Malta’s aviation sector represents a textbook definition of a cluster, encompassing maintenance, aircraft registration, leasing, finance as well as crew and flight training. Its legislative framework has turned Malta into a recognised address for the registration of both private and corporate jets, while maintenance, repair and overhaul (MRO) providers have long discovered Malta to be a profitable base. Lufthansa Technik, along with Vistajet, one of Europe’s largest private jet operators, are among the firms that have operations on the island. The country is also a leader in a broad range of other aviation services as it hosts firms catering for everything from crew training to engineering services and communication. Aviation is today one of the fastest growing industries in the country, and the government sees significant potential for further growth by attracting more aircraft leasing, finance and charter companies.
The history of Malta’s aviation cluster can be traced back to Malta’s strong position in the maintenance, repair and overhaul (MRO) field. Companies such as Medavia and Aeromaritime have been operating in the country for a long time, and upon the arrival of aircraft servicing company Lufthansa Technik in the early 2000s, other companies, including SR Technics, chose to explore the opportunities available on the island. Malta’s growing International Finance Centre provided the impetus to expand the industry and update the country’s aircraft registration and finance laws. Malta’s first aircraft register was established in the 1960s, but was populated only by aeroplanes operated by the country’s national carrier, Air Malta, and a small number of business jets and light aircraft. The introduction of a new Aircraft Registration Act in 2010 changed all this and helped develop Malta into a thriving Mediterranean aviation hub. Today, aviation contributes 2.5% to Malta’s GDP. The local industry may be small by international standards, but it is growing at a steady rate, and the island’s vision is to build a sustainable, competitive industry base that includes a wide range of aviation services, including management, training and aircraft maintenance and financing.
Attracting Global Companies
Malta’s aviation sector today aspires to follow in the successful footsteps of the country’s long-established maritime industry, which still retains the largest shipping register in Europe. Similarly, the country’s expanding aviation register is generally regarded as a key driver behind the growth of the industry. The Maltese aircraft registry counts in excess of 260 aircraft, with some 40 air operator certificates (AOC) held by aircraft operators having their principal place of business in Malta. While Luxembourg and Ireland have traditionally been Europe’s aviation hubs, key players in the global aviation industry are increasingly relocating to Malta. Corporate charter airlines such as Comlux, Orion Malta and Air X Charter have all registered aircraft in the country. Aircraft management companies DC Aviation and Hangar 8 also established operations on the island, while in 2016, Austrian private jet company VistaJet relocated its headquarters and registered 50 aircraft, adding to the increasing number of private jet companies choosing Malta as the ideal location for the management of their fleets. The move meant that VistaJet registered business jet aircraft worth $1.8 billion on the Maltese registry, making it the biggest aircraft operator in the country. Dutch-run Aviation Cosmetics moved into a brand new hangar complex in 2016, designated as an aircraft paint shop, spraying all makes and models, including the A380. As the sector grows, Malta’s advantages are being recognised further afield, and the island is now also drawing interest from companies from the US and the Far East who are keen to access Europe and Africa.
This growth is due in no small part to the sector’s helpful legislation. Malta’s Aircraft Registration Act strives to do away with unnecessary red tape and regulatory burdens, while maintaining the added protection of being fully recognised by Maltese and EU law. The legislation allows the registration of an aircraft while it is still under construction, the recognition of fractional ownership and the regulation of trust agreements in relation to aircraft. Transport Malta offers fees that are amongst the lowest in the EU, as well as streamlined regulations that are in full compliance with the international safety standards set out by the European Aviation Safety Association (EASA). The Civil Aviation Directorate of Transport Malta also provides an attentive, personal service to companies setting up in Malta.
The country has long ratified the Cape Town Convention, which is widely recognised as the market standard in aircraft finance.
As well as developing cutting-edge legislation, Malta has recently sought to position itself at the forefront of aircraft finance transactions. The country has long ratified the Cape Town Convention, which is widely recognised as the market standard in aircraft finance. The Convention provides certainty to investors in the event of debtor defaults and details procedures that should be undertaken if this happens, such as taking possession or control of the aircraft, selling or granting a lease on the aircraft, and collecting or receiving any income or profits arising from the management or use of the aircraft. In 2016, the Aircraft Registration Act also underwent some fine-tuning, and areas such as insolvency proceedings and mortgage enforcement have been tweaked, demonstrating the authorities continued support and commitment to growing the sector further.
