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Welcome to the Guernsey Finance podcast page.
Our podcasts bring you all the latest news and insight from Guernsey, the global finance specialist, as well as audio from some of our online events.
Brandon 0:03
Hello and welcome to the We Are Guernsey podcast where we bring you interviews with leaders from the global finance industry, as well as news and developments from Guernsey's financial services sector. My name is Brandon Ashplant and I am Senior Strategy and Technical Executive here at Guernsey Finance. Guernsey is a leading global finance centre and aircraft registration jurisdiction. The success of the industry here is underpinned by economic substance, political stability and asset security and we are committed to the cause of sustainable finance. To find out more about Guernsey's success in sustainable finance, tune into our sister podcast, the Sustainable Finance Guernsey Podcast. Today I am delighted to be joined by Sidhant Sharma, Commercial and Legal Director at 2-Reg. Sidhant holds an advanced Master's in air and space law from Leiden University. On this episode, we'll be discussing the process of aircraft registration and deregistration, the structure of ownership, the opportunities through registration in Guernsey, and the challenges faced by jurisdictions through the COVID pandemic, and the war in Ukraine. So without further ado, welcome, Sid. Great to have you on.
Thanks for joining us. Firstly, just tell me a bit about how 2-Reg was founded?
Sidhant 1:19
So 2-Reg started its operations in December 2013. So we're coming to our 10 year anniversary later this year as well. So really what I would describe where 2-Reg has been in the last three years would be divided into three different stages. The first stage where really we had to develop our products, we had to make sure that we had certainty. And the second stage really where we had to make sure that our services and our products are complemented by the regulations we want to have and the safety oversight we want to have. So I think I'm pretty confident in now saying that, in the last couple of years, we've reached a stage where we know what our products are, we know what our services are. We have the regulations, which are predictable, we have the regulations, which are certain. And now we're in that third stage where it's really about enunciating those products and enhancing those services to the stakeholders and to our clients. So I think really, it's something to be really proud of, where we are, and really puts us in a fantastic position to make sure that the next 10 years of 2-Reg are going to be significantly more positive and and much more fruitful for Guernsey, its economy, than the first 10 have been. But equally the first 10 were so so important in making sure that we are able to give ourselves the best base for having the next 10, which are much, much more positive.
Brandon 3:06
Sure. And could you provide listeners with an overview of how individuals and companies can register and deregister aircrafts and sort of how that works? And I guess the ownership structure behind this?
Sidhant 3:18
I mean, the registration and deregistration process with 2-Reg, is quite straightforward. So all our applications are online. Any owner, whether it's an individual, or a corporate, can make an application or registration online. Typically, this involves our registry team performing a due diligence on the ownership structure, as you mentioned. And you have a know your client review, essentially. It's a very comprehensive process obviously, we need to determine that ownership structures are clear and are in line with the financial regulations obviously, but at the same time we pride ourselves on providing speed efficiency. So our registry team typically would process this within one or two business days, and therefore providing the owner that certainty that their aircraft can be registered and their asset is protected as part of registrations in Guernsey. Deregistration is quite a similar process. The only thing to consider with deregistration which is quite unique is of course whilst the aircraft can be registered with an owner, it may be subject to a finance, right so it may be subject to an interest of a debtor, a financier, which is registered as well would 2-Reg. So we always want to make sure when we deregister that aircraft, the ownership structure and the value of that structure is protected. So we really wouldn't want to deregister an aircraft where that in any way undermines the interest of the financier behind. So that's quite a complicated process for our registration dividend to have consideration of. But it's something which Brandon in the last 10 years now it's such a bread and butter process for us that we make sure that our owners and the financier sitting behind the structure are well protected, which really serves their interests best.
Brandon 3:44
And on that, several other registers have closed recently, how it has 2-Reg found success in Guernsey with I think it's 930 aircrafts registered as of April this year, 2023. And you're on track for 1000 by next year, whereas others have struggled? Why is that?
