Lore of the Letter

The Cayman Islands are three specks in the Caribbean totalling just over 200sqkm in area – yet around 20 per cent of the aircraft on the islands’ register are based several thousand miles away in the Middle East while other, Cayman-registered but Europe-based, aircraft also have Middle Eastern owners.

It was only in the late 1990s that the Cayman register started to promote itself by attending trade shows, said the islands’ director-general of civil aviation Richard Smith, who joined the islands’ Civil Aviation Department in 1976 as a trainee air traffic controller. Even in the 1980s, there were only 50-60 aircraft on the books.

The growth to today’s level of just under 200 had been driven by several factors, he said, primarily the growth of the islands as a financial and legal jurisdiction: “People of wealth and corporations were drawn to the islands and brought their assets such as yachts and aircraft to be registered and domiciled here.

“We don’t use the phrase ‘register of convenience’ because it has negative connotations. We are a ‘register of choice’.”

Owners made that choice to register their aircraft in the tiny British Overseas Territory because of high regulatory standards based on those of the UK, he said. Its regulatory code was also International Civil Aviation Organisation (ICAO)-compliant. In addition: “We are quite selective about who we allow on to the register.” Indeed, on the day on which he talked to Arabian Aerospace, he had turned down one applicant.

What might disqualify an owner from gaining a VP-C registration? “Our application process calls for quite a stringent due diligence process for the applicant; if there are questionable circumstances of finance or issues of that nature, we will not accept them.”

Aircraft under 5700kg were also barred, he said, because some of the costs involved in registering a small aircraft would be disproportionately high: “It’s not in the operator’s interests.”

Did the Caymans see their aircraft registers as a money-earner? It’s “a reasonably useful source of revenue,” said Smith, both in terms of direct benefits to the government and in spin-offs to lawyers and financiers involved in the registration process.

Other reasons to register there? “Operators want their aircraft flying, not stuck on the ground. In a large regulatory authority you wait for somebody to get back to you. That’s no good to an operator who wants go flying.” The Cayman Island register operated on a much faster basis. Flexibility was also a strong suit. If an operator could demonstrate that his alternative solution to a problem – for example, using a component other then that normally specified – provided acceptable levels of safety, the Cayman register was prepared to accommodate him.

However, some things were non-negotiable. Some jurisdictions would allow crew members who were not type-qualified to fly as second pilots. That would meet with a swift ‘No’ from the Cayman authorities, said Smith, a former Boeing 737-200 pilot.

The register was geared up for “continued conservative growth”, he added. He described the Middle East as “very important” to the Caymans “as we see a lot of very credible clients in that area and think they would fit well in our registry”.

Indeed, the Cayman register has an arrangement with the Saudi authorities for Cayman-registered aircraft operating there. “We retain responsibility for the airworthiness of the aircraft itself and the Saudis oversee aspects such as pilots’ licences and flight operations. We’re looking at extending that arrangement to other Middle East countries and are in discussions with two others right now.”

Rather faster expansion is under way at the Isle of Man, an island the size of Bahrain lying in the Irish Sea. It only established its aircraft register in 2007 and already has more than 340 ‘on the books’.

“When we set it up, we thought we’d get one aircraft a month in the first year,” said director of civil aviation Brian Johnson. “We added 119 aircraft in 2010 and have another 50 being processed.”

The register followed in the footsteps of the island’s successful ship and super-yacht registers: “The idea of the latter was that it would attract people to the Isle of Man to do business here and an obvious follow-up was an aircraft register.” It is Europe’s only dedicated corporate aircraft register.

Lengthy negotiations were required with the UK before the Manx registry could be set up, said Johnson, a former head of the UK Civil Aviation Authority’s Flight Operations Inspectorate, who had a shock during one such meeting with a UK civil servant.

