Ireland's multibillion euro aircraft leasing industry is under threat following the approval of a bill in the Seanad last night that allows aircraft to be detained, and in some cases sold, when operators fail to pay their flying fees.
While in most European countries the final buck falls with the plane operators, under Irish legislation the aircraft lessors can effectively be held responsible for something they had nothing to do with.
Aircraft operators such as Aer Lingus and British Airways are required to pay fees to a group called Eurocontrol for flying through airspace belonging to 35 countries. Eurocontrol usually allows the operators to rack up considerable debts, but in the end if these are not paid the terms of a 1981 agreement enable it to sue the operator concerned.
Under the Irish legislation, Eurocontrol has the power to detain or sell an aircraft to enforce the payment of the debts. This is where the problems arise, because very often the aircraft are owned by leasing companies that have nothing to do with the debts, meaning that these groups may end up losing their assets through no fault of their own.
Criticising the Government's failure to amend the bill to take account of the industry's concerns, Fine Gael transport spokeswoman Olivia Mitchell said Eurocontrol should collect its debts "properly rather than depending on draconian legislation."
She said she was severely disappointed that the concerns of the industry had not been heard and that the effects could be harmful.
"Ireland is going beyond what other countries are requiring of their industry and it makes us a less attractive place to land a plane or from which to lease an aircraft." She likened the situation to a landlord losing his house because the tenant failed to pay the electricity bill.
Following the final reading of the bill last night, the industry is concerned that in future leasing companies may choose to set up outside Ireland, where the rules, though less stringent, are still in compliance with European rules.
Currently Ireland is home to several of the large leasing companies, including GECAS, a unit of General Electric that has 500 aircraft on its books, and Airbus, which has 120. The law will affect any plane that lands on Irish soil.
"The minister has said that it serves as a useful deterrent, but in our view it only deters financial institutions from investing in aircraft that come to Ireland," said David Bartlett, vice president and counsel at GECAS.
