Ireland: Irish Aviation Sector - Airfinance Annual 2014 - 2015

Last Updated: 30 October 2014
Article by Chris Quinn and Gerry Thornton

Ireland continues to build on its reputation as a centre of excellence for aircraft financing and leasing and its position has been further enhanced in recent years. There are a number of reasons why Ireland attracts investment in this area which include its favourable tax regime, a wide double tax treaty network and professional expertise.

These factors combined with a government which is committed to growing and supporting the industry mean that Ireland has become the obvious location through which to finance and lease aircraft.

Taxation developments. 12.5% tax rate.The Irish government has repeated its commitment to maintaining the 12.5% corporation tax rate for active trading companies. This commitment has been welcomed by the aircraft financing and leasing community.

Irish 'section 110' companies.It is critical to ensure that aircraft finance can be raised in a tax efficient way. In structured finance and securitisation transactions, an Irish 'section 110' company is commonly used to raise debt financing to acquire assets on a tax neutral basis.

An Irish section 110 company is a standard Irish special-purpose company that satisfies the conditions of section 110 of the Taxes Consolidation Act 1997 of Ireland. An Irish section 110 company is generally entitled to claim a tax deduction for all of its financing expenses, including (subject to some conditions) its profit-linked financing expenses.

Therefore, it is generally possible to ensure that an Irish section 110 company can acquire assets using debt financing on a tax neutral basis by ensuring that the Irish section 110 company pays out all of its return in respect of those assets as tax deductible interest payments to lenders and investors.

Since 2011, the categories of assets which an Irish section 110 company may acquire have been extended to include plant and machinery, which includes aircraft and rolling stock.

As a result of these changes, Irish section 110 companies have proven to be very attractive vehicles to satisfy the bankruptcyremote requirements of financing banks in aircraft financing transactions. This trend of using bankruptcy-remote Irish section 110 companies in aircraft financing transactions has continued in 2013 and 2014.

Expansion of double tax treaty network.Ireland has now signed 71 double tax treaties (68 of which are now in force). Ireland's most recently signed double tax treaties include treaties with Ukraine, Thailand, Botswana, Uzbekistan, Ukraine, Kuwait, Qatar, Bahrain, Saudi Arabia, Armenia and Egypt. The Irish tax authorities are very active in increasing the number of treaties to which Ireland is a party, particularly with emerging market and Middle-East jurisdictions.

New tax credit for non-treaty withholding taxes.Tax treaties play a key role in Ireland's successful leasing industry by reducing or eliminating withholding taxes on inbound lease rental payments. Tax treaties allow Irish lessors to claim tax credits against their Irish corporation tax for any unrelieved foreign withholding taxes.

However, until recently, an Irish lessor could not claim a similar tax credit for foreign withholding taxes where no tax treaty applied. In recent developments, an Irish lessor carrying on a trade in Ireland may now also claim a tax credit for foreign withholding taxes on lease rentals where there is no applicable tax treaty. The relief is granted on a unilateral basis by Irish domestic law.

This recent development has positioned Ireland as an attractive leasing jurisdiction for leasing aircraft and other assets into jurisdictions which do not have a wide tax treaty network.

New investment. The Irish leasing market has been very active with strong investment from Japan and China in recent years. Set out below are just some of the new investments into Ireland in the aviation industry.

In 2014, the Chinese aviation operation of Bank of Communications Financial Leasing (JY Aviation) set up an Irish leasing platform as the site of its European headquarters. With its operation in Ireland, the company plans to recruit experienced aviation leasing experts including technical, legal and operation personnel before the end of 2015.

According to Luo Le, who currently heads up the Irish operations of Bank of Communications Financial Leasing (JY Aviation), "JY currently has a fleet of 21 aircraft leased to Chinese, Asian and European airline customers, and plans to add another 15 to 20 to its fleet through sale/leaseback, financial lease and portfolio acquisition within 2014."

At the end of 2013, the leasing unit of China Minsheng Bank incorporated Minsheng Commercial Aviation (Ireland) Company Limited, an aviation unit in Dublin. Minsheng Commercial Aviation is seeking to grow internationally by buying aircraft in the secondary market or directly from aircraft manufacturers and then leasing the aircraft to airlines.

Following the acquisition by Mitsubishi UFJ Lease & Finance ("MUL") of Jackson Square Aviation, MUL rebranded its Irish leasing platform in January 2014 from MUL Aviation Capital Limited to Jackson Square Aviation Ireland Limited and the MUL and Jackson Square Irish leasing platforms are currently in the process of being integrated. The Irish leasing company plans to acquire and lease narrow-body aircraft and lease to a variety of lessees in a number of jurisdictions.

Norwegian Air Shuttle ASA established Norwegian Air International Limited ("NAI") which has been granted an Air Carrier Operating Licence by the Irish Commission for Aviation Regulation and an Air Operator's Certificate by the Irish Aviation Authority. NAI is the first Irish airline which will be headquartered in Ireland but will initially have all of its operational bases outside of Ireland. It may operate long-haul flights from Ireland in 2015. NAI is an EU regulated low-cost long-haul airline which operates Boeing B787 Dreamliner aircraft.

