Aviation

Focus On 33 COMMERCIAL CONTENT

The SundayBusinessPost November17,2019

AviationLeasing&Finance

– ITS IMPORTANCETO IRELAND

ASPECIAL5-PAGEREPORT

Irishaviationindustry isflyinghigh

From left at Shannon Airport in front of the newEmbraer jet; Mary Considine, chief executive, Shannon Group, John Slattery, president and chief executive of Brazilian aerospace conglomerate Embraer Commercial Aviation, Rose Hynes, chairman, Shannon Group, and TomKelly, chief executive, AerCap Ireland Ltd and director of Shannon Group Technologytoplayakey roleinreducingemissions

A viation has a hefty carbon footprint. If global aviation was a country, its CO2 emissions would be ranked seventh in the world, be- tween Germany and South Korea.Andasflyingbecomes cheaperandmorepopular,the problem is worsening. Aviation emissions aren’t coveredby the2015ParisCli- mate Agreement. Instead, in October 2016 the UN’s Inter- nationalCivilAviationOrgan- isation(ICAO)anditsmember states signed a deal to tackle emissions from internation- al flights through reductions elsewhere. The deal aims to offset the annual increases in total CO2 emissions from internation- al flights above 2020 levels through a UN global carbon offset scheme called Corsia (Carbon Offsetting and Re- duction Scheme for Interna- tionalAviation).Theseoffsets arepurchasedby the airlines, separate to those on offer to passengers for voluntary up- take. The environmental impact of the aviation industry is on

everyone’s mind at the mo- ment. “Sustainability isagrowing concern, but it is a concern that is being addressedby the industry,”saidJohnDrysdale, business development man- ager at the International Avi- ation Services Centre (IASC). Earlier this month, Em- braer’s new state-of-the- art E195-E2 jet was based at Shannonforthreedaysduring the Shannon International Leasing Conference and del- egates got to experience the aircraft for themselves. “Having the new Embraer jet located at Shannon was an added attraction this year, and there’smuch excitement around that,” said Drysdale. “The jet is one of the most fuel-efficientintheworldand goingforwardthat’sakeyarea for the industry: managing growth while, at the same time, coming upwith cutting edge solutions, like those in theEmbraerE195E2,totackle climate change.” “Enginetechnologyandair- craft design are what is going to change the narrative,” said Drysdale.

The growing demand for commercial aviationprovides a significant opportunity for Ireland to continue topunchabove itsweight globally,writes LorraineCourtney

A viationisan extremely important i n du s t r y for Ireland. As an is- landnation, the aviation spacehas always played amajor role in the so- cioeconomic development andwellbeing of the country. Inadditiontothedirectim- portance of aviation, the sec- tor is a key enabler of growth and development in almost allotherareasoftheeconomy. Inward investment inaircraft leasingandfinancinghasbeen one of themajor success sto- ries of Ireland’s international financial services industry. “What began with Guin- ness Peat Aviation (GPA) in the mid-1970s has matured into a broad-based andhigh- ly capable sector,” said head of investment management, IDA Ireland, Fiona McCabe. “When airlines and investors anywhere in the world think about aircraft leasing and financing, they think about Ireland. This is a significant achievementforasmallecon- omy and testament to the vi- sion,hardworkandexpertise of the leasing community here.” As an island economy, it is essential for our tourism industry, for our trading re- lationships and for connect- ing Ireland with the rest of theworld. It contributes €4.1 billiontoourGDP,comprising €1.9billiondirectly fromavi- ation,€1.3billionthroughthe

supplychainand€0.9billion from associated spending by peopleemployedinaviation.It supports 26,000 jobs directly and a further 16,000 in the supply chain. Ireland’s tour- ismindustry,whichisheavily dependent on aviation, ac- counts for a further €5.3 bil- lion contribution to GDP and 180,000 jobs. The size and growth of the sector has been impressive. The industrynowcontributes well overhalf abilliondollars annually to the Irish econo- my–$660million, according to PwC’s Taking Flight report launched last year. The past five years have shown considerable growth in terms of numbers of air- craft and asset value based in Ireland, saidMcCabe. “This is down to a number of factors: new entrants to the market setting up their leasing plat- forms here in Ireland, exist- ing lessors in Irelandmoving more of their portfolio to Ire- land and the renewal of air- craft with newer models and theretirementofolderfleets,” she said. Pricing isverygoodandthe industry has witnessed a 36 per cent increase in aircraft assets. Ireland is now man- aging assets valued at over €150 billion – equivalent to more than 60 per cent of the world’sfleet of leasedaircraft. “An Irish leased aircraft takes off every two seconds,” said McCabe. “Over 50 aircraft leasing companies are based in Ireland, including 14 of the

