Aircraft leasing business feels chill winds from Singapore

Ireland and Singapore are more than 11,000km apart but increasingly they find themselves competing for business in a number of sectors, such as biotech, IT and banking.

Both islands tick off many of the same boxes when it comes to investment.

They have small populations, a strong outward focus, an English-speaking, educated workforce and a low corporate tax rate.

Ireland offers proximity to the European Union and euro membership as a draw for overseas firms, while Singapore’s relative proximity to China is an asset – although at a six-hour flight from Beijing, Singapore is not perhaps as near as people in Europe often think.

However, Mandarin is one of Singapore’s official languages and ethnic Chinese dominate business and political life.

Ireland’s corporation tax rate of 12.5 per cent is lower than Singapore’s 17 per cent corporation tax rate, although write-offs mean the gap is smaller than it first appears.

Singapore ranked No 1 in the Ease of Doing Business report up to June 2012, by the World Bank for the fifth time in a row last year, whereas Ireland came in 15th place.

Singapore’s reputation as a place that welcomes expatriates and its tropical climate and famous lifestyle – it regularly tops global quality of life polls – means it has an advantage when it comes to wooing talent.

Another area where Singapore is providing increasingly tough

competition for Ireland is in the aircraft leasing business, and the next few years will see a major challenge for Ireland

Inc to maintain dominance in an area we have ruled since Tony Ryan and GPA made the leasing business an Irish speciality.

The legacy of GPA means Ireland remains a dominant force in the global leasing market, but Singapore is quickly building up the expertise to challenge that position. And it is a regional hub in an

area of the world that is advancing quickly.

Irish leasing companies manage one in five of the world’s passenger planes, while some 3,500 commercial aircraft are managed from Dublin with a value of more than €80 billion – about half Ireland’s GDP.

There are 1,000 direct Irish jobs in aviation leasing.

But a growing number of leasing operations are working out of Singapore.

BOC Aviation, which is owned by the Bank of China, is based in the city-state, and it owns or manages 203 aircraft operated by airlines worldwide.

Last month, BOC Aviation announced that it placed its largest ever order to buy 50 A320 family jets from Airbus at a list price of $5 billion (€3.75 billion), although with a big order, there are usually major discounts.

It now has outstanding orders for 100 new aircraft, from all the major players including Airbus, Boeing and Brazil’s Embraer. It also has 26 planes in the pipeline from purchase and leaseback deals.

China has made the aerospace industry a priority, and it is developing its own homegrown commercial jetliner, the C919, which it hopes will be able to compete with Boeing and Airbus.

The Chinese are emerging as big players in the leasing game. In December, a Chinese consortium led by New China Trust agreed to buy nearly all of American International Group’s aircraft leasing business ILFC for $4.8 billion (€3.6 billion).

Ireland has been successful in attracting business. Japan’s Sumitomo Mitsui Banking bought the Dublin-based aircraft leasing division of Royal Bank of Scotland for €5.8 billion in January last year to form SMBC Aviation Capital, the world’s fourth-largest aircraft leasing firm by owned and managed fleet, but kept the Irish management and its HQ in the IFSC.

The headline news in Ireland’s involvement in the leasing industry in China to date has been a tie-in with ICBC Leasing, a subsidiary of Industrial and Commercial Bank of China, the world’s biggest bank by market cap.

ICBC Leasing Ireland manages $2 billion (€1.5 billion) worth of aircraft assets from the IFSC.

In July, ICBC Leasing financed five Bombardier Global 6000 corporate jets for the Swiss company VistaJet, in a deal that involved debt being provided to ICBC Leasing Ireland.

The aircraft were then leased on to VistaJet, and registered in Malta, corporatejetinvestor.comreported.

Because the aircraft were financed through Dublin, ICBC Leasing did not need to get approval from the State Administration of Foreign Exchange (SAFE) in China, which can be a tortuous process.