Last week I attended the 9th Isle of Man Aviation Conference, having attended this event for a number of years now I always find it to be a fantastic event with lots of very interesting speakers and networking opportunities.
Simon Williams, Director of Civil Aviation at the Isle of Man Aircraft Registry kicked off the day with an update on the registry’s activity and current challenges. Simon highlighted that the Isle of Man Aircraft Registry was the first aircraft registry to go completely digital, it has also brought in a code of conduct for demonstration flights. Whilst there are challenges from the current political and financial uncertainty as well as the effect trade tariffs could have on the economy which have caused some people to tighten their belts and sell aircraft, the registry is performing well and the feedback from EBACE was very positive. Looking to the future the developments in sustainable jet fuel, electric and hybrid aircraft are very exciting and it’s just a question of when as it will happen. Simon’s view is the next aviation revolution is happening and he can’t wait.
Next Nic Arnold and Phil Morris from PWC provided a topical update on VAT and tax matters that they are seeing. They agreed it has been a challenging few years and mentioned the effect the Paradise Papers have had across the whole industry. Phil pointed out that HM Treasury conducted a review of Isle of Man Customs over a year ago following the release of the Paradise Papers, but so far the report hasn’t been publicly released yet. His view is that if something serious has come out of the review hopefully we’d have known about it by now. Phil stressed the importance of proper planning, having a strong business case and being clear and transparent. Nic is now finding that clients are much more knowledgeable on structuring. They are also focusing on transparency and reputation and are thinking about legacy much more and more questions are being asked about jurisdictions. In the UK the very onerous Benefit in Kind rules are having a knock-on effect on private structures and that clients are considering their aircraft ownership structure in the context of their global tax planning.
Neil Donaldson of Aviation Forex next provided an update on foreign currency risk management for aviation clients. He covered the effects of a hard or soft Brexit and how trade tariffs with China could affect currency. The most active currencies in the sector are EUR/USD, USD/JYY and GBP/USD. He explained that banks seek volume in order to maximise bid offer spread and also highlighted that the increased cost of regulation is leading to more pressure to maximise returns of low volume SME clients.
Robert Baltus of EBAA gave an update on the area of grey charter which are non-conforming flights such as illegal charter flights. He said the Emiliano Sala plane crash was the worst example of an illegal flight. In 2012 it was estimated that 7.3% of all business aviation flights were non-conforming. To reduce this it is important to understand the motivation behind illegal flights. Pilot education is key, and it is important they know that if they operate an illegal flight that they could lose their license, it is also crucial for operators to appreciate the risks relating to insurance, finance and their reputation. Clearer definitions are needed and the EBAA, Broker AMAC, BACA have joined forces on no-conforming flights.
Mark Bisset of Clyde and Co gave an update on the potential outcomes of Brexit and the effect it could have on the aviation industry. He highlighted that the Department for Transport have done a huge amount of preparation for a no-deal Brexit. Lots of work has been done on replicated EU rules so that the UK CAA could operate separately. Private Aviation shouldn’t be affected but potential difficulties could sit with certain areas of commercial aviation. His final comment was let’s not panic.
Next Eric Lewin of The Law Offices of Eric Lewin, Andy Blundell of Close Brothers Aviation and Marine, and Simon Davies of Global Jet discussed the impact of Brexit on Aviation Finance. Eric began by stating that with change comes opportunity but that borrowers do have concerns and some are holding of during the uncertainty. Simon highlighted that clients are giving a lot more consideration regarding which currency to borrow in as the cost of borrowing differs between currency. A trend Eric is seeing in the US is that lots of people are choosing to charter so they have the right aircraft for a particular trip. Andrew is finding it encouraging to see younger people buying aircraft such as tech entrepreneurs. He is seeing them charter first and then purchase.The panellists agreed that the overall trend is that potential clients are reluctant to acquire aircraft until the situation is clearer, there is pre-Brexit anxiety.
After lunch Ashley Namihas of Textron Aviation and Trevor Lambarth of Guardian Jet discussed purchasing new or pre-owned aircraft from a sales perspective. It was a very interesting discussion with pros and cons of both options being discussed at length. Brand reputation and technology are things that are very important to customers purchasing both new and used aircraft, as well as altitude, noise levels and using an experienced broker.
Howard Rosen next discussed how the Cape Town Convention is changing the aircraft finance industry and outlined the benefits for financiers. This was followed by Andy Hudson of Down Route and PJC Aviation who explained the importance of using smart data to make decisions and stated that “data is the new oil”. He explained the differences between big data and smart data and pointed out that customers now expect us to know what they want. Smart data can also be used to work out fuel consumption on routes in particular weather conditions and also work out which pilots use more fuel. The question is can you afford not to be looking at utilising smart data.
The day finished with Chris Mace of Domivs Aviation, Dave Edwards from Windsor Capital LLP and Graham Williamson of Tag Aviation discussing how operations are changing and operations of the future. They discussed a range of topics including recycling aviation parts, electric aircraft which everyone agreed are set to be a very big change. They also touched on blockchain and digitalisation before discussing space and supersonic/hypersonic aircraft. They agreed that challenges continue to be new regulations, capacity, continued volume and environmental challenges. They are also finding that attracting young people into the industry is currently a big problem as nobody wants to be a pilot, baggage handler or air traffic controller. It is also very difficult to make a profit as an operator. They did agree there are opportunities though including enhancing utilisation through technology, using smart data for value add and there will be environmental advances and green technology.