Smurfit school unveils unique aviation finance course

The international aircraft leasing industry has long been dominated by Irish expertise, and now the University College Dublin is hoping to capitalise on that success.

The university’s Smurfit Graduate Business School has established Europe’s first masters course in aviation finance, tapping into the expertise that the industry has built up over the past 20 years.

The question facing the industry now is how to keep growing. Ciaran O’Hogartaigh, the dean of UCD Smurfit, says the MSc in aviation finance is as much about looking to the future of the industry as about capitalising on its past.

“The industry is thinking, and we are thinking, about where the next generation of industry leaders is going to come from,” he says.

As Smurfit prepares to enrol the first students for the programme, which begins in September 2016, the aviation finance industry is putting its weight behind the move.

Peter Barrett, chief executive of SMBC Aviation Capital, one of the world’s biggest aircraft lessors, says the industry is backing the academic institution “not just with hard dollars but with time”.

Mr Barrett acknowledges the debt the industry owes to Irish businessman Tony Ryan, who died eight years ago.

Mr Ryan is best remembered for co-founding Ryanair, which rose from scrappy beginnings in the cut-price market to become one of the world’s biggest airlines. His legacy, however, is more significant than that.

As the founder of GPA (Guinness Peat Aviation), the pioneering but ill-fated aircraft leasing company, he laid the foundations for an extraordinary Irish success story.

Although GPA no longer exists — its assets were acquired by GE Capital — its alumni have risen to the top of Irish business, and they dominate the global aircraft leasing market.

“GPA created a cadre of knowledge and expertise that really became the heart of the aviation leasing industry in Dublin,” says Mr Barrett. “It was the oak that grew a lot of acorns. The tree is dead, but the acorns are flourishing.”

Aircraft leasing

One in five passenger aeroplanes are owned by aircraft leasing companies operating out of Ireland. Airlines lease about 40 per cent of their combined global fleet, and half the world’s leased aircraft are supplied to airlines by those Irish companies.

The way the Irish tax system treats depreciation is one reason why the aircraft leasing industry has made Dublin its home. As well as that, the country’s 12.5 per cent corporate tax rate is one of the lowest in Europe.

Ireland has double taxation treaties with many countries.

It also has a certain expertise in technical services to the airline industry and a nexus of professional services in law and accounting that has grown up around the aircraft leasing sector.

Mr Barrett is one of those acorns. So is Domhnal Slattery, founder and chief executive of Avolon, the lessor that was acquired for $2.5bn a few weeks ago by Bohai Leasing, a unit of the Chinese conglomerate HNA.

Both Michael O’Leary, chief executive of Ryanair, and Denis O’Brien, the telecoms tycoon who is Ireland’s richest man, started their business careers at GPA as personal assistants to Ryan.

The Smurfit school expects the next generation of industry leaders to come from abroad as well as from Ireland. About 40 per cent of the students enrolled for the first year are international, says Don Bredin, who chairs banking and finance at UCD.

The course has been marketed heavily both in Ireland and internationally.

It is designed “to service the industry and to develop the academic space it has created,” Prof Bredin says. Subjects will include the analysis of the parties on both sides of the leasing agreement — the company that owns the aircraft and the airline that uses it. Other topics include taxation and law, risk assessment, aircraft valuation and insurance.

The course will run for six months, with the final third of the programme ending in placements for the students. It is being backed by some of the industry’s main operators, including SMBC, Avolon, Safran, and KPMG, and a senior industry figure is expected to be named as chair for the course.

Prof O’Hogartaigh says the development of the MSc in aviation finance is part of the school’s push for a higher international profile.

One way of achieving this, he says, is “to pick an academic area that plays to Ireland’s strengths”.

Students who graduate will work for companies with large balance sheets, and “can expect to be very well paid”.

Ryan, who made two fortunes and lost one of them, would love that.