Armed with brand new legislation and a successful track record in attracting industry leaders such as Lufthansa Technik and SR Technics, Malta aims to take its place among the global aviation service centres.
Malta’s aviation and aerospace industry has taken off. While the island has been fostering the sector for the last couple of years, today, the aerospace sector has expanded and offers a wide range of related services. These include: airline registration; maintenance; repair and overhaul of aircraft, engines and components; airline call centres; financial services; software development; aircraft management and support services. ‘With the full range of services available and Malta’s geographic position at the centre of the Mediterranean, the country has turned into a strategic aero hub.
Malta aircraft registration
In 2010, Malta implemented a new aircraft registration regime, structured in a manner to accommodate efficient registration of smaller aircrafts, in particular business jets. The regime is governed by The Aircraft Registration Act, Chapter 503 of the Laws of Malta which will serve as the framework for the registration of aircrafts in Malta.
In recent years Malta has been actively positioning itself as a favourable aviation base in the EU. Malta has so far attracted several international carriers to operate from Malta and more importantly, the successful establishment of aircraft maintenance facilities such as those of SR Technics and Lufthansa Technik.
The Aircraft Registration Act addresses several important issues such as different types of registrants, the concept of fractional ownership and the protection of creditors and special privileges which may exist on the aircraft. Aircraft registration is administered by the Authority for Transport in Malta.
An aircraft may be registered by the owner, operator or its buyer under a conditional sale. Only qualified persons are entitled to register an aircraft in Malta. Qualified person/s should be beneficially owned at least to the extent of 50% by individuals who are citizen of the European Union, EEA or Switzerland. Qualification for registration is more flexible when it comes to the registration of private jets. An aircraft which is not used for ‘air services’ may be registered by any undertaking established in an OCED Member State. Registration caters for issues of confidentiality in the sense that it is possible for the aircraft to be registered by a trustee. Foreign undertakings registering an aircraft in Malta are obliged to appoint a Maltese resident agent.
Maltese registration allows the possibility for separate registration of the aircraft and its engines. An aircraft which is still under construction may also be registered in Malta. The notion of fractional ownership is fully recognised by Maltese law allowing that the ownership of an aircraft to be split into one or more shares. Details recorded on the public register include the physical details of the aircraft, physical details of its engines, name and address of the registrant/s, details of any registered mortgage/s and details on any irrevocable de-registration and export request authorisation.
Maltese law allows the aircraft to act as a security for a debt or other obligation. A mortgage on an aircraft may be registered and as such all registered mortgages including any special privileges are not affected by the bankruptcy or insolvency of its owner. Furthermore, the law protects the judicial sale of the aircraft (instituted by the registered mortgagee) from being interrupted by curator in the bankruptcy proceedings of the owner. A mortgage may be transferred or amended according to the relevant preferences and circumstances of the creditor. Special privileges are granted in respect in respect of certain judicial costs, fees owed to the Malta Transport Authority, wages payable to the aircraft’s crew, debts owed in relation to the repair and preservation of the aircraft and if applicable, to wages and expenses in relation to salvage. Interpretation of the provision of the governing legislation has been consolidated and facilitated by Malta’s ratification of the Cape Town Convention.
The regime has also been supported by attractive fiscal incentives:
- Income derived by a person from ownership, operation of leasing of aircrafts is not taxable in Malta unless this is remitted to Malta
- 0% withholding tax on outbound lease and interest payments made to non-resident persons
- Beneficial depreciation period for wear and tear
- Exemptions from certain fringe benefits
Top safety standards
While structuring their plans to establish the country as a successful aviation register, the Maltese authorities recognised that by introducing cutting -edge regulation, strengthening the support infrastructure for the operation of aircraft and leveragtng off the islands’ well established and highly regarded business infrastructure, they could successfully target the ever- increasing number of private and corporate business jet owners seeking a European base. Malta is already a thriving aircraft maintenance location, hosting facilities for major international companies such as Lufthansa Technik and SR Technic, and this fact, together with the considerable fiscal benefits associated with the setting up of Maltese companies, plus the country’s reputation among European aviation circles for top professional safety under European Aviation Safety Agency (EASA) standards, give Malta a collection of compelling advantages over competing destinations.
New legislation opens market
The importance of facilitating and developing the aircraft registration sector in Malta was recently given another push by the Maltese authorities when on the 1st October 2010 the new Aircraft Registration Act entered into force. The new Act streamlines and sets a defined legal framework to regulate aircraft registration in Malta. It also widens registration possibilities for aircraft not used for air service and implements the Cape Town Convention, now widely recognised as a market standard in aircraft finance transactions. To sum up, the Act is designed to facilitate the registration of aircraft, facilitate aircraft financing and safeguard aircraft owners’ and operators’ interests. Updating and widening the scope of the regulation, while introducing innovative concepts, the new laws are intended to make Malta even more attractive to the aviation industry, the ambition being that Malta becomes the first consideration for aircraft registration in Europe.
