Factors such as the ongoing trade dispute between the US and China will have a negative impact on the aviation sector. Brexit will also have an impact, says Carol
“Once the UK becomes a non-EU country, then all imports from and exports to the UK will be subject to lodging customs declarations regardless of whether a trade agreement is concluded or not. This means there will be a customs declaration requirement for the movement of aircraft and parts between the EU/Ireland and the UK”
With increased paperwork comes increased risk of mistakes, including in relation to aircraft being moved post-lease. “Twenty three per cent of €100 million would be quite a significant mistake to make” says Carol.
Aviation carbon tax is also on the radar. “There has been growing sentiment among some member states and international organisations that air travel is both lightly taxed in the context of the taxes applied on other transport sectors and in the context of concerns regarding the catastrophic impacts of climate change” says Carol
“While airlines are part of the ‘EU Emissions Trading System’, aviation fuel used for the purposes of intra-EU and international commercial transport is not subject to any excise duties. Therefore, in Ireland, aviation fuels are exempt from excise duties – or ‘mineral oil tax’ – when used for the purposes of international commercial flight” she says.
But Austria, France, Germany, Italy, Norway, Sweden, and the UK all presently operate aviation taxes, based on passenger departures, and momentum is gathering. Sweden’s air travel tax was introduced in April 2018. The Netherlands has legislated for an air travel tax to be introduced in January 2021. Belgium has made preparations for the possible introduction of an air travel tax in 2021.
“2019 saw the collapse of several airlines, most notably Thomas Cook and Wow Air, and in each of these cases, financial insolvency was cited as the main reason for their demise. The high cost of running such a business can mean that margins are tight and taking this into consideration, the introduction of an aviation carbon tax is something that would need consideration in 2020,” says Carol. “It would also particularly affect Ireland as an island economy.”
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Content adapted from the Irish Times online: "Five trends on the horizon for aviation finance"
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