Malta strikes the right balance
Business aviation in Malta has experienced rapid growth in the past 10 years; encouraged by the Maltese government. Words: Yves Le Marquand
HOW DOES a jurisdiction grow from a handful of AOCs a decade ago to more than 40 now – and still rising? The answer can be found in a delicate balancing act.
Just as balance is key to leading a healthy life, the successful operation of a charter business, maintenance outfit or aircraft regulatory body is no different. But striking a balance can be fraught with difficulties.
In Malta, for the past decade or so, striking a balance between the regulatory stipulations of the local authority and the desire for business jet operators to turn a profit has been the focus of much attention. Now with more than 500 aircraft registered on the island to the 40-plus AOC (Air Operators’ Certificate) holders that attention looks to have paid off.
Companies like VistaJet have moved their entire operation to Malta Air while others have expanded their businesses by establishing offices on the island. Low cost commercial carrier Ryanair has two subsidiaries active on the island. One is Lauda Europe and the other Malta Air, which received its AOC in 2019 and operates a fleet of 120 aircraft. The island has grown into an aviation cluster involving operators like Lufthansa Technik, SR Technics, Comlux, AirX, Hyperion Aviation and many others.
“Maltese aviation has provided a regulated modern framework within which it supports business aviation alongside commercial aviation,” Joanne Goodall, CEO, TAG Aviation Europe, told Corporate Jet Investor. TAG Aviation moved part of its operation to Malta as part of a commitment to expand into new EU territories. The firm attained its Maltese AOC in 2017 after just several months of planning, a success which they credited to Transport Malta’s “warm welcome and expert guidance”.
Goodall continued: “They have managed to ensure that all air transport continues to develop in a safe manner whilst keeping a helpful mindset for the operator. This has enabled business aviation to adhere to high levels of safety and regulated practice under their direction whilst also being understood as a business.
“As with any AOC operation, a regulatory structure is required that necessitates appropriate personnel to have extensive experience in the sector as they undertake post-holder positions. This can be a limiting factor in the initial stages. The Maltese authorities are extremely exacting and follow strict due diligence before supporting an AOC application and there are considerable steps to take to ensure compliance, which although a challenge is highly respected in the industry.”
“Maltese aviation has provided a regulated modern framework.”
Fiona Healy, Managing director, FCF Assets
Fiona Healy is a solicitor and has been based in Malta since 2011 – initially as legal counsel for a law firm specialising in aviation. Fiona founded FCF Assets in 2015. The consultancy provides both legal and practical assistance to clients in obtaining Maltese AOCs and a broad array of other advisory services pertaining to sourcing, financing, importing, registering, and operating business aircraft.
[email protected] • +356 7963 6334
Joanne Goodall , CEO, TAG Aviation Europe
With a diverse background in business aviation, Joanne Goodall has worked for commercial and cargo-based airlines. She started in 2007 as a senior account manager and subsequently undertook an array of executive appointments which advanced her worldwide aviation knowledge. She joined TAG in 2017 as a client relationship manager and prior to this worked for an FBO/maintenance company in Basel.
[email protected] • +44 1252 526564
Dr Katrina Abela, Senior associate, GVZH Advocates
Katrina Abela joined GVZH as an associate in 2015. Her main areas of focus are maritime, aviation, corporate and commercial law and she has been involved in a number of transactions in these fields. She also regularly assists local and international clients on matters related to compliance, fiduciary and trust obligations. Abela graduated as a Doctor of Laws from the University of Malta. She was called to the bar in 2014.
[email protected] • +356 2122 8888
Jonathan Galea , Aviation leader, Deloitte Malta
Jonathan Galea is a barrister leading the aviation advisory group at Deloitte Malta. He specialises in Malta registrations, aircraft leasing and finance, MRO investment, M&A and related legal, tax and corporate work. Graduating with first class honours in Economics and speaking fluent Chinese, Arabic and Russian. He ended his foreign service career as director general at Malta’s Ministry for Foreign Affairs before joining Deloitte.
[email protected] • +356 2343 2849
Charles Pace, Director general, Transport Malta
Charles Pace heads the Civil Aviation Directorate. For all aviation-related matters in Malta’s territory, the buck stops with him. He is a former pilot with Malta’s national carrier and has 40 years of operational experience in the aviation sector in various areas. Pace has worked as safety manager at Comlux Aviation, compliance manager at Air Malta, and chief pilot on an Air Malta Boeing 737.
[email protected] • +356 2555 5642
The project to establish Malta as a primary destination for business charter began 10 years ago. Image Credit: Shutterstock
Being a member of the EU, Maltese AOC holders have access to the single aviation market, as well as all open skies arrangements between the EU and other countries. Maltese AOCs are issued in accordance with all European Union Aviation Safety Agency (EASA) regulations and standards. Furthermore, according to Goodall, the costs for acquiring premises as well as employing personnel in Malta are relatively low and there are various services providers and professional advisors to meet the need of air operators.
Signatory of the Cape Town Convention
Transport Malta, the island’s aviation regulatory body, is available 24-hours a day, all year round. “They are responsive and work with the operator on safety and oversight along with being competitive with their AOC costs. Alongside this, Malta has a stable government and economy, uses English as an official language with a legal constitution that is similar to UK law and subscribes to the Signatory of the Cape Town Convention,” said Goodall.