AerCap acquired International Lease Finance Corporation ("ILFC") in May 2014. The former ILFC portfolio of almost 1,400 aircraft will be serviced by AerCap Ireland Limited as the Irish based servicing arm of the AerCap Aviation Group.

AerCap's CEO Aengus Kelly stated that "AerCap's acquisition of ILFC will create the leading global franchise in the aircraft leasing industry. This transaction presents a unique strategic opportunity to bring together the outstanding and experienced personnel from both companies and two attractive portfolios of modern aircraft on lease to a highly diversified customer base. Further, we believe AerCap will now have the most attractive order book in the industry."

Capital market deals. Ryanair, the Irish low-cost airline, raised e850m in its first ever bond offering in June 2014. The seven-year bond will be listed on the Irish Stock Exchange ("ISE") and the funds raised from this offering, and subsequent offerings planned for the next few years, will be used to finance the purchase of 180 Boeing B737 aircraft which it has on order.

In 2014, Ryanair received a BBB+ rating from Standard & Poor's and Fitch which makes it the highest rated airline in the world.

In July 2014, CIT closed a US$640m securitisation capital markets financing of 28 aircraft. The Class A-1 Notes issued were listed on the Global Exchange Market of the ISE.

Cape Town Convention and Aircraft Protocol. Aviareto Limited, an Irish limited liability company which is a joint venture between the Irish Government and SITA was, in 2012, reappointed as the Registrar to the International Registry for a further five years.

Ireland was one of the first Contracting States to the International Registry and Aircraft Protocol and this has been another reason why lenders favour Ireland as a jurisdiction for aircraft financing.

If the borrower and mortgagor is located in Ireland, the lenders will get the benefit of the Cape Town Convention and Aircraft Protocol. The added protection afforded under the Cape Town Convention and Aircraft Protocol has been increasingly relied on by lenders and in certain transactions has replaced traditional local law mortgages where obtaining such mortgages was inefficient from a time and cost perspective.

The decisions of the Irish High Court in PNC Equipment Finance LLC v Aviareto Limited and Link Aviation LCC (unreported, High Court December 19, 2012) and TransFin-M, Ltd v Stream Aero Investments S.A. and Aviareto Limited (unreported, High Court (Commercial Division) April 18, 2013) illustrate that frivolous or unwarranted registrations made on the International Registry may ultimately be removed at the direction of the Irish Courts and at the expense of the registrant.

The decisions also illustrate the willingness of the Irish Commercial Court to accept jurisdiction to hear substantive causes of action in disputes relating to registrations originating entirely outside Ireland under the provisions of the Cape Town Convention and Aircraft Protocol, which were given effect in Ireland pursuant to the International Interests in Mobile Equipment (Cape Town Convention) Act 2005.

The approach of the Irish Courts, coupled with the speedy resolution of such disputes by the Irish Commercial Court, will greatly aid the proper and efficient functioning of the International Registry, and provide comfort to parties seeking to discharge unwarranted International Registry registrations that such discharges can be done in a timely, effective and efficient manner.

The State Airports (Shannon Group) Bill 2014 was published recently and will enable the Irish government to make an order giving the Cape Town Convention Alternative A insolvency remedy force of law in Ireland. It is hoped that this Bill will become law by the end of 2014. This will be very similar to the US Chapter 1110 insolvency remedy and will provide that in the case of an insolvency related event of a lessee, mortgagor or conditional purchaser, the lessor, mortgagee or conditional seller will be entitled to the return of the aircraft within 60 days unless certain criteria are met.

Irish Aviation Authority. Many aircraft which are operated in countries such as Russia and Italy are registered with the Irish Aviation Authority. Owners and lenders choose Ireland as the State of Registration to remove deregistration risk and protect the residual value of the aircraft by having the aircraft registered with an EASA registry. This trend has continued in recent years and has been further bolstered by the fact that registration of an aircraft in a Contracting State to the Cape Town Convention and Aircraft Protocol satisfies one of the connecting factors under the Convention and Protocol to create an international interest. Further protection can be afforded through registration of an IDERA with the Irish Aviation Authority.

Irish Stock Exchange. The ISE has recently developed a dedicated Aviation Exchange for aviation related debt and other instruments. This move reflects the increasing importance of capital markets to the global aviation sector. At the beginning of 2014, there were 26 aviation debt listings with a total value of US$12.7bn.

ISE Chief Executive Deirdre Somers explained that the new Aviation Exchange will be a "dedicated platform specialising in aviation related debt instruments that will provide issuers and investors with what they are looking for: visibility and specialist knowledge of their sector."

Conclusion. Ireland's reputation as a centre of excellence for the aircraft financing and leasing sector remains strong and has been enhanced by the extension of Irish section 110 companies to include aircraft assets. Combined with the existing taxation benefits, this is an additional tool in the box which permits the aviation financing structures required by aviation sector investors and lenders.

As a result, Irish section 110 companies are now frequently used in aviation financing and leasing structures. Ireland will continue to expand its double tax treaty network over the coming years demonstrating Ireland's commitment to the aviation financing and leasing sector.

This chapter appeared in the Airfinance Annual 2014/2015 and is reproduced with permission from Euromoney Institutional Investor.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions