Aircraft leasing – an industry almost born in Ireland

Few individuals have had an influence as significant as the late Tony Ryan has had on the global aviation industry.

Not only did he found Ryanair, Europe’s largest airline, but many believe he was single-handedly responsible for the creation of the Irish aviation leasing industry.

“You have to go quite a bit back to figure out how the Irish aviation leasing sector got to where it is today,” says Dr Thomas Conlon, professor of Finance at UCD School of Business.

“In the 1970s, Aer Lingus took delivery of two Boeing 747 Jumbo jets which it had no use for due to market conditions. They asked a young executive called Tony Ryan to figure out what to do with them. He found a home for them with Siam Air, now Thai Air, on a wet lease arrangement where the airline rented them from Aer Lingus complete with crew and maintenance contracts and so on.

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“Ryan went back to Aer Lingus and said there might be a business in this type of arrangement but being a State-owned company, they weren’t interested. He went off and set up the GPA aviation leasing business.”

GPA effectively become the mother lode that fuelled the growth and development of the industry to this day.

“The industry is only now beginning to move away from former GPA executives,” Conlon notes. “The vast majority of the companies were founded by them and many of them are still led by former GPA executives.”

GPA ultimately failed for a variety of reasons.

“It split into two businesses, a good bank and a bad bank if you like,” Conlon explains.

“The good bank part was taken over by GE and it became Gecas. The bad part was acquired by a number of different investors including Daimler and eventually become Aercap. In 2021, Aercap acquired Gecas from GE and reunited the two former GPA businesses to form the world’s largest lessor.”

The GPA legacy extends beyond Ireland, he argues.

“In many ways, the global industry was created by GPA. There was only one other large aviation leasing business in the US at the time. That was the genesis of the industry before it became the behemoth we now have in Dublin.”

Elizabeth Bowen, director of Aircraft Leasing Ireland (ALI,) the Ibec group representing the aircraft leasing sector, also traces the industry’s origins back to the foundation of GPA, but other factors have contributed to its growth.

“Our rich aviation heritage, a highly skilled talent pool, a comprehensive double tax treaty network and pro-enterprise policies, along with a stable political and legal system, have allowed Ireland to develop an internationally orientated and fast-growing industry,” she says.

Ireland’s stable legal and regulatory framework, compared to other jurisdictions, has allowed aviation leasing to become a significant and growing sector in the economy, she adds.

“In Ireland, there are several high-quality aviation courses on offer through various institutions across the educational spectrum,” she continues. “Industry-supported apprenticeships ensure the continued supply of an appropriately skilled workforce.”

KPMG head of aviation finance, Joe O’Mara, points to the importance of the tax regime.

“Ireland’s success comes down to talent, track record and the tax environment,” he says. “Focusing on the latter, the stable tax environment we have had in Ireland for decades has been the foundation which attracted capital to come here, allowing companies to flourish, creating high-quality jobs and generating huge value for the wider economy.”

Those factors will remain important if Ireland is to retain its leading position, according to Bowen.

“To support and further develop the industry, government policy must focus on increasing its investment in skills, housing, productivity, and infrastructure,” she contends.

“To remain competitive, we must maintain our competitive tax regime and better understand how international tax reform could affect the industry. In addition, Irish aviation lessors are committed to achieving net zero carbon emissions by 2050. To achieve this policymakers both nationally and internationally must work with the aviation sector to bring about decarbonisation measures and supports.”

A considered approach is required, says O’Mara.

“I spend a lot of my time talking to investors about ‘Why Ireland?’ and it very helpful being able to talk about a stable and non-concessionary tax regime, which is understandable and attractive for investment. Our regime is getting a lot more complex, with a level of change that is unprecedented.

“While most of that change is being driven from outside our borders, it’s important our lawmakers are considered in how they implement required changes. We are talking about a mobile asset class, and maintaining our pro-business approach is critical to defending our world-leading position.”