Ireland: Opportunities Post AIFMD – The Sky Is The Limit

Ireland, as you would expect from a domicile that services over 40% of the world's alternative investment products, was in the vanguard when it came to the implementation of the Alternative Investment Fund Managers Directive ("AIFMD"). At the time of writing there are over 127 Alternative Investment Fund Managers ("AIFMs") regulated in Ireland, with in excess of 2,000 AIFs.

While we can certainly expect the number of AIFs domiciled in Ireland with so called "traditional" alternative asset classes to increase in the coming months, some of the more progressive AIFMs have been seeking out fresh asset classes, in order to utilise the robust framework provided by regulated AIFs. In this regard, the aviation sector may offer an asset class that will appeal to investors' growing appetites.

Prior to the development of the Irish funds industry in the late 1980s, Ireland had already become the jurisdiction of choice for both aircraft financing and leasing operations. The catalyst for this was the establishment of Guinness Peat Aviation ("GPA") in Shannon, County Clare in the mid-1970s.

GPA spawned an industry of global aircraft lessors either headquartered or exercising an established presence in Ireland. The industry here has grown year on year, due primarily to the number of experienced executives and professional services firms available and the attractive legal and taxation regimes in place. To give some idea of the scale of the industry in Ireland currently, nine of the world's ten largest aircraft lessors are located here, with approximately 50% of the entire global aircraft fleet of leased aircraft being managed out of Ireland. Aviation companies based in Ireland include

More recently, the manner in which aircraft financing is being structured has started to evolve and become more sophisticated. We see private equity and hedge funds assuming an ever more important place in the aviation market. These act as significant sources of equity, and provide capital for both lending and leasing. The range of aviation related assets in which such entities can invest are broad and varied and can include, for example, direct investment in aircraft or aircraft owning entities, secured and unsecured privately placed notes, equity investment in leasing firms as well as aircraft and lease asset backed securities.

Aircraft assets, particularly newer aircraft, have generally not been subject to the wide fluctuations in value seen with many other asset classes. In addition, significant amounts of capital can be put to work relatively easily and effectively in aircraft related investments. Aviation assets are so called "hard assets", which have traditionally proven popular with investors, particularly at less economically certain times. Moreover, aircraft as an asset class has shown notable resilience in the face of inflation, as they are assets that reset their financial terms on a regular periodic basis.

The aviation industry is currently enjoying a period of strong growth. This can be attributed to a number of factors, including growing passenger numbers in Asia and the fact that we are in the middle of a period of global aircraft replacement with many aircraft currently coming to the end of their lifecycle, and new orders for aircraft at all-time highs. In addition, investors are becoming more and more aware of the importance of diversification in terms of asset class and portfolio and are enticed by historically predictable cash flows that aircraft have shown to yield (while remaining quite a liquid asset class). As a result, aircraft as an asset class are becoming more and more attractive to investors and clients of AIFMs.

The Qualifying Investor Alternative Investment Fund ("QIAIF") is one way in which sophisticated investors can go about diversifying into aircraft as an asset class. Nevertheless, while the QIAIF can invest directly, it is more likely (e.g. for treaty benefit reasons) to use the "Super QIAIF" structure. This structure combines the favourable investment funds regime for QIAIFs with the favourable Irish securitisation regime (in respect of which Irish tax neutrality can effectively be achieved through the use of profit equalisation securities). Essentially, the QIAIF finances the securitisation vehicle (SPV) (which will be a 100% subsidiary of the QIAIF) by taking up a profit participating security issued by the SPV. The SPV then uses the monies raised through the issue of the profit participating security to purchase the aircraft (in the normal manner) as set out in the investment funds' policy documentation. As the SPV is a fully taxable vehicle in Ireland (albeit its taxable profits can be managed to a desired level including taxable profits of zero if so desired – through the use of profit participating securities) and the SPV is the entity making the investments, it typically removes one of the obstacles to taxexempt regulated funds obtaining treaty benefits, namely the requirement to be "liable to tax".

A number of recent legislative developments also lend themselves to increasing both Ireland's attractiveness and the attractiveness for investors of aircraft as an asset class. One such significant development is the enactment into Irish law of the State Airports (Shannon Group) Act, 2014 (the "2014 Act"), which provides for amendments to the International Interest in Mobile Equipment (Cape Town Convention) Act, 2005 (the "2005 Act") and the associated Aircraft Protocol (the "Protocol"). The 2005 Act incorporated the Cape Town Convention (the "Convention") into Irish law. However, in accordance with EU rules, Ireland did not make a declaration in respect of the insolvency remedies provided for in the Convention, nor did it modify its domestic insolvency regime to incorporate such remedies. Now, the 2014 Act enhances Ireland's aviation insolvency regime by giving effect to Alternative A in Article XI of the Protocol ("Alternative A").

Alternative A is very similar to the long established Chapter 1110 regime in the USA, which has proven very effective from a practical perspective in dealing with airline re-organisations. Restructurings under the regime have been undertaken by numerous notable players in the industry, including Continental, Delta, US Airways and United. Given the fact that many aircraft lessors have strong US operations, it is significant that Ireland now offers a regime not dissimilar to that which has been tried and tested in the USA.

Separately, and perhaps more importantly, the introduction of Alternative A better facilitates the issuance of Equipment Trust Certificates ("ETCs") in Ireland going forward. ETCs operate whereby a "trust certificate" is sold to investors in order to finance the purchase of aircraft by a trust, managed on the investor's behalf. The trust will then in turn lease the aircraft to a lessee routing payments through the trust back to investors. The lessee will receive title to the aircraft once the trust certificate matures. Effectively, the ETC is a type of secured debt financing not dissimilar to a mortgage. Enhanced Equipment Trust Certificates ("EETCs") or double ETCs are similar to ETCs except for the division of the entitlement to payment conferred thereby into two or more classes of securities e.g. senior and junior securities.

We expect to see further developments in this area over the coming year, as the main players in the Irish aviation finance and leasing sector and the Irish funds industry seek out synergies across related investment platforms. We hope to see increased activity in the area, and capitalisation on the combination of favourable Irish legal, regulatory and taxation frameworks, the wealth of experience domestically in this area, the sustained growth of the aviation sector and the attractive and historically solid return that aircraft as an asset class offers to investors.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions