Published on February 12th, 2018 | by Mark Dwyer0
Taking Flight Report 2018 predicts 22% Growth in Aviation Leasing sector by 2021
Taking flight 2018, an economic and employment analysis of the aviation leasing industry in Ireland by pwc has predicted that the sector will grow by 22% in the period from 2016-2021. This is on top of a growth of 36% from 2012-2016. The report found that the leasing industry supports 4,970 jobs and contributes €535 million to the Irish economy. This figure includes €95 million in payroll after tax (available for spending in the economy) and €90 million in payroll related taxes to the government. A further €260 million is spent by the industry in the Irish economy in non-payroll related costs (e.g. suppliers).
In terms of leasing income from aircraft, Europe was the leading location for lease rental income in 2016, with 34.7% sourced from the region. However, this position had eroded from 2012 when Europe accounted for 46.8% of total lease rental income. Asia’s share of lease rental income increased from 27.7% in 2012 to 32.6% in 2016 and is expected to continue in that vein, with 36.9% of lease rentals being sourced from the region by 2021. The America’s an Africa have remained relatively constant but there has been some growth in the Middle East from 2.9% in 2012 to 6% in 2016.
The Maintenance Repair and Overhaul (MRO) industry has also been a major source of job creation in Ireland specifically in the areas of engineering and technical services. Today, there are three commercial aircraft heavy maintenance MRO providers who, together employ approximately 1,000 people in Dublin and Shannon. In addition to aircraft heavy maintenance, other providers support landing gear and APU maintenance and overhaul for their customers. Heavy maintenance MRO providers in turn support a sub-supply ecosystem. Total employment in the Shannon aviation services cluster is approximately 2,600, of which approximately half is made up of MRO providers and their suppliers. It was recently reported that one MRO plans to create 150 jobs over the next three years including roles across the areas of engineering, avionics technicians, structures and composite technicians, painters and aircraft operatives.
The lack of supply of appropriately skilled and trained personnel presents great difficulty for MROs in meeting and supporting growing business volumes as well as oversight of expanding apprenticeship programmes. In addition, Irish MROs are coming under increased pressure from global competitors who have access to lower cost of labour, capital and infrastructure. Local authority rates on aircraft hangars are a particular burden for the Irish MRO industry.
The report looks the Ireland’s strengths and weaknesses in the global context. Strengths identified were Double tax treaty network, Low corporate tax rate and attractive tax depreciation, Availability of skilled labour and Legal and regulatory framework. Two weaknesses were highlighted, these were the Personal tax regime and Social infrastructure
Ireland has 73 double tax treaties signed to date, with 5 additional treaties either awaiting ratification or under current negotiation. This is an indicator of Ireland’s strong ties with economies across the globe and the importance of international trade to the Irish Exchequer.
Ireland’s personal tax regime has presented a major challenge to many industries with the marginal income tax rate being significantly higher when compared to competitor jurisdictions. In terms of social infrastructure, housing and education were two areas that were identified as barriers for attracting overseas talent.
Paschal Donohoe T.D., Minister for Finance, Public Expenditure and Reform, commented on the launch of the report “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. 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 full report is available to download HERE.