Ireland’s challenge to remain at the centre of the aviation industry

Since the 1970s Ireland has led the way in aircraft finance, but its love affair with aviation goes back to 1919 when the first transatlantic flight piloted by Alcott and Brown landed at Clifden, Co Galway. Currently, Ireland has a 65 per cent share of the global aviation leasing marketplace, with 50 aircraft leasing companies based here, including 14 out of the world’s top 15 lessor companies.

Despite the hammer blow wielded by Covid-19, Ireland still remains a key player in the global aviation leasing and finance industry.  

[ The Irish Times ePaper ]

Dr Marina Efthymiou, DCU’s assistant professor in aviation, believes Ireland’s poll position lies in three key advantages, including the fact 80 per cent of Ireland’s double tax treaties deliver a favourable result for aviation finance companies, the presence of strong human capital in the country and a rich history of innovation.

She also points to networks. “There are so many Irish people now working in aviation on a global basis that works in the country’s favour also.”

The taxation advantage is of course under threat. Joe O’Mara, head of aviation finance, KPMG Ireland, is worried about the OECD’s BEPS 2.0 project and its proposed 15 per cent minimum corporate tax rate.

Dr Efthymiou agrees that a movement in taxation will significantly impact the aviation industry. “But that is also a wider discussion as our favourable tax position will affect a number of other industries, not just aviation,” she says.

“The Government has done a good job in representing Ireland’s interests to date and it will be important for Irish businesses, lessors included, that we continue to engage proactively in the process,” says O’Mara.

There are new actors emerging, within countries such as Malaysia, Hong Kong and Singapore, who are looking to compete for market share

The other factor that gives Ireland a competitive advantage over other jurisdictions is the talent pool in aircraft leasing that has built up over the last four decades.

O’Mara says: “The likes of UCD, DCU and others have excellent aviation-focused graduate and post graduate courses. But we can’t be complacent in focusing on attracting and retaining the best talent for the sector in Ireland and internationally. When people join this industry, they rarely leave and attracting the best talent in the first instance into the sector is critical in keeping Ireland where it is today.”

Dr Efthymiou agrees. “It is important to invest in human capital. The aviation leasing industry is not heavily reliant on a product or software, but the people. We need to ensure we continue to create a pipeline of educated employees to maintain our competence.”

Mark Jordan, Chief Technologist at Skillnet Ireland, agrees that the current favourable corporation tax structure along with a multi-disciplined talent pool and deep roots within the industry will help steady Ireland’s position.

However, he points to other challenges. “There are new actors emerging, within countries such as Malaysia, Hong Kong and Singapore, who are looking to compete for market share. Political stability, cost and ease of conducting business and talent will ultimately be the key differentiators for Ireland to continue to protect and grow its over 60 per cent share in the global leasing market,” he says.

Increased surges

Caroline Devlin, co-head, Aviation Group at Arthur Cox notes that before Covid-19, analysts were predicting increased surges in passenger traffic.

“Clearly the trajectory has reversed for the time being, but this has not stopped new entrants into aviation – in every aspect, including locations for hosting the industry.

“The value of a stable political environment cannot be underestimated. A lessor can set up in Ireland and know that the legal system will protect their assets. This cannot be said of some other jurisdictions,” she concludes.

Laura Cunningham, partner, Aviation Group with Arthur Cox believes aviation clients must keep up to date with new digital innovations to ensure effective competition and to enable them to structure transactions more efficiently.

“The digital advances being adopted by airlines in terms of Covid checks, ticketing, booking systems and flight safety is only one side of the digital revolution,” she argues. “Digital adoption has increasingly played a significant role in the field of aviation finance and is necessary to keep up with customer demands and to be on the front foot with regards unanticipated disruptions to the market,” she says.

Finally, the issue of government support is vital in helping keep the Irish aviation industry in the air with a variety of grants and government assistance opportunities available to airlines, especially in the context of the Covid-19 pandemic.

Ruth Lillis, partner, Aviation Group with Arthur Cox points out: “The Competitive Start Fund is available to the aviation sector in particular to financial services associated with the sector. The purpose of this fund is to accelerate the growth of new companies related to the sector, helping these new companies reach key milestones.”

In the context of the pandemic, the government announced a €80 million package for Irish aviation in July 2021, including €23 million to compensate for airport losses over the past year and a half.

O’Mara is not sure if this will be enough. “The final point that we need to appreciate is that aviation is of pivotal importance to our small open economy. When we get out of this crisis, there will come a time when people will look at how Ireland acted in the context of international travel, versus our peers. It is important we act with appropriate foresight and an appreciation of our international reputation. The EU digital Covid certificate was a positive step in the safe return to travel. While we need to be careful in how we manage the reopening of the skies, we also need to be cognisant of the fact that Ireland’s out-sized place at the centre of the aviation world is fragile.”