The newly appointed Minister of Financial Services the Hon. Hope Strachan has flagged aviation as one of the areas of focus for her ministry as she takes responsibility for directing its affairs. Speaking at the International Business and Finance Summit on February 6, 2015 in Freeport, Grand Bahama, the minister expressed her commitment to the development of aviation within the context of financial services. Her pronouncement prefigures the beginning of a fresh initiative to explore the expansion of aviation related services with a view to broadening the already impressive array of financial services and products on offer to both the domestic and international market.

Participants in the aviation industry are engaged in a broad range of issues across a number of aviation sectors. These involve matters related to airports, airline operations, travel agencies, cargo, ground services, air navigation services, and accounting/finance. Aviation sectors also include the civil aviation authority (with responsibility for regulations including safety regulations, registration and licensing) and aircraft acquisition and financing including lease financing.
Arguably The Bahamas has of late distinguished itself in that aspect of aviation concerned with airports. The Bahamas is able to boast of its recently constructed and celebrated world class Lynden Pindling International Airport.

Whereas The Bahamas may have preeminence in airport management and facility, The Bahamas is a bit late out of the blocks in certain other aviation related areas. The Bahamas is currently facing a fast closing window of opportunity which must be seized in order to ensure that we stay well positioned in the race for aviation offshore preeminence. The sectors of aviation which may be primarily affected are aircraft finance and possibly airlines. The window of opportunity concerns the prospect of The Bahamas acceding to the Cape Town convention in a timely manner.

So what is the Cape Town Convention and why is it important to the Bahamian aviation and financial services industry? The Cape Town Convention is an international treaty designed to support the financing and leasing of aircraft. The convention achieves this through the establishment of the International Registry (located in Ireland) and provides for the electronic registration and the protection of security interests in aircraft assets. The convention also provides for a standard and predictable legal framework within which financial institutions may operate if it becomes necessary for them to access their security.

Financial institutions providing aircraft financing have greater confidence in the decision to grant credit to entities within or connected to Cape Town contracting states. With reduced creditor risk they are able to reduce borrowing costs. The Cape Town discount provided by certain financial institutions may reduce the risk premium of export credits by up to 10 percent. Financing aircraft acquisitions are less expensive for debtors located in Cape Town contracting states.

In addition to benefits received by airlines through discounted financing for local acquisitions of high end aircraft, the implementation of Cape Town along with the creation of The Bahamas' own register of charges will also have positive impact on the financial services industry. These will include:

i) revenue from increased registration of aircraft,

ii) enhanced revenue from registration of charges over aircraft,

iii) revenue from increased incorporations of companies created to hold title to aircraft or lease aircraft,

iv) increased fees for ongoing company maintenance,

v) revenue from increased utilization of financial services products such as trusts and foundations in aircraft finance and leasing structures,

vi) revenue generated from expanded insurance services,

vii) opportunities for development of new lines of business including aircraft lease management companies, as well as flight departments to support private jet ownership, and

viii) opportunities for development of skill sets and career opportunities in inspection and also International Registry administration.

Signing on to Cape Town will also continue the reputation of the Bahamas as a progressive jurisdiction capable of providing effective responses to the needs of sophisticated international persons.

Currently there are 65 contracting states to the Cape Town Convention. These include the United States, Canada, Ireland, New Zealand, China and the United Arab Emirates. The list of contracting states also includes Panama and Cuba.

The Australian Government anticipates acceding to the convention within the year; with the convention coming into force in Australia shortly thereafter. Most interesting for The Bahamas are the developments within the United Kingdom.
It is clear from a review of material in the public domain that the government of the United Kingdom is pressing forward with its commitment to ratify the Cape Town Convention.

With ratification of Cape Town by the UK government it is anticipated that ratification will be extended to its overseas territories which will included Bermuda and the Cayman Islands. Both jurisdictions will be recognized as Cape Town jurisdictions thereby consolidating their positions as regional leaders in aviation services.

The importance of Cape Town to the aviation industry is demonstrated by the Cayman Islands enactment of legislation known as the Cape Town Convention Law 2009 which seeks to give persons who access the jurisdiction, Cape Town equivalent rights and remedies.

Progress in advancing aviation related services will test the resolve not only of the Ministry of Financial Services but that of the Ministry of Transport and Aviation, the Ministry of Foreign Affairs and the Office of the Attorney General. The opportunity to display acumen, agility and a facility for collaboration between ministries with the support of industry is once again presenting itself.

We anticipate with optimism that The Bahamas will be true to its historically demonstrated propensity to seize the day and provide prudent, creative and effective responses to opportunities within the aviation industry and the financial services sector.

Click here to read more at The Nassau Guardian