Tuesday 18 September 2018

Take-off in aircraft leasing is worth €541m to economy

Approximately 40pc of the world’s commercial aircraft are not owned outright by airlines, but are leased, and forecasts show this figure will increase by 50pc by 2020. Stock Image: Getty Images
Approximately 40pc of the world’s commercial aircraft are not owned outright by airlines, but are leased, and forecasts show this figure will increase by 50pc by 2020. Stock Image: Getty Images
Colm Kelpie

Colm Kelpie

Ireland's aircraft leasing industry contributes around €541m to the Irish economy, and supports about 5,000 direct and indirect jobs, a report claims.

The industry enjoyed growth in the years between 2012 and 2016, with a 36pc jump in the number of aircraft being handled by firms here.

The leasing industry here is a runaway success story, with the unintended consequence of distorting Ireland's GDP upwards because of the manner in which aircraft - that may never touch Irish soil - are measured in the national accounts.

Approximately 40pc of the world's commercial aircraft are not owned outright by airlines, but are leased, and forecasts show this figure will increase by 50pc by 2020.

More than half of these leased aircraft are owned and managed from Ireland.

Launched ahead of the annual aviation finance conferences in Dublin this week, the PwC report seeks to analyse the economic and employment impact of the aviation leasing industry in Ireland, and maps its growth since 2012.

Finance Minister Paschal Donohoe. Photo: Gareth Chaney, Collins
Finance Minister Paschal Donohoe. Photo: Gareth Chaney, Collins

"The aviation sector in Ireland continues to grow and to be a significant contributor to the Irish economy in terms of the number of jobs created, the amount of revenue generated and, of course, the knock-on effects for the economy generally," said Finance Minister Paschal Donohoe, who launched the report.

"In line with the Government's IFS 2020 strategy, we will continue to take actions to ensure Ireland remains the leading worldwide hub for aviation leasing firms long into the future."

The report claims that aviation leasing companies based in Ireland spent approximately $581m (€475m), inclusive of payroll-related tax and non-recoverable Vat, in the Irish economy in the financial year 2016. Payroll accounted for $261m (€213m), or 45pc, and non-payroll (payments to Irish suppliers) accounted for $320m (€262m), or 55pc.

The report says 1,700 people are employed directly by aviation companies in Ireland, with the balance of the near 5,000 jobs made up of a range of ancillary supports and services, including lawyers and those employed by professional services firms.

The aircraft leasing industry contributed to the 26pc surge in Irish GDP in 2015, dubbed 'Leprechaun economics' by one economist.

Economists say that while growth is strong, the official figure is dramatically overinflated - because it is driven primarily by the activities of Ireland's multinational and aircraft-leasing sectors.

The report found Irish lessors reported growth of 36pc in fleet numbers on the books of the companies in the five years from 2012 to 2016.

Brian Leonard, tax partner at PwC Ireland Aviation Finance Practice and author of the report, said the industry is growing here.

"The broader global industry is growing at pretty strong rates. Ireland has a very strong position within that, and even within that Ireland's share does look like it's growing at strong rates," Mr Leonard said.

The report said Europe was the leading location for lease rental income in 2016, with 34.7pc sourced from the region.

However, it said this position had eroded from 2012 when Europe accounted for 46.8pc of total lease rental income.

"This trend is projected to continue to 2021, with lessors reporting that they expect that the region will account for 31.5pc of lease rental income come 2021," the report said.

The report also said that the greatest threat to the Irish aviation leasing industry is competitive tax regimes in other jurisdictions. This is followed by developments from international tax reforms, the lack of a dedicated representative body for the industry and the cost of doing business in Ireland.

Irish Independent

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