Booming leasing industry a big draw for investors

It is Ireland’s status as a leading world center for aircraft leasing that led He Chengyu to travel 8,600km from Dalian in China to start the MSc Aviation Finance degree at University College Dublin.

He, 24, studied Aircraft Propulsion Engineering and chose to continue his studies in Dublin, because it is the base for leading aircraft leasing companies such as Aercap, Avolon and SMBC .

“The program is supported by major aircraft leasing companies through internships, scholarships and research projects, which offers me a great deal of opportunities to acquire hand-on experience in the industry,” he said.

The course at the university’s Smurfit Graduate Business School is Europe’s first masters course in aviation finance, tapping into the expertise that the industry has built up over the past 20 years.

“The industry had a need to develop a strong pipeline of highly qualified graduates for its growing employee requirements and decided that a postgraduate qualification was what fitted the bill best,” said Patrick Blaney, an industry veteran and now the chairman of aviation leasing finance and law program at University College Dublin.

Aircraft leasing is worth more than 500 million euros ($615 million) to Ireland’s economy and supports almost 5,000 jobs, according to the Taking Flight-2018 report by PwC.

Fiona McCabe, who is responsible for aircraft leasing at Investment and Development Agency Ireland, said the home-grown talents are the key to the aircraft leasing success in Ireland.

Chief executives of three of the top four leasing companies emerged from Guinness Peat Aviation, the pioneering but ill-fated aircraft leasing company, which imploded in the early 1990s after an unsuccessful initial public offering.

Guinness Peat no longer exists, but its assets were acquired by General Electric Capital Aviation Services, creating a stronghold in Ireland for talent which became the essence of the aviation leasing industry in Dublin. McCabe said. “On top of that, we have had strong business environment such as double taxation agreement and competitive corporate tax rate of 12.5 percent, which makes Ireland attractive as an aircraft leasing hub” she added.

In recent years, Chinese companies are pumping capitals into the industry, with 18 groups from China using the Irish capital as a strategic foothold in their push for a bigger share of the booming global market.

FlightGlobal, an online news and information website which covers the aviation and aerospace industries, estimates the capital deployed by aircraft lessors has grown to $261 billion, a 51 percent increase over the past 10 years, of which $71 billion came from Chinese sources.

The biggest Chinese move by far in Ireland’s aircraft leasing came in 2015 when Bohai Leasing Co., the Chinese leasing and financial services company affiliated with HNA group, made a cash offer for 100 percent of Avolon’s common shares at $31 per share.

Other Chinese mainland and Hong Kong lessors are also making inroads in Dublin, including groups such as Industrial and Commercial Bank of China, China Development Bank, Bank of China Aviation, Bank of Communications, Goshawk and Accipiter.

FlightGlobal data show that more than 1,100 Chinese-owned aircraft are managed from Dublin, about a quarter of the 4,300-strong global leasing fleet in Ireland.

McCabe said “There is a natural market demand given the strong increase in air traffic in China and Dublin is emerging as a major hub for China’s ambition in the aircraft leasing market.”

She also believes that aircraft leasing is seen as a renowned industry in Ireland, less risky than other industries, so Chinese companies are likely to consider it as a stable return on investment.