Tuesday, January 17, 2017

Ireland’s trade in aircraft–our largest goods import

In 2015 our trade statistics moved to a transfer of ownership basis for recording trade in aircraft.  Prior to this aircraft were recorded in the country where they were registered.  They are now recorded in the jurisdiction where the owner is resident. 

The previous approach generally only picked up aircraft owned by Aer Lingus and Ryanair with some sundry others.  The revised approach means that aircraft owned by leasing companies which are resident in Ireland are now included.  This has seen the recorded annual trade in large aircraft for Ireland move from double digits to treble digits, with imports now regularly exceeding €10 billion.

Here is revised data back to the year 2000 based on the transfer of ownership approach.

792.40 Aircraft

Since the year 2000, Irish-resident entities have purchased over 3,000 wide-body aircraft while selling about 1,000 less.  The value of imports is €96.2 billion compared to €23.6 billion for aircraft sold.  It can be seen that the average value of aircraft purchased is about three times the average value of aircraft sold (€31 million versus €11 million).

Aircraft imports for 2016 already exceed €10 billion even though the detailed data from the Trade Statistics have as yet only being compiled to October.  Aircraft are Ireland’s largest goods import exceeding food and live animals (€6.6 billion in 2015), oil and gas (€4.9 billion), medicinal and pharmaceutical products (€5.4 billion), organic chemicals (€3.8 billion), cars and other road vehicles (€3.5 billion).  Since 2010, wide-body aircraft have average 15 per cent of total goods imports in the External Trade Statistics.

All these aircraft are included in Ireland’s capital stock.  Aircraft leasing forms part of the Administration and Support Services Activities sector (Nace N).  Given the value of wide-body aircraft it is fairly safe to assume that most of the Transport Equipment assets held by this sector are held by aircraft leasing companies. [Aer Lingus, Ryanair and aircraft leased by operators will be in Nace H – transportation and storage.]

The left panel of the following table gives the nominal value of transport equipment assets in the sector.

Capital Stock of Aircraft

At the end of 2014, Ireland had a stock of wide-body aircraft with a gross value (i.e. valued at the price of new capital goods) of something approaching €86 billion, double the level recorded in 2009.  If the age and depreciation are taken into account the value was around €50 billion at the of 2014.  These increases in the capital stock of aircraft will also be contributing to increases in the provision for depreciation in the national accounts (though can only be part of the reason why the provision for depreciation jumped from €30 billion to €60 billion in 2015). 

The 2016 capital stock figures won’t be published until the end of the year but the figures for transport equipment are likely to be suppressed, just as they were in 2015 due to confidentiality reasons (in another category).  The Irish Aviation Authority says that there are over 4,000 aircraft under Irish management with a value of $120 billion.

We can get some indication of the evolution of Ireland’s stock of wide-body aircraft from other CSO data. The trade data show that since the start of 2015 net imports have been €13 billion.  The trade data will include purchases by Irish-resident entities but will omit the transfer to Ireland of aircraft owned by entities who re-domicile and become Irish-resident.

We can also get an indication from the Balance of Payments by looking at export income from operational leasing.  This is given in the right panel above along with the ratio of such income to the net capital stock of transport equipment in NACE N.

While the import of the aircraft is largely GDP neutral – as the negative import figure will be offset by a positive investment figure – the income from these leasing activities is GDP positive (as, one assumes, is the export sale of the aircraft).  And with much of the income  being absorbed by the provision for depreciation it will also form part of Ireland’s GNI.

The change in treatment means that Ireland’s current account balance in the Balance of Payments has been revised down (by the revised net trade amount in aircraft).  For 2015 it can be seen from the first table that this reduced the current account by around €6 billion.  That knocked a small bit off the bizarre look of our current account which recorded a €26 billion surplus in 2015 (with that largely being the gross operating surplus that a small number of Irish-resident subsidiaries of MNCs are using to  repay debt as discussed here).

No comments:

Post a Comment