January 22, 2013 / 5:03 PM / 5 years ago

CORRECTED-Ireland defends aircraft leasing crown as Asia rises

(Corrects name of bank in paragraph nine to Royal Bank of Scotland from Bank of Scotland Group)

* Half the world’s leased aircraft are managed from Ireland

* Growing number of lessors working from Singapore

* Asian banks pour money into leasing industry

* Ireland aims to develop aircraft maintenance hub

By Conor Humphries

DUBLIN, Jan 22 (Reuters) - A clique of veteran aviation industry executives is fighting to maintain Ireland’s dominance of the $170 billion aircraft leasing industry in the face of strong competition from Asia.

With a skill set that runs from seizing planes from bankrupt third-world airlines to negotiating multibillion-dollar deals with Airbus and Boeing, a few dozen former colleagues from now defunct GPA have ensured that one in every five of the world’s passenger planes is managed from Ireland. That equates to about half of the world’s 7,000 leased aircraft.

GPA, founded in 1975, helped to pioneer the model under which airlines agreed to lease aircraft for years or even months, allowing them to adapt quickly to changing market conditions. Large airlines, which tend to secure lower lease rates, reduce the risk of a fall in the value of their fleets, while smaller rivals gain aircraft they could not buy outright.

Ireland, however, is starting to look less attractive for an industry in which the financing and the airline customers are increasingly coming from Asia.

“We got to where we are through a fluke of history and the genius of (GPA boss) Tony Ryan, but we can’t rest on our laurels,” said analyst Joe Gill. “We’re dealing with dollar-based assets made outside of Ireland for customers outside of Ireland, so there is a significant risk.”

Singapore poses the biggest threat, but the rivalry looks likely to be a long game, as Asian firms gradually build up the experience needed to compete in a highly technical industry.


There is no doubt that aviation financing is shifting. In December a consortium of Chinese banks agreed to buy the world’s No.2 aircraft leasing business from U.S. insurance group AIG for up to $4.8 billion.

Demand for aircraft is also moving east, with Asia-Pacific carriers ordering 1,100 aircraft last year - more than North America and nearly three times more than Europe, according to consultancy Flightglobal.

So far the flood of Asian money has been mostly positive for Ireland. When Japan’s Sumitomo Mitsui Banking Corp bought the Dublin-based aircraft leasing division of Royal Bank of Scotland last year for 4.7 billion pounds ($7.4 billion), it retained its Irish management and headquarters.

Several other Asian companies operate from Dublin, including the leasing arm of Industrial and Commercial Bank of China , which manages $2 billion worth of aircraft assets from its Dublin office.

“What we’re seeing is a rebalancing of the world, with Asia now taking its proper place as a significant region for the industry,” said Peter Barrett, chief executive of SMBC Aviation

The usually low-profile industry spills onto the streets of Dublin this week, with senior executives from airlines, planemakers and leasing companies attending two conferences.

But Dublin’s pre-eminence is under threat. Asia is fighting more on supply and demand. Singapore has copied Irish tax relief policies for companies and has undercut Ireland’s personal income tax rate by half, charging a top rate of 20 percent rather than 41 percent.


“We need to be careful,” said Colm Barrington, CEO of Dublin-based FLY leasing. “Singapore is offering all of the incentives to move there. It’s in the middle of this booming market and the personal regime is so much better.”

Singapore’s 17 percent corporation tax rate is higher than Ireland’s 12.5 percent, though most lessors are able to use depreciation rules to write off most of their tax.

Barrington, like many of the senior Irish executives in the business, began his career at GPA. The company collapsed in 1992, when tumbling prices caused its initial public offering to fail, but its break-up ultimately helped Ireland to consolidate as the location of choice for leasing businesses as executives branched out on their own, creating dozens of smaller lessors and support companies.

Paul Sheridan, head Asia consultant at aviation advisory firm Ascend, acknowledges that there has been a trickle of Irish leasing executives heading to Singapore but said that “the skill in executing and in dealing with aircraft is still in Dublin”.

The Irish government is implementing a two-pronged defence: resisting growing calls for higher taxes on Ireland’s top earners and by trying to convince leasing companies to physically base in Ireland some of the 3,500 aircraft they own and manage.

It is rolling out a plan to develop Shannon Airport as a hub for international lessors to store and refit their planes before they are shipped to new customers. In December it split the airport from the state airport authority and announced new rules to allow lessors to write off the depreciation of hangars.

“We want to get deeper into the aircraft food chain,” said John Moran, a former GPA executive who is now secretary general of Ireland’s Department of Finance. “We want to build on the cluster that we have.” ($1 = 0.6316 British pounds) (Editing by David Goodman)

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