Creating a course for aviation specialists

Ireland has been associated with pioneering developments in aviation almost since the very beginning of manned flight. This is reflected in some very impressive employment and financial statistics which show that some 26,000 jobs are supported directly by the aviation industry in Ireland with a further 16,000 employed indirectly in the supply chain.

The industry also contributes €4.1 billion to the economy comprising €1.9 billion directly from aviation, €1.3 billion through the supply chain, and a further €900 million from associated spending by people employed in the sector.

A new MSc in Aviation Finance from the UCD Michael Smurfit Graduate Business School is aimed at supporting the burgeoning finance and leasing sector. Ireland has established itself as a global hub with half of the world's aviation fleet managed from here and with 1,000 people directly employed.

The industry has its genesis in GPA, the aircraft leasing company established almost 40 years ago by Ryanair founder Tony Ryan. Now, approximately 4,000 aircraft are leased through Ireland, representing a total value of $115 billion.

"The new MSc is part of quite a significant development in aviation finance here at the school of business," says Prof Don Bredin, head of the banking and finance group at the UCD Michael Smurfit Graduate Business School. "We have a number of research programmes going on with industry partners, we already offer aviation finance modules on other courses, and we will also be doing professional development courses as part of our executive education programme."

The programme, which commences in September, is the only masters degree in Europe covering aviation finance. As such it offers a level of specialisation in leasing and airline industry developments which cannot be found on any other course and will help students acquire the knowledge and skills necessary for a career in the aircraft and airline financing industry.

Students will gain a detailed understanding of the financial processes and procedures associated with the aviation finance sector including risk assessment and aircraft valuation, relevant accounting and taxation issues, leasing developments and insurance applications, along with legal implications.

They will also develop a comprehensive understanding of the airline industry and the tools used by the industry globally as well as a critical awareness of the operation and functions of aircraft management, leasing and insurance. In addition, the programme will cover the complex transaction modelling tools required for analysing the aviation industry. A summer term research project and internship option will enable graduates to either deepen their conceptual understanding and analytical skills or put their learnings into immediate practice in the field.

The masters was developed as a response to the very specialised requirements of the industry, according to Bredin. “Aviation finance is very, very different. First up, it is an extremely capital intensive industry. Aircraft are very expensive assets and it is an extremely cyclical industry. Aviation is among the most cyclical of all industry sectors.”

The capital intensity of the industry is illustrated by the prices of new aircraft with Boeing 737s ranging from $57 million to $94 million and 747s coming in at an appropriately colossal $240 million for the basic model.

“When you take the capital intensity and the cyclicality into account cash flows in the industry are very volatile and this requires very specific types of financing,” Bredin explains. “This makes the decision on whether to buy or lease an aircraft a very complicated one for an airline.”

Access to capital is very important in this regard. “We will focus in a lot of detail on the aircraft finance market and we will also take into account the related areas of taxation, insurance, valuations, legal issues and so on. We will look at the credit assessment tools that can be used for airlines as well as the different fleet financing tools that might be suitable for different airlines.”

Securitisation will also be another area of focus. This takes the programme into the aircraft backed securities (ABS) space. A fairly typical ABS might involve a leasing company putting a number of the aircraft it owns and has leased out into a vehicle which investors can buy shares in. The investors benefit from the income generated by the aircraft with the attraction of a very predictable return.

“Securitisation will be a big area for us”, Bredin points out. “That’s an area of finance that was pioneered here in Ireland. The first aircraft securitisation product was developed by Tony Ryan in GPA. Aircraft valuation will also be a critical component of the programme as well risk assessment and ongoing developments in aviation law and the single EU aviation market.”

Tax will also be another important component. “We will take an international approach to this. We have significant support from industry partners in Ireland in this regard and we have a number of tax experts here in the business school who will also be contributing.”

These industry partners include Safran, AerCap, Avolon, SMBC Aviation Capital, Hong Kong Aviation Capital, and KPMG. "Our industry partners will play a role in all of the different aviation finance programmes both through providing guest speakers and internships. They are also supporting our research programmes in the area at PhD and post-doctoral level."

Applications are being taken now for the UCD Michael Smurfit Graduate Business School MSc in Aviation Finance. To learn more about the course, available in both full-time and part-time formats, see smurfitschool.ie/ourcourses/masters/finance/mscinaviationfinance