sociatedwiththenewrunway in due course. The government also has plans in place to separate the IAA, creating a new aviation regulatorandseparateairtraf- fic control company. The IAA is working with the govern- ment on the implementation of this plan. The legislation neededforthisprojectisinthe early stages of development, according to the IAA. There are over 14,000 drones registered in Ireland, and drones will continue to develop in 2020. The IAA is to oversee an EU-wide drone regulation system that will come into force inmid-2020. TheInternationalAirTrans- port Association (IATA) ex- pects 7.8billionpassengers to travelin2036,aneardoubling of the four billion air travel- lers in 2017. The growing de- mandforcommercialaviation provides an unprecedented opportunity for the aviation sector. “Aviation will remain an importantindustryforIreland and will continue to enable economic growth and devel- opment,”saidaspokesperson for the IAA. “Decisions that wemakenowwill be import- ant for the continued success of the industry, efficiency of operationsandthecontinued improvement of safety stan- dards. Theaviationsectorwill have to play its role in resolv- ing the climate change crisis, and this is a key challenge.” Safety will always remain paramount. “From an Irish perspective, it is important that we continue to promote aviationandensureourstruc- tures and planning can allow the Irish aviation industry to continue to punch above its weightglobally,”aspokesper- son from the IAA said. Marie O’Brien, aviation finance partner, A&L Good- body,highlightedthatabreak- down of the numbers paints a positive outlook for the aviation industry in Ireland. “It is predicted that there is demandforabout40,000new aircraft globallyover thenext 20years,”shesaid.“Atcurrent levels,nearlyhalfof theseair- craftwill be leasedand, look- ingatIreland’scurrentmarket share,itmeansthat40-50per cent(about8,000aircraft)will be owned or leased by Irish companies.Inaddition,many existingaircraftwill continue tobebought, sold, leasedand financedbyIrishcompanies.” The industryhas donewell in selling down assets to US PE funds, and those funds are therefore nowmore aware of Irelandasabusiness jurisdic- tion.McCabesaidthattheIDA views the sector as a source of further opportunity and inwardinvestmentforIreland. “This is because the global industry has significant po- tential for futuregrowth,”she said.“Aviationhasproventobe highly resilient to economic stress, with only three years in the past 40 when passen-

ger traffic has declined. With globaltrafficexpectedtogrow by an average 5 per cent per annumoverthenext20years, itisestimatedthatover30,000 commercial aircraft will be required tomeet this growth, plusfleetreplacement,requir- ing more than $4.5 trillion of financing.” The IDA expects that, for optimal fleet finance and flexibility, airlines will buy fewer aircraft and instead expand their use of leasing arrangements. “Asia will be thekeymarket,accountingfor more than35 per cent of total

aircraft deliveries,” said Mc- Cabe. “Thedepthandbreadth oftheleasingclusterinIreland meansthatthesectorherecan expect tobenefit fromthis fu- ture growth.” Becauseof Ireland’sunique valuepropositioninthespace, wehaveastrongfootholdthat isn’t easy to challenge,” said McCabe. “We have been do- ing this well for more than 40 years. The expertise here is very strong and if you are lookingtoleaseanaircraftinto anotherjurisdictionyou’llfind that the depth of knowledge isn’t there.”

FionaMcCabe, head of investment management, IDA

world’s top 15 lessors andcir- ca 5,000 aircraft under Irish management.” This year has seen some significant positive develop- ments for aviation, such as the launch of the Aireon sys- temwhich, for the first time, providesglobal air trafficsur- veillanceusingaspace-based constellation of satellites to monitor all parts of the globe. The IAA is also a part owner in Aireon, which will allow for important safetyandeffi- ciencygains–particularlyfor air traffic crossing areas such as the North Atlantic Ocean. “In addition, the IAA’s new air traffic control tower at Dublin airport completed construction in 2019 and is now in the process of being fully fitted out for operations in2020,”saidanIAAspokes- person. “The project was de- livered on time and under budget, a rarity for such large scale, riskyandonce-off/be- spokeconstructionprojects.” ConstructionofDublinAir- port’ssecondrunwayhasalso started – an important piece of infrastructure for the con- tinued growth and develop- mentofDublinairportandthe national economy, according to the IAA. Irish airlines con- tinued to perform well, with Ryanair purchasing Lauda and Air Malta and expand- ing its network, while Aer Lingus continues to grow its route network in Europe and to the US. The IAAsaid that therewill be significant developments for the industry in 2020 and beyond. “Environmental and climatechangeconsideration must be central to industry development. In terms of air traffic control, the IAA has been a leader in minimising emissionsassociatedwithavi- ation.Wehavehadanefficient airstructurecalledFreeRoute Airspace (FRA) inplace since 2008;manycountriesareonly catching up now or will not catchupforanumberofyears. FRA ensures the most envi- ronmentally friendly routing for aircraft, minimising fuel burn and CO2 emissions.” ThesecondrunwayatDub- lin Airport will go into oper- ation in 2021, which will be an important milestone in terms of economic develop- ment. Fingal CountyCouncil wasappointedin2019andwill bemaking itsdeterminations regardingnoiseregulationas-

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