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AIRCRAFT LEASING SECTORIreland’s role as a centre of excellence in the aircraft leasingsector is undisputed and working together will ensure our sus-tained growth. Aircraft leasing has developed rapidly in recentyears, shrugging off its former reputation as a niche sector andcemented itself firmly in the mainstream thanks to the surgingglobal demand for air travel.

In recent years, airlines have recognised the importance thatleasing can play in their long-term growth strategies, enablingthem to manage cash flow and thus increasing their fleets tomanage passenger demand.

The leasing sector has also been a key enabler of the growthof new airline entrants in the market and has helped facilitate thedevelopment and adoption of next generation aircraft typeswhich are delivering step changes in airline operating economicsand fuel efficiency.

Ireland as a centre for innovation for global aviation. I haveworked in the aviation sector for many years and I am proud tosay that I have seen Ireland play a leading role in driving theglobal growth of the sector and producing some of its most inno-vative companies.

We have a long tradition playing a significant role to adiverse number of companies in the sector, some of which havedirectly spun out of aircraft leasing – world class airlines like AerLingus and Ryanair, MROs such as Dublin Aerospace and pro-gressive regulators like the IAA.

We now have 15 of the world’s largest leasing companies withtheir headquarters here. To put that in context, an Irish aircraft takesoff or lands close to every two seconds in the world and, accordingto PwC, Irish lessors manage over 65% of the world’s commercialaircraft and employ close to 5,000people both directly and indirectly.

And the industry is poised forcontinued growth. Notwithstandingsome of the challenges that the sectoris facing with recent airline bank-ruptcies and the continued ground-ing of the Boeing B737 MAX, thedemand for aircraft is set to continueto grow as passengers want to travelmore, predominantly in Asia andSouth America, in line with the riseof disposable income.

The role of Aircraft Leasing Ireland. Aircraft Leasing Ireland(ALI) was established in 2017 to represent the needs of the sectorin Ireland and now represents 31 leasing companies who ensurethe continued development and success of Ireland’s aircraft leasingindustry working collaboratively with the Irish Government andother stakeholders.

We are the envy of other jurisdictions like China, India andHong Kong, so much so that respective governments have intro-duced new measures in these locations to encourage leasing com-panies to consider relocating their headquarters there.

However, while it would take a long time for any of theselocations to replicate the Irish success story, we cannot rest on ourlaurels. The role of ALI is to also address some of the challengesthat the sector is facing and how we can make it an even bettersector for the future. This means addressing areas like future edu-cation and skills needs and maintaining the vibrant ecosystem thathas been created here.

For example, the ecosystem supports a significant amount ofprofessional jobs for lawyers and accountants but also technicalskills to support the growth of a healthy MRO (maintenance,repair and overhaul) sector which provides much needed techni-cal skills to inspect aircraft and to facilitate the transition of air-craft from one operator to another.

Leasing’s role in supporting sustainable growth. But ratherthan just the operating environment, we also need to look at thefuture challenges affecting the sector itself – for example how canaircraft leasing maintain its entrepreneurial spirit and turn thistowards addressing some of the larger challenges faced by the leas-ing industry and the broader aviation sector?

There are issues that are facing us that mean we need to lookat the way we work through a new lens. For example, how do we

Ireland

Irish lessors manage over 65% of theworld’s commercial aircraft.

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create more diverse and inclusiveworkforces so that the future work-place for aircraft leasing companies issustainable? As facilitators of airtravel, how do we address globalwarming and climate change andhow do we innovate in a sector thatcould leverage technology to itsadvantage?

These are questions that are noteasily answered but progress in theseareas is crucial for the long-term sus-tainability of our industry. The paceof change in leasing in reality just hasnot been quick enough but I am gladto say that it has started. It will taketime and resources and working col-laboratively with the wider industryincluding the OEMs and our customers to come up with solu-tions but we acknowledge that we have an important role to playand this is an area that ALI is looking at very seriously and now isthe time where we need to act to enhance this sector for thefuture.

Harnessing technology. Looking at the leasing and tradingand novating of aircraft, we are still doing things the same way wealways have done, pretty much since the industry began. Leasing,trading and novating aircraft still requires onerous documentationwhich is costly both to ourselves and to our airline and investorcustomers.

In reality, we have become inefficient because the number ofleases and also numbers of aircraft traded have increased dramati-cally in recent years. But we are now starting to wake up to thebenefits that technology can bring.

GATS – the Global Aircraft Trading System has beenachieved through working together and was conceived by all themain leasing companies coming together to discuss how we couldalleviate some of the pain for airlines caused by novations, thetransfer of ownership, or creation of a new lease for an aircraft.This will ultimately revolutionise how aircraft are bought andsold.

Developed by an Irish technology company, Fexco, GATSeffectively introduces an electronic trading platform with asecure, live and searchable electronic ledger displaying details ofownership, transfers and security interests in GATS aircraft-owning trusts. There will now be no need for a lease novationwhich dramatically reduces the requirement for legal advice, thusreducing costs for all parties.

Key highlights of GATS:• GATS will be a fully electronic system, with e-signatures, e-

delivery of documents and use of a secure electronic ledgerto record transactions.

• Each aircraft will be owned by a US, Irish or Singapore trust.• The sale of an aircraft will be performed by an e-transfer of

the beneficial interest in a trust.• The transfer and related documents will be standardised and

executed and delivered electronically.

• GATS will not change commercial terms agreed with an air-line in leases. Any conditions to a transfer can be integratedinto a GATS transaction, which preserves all rights and pro-tects all parties.

• GATS is a voluntary system open to all industry players.But we acknowledge that this is just the beginning. And we

now need to rise to the challenge of what other benefits technol-ogy could mean for improvements in leasing. It is now up to thesector to put resources into looking at ways in which we caninnovate further so that we can fundamentally change over thenext few years.

In October 2019, ALI facilitated a roundtable discussionwith government and advisers to look at how other sectors havebenefited from technology and now we have a framework tobring this discussion on further.

But it cannot stop there. We are also very conscious of ourneed to do more as an industry when it comes to ensuring thatwe move forward at the same pace as other industries and createnew platforms for the future such as new diversity and inclusioninitiatives and addressing climate change and the environmentwhich are critical to that debate and to our future as an industry.

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I R E L A N D

Author:David Swan

Chair – Aircraft Leasing Ireland(ALI)

COO – SMBC Aviation CapitalIFSC House

IFSCDublin 1, Ireland

Tel: +353 1 8599400Email:

david.swan@smbc.aeroWebsite:

www.aircraftleasingireland.iewww.smbc.aero

Ireland plays a significant role to a diverse number of companies in the aircraft sector, including world classairlines like Aer Lingus and Ryanair, MROs such as Dublin Aerospace and progressive regulators like the IAA.

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