Hong Kong needs more than tax breaks for the aircraft leasing hub to get off the ground
Hong Kong is aiming for an 18 per cent share of an industry that can create 15,340 jobs, add HK$10 billion in tax receipts and contribute HK$430 billion to the city’s economy
With typical Hong Kong efficiency, ICBC Financial Leasing delivered its first jetliner to a customer less than six months after a new tax regime to attract aircraft leasing companies to set up shop here, a speedy response that augurs well for the city’s vision to claim a stake in the US$261 billion industry.
The late-December delivery of a new Boeing 787-9 aircraft to Korean Airlines is a boost to the city’s efforts to remake itself into an aircraft leasing hub banking on a share of a global market where 50 per cent of the world’s commercial aircraft will come from a lessor over the next two decades, compared with the current 40 per cent.
Out of that growing pie, currently 85 per cent claimed by Ireland and Singapore, Hong Kong is aiming for the crumbs at third place. Still, that translates into financial leasing for 3,240 aircraft valued at HK$700 billion (US$89.6 billion), with the potential to create 15,340 jobs over 20 years, according to 2017 projections by the Financial Services Development Council, the advisory body to the government. The government also expects the industry to add HK$10 billion to its coffers and contribute HK$430 billion to the economy.
“Hong Kong has been a huge laggard in aircraft leasing, so the new tax regime brings it more in line with Singapore and Ireland’s,” said Corrine Png, CEO of Crucial Perspective, an independent equity research house in Singapore. “This has essentially levelled the playing field and improved Hong Kong’s competitiveness in terms of tax efficiency for nurturing the aircraft leasing industry ... there is a lot of catching up to do in the coming years.”
ICBC Financial, a unit of one of China’s largest banks, switched its transaction to Hong Kong from Ireland, making the victory especially sweet for the city.
Between 11,000 and 12,000 aircraft are leased every year by global airlines, with Ireland taking the lion’s share of the market at up to 65 per cent, after being in the business for 40 years. Singapore has 20 per cent of the global market in second place, after being in the business for two decades. An estimated 15 per cent of the market - equivalent to 1,000 planes - is now handled in China between Shanghai, Shenzhen and the Dongjiang free trade zone in Tianjin. Hong Kong is aiming for an 18 per cent share of an enlarged pie.