Irish airlines should be given manufacturing status for tax purposes to enhance their competitiveness within Europe, according to Cityjet chief executive Mr Pat Byrne. At present, airlines paid the standard 36 per cent corporation profits tax. The manufacturing rate was only 10 per cent.
Mr Byrne was speaking at the "Cleared for Take-off?" conference organised by the Irish Airline Pilots' Association (IALPA) in Dublin yesterday. It is the first conference involving unions, employers and the Government to debate the future of the aviation industry in Ireland.
The Irish aviation industry enjoyed "comparatively lower employment costs and less restrictive work practices than our European counterparts", Mr Byrne said. This attractive cost base must be preserved if Irish aviation was to exploit the present opportunities in Europe.
He went on: "To bolster the expansion of Irish airlines into Europe, I feel strongly that the time has now come for the Government to grant manufacturing status to Irish licensed carriers. This will bestow a 10 per cent tax status on corporation profits tax, which will have an immediate effect of attracting private and institutional investment for airlines with sound business expansion plans."
The potential return for investors could be greatly enhanced by creating a favourable tax regime.
As justification for claiming the manufacturing tax rate, Mr Byrne said that the exacting criteria for aircraft maintenance "effectively requires an ongoing re-manufacturing process in terms of component replacement and overhaul". He quoted as a precedent the granting of 10 per cent tax status to Irish licensed companies at the IFSC, where a leading activity was aircraft leasing.
With a number of continental flag carriers beginning to contract out short-haul routes to lower-cost regional operators, Mr Byrne said Irish airlines were ideally based to grow in this lucrative market. He called for an alliance between Irish licensed airlines to ensure that they exploited European market opportunities to the full.