Flags of convenience: why some countries are more attractive than others when it comes to aircraft registration

The clear Mediterranean waters, year-round mild weather and rich history make the island of Malta a top tourist destination, but these are not the only reasons why Ryanair, Wizz Air and Eurowings have settled in the smallest Member State of the European Union.

Forty airline operators with a combined fleet of over 500 aircraft were on the Maltese register as of last month; this number makes the small Mediterranean country one of the few jurisdictions that punches well above its weight when it comes to aircraft registration.

However, the usual names still top the charts. Data from aviation analysis firm Cirium shows that the United States leads by a huge margin in all aircraft categories, including commercial, business and general aviation; other large countries such as China, Canada and Brazil follow far behind.

However, not all leading countries in terms of aircraft registers are large, as the case of Malta shows. Other smaller jurisdictions like Ireland, Bermuda and the Cayman Islands have also carved out a remarkable place in the global aircraft registration market.

You can assume that the reason these small countries offer a noticeable number of aircraft registrations is due to taxes. While some of these jurisdictions may indeed have tax advantages for aircraft registration, TPG consulted various industry experts who downplayed this factor.

So why do some smaller countries offer comparable numbers of aircraft registrations? We took a closer look to find out.

Ryanair Boeing 737-800 on the runway at Dublin Airport. JJFARQUITECTOS/TWENTY20

Service reigns supreme

“Taxation has become less of a pull factor for new aircraft operating certificates and aircraft registrations, particularly since the introduction of European harmonization directives in the area of ​​taxation over the past decade”, said Stephan Piazza, a lawyer specializing in aviation and navigation consulting services. at the Maltese office of accountancy organization KPMG, said: “This is a trend that is likely to continue.”

If taxes aren’t driving the high number of aircraft registrations in smaller jurisdictions, what are? In other words, it is the speed of service that these countries are able to provide.

“The Malta Registry is a very service-oriented authority,” Piazza said. “Regulatory approval that can take months in a larger jurisdiction can be done in weeks here while, at the same time, ensuring the highest levels of regulatory compliance.”

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Others have further emphasized this point, including David Colindres – president of the San Marino Aircraft Registry who oversees aircraft registries in the small independent microstate of San Marino (where there is no airport ).

“Service is the main factor here,” Colindres said. “When a jet is purchased, wealthy individuals and businesses want to get it operational as soon as possible, and that’s something we can do. We pride ourselves on our ability to react very quickly. We work closely and align with the government, although the registry is run as a private company. »

Unsurprisingly, this ability to register aircraft quickly seems to resonate with business jet operators.

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Location, location, location

Beyond seeking prompt service, operators aim to derive maximum benefit from the jurisdiction they choose to register their aircraft.

“When choosing where to register an aircraft, it is important to consider the geographic region in which that aircraft will primarily operate,” said Brian Skehan, an industry executive and managing director of SARC, a consulting firm specializing in aviation regulation.

It will likely come with a few added benefits.

Malta, Ireland and Austria, for example, are members of the EU, so their fleets can operate unhindered throughout the EU without needing to obtain third-country operator authorisation.

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Policies matter

Maltese Prime Minister Robert Abela and Health Minister Chris Fearne. JONATHAN BORG/XINHUA NEWS AGENCY/GETTY IMAGES

Specific policies also play a role in deciding where to register an aircraft.

The international framework that regulates civil aviation – of which the Convention on International Civil Aviation (also known as the Chicago Convention) is a cornerstone – provides flexibility for countries to prioritize certain interpretations of registration rules so that they can attract more aircraft owners and operators.

For example, in some jurisdictions, an aircraft must be registered by its beneficial owner; other jurisdictions allow more complex ownership structures, providing additional flexibility for operators. This is another reason why Ireland regularly attracts operators to its shores to register their aircraft.

Malta’s ratification of the Cape Town Convention – an international treaty that protects property rights in highly mobile assets like aircraft – in 2010 also explains how Malta has become a major player in aviation services. By taking this decision and subsequently revamping its aircraft registry to better align with commercial interests, the country has invested more in maintaining and improving facilities, which operators can then benefit from. We are not talking here about a simple annotation on a register, but about hard and tangible metal which rolls on the tarmac of the local airport.

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At the end of the line

Just as countries compete to attract foreign investment into their economies, so does the market for aircraft registrations. The Aircraft Registry has become a key tool for jurisdictions that, regardless of size, want to play their part in the development of the global aviation industry.

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