Excellent infrastructure for maintenance and repair
Prior to 2003 the Maltese maintenance repairs and overhauls sector (MRO) was still in its infancy stage. Besides Air Malta, the two most renowned companies operating in this sector were Medavia and Aeromaritime.The arrival of Lufthansa Technik in 2003, a global leader in the MRO industry; heralded fresh impetus in the sector. Commencing operations with 160 staff, the company expanded its operations within a few years of arrival, constructing a 55-million-euro expansion to set up new aircraft maintenance facilities to handle the Airbus A330 and A340 aircraft. The new hangar, among the first in the world able to take the new Airbus A380, was inaugurated in March 2009 and created over 500 new jobs for specialised personnel.
The initial success of Lufthansa Technik led other companies to set up shop in Malta. This includes SR Techntcs, the Swiss-based aircraft maintenance company, which set up operations in 2010 and is aiming to employ 350 people by 2014. Their first major client in Malta is popular low-cost airline, easyJet, which has signed an l l-year contract with SR Technics for the service and maintenance of all 157 aircraft in their fleet The investment by the Maltese government in the MRO educational segment has led to the sector growing year on year, both when it comes to employment levels and also to gross value added to the economy.
Aviation cluster gaining momentum
Malta’s strong infrastructure, with a high quality telecommunications system and the Safi Aviation Park, has attracted not only companies like Lufthansa Technik but also companies such as Medavia and AeroMaritime who have long established operations on the island offering a range of services from aircraft maintenance to business charter brokerage. The Safi Aviation park with 2-bay hangars and with associated ancillary infrastructure, will be completed in 201 L In addition, on the IT side companies like Megabyte have been designing and implementing custom IT projects for Air Malta, Cyprus Airways and Etihad Airways amongst other airlines, while specialist airline reservation call centres such as Centrecorn, which forms part of the World Aviation Group, have set up on the island. The fact that Malta has English as one of its official languages has served as an incentive for the setting up of call centres in Malta. Leveraging off the country’s international business and financial services infrastructure, other areas, including aircraft management and professional support services, as well as the Safi Aviation Park are gaining momentum.
Expanding the industry
Government has been especially keen to expand the sector as the industry pays above-average salaries and relies heavily on technical skills that make the jobs more sustainable. To promote the sector the Government is offering an attractive package of both fiscal and non-fiscal incentives while also investing in sector-specific education and workforce training. Malta College of Arts, Science and Technology (MCAST) offers three courses in aircraft maintenance, and is working closely with the industry to ensure sufficient numbers of suitably qualified graduates are produced to fill the new jobs the industry is creating. The Maltese Employment and Training Corporation (ETC) in addition provides hands-on training in Electrical and Electronics engineering, Pneumatics and Hydraulics, Metal Machining and Engineering Skills amongst others. Indeed, the growing importance of the MRO industry is credited directly to the excellence of its personnel and investors consider the quality and can-do flexible attitude of the Maltese workers to be the country’s greatest advantage.
In addition, acknowledging the importance of integrated policies for the transport sector, the Maltese Government set up a new authority in January 2010. Transport Malta assumes the functions previously exercised by the Malta Maritime Authority, the Malta Transport Authority, the Department of Civil Aviation and the Network Infrastructure Directorate. The vision for Transport Malta is to promote Malta as a centre of excellence in the transport industry. This new organisational structure, the authorities believe, will enhance Malta’s capability to further the potential opportunities the island offers as a service centre of the global maritime and aviation industry.
International Endorsement promises a bright future
The Maltese Government has undertaken to commit all the necessary investment to support the aviation industry in Malta. Malta’s MRO and supporting service industry offer Significant advantages to aviation companies: an enviable physical infrastructure; a tradition of engineering excellence; an established industry base; English speaking workforce; an attractive corporate tax regime and a track record of success.
For Malta’s authorities, Lufthansas constant investment is the best endorsement the country could have hoped for. It has provided a powerful impetus that strengthens Malta’s international reputation and has broadened the islands’ ambition of positioning Malta as a centre of excellence for all aspects of aviation services. With ample space and excess runway capacity available at Malta International Airport, the airport authorities are encouraging the establishment of flight training academies, the location of simulator training systems, regional business jet operations, cabin crew training and the further expansion of MRO activities. On a wider level, airline call centres, IT support services, aircraft management, flight operations support, aviation financing and leasing sectors are all also being targeted as areas of great potential for the development of this sector.
With the path already laid for other companies to set up on the island in terms of infrastructure, legislation, personnel and market access, any new airline, software company, aviation manufacturer, MRO or other service companies that choose Malta in the future will be positioning themselves to reap multiple benefits. All the right elements are in place which make Malta the ideal location for the aviation niche to grow and prosper.