Head of Transport Malta, captain Charles Pace, told CJI that the project to establish Malta as a primary destination for business charter operations began a decade ago. But it has really taken off in the past six years as companies have decided to expand their operations to Malta and some “big players”, like VistaJet, have switched entirely.
Pace puts Malta’s attractiveness down to his team’s flexibility and dedication: “We try to understand the business side as well as the technical side of aviation operations. We work well within the EASA regulatory framework with no added national twists. We have very good software and are always looking for pragmatic ways to reach our goals. I talk to many operators who come to us from other countries and tell us we are much more efficient and the fees are relatively low.”
The biggest challenge to attaining an AOC in Malta is getting your numbers right, said Pace. By this he means the economic viability of any potential operation. “An AOC needs at least three aircraft to make economic sense and also needs to have a management team that knows the regulations and responsibilities. We have had to work hard with some operators on this but once the penny drops, they thank us for being strict. We are keen to grow and are always looking at new opportunities. We are conscious of the fact that we also need head count in line with our oversight responsibilities,” said Pace.
Another potential challenge to establishing business in Malta can be its banking system, according to Dr Katrina Abela, lawyer, GVZH Advocates. But the benefits of establishing a private aviation business in Malta do certainly outweigh the challenges, she added. “One issue which comes to mind, is the banking system in the Maltese Islands, which has become more restrictive.”
Dr Abela added: “The change has been a direct result of the increase in regulations worldwide and the strict measures which have been implemented throughout the EU in line with the prevention of money laundering and funding of terrorism initiatives. This drastic change has taken place in the past 10 years.”
(1) Malta capital Valetta blends Moorish architecture with modernist buildings. Image Credit: Shutterstock
(2) Based in The Parliament House, the Maltese government has prioritised the growth of aviation. Image Credit: Shutterstock
(3) Malta is proving an attractive home for business aviation.
(4) One of Malta’s many business districts. The island has attracted significant investment in recent years. Image Credit: Shutterstock
Malta offers a package of benefits
Aside from Transport Malta’s expertise and hospitality, the Maltese government has tried to offer operators a package of benefits if they choose to establish operations on the island. As Goodall highlighted, Malta is a signatory of the Cape Town Convention – which attempts to standardise transactions involving movable property.
Then there is Malta’s favourable taxation system. Fiona Healy, MD and lawyer, FCF Assets, has been assisting the establishment of AOCs in Malta for the past 10 years. She told CJI: “Taxation in Malta is pretty low by European standards anyway, but there are some interesting tax concessions the Maltese government has introduced.” Jonathan Galea, an English-trained lawyer and aviation leader with Deloitte said within the tax arena the overall environment in Malta is generally attractive for companies looking to establish a presence. Business aviation companies no doubt have this in mind when mulling their investments: “Malta has comparatively lower operating costs and in line with other countries, such as Ireland, aircraft have accelerated depreciation rates for tax so airframes, engines, overhauls and interiors are generally written off over four years.
“Newcomers involved in business aviation would be subject to the standard company income tax rate of 35% and there are no specific reductions for the initial years in the headline rate. However, when combined with accelerated depreciation rates this means that during the initial years the effective amount of income tax paid can be quite low, depending on the circumstances in question.”
Law based on EU VAT directives
From a VAT perspective, Malta VAT Law is based on EU VAT Directives and therefore international transportation of passengers and goods is VAT exempt (with credit for input VAT). “That is assuming we are referring to qualifying aircraft, such as those used for commercial operations in terms of their AOC.”
According to Galea, provided that an investor intends to establish a concrete presence in Malta and create jobs, there is an array of benefits and incentives which can assist them in achieving their objective. For example, investment-related tax credits may be available, and these will assist investors in the long-run costs of setting up, managing salaries and operational costs. Guarantees, soft loans and interest rate subsidies may also be available in some circumstances.
Galea added: “At a personal level, Malta’s tax system is also a very reasonable one, with long-established norms that reward foreign talent. The top rate of personal income tax in Malta is 35% and social security contributions are capped at about €2,500 per person per annum. Also, a 15% rate of personal tax for a wide range of eligible aviation expatriate professionals applies for duties carried out in Malta through the Qualifying Employment in Aviation [Personal Tax] Rules.”
Striking the right balance between understanding that a business must be profitable to be successful yet needs to operate within a strict regulatory framework, is a balance that Malta seems to have found. Through government policy, Transport Malta’s hospitality, responsiveness and efficiency; its EU membership, English-inspired legal systems, amongst a raft of other benefits, the island’s AOC holders have grown exponentially with no sign of levelling off.
Dr Abela put it best: “We have seen the Maltese register developing from a ‘dormant’ register, catering only for local needs to become the go-to aircraft registry in the EU. I believe that the main reason for this was the active effort that the government committed towards growing it, with the aim of mirroring the success Malta has had with the maritime registry.
“It would be optimistic to say that there are no challenges in establishing a private aviation business in Malta. However, the benefits one can obtain when establishing a private aviation business here most certainly outweigh the challenges.”
Island haven: The jurisdiction has grown from a handful of AOCs to over 40.