Aircraft Leasing: Ireland vs India - A comparison

Aircraft leasing is a critical component of the global aviation industry, enabling airlines to operate aircraft without the upfront capital investment of purchasing them. Ireland and India both play roles in the aircraft leasing sector but differ significantly in scale, regulatory frameworks, and infrastructure. Below is a comparison between the two:

Historical Significance and Market Presence

Ireland:

- Ireland is the global hub for aircraft leasing, with over 50% of the world’s leased aircraft being managed by companies based there, including industry giants like AerCap and SMBC Aviation Capital.

- The country has a long-established leasing ecosystem dating back to the 1970s, when Guinness Peat Aviation (GPA) was founded, making Ireland the premier destination for aircraft leasing.

India:

- India's aircraft leasing sector is nascent, with a small but growing presence. The country took steps to enter this space more assertively in 2021, with the establishment of the GIFT City (Gujarat International Finance Tec-City) as a hub for aircraft leasing.

- The government has launched initiatives to attract aircraft leasing companies, but the scale and maturity are far behind Ireland.

Tax and Regulatory Environment

Ireland:

- Ireland offers a favourable tax environment, including a 12.5% corporate tax rate, which has attracted many global aircraft lessors.

- The Cape Town Convention—an international agreement reducing legal risks for financiers in aircraft transactions—was implemented early in Ireland, giving lessors a secure legal framework.

- Ireland’s double taxation agreements (DTA) with numerous countries further reduce financial burdens for leasing companies.

India:

- India’s entry into aircraft leasing is relatively new. While GIFT City offers tax incentives similar to those in Ireland (such as no GST on aircraft lease payments), the regulatory framework is still evolving.

- India is also a signatory to the Cape Town Convention, but the implementation and legal processes have not yet reached the maturity of Ireland’s, though improvements are being made.

- India has been working to reduce red tape, but some regulatory hurdles and complexities remain in comparison to Ireland’s well-established systems.

Infrastructure and Support Ecosystem

Ireland:

- Ireland has an established financial and legal infrastructure, with a specialized workforce experienced in aviation finance, law, and leasing.

- The ecosystem in Ireland is highly developed, with financial services, technical experts, and a globally connected network of professionals all contributing to its status as a global leader in aircraft leasing.

India:

- India's infrastructure for aircraft leasing is still developing. While GIFT City is designed to be a financial services hub, it lacks the depth of expertise and the network that Ireland offers.

- India is investing in creating a supportive ecosystem, including training professionals in aviation finance, but it will take time to match Ireland’s scale and specialization.

Proximity to Markets

Ireland:

- Located in Europe, Ireland has access to the world's leading aviation markets, including Europe, North America, and the Middle East.

- Dublin is a well-connected international hub, making it a convenient base for leasing companies and their global operations.

India:

- India’s leasing hub is strategically positioned in Asia, which is expected to be the fastest-growing aviation market. India’s geographic location is ideal for serving airlines in Asia-Pacific, the Middle East, and Africa.

- As domestic air travel in India grows exponentially, there is significant potential for India to serve its own airlines and regional carriers.

Challenges

Ireland:

- Ireland faces increasing competition from emerging aircraft leasing hubs like Singapore, Hong Kong, and now India. However, its long-established ecosystem gives it a strong competitive advantage.

- Potential tax reforms within the European Union may also impact the attractiveness of Ireland for aircraft lessors.

India:

- India's primary challenge is catching up in terms of expertise, infrastructure, and market confidence. The leasing industry in India is still in its infancy, and it faces hurdles such as bureaucratic processes and a lack of deep financial expertise compared to Ireland.

- Building trust among international lessors and airlines will take time, given the dominance of established hubs like Ireland.

Future Outlook

Ireland:

- Ireland’s future as a leading aircraft leasing hub seems secure for now due to its comprehensive infrastructure and global connections, but it will need to innovate to maintain its edge, especially in the face of growing competition from regions like Asia.

India:

- India has immense potential due to its booming aviation market and government initiatives to promote the leasing sector. As India builds capacity, attracts international players, and reduces regulatory bottlenecks, it could emerge as a significant player in Asia.

Conclusion:

- Ireland remains the undisputed leader in aircraft leasing, with a highly developed ecosystem, favourable tax policies, and a global presence.

- India, while still developing, shows promise with its strategic location, growing aviation market, and government support. However, it will take time and concerted effort to match Ireland’s scale and global influence.