one to watch
‘There’s a huge network as well of law firms, tax advisors, accounting firms revolving around the industry here in Ireland, which is another big spin-off of the sector’
Ireland’s success Cronin says there are possibly three main reasons why the aircraft leasing sector is so successful in Ireland. “Because Ireland was one of the first countries where people leased aircraft from, it’s got a very comprehensive network of tax treaties. There’s a proven precedent for leasing aircraft from Ireland to all kinds of countries around the world, and a lot of other countries simply don’t have that network. The countries that do are really the US and Ireland. “The second is, of course, our favourable corporate tax
rate, which is a not insignificant factor, and the third one is that there is currently an embedded base of expertise here in Ireland. GECAS is headquartered here, as is AWAS and RBS Aviation. If you look at the top 10 or 15 firms globally, two thirds of them are based in Ireland. So you know, it’s quite a strong pull for people. We’ve seen a lot of businesses relocate to Ireland in the past few years, and businesses as diverse as ICBC, which is a Chinese bank, has opened up an Irish company to start leasing aircraft. Ireland really is the world’s centre for aircraft leasing.” Yet Cronin agrees that it often passes under the radar.
“It doesn’t employ a huge number of people, but there’s quite an amount of dollars that pass through the indus- try so it’s a big ticket sector. It does get sporadic atten- tion but not a strong focus.” Anyone you speak to in the sector, including Cronin, is
quick to point to the foundations built by Tony Ryan’s GPA. “I mean if GPA hadn’t existed we wouldn’t have the network of aircraft leasing treaties, tax treaties, we wouldn’t have that critical mass of talent in the country. I would say it is entirely due to GPA and without it we just wouldn’t haven’t happened.”
Avolon’s future Avolon has been busy purchasing aircraft in its short time in operation, Cronin points out. “Part of the advan- tage of having a very experienced team is that we have been able to hit the ground very fast, both on the financ- ing and equity raise but also on the acquisition side,” he says. “Based on current letters of intent and contracts we’re up to 66 aircraft committed, which is a portfolio valued at well over €3bn, so that’s a very strong pipeline for the growth of the business.
32 Irish Director Winter 2010 “It’s an important part of our product offering to air-
lines, because it means as well as just offering to supply capital into the business, we’re also offering them air- crafts. That puts us in a different bucket in terms of comparatives.” So what are Avolon’s future ambitions? “The ambition
is to make it a sustainably profitable business, and that means you need to be able to manage your risks on the one hand, and you need to get to a critical mass of size on the other hand to be relevant in the industry,” replies Cronin. “We see the ideal size of being somewhere in the region
between US$5bn and US$8bn of assets. There are a cou- ple of reasons for that. Number one, you need to be a cer- tain size so you can tap into different sources of equity capital which allows you to diversify your sources of cap- ital – your biggest risk in any kind of financing crisis. “The second – the upper limit on it is once you go over
the US$8bn mark it’s very hard to keep your fleet very young, and very hard to keep recycling your portfolio and trading assets. “We think that to be sustainable we need to be accessing all of the available forms of capital that make sense, but we also need to be constantly refreshing the portfolio, having a high trading presence in terms of selling aircraft as well and keeping the fleet very young, and focusing on modern investor-friendly assets rather than end of life assets, which is just a dif- ferent business to what we do.” And what does he see in the future for the aircraft leasing sector in Ireland? “I think it’s very positive and very strong and I think most of the firms based in Ireland are doing well,” says Cronin. “Generally aircraft leasing firms have performed very well through the last recession, almost all of them have continued to be prof- itable so I think the embedded knowledge within Ireland is increasing. “I think we’re seeing more people now recognising
Ireland as the place to be for aircraft leasing. There’s a huge network as well of law firms, tax advisers, account- ing firms revolving around the industry here in Ireland, which is another big spin-off of the business and people are choosing to relocate firms or teams to Ireland to take advantage of being close to the aircraft leasing companies. I think this sector has got a very strong future in Ireland.”
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