Asian demand continuing to drive growth for Irish aircraft lessors
With Asian investors increasingly investing in aircraft leasing platforms and with air travel forecast to grow by 6 per cent annually in the region, Asia is driving the growth of Ireland's world leading aircraft leasing industry writes Brian Leonard.
The global aircraft leasing market has seen a flood of activity from Asian participants of late as a number of largely domestic lessors seek to gain a foothold in the international marketplace. This trend is influenced by promising regional forecasts (the Asian travel market is set to increase by approximately 6% annually) and broader investor interest in aviation assets in Asia. This is highlighted, in particular, with new Chinese entrants into the international aircraft leasing space, mainly via either corporate or portfolio acquisitions.
Brian Leonard speaking at Hong Kong Airline Economics in November where Ireland's close industry links with Asia were in evidence.
Brian Leonard speaking at Hong Kong Airline Economics in November where Ireland's close industry links with Asia were in evidence.

It is estimated that in the past year over US$16 billion worth of acquisitions have involved aircraft leasing companies in China alone. Notably, the Cheung Kong group (led by Hong Kong billionaire, Li Ka-Shing) has acquired portfolios of aircraft from a number of international aircraft lessors. More recently Chinese based Bohai Leasing is expected to close a merger deal (worth approximately US$7.6 billion) to acquire Avolon in early 2016 and China Construction Bank announced its headquarter establishment in Ireland to facilitate growth plans. As an indication of the size of this expected growth, China Construction Bank plans to grow its fleet from 17 to 200 aircraft over the next five years. A large proportion of other Asian lessors including ICBC, CALC, Bocom and Goshawk have also established a presence in Ireland in recent times.

There are a number of fundamental reasons why Ireland is central to this Asian funded activity. Being the birthplace of the industry with a supportive infrastructure and specialist industry talent pool it is a natural location for Asian lessors to establish a global presence. Key specialist talent is a particular attraction to Chinese lessors, many of whom are new entrants to the industry. Ireland’s attractive tax regime has played a key role for this industry also and, in particular, Ireland’s network of tax treaties. This competitiveness is likely to be enhanced by future developments emanating from the OECD/G20 supported international tax agenda where increasing focus will be placed on jurisdictions exhibiting the necessary and relevant substance to support global tax revenues. Competition does exist for this global leasing business. Singapore and increasingly Hong Kong are continuously striving to enhance their offerings to global investors. For Ireland it is paramount that our tax treaty network competitive advantage is retained. With a focus on this and growth in the Asian marketplace, new tax treaties with countries such as Indonesia, Taiwan and the Philippines would be the most welcome.

Overall it is evident that investor driven demand from Asia is resulting in further establishment of leasing platforms in Ireland. With this support it is expected that the strong growth of Ireland’s aircraft leasing industry will continue in 2016.
Brian Leonard is a tax partner at PwC.
This article appeared in the January 2016 edition.