Malta is also well placed for the structuring of air finance deals through various methods, such as syndicated loans and securitisation. A wide variety of asset classes can be securitised under Malta’s Securitisation Act, including lease/charter payments for aircraft. The regulator has also developed a procedure for aircraft leasing which makes the purchase and subsequent lease of an aircraft more attractive, whereby VAT becomes due only for the time an aircraft operates in the European Union. In addition, Malta offers the aviation industry a competitive tax system and access to over 70 double taxation treaties worldwide.
Corporate charter airline Comlux has registered aircraft in Malta
With 40% of the world’s aircraft being leased today, aircraft leasing proves to offer tremendous opportunities for Malta to position itself as a Mediterranean hub alongside established or emerging centres. The main challenge for Malta’s aviation finance and leasing industry in meeting its own growth targets is to develop the required expertise, but the industry is confident that with increased exposure to international transactions it will quickly develop a track record of high-quality work. To take full advantage of the growing aircraft leasing and financing markets, it will be important for Malta to further develop its tax treaty network, in particular with the large and developing economies in Asia that are increasingly on the radar of the industry.
Due to its lower cost-base and competitive fiscal framework, more and more companies are choosing to capitalise on the opportunities available on the island.
Emerging business streams in aircraft leasing and finance are strongly supported by investment in physical infrastructure, such as the €17 million, 200,000 square metre Safi Aviation Park, which hosts a number of business aircraft operators and MRO facilities. The government sees this development as instrumental in attracting larger aircraft-leasing and charter companies, thus sustaining the industry’s upward trajectory. In addition, law and accountancy firms provide a growing number of ancillary services and are able to assist aircraft owners, managers, lessors and lessees, financiers and aircraft MRO facilities on a wide range of issues. They advise on sale and purchase deals, aircraft registration, chartering and leasing, and the drafting of aviation-related service agreements pertaining to maintenance and repair.
The growth of the industry has also allowed the establishment of flight academies, as well as permitting the Malta College of Arts, Science and Technology (MCAST) to begin offering aviation-related training. Added to its very supportive environment, Malta has taken strides to attract an even greater share of top-tier talent and world-class firms by extending tax-friendly policies, originally drawn up for the finance industry, to the aviation sector. Foreign aircraft managers coming to Malta can now benefit from a reduced income tax rate. These advantages, combined with EU membership and the fact that English – the global language of aviation – is one of Malta’s official languages, enhances the country’s proposition as a base for aviation operators. On the flipside, companies in Malta are reporting that the rising cost of housing and office space are increasingly eroding the island’s traditional cost advantages, although rates are still somewhat lower than in most locations in Continental Europe.
Safi Aviation Park
As part of its aviation sector development strategy, Malta is supporting diverse activities, including, but not limited to, MRO operations, back-office set-ups, R&D and the production of aircraft components. A number of smaller companies have already built up a reputation for quality and craftsmanship in fitting and refurbishing aircraft. The sector offers a range of opportunities in profitable niches such as custom IT design or specialist airline reservation call centres. Major airlines also regard the country as a recruitment location due to the language abilities of the Maltese, and another market being developed is aircrew training. There is room for expansion in the area of pilot training due to the lack of flight simulators, but it is already possible to enrol in a number of flight academies on the island. In addition, Malta invites companies to take advantage of its licence regime for airborne telecommunications.
With a rapidly growing aircraft register, effective legislation and a strong support infrastructure, Malta’s aviation industry looks set to continue its extraordinary expansion. Although the global aviation industry is challenged for profitability, growth for the years ahead seems to be assured by an increasing demand for safe and efficient transport in nearly every corner of the world. Due to its lower cost-base and competitive fiscal framework, more and more companies are choosing to capitalise on the opportunities available on the island. This implies that the aviation ecosystem will grow further and create more opportunities for service providers to expand in tandem with the sector. The government has also announced its intention to invest heavily in aviation research and development sector in order to retain its competitiveness on a global scale. Should Malta’s aviation sector maintain, or even improve upon, its recent performance, there is little doubt that it will achieve its goal of emulating the success of Malta’s maritime industry and build up the critical mass to reinforce its position.