As a British dependency he assumed the island would receive a VP- prefix. During the meeting the UK official casually remarked: “I suppose you’ll be wanting ‘M’, then?” Johnson admitted he looked disbelievingly at the official, who revealed that the UK had received ‘M’ when ICAO was created in the late 1940s in the belief that the then-British Empire would require considerable reserves of registrations. “I suppose Malta or Madagascar would have quite liked it,” smiled Johnson, who added that he believed the UK still had other, undeclared prefixes available to it.

‘M’ had the advantage of being a ‘neutral’ registration, he added. “In some ways it’s like Switzerland. You could put a Swiss-registered aircraft anywhere in the world and nobody would take any exception to it. We’re exactly the same.”

As an ICAO-registered state, the regulations governing aircraft registration were the same as every other ICAO-compliant location, “so the only advantage we offer is we do it in a very professional way. Most registers are run by bureaucracies; they don’t have to be service-oriented. They work civil service hours.

“We deal with corporations across the world; we work at nights and weekends. We ask them when THEY want it registered. We’ve blown a lot of people’s minds who’ve said they can’t believe how quickly we can do it.”

As in the Caymans, this had led to a lot of word-of-mouth recommendations: “Typically, the first telephone call we get is: ‘Mr X, the chairman of So-and-So, has told us you’ve done a good job for him and we would like to bring our aircraft to the Isle of Man as well.’”

Johnson said he was aware of the pitfalls of offshore status. “If you run a registry at a profit you’re seen as a flag of convenience. The government asked me to set it up to make a loss.”

Around 20 aircraft on the Manx register were from the Middle East “and it’s a growing number”, said Johnson. “The Kuwait ruling family have an Embraer ERJ-190 registered here, and a Middle East prince has an Airbus with us.”

Again like the Caymans, Johnson said he did not hesitate to refuse certain applicants: “I’m turning somebody down today. He’s been in court for operating [the aircraft] outside its certificate of airworthiness. It was unsafe to fly, basically, and they knew that.”

Protecting the integrity of the register was vital, he said. One ‘bad’ aircraft could spoil its high-quality reputation, as authorities around the world could start to look at the whole register with suspicion.

The head of Aruba’s register said it has never had to reject an applicant, but only because it runs extensive checks on applicants first. It takes a close look at the funding behind applicants, “but most of our clients are big figures such as [Russian billionaire and Chelsea Football Club owner] Roman Abramovich,” said the register’s chairman and CEO Jorge Colindres. Aruba will not accept any application that refuses to identify the beneficial owner of an aircraft.

Actors, heads of state, royalty and major CEOs all feature on the registry of the small island off the coast of Venezuela, which is classed as an overseas territory of the Kingdom of the Netherlands.

Aruba also trades on a reputation for getting things done quickly: “We’re extremely customer service-focused. We concentrate on safety, but also on the way we handle the client.” The register had a private sector mentality, he said: “Things happen faster.”

Tax advantages were another factor promoted by Aruba. Virtually all taxes on aircraft were zero-rated. Payments would only be required if an aircraft was domiciled in Aruba. Any profits made by the register must be ploughed back into improving local aviation facilities.

Aruba had a lot of Middle East clients, said Colindres, although over the past decade he had seen a shift in clientele towards countries such as Russia, Ukraine and Kazakhstan. To remedy this drift, the register was refocusing its attention on the Middle East this year. It is a member of the Middle East Business Aviation Association and has a target of signing up an extra 10-30 clients from the region.

Malta’s register differs in several respects from the others. Many of the aircraft there are commercial airliners registered to operators holding Maltese AOCs. Following Malta’s accession to the European Union it is also no longer an offshore registry. “We are an ‘onshore, yet favourable’ registry,” said Dr Michelle Grima, legal advisor at the Mediterranean island’s Civil Aviation Directorate. Bureaucracy was cut to the minimum and register members had the comfort of EU regulations.

The Malta register had plans to actively attract more Middle East members, she said. “We’re very keen to welcome business from that region and attended MEBA in Dubai.”

The Maltese authorities wanted to see the register grow and to develop ancillary businesses on the island such as maintenance, repair and overhaul facilities that would make it an attractive place for owners and operators.