Sidhant 5:59
I think it sort of goes back to my first answer, really, where those two or three years at the beginning, when we started 2-Reg, were so so critical for us, because that was the time when we put faith in a set of products and services that we wanted to provide. And I think it's really a compliment to the entire 2-Reg team and the government support in that because we have ensured that we continue to trust those products for all this time. And what that's done is with variable stakeholders and clients, they have recognised obviously, that, with all the perseverance and with all the effort that 2-Reg has put in the last 10 years, we've become market leaders in that now. So when it comes to transitioning aircraft for a financier or a leasing company, I think 2-Reg really is the first name, which the leasing companies think of. So I think that's really been one of the key factors to make sure that we've developed and we've grown, as we have in the last four or five years, because we get paid, you know, we get trust and what we wanted to develop, we didn't just go where the wind blows, we really wanted to set something for ourselves. So our transition product, and obviously the niche that we have with business jets that are also registered on 2-Reg really provides a good balance, which I believe a lot of other regulatory authorities that have not succeeded or have not succeeded as much as they would have liked, have perhaps not been as committed to that process. So I think for us, it's really something that we want to be proactive on and has played a key role.
Brandon 8:08
And I suppose when looking at other jurisdictions, an inevitable question has to be what role do fees play in the decision-making process? When you compare jurisdictions, costs in Guernsey do appear to be substantially lower at times. Is that again, a factor in this success?
Sidhant 8:30
Yeah, I would say it's important factor because, of course, I mentioned that two set of stakeholders that 2-Reg predominantly deals with, the leasing and the finance industry that transitions the aircraft and business jet owners. Now, of course, most of these stakeholders own an aircraft, so you'd argue that well, if they can own an aircraft, which is worth 100 or 200 million, is cost really an important factor? Actually, yes, it is, it definitely plays a role in them to ensure that their budgets are appropriately being met as well. Having said that, would I be giving this feedback to you earnestly if our services were not top notch? Definitely not as well, right. So yes, cost plays a big role. And if you put 2-Reg in comparison with some of the other registries that are in the same products and services as us, whether it's the Caymans whether it's the Isle of man's or the Bermudas, costs plays a role, but I think what really complements that is the fact that not only our costs are lower than the names that I've just mentioned. But we're complementing that with our safety oversight, that's proportionate. So it's really a balance of those two factors, which plays a massive role in ensuring we're the best.
Brandon 10:12
And we've talked about the success of 2-Reg, in recent years, and the expansion you've had after the initial phase of starting up and getting going. And also, we've talked about Guernsey and the role that the jurisdiction plays in comparison to other competitor jurisdictions. But I also want to focus on this area of the last two, three or four years because obviously, there's been huge upheaval, many industries, if not all, I mean, let's be honest, all industries have faced turmoil in recent years, but particularly your industry as well, given that travel has not been possible. And yet despite that, Guernsey's performed well, despite the challenging landscape. So we've seen Guernsey oversaw a significant increase of new private jet registrations. I think it's now at 85. Whereas again, other jurisdictions saw losses over that same sort of time span. So what is it that enabled Guernsey to see continuing rises in registrations, whereas other jurisdictions did not?
