Senior executives from Ireland’s global aircraft leasing sector have warned that the cost of doing business here is the single biggest challenge they face.

A report published this morning by PwC shows that the already highly-paid sector is seeing pay demands that are “unsustainable”.

It comes as the report highlights that the aircraft leasing sector contributes almost $1bn (€916m) to Ireland’s economy every year and is now supporting more than 8,500 jobs.

Ireland is home to most of the world’s biggest aircraft leasing firms, including the largest, AerCap, as well as SMBC Aviation Capital and Avolon.

“Respondents referenced the cost of housing and the cost of living which is driving pay demands to unsustainable levels,” the report from PwC notes.

It adds: “As a small, open economy ensuring Ireland’s competitiveness is key to underpinning our future prosperity and ensuring that Ireland continues to attract and retain the people with the skills required to maintain Ireland’s position as a world leader in the aviation leasing sector.”

When the last PwC industry report was published in 2018, the cost of doing business in Ireland was one of the least concerns among top aviation executives.

Soaring inflation has hit businesses in all sectors. The aviation sector is also dealing with the fallout from Russia’s invasion of Ukraine last year that resulted in a swathe of sanctions against Moscow.

That saw hundreds of aircraft and engines owned by lessors that were worth tens of billions of dollars illegally seized by the government in Russia. Lessors have been forced to write off the assets they had based in the country.

The war has also had a knock-on effect on airlines, with Ukrainian airspace closed and Russian airspace unavailable for overflights for western carriers en route to Asia.

Launching the report, Finance Minister Michael McGrath said the government will continue to support the industry and “take actions to ensure Ireland remains the leading worldwide hub for aviation leasing firms long into the future”.

The leasing sector has highlighted in the PwC report that Ireland’s high levels of personal taxation continue to be a “major challenge”.

It points out that the €40,000 threshold before workers start paying the higher rate of tax remains low compared to EU levels. It adds that while the Government’s Special Assignee Relief Programme has helped to lure senior talent to Ireland, it should be fine-tuned.

The PwC report suggests extending its duration from five years to seven or nine years, and extending relief to include new hires who do not currently work for an associated company in another country.

“The talent pool which the sector has built up in Ireland over the last four decades has provided a real competitive advantage to the industry,” noted Yvonne Thompson, leader, PwC Ireland Aviation Finance Practice. “However, continued focus on a strong pipeline of educated employees in the sector is critical,” she added.