax – Dublin. Photo: William Murphy / Flickr

A competitive landscape

Ireland, however, is not the only country seeking to attract the aviation finance sector. Countries such as Singapore, Malta, the Cayman Islands and, more recently, Hong Kong have been vying to attract the industry.

In the case of the latter, Hong Kong, the region is aiming to secure 18% of the global leased fleet, in part through a newly established tax regime. Also, fueling a geographic shift to the East is Asia’s significant projected growth and future fleet needs. Irish executives note however that Hong Kong’s efforts do not constitute a treat for Ireland’s industry rather, compliment Irish based companies.

Ireland has endeavored to provide a conducive business environment for the aircraft finance industry. In turn, aircraft finance availability has helped airlines and air-framers meet increasing demand and fuel growth.  The maintenance of such an environment purports the successful management of political, economic, and social pressures while controlling for international competition. 5,000 Irish jobs and the industry’s sustained expansion depends on it.