Angela Fleming | Ireland's position as a global aviation powerhouse

27 January 2020

Angela Fleming featured in The Irish Times, discussing Ireland’s position as a global aviation finance powerhouse and the potential threats from other markets.

It is estimated that Ireland commands a 60 per cent share of the global leasing market, with more than 50 aircraft leasing companies including 14 of the world’s top 15 lessors based here. According to Philip Greene, HSBC Ireland, over 4,000 of the world’s leased aircraft are owned by Irish companies. Those companies employ more than 5,000 people and make a €550 million contribution to the Irish economy each year, according to Angela.

The industry will face some turbulence in the future and must take into account the sustainability agenda. The sector also needs to better promote technical innovations as well as highlighting the social benefits that air travel brings. The long-term outlook however, is still very positive, says Angela. ““We have seen a doubling of passenger numbers since 2000 and IATA predicts that it will rise to 8.2 billion by 2037, with an average annual growth rate of 4.3 per cent to 4.6 per cent. Airbus estimates that sales of new aircraft worldwide will reach 39,000 over the next 20 years while the Boeing estimate puts it at 44,000. These aircrafts will be required to meet demand fuelled by growth and to replace older aircrafts. This is in turn will drive continued growth in the aviation finance sector.”

Much of the anticipated growth is expected to come from China and the International Air Transport Association, have predicted China will overtake the US as the world’s largest aviation market within the next five years. It is therefore, quite natural for Asian jurisdictions to see themselves as potential competitors to Ireland when it comes to aircraft finance.

Singapore see themselves as a serious threat and have long cast a covetous eye in Ireland’s direction. From the outside, Singapore has similar tax arrangements to Ireland, however Ireland’s system is straightforward while theirs is discretionary. Angela agrees with this; “The fact that it’s concessionary effectively means that it’s temporary and that is a difficulty for them.”

Ireland’s tax treaty network is also difficult to replicate, according to Fleming. “Ireland has a network of 74 tax treaties but it’s not just the number that’s important. Many of them have been negotiated with aircraft leasing in mind. Very few of those treaties can be beaten by other jurisdictions and it takes years or even decades to negotiate.”

Hong Kong is a more recent entrant to the market as they introduced a new regime two years ago. The relative youth of that scheme and its tax treaty network are factors that are holding the scheme back. “There is always a question mark over new arrangements and how long they will last,” says Fleming. “When you have an aircraft with a viable life of 25 years, you need certainty in relation to the financial structures you put in place around it.”

BDO have been providing professional services to the aviation industry in Ireland since the 1980s. What makes us different is our investment in the processes, systems and above all the people in our aviation finance advisory team. Our Aviation Finance team in Ireland can act as a single point of contact and liaise with local country teams in member firms globally to coordinate international queries. For more information contact us on [email protected].

Content adapted from The Irish Times online