Guernsey: 2-REG Takes Off

Last Updated: 25 March 2015
Article by Marianne Domaille

Most Read Contributor in Guernsey, September 2018

The addition of the 2-REG could see Guernsey become the jurisdiction of choice for corporate aircraft ownership, according to Marianne Domaille, Director of Albecq Trust Company Limited.

The first use of aircraft registrations came about in the early 1900's and tail numbers were based on the radio call sign which was allocated to a particular nationality. Aircraft registration has advanced dramatically since then. More recently, a number of aircraft registries have been established in offshore jurisdictions and are viewed by many as a complementary facility to the offshore financial services industry. In addition to offering private aircraft, mortgage and engine registers, most offshore aircraft registries will also provide ancillary services such as airworthiness certifications, radio and pilot licensing.

The Channel Island Aircraft Registry (the 2-REG) launched in December 2013. It is similar to the Isle of Man Aircraft Registry, which launched in 2007 and had registered some 650 aircraft by the end of 2013. Bermuda and Cayman's registries are also enjoying similar success and there are plans for several more offshore jurisdictions to establish aircraft registries in the near future. The pertinent reason for Guernsey to introduce the 2-REG is to be able to cater for all the wealth management needs of its international client base.

So, why is demand for offshore aircraft registries increasing?

  • As manufacturing technology develops, private aircraft ownership is becoming a much more affordable option to individuals and businesses, particularly those looking to take a step up from jet chartering and fractional ownership schemes. For example, excluding running costs, a new 6 seater jet, able to fly non-stop from London to Cairo, can be purchased for less than US$9 million.
  • We have seen substantial economic growth in countries such as China and Brazil. China is well known to be one of the fastest growing private jet markets in the world. Its expansion is inhibited to a certain extent, mainly due to a general lack of infrastructure, technical knowledge and experience. Some large corporates are resorting to constructing their own airports to cater for their fleet of business jets.
  • Most individuals who are wealthy enough to be able to afford an aircraft will often already have pre-existing offshore structures and will be familiar with the associated benefits.

One of the most common ownership structures used to hold private aircraft is a limited company. In recent years, there has been a shift away from appointing corporate service providers in less regulated jurisdictions towards choosing more reputable jurisdictions such as Guernsey. Clients and their professional advisors now attribute greater value to reputation and integrity and understand the additional compliance cost that this may bring. It is worth pointing out that while the initial, upfront costs of doing business in Caribbean jurisdictions may be less than using Guernsey, in fact, over the longer term, the expense is likely to be broadly comparable.

It is rare to find a client holding an aircraft in their own name, without the protection of limited liability and separate legal personality. Use of a company provides the confidentiality that many people seek. The risk of negligence as regards the safety, maintenance and operation of the aircraft is significant, and in the event of an accident, by using a limited company, the liability of the beneficial owner is limited and they should normally be protected from any claims.

What does the future hold?

While the concept of a trust can be dated back as far as the 11th century, the fiduciary industry as it is today did not really evolve until the 1970's. Companies featuring both separate legal personality and limited liability have been around since the mid 1800's. Guernsey's own trust and company laws have undergone an overhaul in recent years and are both forward thinking and practical. With the addition of the 2-REG, Guernsey could soon become the jurisdiction of choice for corporate aircraft ownership.

Private aircraft ownership is on the rise. Individuals and businesses are seeking more efficient methods of commuting to and from their business destinations. In many cases, the flexibility, convenience and time saving that private flights can offer to the user is more valuable than the ticket cost saving of flying commercially.

The general view of the aviation industry is that we should start turning attention towards South-East Asian countries where GDP growth is on average, significantly higher than Europe or the US. In countries such as Singapore, Thailand and Indonesia, the number of business jet fleets is increasing commensurately.

Private aircraft ownership is set to become common place. If we can keep pace with demand for appropriate aircraft ownership structures, the future for this sector is bright.

An original version of this story first appeared in the STEP Directory, January 2015.

For more information about Guernsey's finance industry please visit www.guernseyfinance.com.

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.

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