Sidhant 11:16
Yeah, I think again, it's a combination of what our products are, and the two stakeholders that I've mentioned with business jets and transitions, and really what we've tried to consider throughout the lifecycle of 2-Reg is to be as unaffected by external affairs as possible. Aviation, as an industry plays such a crucial role in connecting people, in maintaining supply chains and all those important factors. So it is an industry which can be, objectively speaking, sometimes volatile, because of external factors as well, but we've tried to make sure that we set products that are unaffected from those features. So I think that's played a key role in ensuring that 2-Reg has had stability and growth. The other factor to mention, obviously, some of the external features that have happened, whether it's COVID or Brexit in the recent times or the unfortunate Russia Ukraine war, for instance, from things like Brexit, we've actually had a massive registrations of private jets, so even though that is an external feature, which we tried to remain unaffected from, it sort of had a positive impact on 2-Reg because after Brexit, a lot of private jet owners registered their aircraft in 2-Reg because it provided them a jurisdiction which obviously ensured that the asset was protected. It ensured that the regulatory setup because Guernsey obviously, and the regulations that 2-Reg has are not linked with the regulations of the UK. Guernsey as a Crown Dependency is absolutely entitled to ensure that its regulations are independent. So whilst Brexit had an impact on the UK, Guernsey remained very independent of that, and a lot of business jets therefore registered there. You know, similarly, when when we speak about the events that happened and are unfortunately continuing to happen with Russia and Ukraine, 2-Reg just did not have that exposure, or that reliance on one product, which would be affected so significantly, as some other registries have been impacted. So we've been able to mitigate a lot of those risks by ensuring that we're not putting all our eggs in one basket, we've tried to have stakeholders across the globe to make sure that we are really ensuring that our risks are mitigated in that perspective. And I think the other important thing to mention Brandon really is that, and this is not just something over the last three to four years, but that's really been through the life, I would say of 2-Reg is as efficient and as productive our services have been, the one factor which has truly distinguished Guernsey and 2-Reg is the provision of local businesses that exist in Guernsey and I think that advantage and that benefit which Guernsey has, it cannot be emphasised enough. Whether that's law firms, whether that's resident agents, whether that's insurance, tax providers, they play such a key role. So if you think about an aircraft getting registered on 2-Reg, a law firm based in Guernsey is so instrumental, where they end up actually having a lot of power of attorney to act on behalf of these companies, or on behalf of these individuals. So the level of professionalism which presently exists in Guernsey, and in my view is going to be enhanced even further going forward, is so critical to ensure that Guernsey has been able to really distinguish itself from so many other registries that are in the same structure in the same vein as 2-Reg. And that's a massive compliment to different local businesses and the efficiencies that they've provided to us.
Brandon 15:58
You mentioned at the beginning of your answer there, the Russian invasion of Ukraine, and how that affects things. And we know that the events in Europe and globally have affected the aviation industry in a multitude of ways, from increasing operational costs and the deregistration of aircrafts as well. We know some places have seen losses in revenue of up to I think, 85%, in some cases, what affect has this had on 2Reg?
Sidhant 16:37
I think there are a couple of perspectives, right. So if you consider events like COVID, and how that massively impacted the income and the revenue streams of airlines. Now, again, because we are such a leading player with transitions, when those airlines have had those unfortunate events, the leasing companies who predominantly own those commercial airliners, have then been in position to repossess those aircrafts, or those aircraft have been voluntarily delivered by those airlines. Now, in that situation, and in that interim period, all these leasing companies have used 2-Reg to transition those aircrafts. And I probably sound like a broken record now but that's again, a massive compliment to 2-Reg. To my predecessors, and to my colleagues, the DCA, the Registrar for sticking to the position that transition will remain one of the key products that we will offer to the industry because in times of massive success of the industry, when there are more aircraft deliveries to airlines, 2-Reg becomes a key player, because that is a transition going to airlines. And in unfortunate events like COVID, where airlines have had a dip and have had to redeliver those aircraft to the owners, again 2-Reg becomes an important player in that to support those leasing companies in getting that aircraft back into storage or into maintenance, or into an operator where perhaps the external factors are not as critically impacted. So that has been a massive support for us. And, of course, with regards to the Russia Ukraine situation, which I mentioned as well, I think with that we really have been in a situation where as a regulatory authority, we always wanted to make sure that we don't sign up for a product, which puts us jurisdictionally at risk in any circumstance. Russia Ukraine, of course, is one of the examples of that. But you never can predict how globally things evolve. So, from a 2-Reg perspective, we're never going to be entrenched in any jurisdiction, which is going to open us up to that sort of risk. And you could put a name to that. Unfortunately, a lot of other regulatory authorities were in that position where either Russia or Ukraine in one of the instances was a key jurisdiction for those authorities. And they've simply not been able to then mitigate that risk. Whereas for us, I personally never want to be in a position where we have to pivot our products and services. And I think the reason I say that quite proudly is because we try and process those things in a proactive manner. On an annual basis, every six months, my colleagues and vice versa, we're challenging each other on how can we do things to improve? How can we do things to address a potential risk? So when when you're surrounded by a positive culture like that, it becomes easier then to try and anticipate those challenges, try and anticipate those risks as much as possible and deal with them the best way you can.
