| CIT chooses Dublin for workforce/tax benefits |
Back |
| CIT Aerospace International, the latest entrant in Ireland’s aviation finance sector, chose Ireland for its employment and corporate tax advantages. |
Speaking to FINANCE, Frank Pray, managing director of the new operation, said, ‘Ireland was chosen for its strong pool of highly skilled aviation related workforce (a lot of expatriates that are looking at relocating back to the country from overseas) as well as its low corporate tax rate’.
Although CIT, the US commercial and consumer finance group, looked at other global locations, ‘we subsequently focussed on Europe as it allows for better overlap with our US operations and Asian customers,’ says Pray. | | Frank Pray, managing director, CIT |
CIT Aerospace International will oversee the company’s international leasing and financing business. Based in Georges Dock, the new operation will employ 25 people, and will manage €2.5 billion in assets by year-end, with a growth target of €4 billion of aerospace assets by 2008.
The US Jobs Creation Act 2004 also played a key role in the decision making process. According to Pray, as a result of the Act, ‘the earnings of our Irish based portfolio are taxed at a lower corporate tax rate than they would have been in the US. This improved profitability will allow us to further grow the business (in the US and Ireland) and invest in additional aircraft purchases from Airbus and Boeing and aircraft engines from our engine suppliers’.
Pray expects that the majority of CIT’s latest aircraft order from Airbus, which consists of 24 A320 family aircraft to be delivered in 2007 and 2008, and 5 A350 aircraft, to be delivered in 2012 and 2013, at a cost of $2.2 billion, will be managed in Dublin, as they will be placed with airlines outside the US.
As the general infrastructure for the new operation is set up, CIT will now focus on expanding the distribution network (marketing and sales) as well as the asset management side (aircraft technical) in the near term.
Industry outlook
Pray is optimistic about the outlook for the sector as a whole, but warns that there will be further casualties in the US industry, before it sorts itself out.
‘The aviation business is going through significant change, however one has to differentiate between global issues (like fuel cost) and regional issues (local GDP growth and local economic issues). Our business in Asia, particularly China as well as India and the Middle East and in most parts of Europe is doing very well. The aviation business in South America is consolidating and should develop reasonably well over the next couple of years. The US will need a couple more years to sort itself out as there are unresolved labour issues and there is still excess aircraft capacity in the system. This excess capacity impedes airline’s ability to pass on increased fuel costs to the consumer which will cause further financial casualties in the near future’. |
|
| Article appeared in the September 2005 issue.
|
|
