Reinforcing Ireland's Global Leadership in Aviation Finance
Patrick Blaney, Chairman of Aircraft Leasing, Finance & Law, UCD Smurfit School
Original Article - Irish Times 21.03.16
The Irish aviation sector, one of the country’s outstanding international success stories, plays a significant role in the economy. According to the Irish Aviation Authority, the sector contributes just over €4 billion to GDP – €1.9 billion directly from aviation, €1.3 billion through the supply chain, and a further €900 million from associated spending by those employed in the industry.
In terms of jobs, some 26,000 people are directly employed and a further 16,000 are in the supply chain.
A key element of this success story is the aircraft leasing and finance sector, where Ireland is now firmly established as the leading global hub. Today, more than 50 percent of the world’s leased aircraft are owned and managed from Ireland; 14 of the top 15 global lessors have operations here.
Continued growth seems assured. The global industry is forecast to double in size over the next 20 years, increasing to over seven billion passengers flying per annum, compared with 3.5 billion today. In addition, the global aircraft fleet is set to double to 44,000.
All of these extra aircraft have to be financed, and even if Ireland only maintains its current market share, that adds up to an awful lot of additional business. That in turn will lead to a requirement for new staff for this highly specialised and complex business.
A new MSc in aviation finance from the UCD Michael Smurfit Graduate Business School aims to support the industry by meeting that need.
Ireland has achieved this enviable position in the aviation finance sector as a result of a number of factors, says Patrick Blaney, chairman of the aircraft leasing, finance and law programme at UCD Smurfit.
“The starting point for Ireland becoming the global hub for the industry was Tony Ryan and GPA, ” Blaney says. “The gene pool of the entire industry here is ex-GPA people. Over the years GPA has directly led to the development of industry behemoths like Gecas and AerCap.” And that’s not to mention people such as Domhnal Slattery, who founded Avolon, and Peter Barrett, who set up SMBC Aviation Capital.
“The second reason is that the Irish government has been very supportive of the industry,” he says. “We are competing with locations like Singapore and the US, and we need to be able to keep laws and regulations up to date to meet the needs of the evolving structures of complex aviation finance deals.
“Ireland is small enough to be able to talk to the government and the regulators about these issues. It’s a work in progress; it’s never-ending. Successive governments have been good at doing it.”
Blaney points to taxation as an example.
“You can get the same tax rate in Holland, Singapore and other places,” he notes. “The key is that Ireland has 72 double taxation treaties with countries around the world. That means you can own an aircraft in Ireland and lease it to an Indian airline, which is operating in the southeast Asian market, in a tax-efficient way.
“Ireland has managed its tax treaty network in a way that facilitates this.”
The other key factor has been the availability of high- quality support services here at home, he says.
“GPA prospered because we have gold standard professional services firms in the legal, accountancy, and consultancy spaces here. The firms here are the equal of anything you will find in London or New York.”
The Smurfit programme, which begins in September, is the only masters degree in Europe covering aviation finance. As such, it offers a level of specialisation in leasing and airline industry developments that cannot be found on any other course. It will help students acquire the knowledge and skills necessary for a career in the aircraft and airline financing industry.
“The way the industry is growing,” Blaney says, “there is a question around where the people it needs are going to come from. In the past, some come from professional services firms, some from law firms, some from international banks. But you need people who understand metal. That’s where the idea for the course came from.”
The programme, he says, is very much a joint effort with the industry.
“When it was decided to put on a masters in aviation finance we got in people from the industry to help develop the syllabus. The industry has been very supportive, and a number of leading companies involved in the sector, including KPMG, AerCap, Avolon, SMBC Aviation Capital, GE Capital Aviation Services and Safran, have come on board as sponsors.”
The MSc aims to advance students understanding of all aspects of aviation finance, with a specific focus on the practical features of global aviation markets. They are encouraged to develop creative and analytical approaches to problem-solving in the aviation finance and leasing sphere, and to enhance interpersonal and leadership skills.
The course is specifically aimed at those who already have five or six years’ experience in a relevant area of the industry and wish to further develop their skills for this particular sector.
“With aircraft leasing, you are dealing with assets with a minimum value of $40 million,” Blaney says. “A degree of maturity is required to deal with the industry. It takes a certain type of person to deal with senior people in airlines and financial institutions.”
Students will acquire a detailed understanding of the financial processes and procedures associated with the aviation finance sector, including risk assessment and aircraft valuation, relevant accounting and taxation issues, leasing developments and insurance applications, along with legal implications.
In addition, they will develop a comprehensive understanding of the airline industry and the tools used by the industry globally, as well as a critical awareness of the operation and functions of aircraft management, leasing and insurance.
Applications are now being accepted for the programme, and there is already strong interest from both Europe and Asia, Blaney says.
“The main growth in the industry over the next 20 years is going to be from Asia, not the West, and sharing culture will be a big benefit. At the moment, half of applications for the course are coming from India, China, Malaysia and Vietnam. It’s a global business, and you can’t do business in different countries unless you understand how the business culture operates there.”
Blayney concludes by highlighting the quality of the opportunities that the new programme will open up.
“We are very lucky to have a truly global business here in Ireland – where the decisions are actually made here. You can work in the global HQ and go to the very top in Ireland. There are very few industries where you can say that.”