The aircraft leasing business is a cornerstone of the global aviation industry, offering airlines a flexible alternative to outright aircraft purchase. Rather than making large capital outlays, carriers often choose to lease aircraft from companies that focus on leasing, gaining benefits such as operational flexibility and access to newer fleets.
In India, several prominent airlines rely on aircraft leasing to manage their fleet requirements. For example, major players like IndiGo and Air India extensively lease aircraft to support their expanding operations. Even newer airlines such as Akasa Air have adopted leasing as a key strategy for fleet acquisition. This approach allows these Indian carriers to adapt to market demands and growth opportunities without the immediate burden of ownership.
The air leasing ecosystem involves various players, including lessors, airlines, and manufacturers. However, a critical, often understated component is the network of service providers who are instrumental in managing the intricate structures used in aircraft leasing, known as Special Purpose Vehicles (“SPVs”).
These SPVs are often established by lessors for each aircraft or portfolio of aircraft to isolate financial and legal risks. We support these structures through aviation finance and accounting services, with a strong track record in cross-border transactions. We play a vital role in the establishment, governance, and ongoing administration of SPVs. We ensure compliance with complex regulatory requirements across different jurisdictions, manage the flow of funds between lessors and lessees, handle tax matters, and provide essential administrative support. The quality and consistency of our work are critical to the smooth operation and integrity of the air leasing market.
Our careful management of SPVs provides a layer of security and transparency that underpins investor confidence and facilitates the multi-billion-dollar transactions that define the industry. Without service providers such as us, the complex financial and legal architecture of modern air leasing would be significantly more difficult to navigate.
The air leasing market is global and highly competitive, with lessors constantly seeking suitable jurisdictions to establish their operations. This brings us to the importance of Ireland and Gujarat International Finance Tec-City (“GIFT City”).
Ireland: The Emerald Isle's reign in air leasing
Ireland has firmly established itself as the undisputed global hub for aircraft leasing. Several factors have contributed to this dominance:
- Competitive tax regime: Ireland offers a competitive corporate tax rate and a well-established network of double taxation treaties, making it an attractive location for international businesses, including aircraft lessors. Specific tax provisions related to capital allowances on aircraft further enhance its appeal.
- Strong legal framework: Ireland boasts a robust and well-respected legal system based on common law, providing certainty and security for complex financial transactions like aircraft leases. The Cape Town Convention, an international treaty dealing with interests in mobile equipment (including aircraft), is well-integrated into Irish law.
- Skilled workforce: Over decades, Ireland has cultivated a workforce with detailed knowledge in aviation finance, law, and the technical aspects of aircraft leasing. This ecosystem of talent is a significant draw for lessors.
- Established infrastructure: Ireland has a well-developed infrastructure to support the aviation leasing industry, including legal firms, accounting firms, insurance providers, and aviation consultants with sector-specific experience.
As a result of these advantages, a significant portion of the world’s leased aircraft are managed from Ireland. Many of the largest and most influential aircraft leasing companies have their headquarters or major operations in Dublin. This concentration of knowledge and activity creates a powerful network effect, attracting even more businesses to the Irish jurisdiction. Our presence in Dublin allows us to support clients at the heart of the global aircraft leasing market, working alongside the industry’s leading players
GIFT City: India's aspiring aviation finance hub
GIFT City is a business district being developed in Gujarat, India, with the aim of becoming a global financial hub. Given the immense potential of the Indian aviation market, GIFT City is actively positioning itself as an emerging jurisdiction for aircraft leasing and financing.
Several factors make GIFT City an attractive proposition:
- Strategic location and growing aviation market: India is one of the fastest-growing aviation markets globally, with a huge demand for new aircraft. GIFT City offers a gateway to this burgeoning market.
- Supportive regulatory framework: The Indian government is actively promoting GIFT City as a special economic zone with a business-friendly regulatory environment. This includes tax incentives, simplified procedures, and a dedicated regulatory authority known as the International Financial Services Centres Authority (“IFSCA”).
- Tax advantages: Companies operating within GIFT City benefit from various tax exemptions and incentives, including a lower corporate tax rate and exemptions from certain other levies. These tax benefits can significantly reduce the operational costs for aircraft lessors.
- Developing ecosystem: While still in its nascent stages compared to Ireland, GIFT City is actively building an ecosystem to support aircraft leasing. This includes attracting legal and financial expertise, developing infrastructure, and fostering collaborations with international players.
- Potential for growth: As the Indian aviation market continues to expand, GIFT City has the potential to become a major hub for aircraft leasing and financing, catering specifically to the needs of the Indian and South Asian markets.
- Focus on international standards: IFSCA is committed to adopting international best practices and standards in regulating the financial services sector within GIFT City, including aircraft leasing.
However, GIFT City is still developing and will take time to match the maturity and scale of Ireland’s established ecosystem. We are among the few service providers with the capabilities and footprint to support clients seamlessly across both jurisdictions.
For anyone seeking to understand the intricacies of the air leasing business, it is essential to appreciate the pivotal roles played by established hubs like Ireland and emerging centres such as GIFT City. If you’d like to learn more, please feel free to contact us.
