We must keep aviation industry flying high

Aviation is vitally important to the health and trajectory of the Irish economy relative to most other countries.

That will be further amplified this year as organic growth and corporate activity raises the scale of the industry.

Commercial air travel permeates Irish economic life at a number of levels.

At its rawest, it is an essential element in the working of a small open economy that exists on an island.

Air links are key to funnelling trade in goods and services throughout the economy, while also supporting the key pillar of tourism.

Moreover, the migration phenomena whereby large volumes of Irish and non-Irish workers transit to and from the country, could not exist without air connections. It is for these reasons that having an efficient air travel infrastructure is critically important.

That infrastructure is composed of a set of airports and exchequer managed taxes on air travel. In recent years, policymakers allowed these two components to lose sight of their economic importance as air passenger taxes aping the UK system were introduced at a time when large infrastructure spending was under way at Cork and Dublin airports.

That all came to a head when the economy collapsed after 2008.

These negative trends have been reversed as air passenger taxes were cut to highly competitive levels (especially compared to Britain) and the airport operators responded to airline demands for greater flexibility in pricing in response to adding flight services.

Together with a nascent economic recovery, this has produced an encouraging rise in passenger volumes and new short and long haul routes over the past year.

Attached to the airport infrastructure is the operation of air traffic control and the registration of the commercial fleet. Here too, positive signs are evident as the Irish Aviation Authority enjoys a profitable trade managing air traffic in to, from, and above, Ireland. It also is the beneficiary of a growing aircraft fleet in another piece of our aviation story — aircraft leasing.

Last month, an aircraft lessor with deep Irish roots, Aercap, engineered a spectacular takeover of the US government owned lessor ILFC, which has a fleet of over 1000 aircraft.

These will add materially to the fleet already managed and operated under Irish regulations and in turn will boost the position of Ireland as the world’s pre-eminent centre for air finance, where it accounts for over 50% of the global market.

With demand for aircraft leasing rising (it now stands for 40% of aircraft deliveries), the prospects for the 30-plus leasing companies centred here are positive.

All of this activity would be impossible without the existence of airlines. On this front, Ireland also is on the front foot. It is home to the legacy carrier Aer Lingus, which has ridden the challenges posed by hyper-intense competition.

Ryanair remains the most potently profitable low cost airline in the western world and has formalised plans to grow robustly in the next five years. Another low profile operator, ASL Group, runs a fleet of over 80 aircraft servicing cargo and passenger customers internationally from a base near Dublin. It has developed a profitable franchise that recently expanded in a joint venture with Aer Lingus.

Not everything is rosy. Certain parts of the aircraft maintenance sector are troubled. CityJet, which has incurred material losses in recent years, is going through an ownership change. Aircraft leasing is under attack from jurisdictions offering low tax rates.

Despite these challenges, Ireland should be proud of its aviation industry and work relentlessly to further improve its competitive position.

Joe Gill is director of corporate broking with Goodbody Stockbrokers. His views are personal

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