Marianne Domaille of Albecq Trust Company in Guernsey explains the advantages of Guernsey's new aircraft registry, the 2-REG.

The first use of aircraft registrations came about in the early 1900's and tail numbers were based on the radio call sign which was allocated to a particular nationality.

Aircraft registration has advanced dramatically since then. More recently, a number of aircraft registries have been established in offshore jurisdictions and are viewed by many as a complementary facility to the offshore financial services industry. In addition to offering private aircraft, mortgage and engine registers, most offshore aircraft registries will also provide ancillary services such as airworthiness certifications, radio and pilot licensing.

The Channel Island Aircraft Registry (the 2-REG) launched in December 2013. It is similar to the Isle of Man Aircraft Registry, which launched in 2007 and had registered some 650 aircraft by the end of 2013. Bermuda and Cayman's registries are also enjoying similar success and there are plans for several more offshore jurisdictions to establish aircraft registries in the near future.

The pertinent reason for Guernsey to introduce the 2-REG is to be able to cater for all the wealth management needs of its international client base.

So, why is demand for offshore aircraft registries increasing?

1) As manufacturing technology develops, private aircraft ownership is becoming a much more affordable option to individuals and businesses, particularly those looking to take a step up from jet chartering and fractional ownership schemes. For example, excluding running costs, a new 6 seater jet, able to fly non-stop from London to Moscow, can be purchased for less than US$9 million.

2) According to Forbes, the number of billionaires in the world in 2014 has risen to a record high of over 1,500. Many of these individuals are likely to have pre-existing offshore structures and will be familiar with the associated benefits.

One of the most common ownership structures used to hold private aircraft is a limited company. In recent years, there has been a shift away from appointing corporate service providers in less regulated jurisdictions towards choosing more reputable jurisdictions such as Guernsey. Clients and their professional advisors now attribute greater value to reputation and integrity and understand the additional compliance cost that this may bring. It is worth pointing out that while the initial, upfront costs of doing business in Caribbean jurisdictions may be less than using Guernsey, in fact, over the longer term, the expense is likely to be broadly comparable.

It is rare to find a client holding an aircraft in their own name, without the protection of limited liability and separate legal personality. Use of a company provides the confidentiality that many people seek. The risk of negligence as regards the safety, maintenance and operation of the aircraft is significant, and in the event of an accident, by using a limited company, the liability of the beneficial owner is limited and they should normally be protected from any claims.

What does the future hold?

Individuals and businesses are seeking more efficient methods of commuting to and from their business destinations. In many cases, the flexibility, convenience and time saving that private flights can offer to the user is invaluable.

It is thought that 15% of Europe's heavy jets (aircraft which are based on or converted from airliner planes) are currently owned by UK resident individuals or businesses. This makes it Europe's second largest market for business jets, with Germany believed to be the largest. Sales of private aircraft in the UK have grown by almost 50% since the 2008 financial crisis. Analysis indicates that the majority of these sales were made to foreign nationals who have moved to the UK from overseas.

The busiest airport for private planes in the UK is London Luton Airport. It is only 32 miles from central London and offers a choice of three private jet handling agents. It is no coincidence that the Harrods Group, famous for their luxury Knightsbridge department store, has established an aviation services base at the airport. Air Harrods has been successfully providing services such as limousine transfers and on-board catering as well as 24/7 aircraft servicing since 1995.

The island of Guernsey is conveniently less than an hour's flight away from the UK and as it is outside of the European Union, there is no VAT. As a result, aviation fuel and maintenance tends to cost less than it would in the UK.

Guernsey's 2-REG offers the aircraft owner the option to choose a personalised tail number. The tail numbers "2-PLAY" and "2-HIGH" were registered almost immediately upon the launch of the 2-REG, and were closely followed by "2-RICH" and "2-KOOL". The registrations list certainly makes for interesting reading.

Guernsey's trust and company laws have undergone an overhaul in recent years and are both forward thinking and practical. With the addition of the 2-REG, Guernsey could soon become the jurisdiction of choice for corporate aircraft ownership.

An original Russian version of this article was first published in Kommersant, September 2014.

For more information about Guernsey's finance industry please visit www.guernseyfinance.com.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.