Brandon 20:26
And how has the current economic environment of stagflation, we've seen inflation at astronomical levels, not just in Europe or the UK, but globally. How has that impacted the industry? And again 2-Reg's outlook on that particular issue?
Sidhant 20:43
Yeah, I think obviously the inflation aspect or the economic aspect is, I'd say is a stage which presently so many industries are going through. And, you'd expect that once the global aspect retains that objectivity, and more composure to those policies, those things will become more status quo, they will retain that place back. But I think in terms of the biggest challenge, which 2-Reg, and anyone in the aviation sector, would really be subject to in the next 10 to 15 years is environment. So the social factors like environment, sustainability, is one of those things, which presently in aviation is such a key aspect. And for all the right reasons, it is at the end of the day, people are quite protective of such a critical aspect. And I think that's something that 2-Reg has to be an active player in, we have to make sure that as an industry, we play a key role to mitigate the risks, and try and accept those challenges, embrace them as much as possible to address those social political/ environmental aspects that's linked,. I think sustainability, to be honest, in aviation, the link between aviation and sustainability is so critical. I said earlier that aviation plays such a key role in connecting people, in ensuring that there's transportation of goods, but I think it would be quite unfair if we would make a key issue like sustainability, an individual company aspect. I think it's one thing which as an industry, we have to tackle hands on. And really, I think 2-Reg is playing a role, we're discussing with different organisations that want to introduce electric aircrafts in the future, which are more complementing of those sustainability objectives across the globe, to play a part in it. So I think, like I said, the next 10 years of 2-Reg wont only be a challenge, from the positive perspective and from perhaps a few non-positive perspectives, but it would be one that we will embrace with full force and try to ensure that we are a key stakeholder that's playing a role to support the industry with that.
Brandon 23:49
And closer to home has, 2-Reg taken steps to review the importance of light aircraft as recommended by the Committee for Economic Development by the States of Guernsey?
Sidhant 23:59
Yeah, absolutely. So I think again, that's one of the steps which when we started 2-Reg the applicability of the fees, for instance, for lighter aircrafts was, at the time considered proportionate, but obviously, as we've evolved, it's one of those things that we've recognised that it needs addressing. So, we have already affected the fees to be now significantly lower for the aircraft owners of smaller jets. And I think from a regulatory perspective, well I know that John Nicholas, the DCA, is very committed to make sure that the general aviation stakeholders based in the Channel Islands are able to get further efficiencies going their way as well. So I think fees is really the first step. And I think if I'm not wrong, because there's also an article in the Guernsey Press earlier this week, which supported that and which confirmed essentially the lowering of the fees that 2-Reg has now subscribed. But I think the regulatory aspects that John and our team are cohesively working on, would also go a long way in further enunciating and supporting the message from the committee.
Brandon 25:40
And just to finish up, what's next for 2-Reg and your contribution to the wider financial services industry on Guernsey and that side of things?
Sidhant 25:53
As I mentioned, for me, the financial industry, which sits in Guernsey, and the variable stakeholders that are part of it have been very important for the first 10 years of 2-Reg. What I would say is, we haven't truly been able to work together with them. It's a massive compliment to that industry that they've obviously recognised what 2-Reg has brought in and used our products and services to offer their services, to the stakeholders to our mutual clients. What I'd really like to do, and it's something that I've already subscribed to, is we're in the process of working with more than 20 companies, which are now based in Guernsey, and I hope that number grows next time we speak. And the intent really is to create a group where stakeholders, including 2-Reg, and including everyone, from the finance industry based in Guernsey to come together and determine what are the key performance indicators that they'd like to understand more about 2-Reg. And really, then use that so that 2-Reg can appropriately share those aspects with the industry and for the industry to then leverage that to offer their services more efficiently to the clients of 2-Reg or to the stakeholders that are coming as a compliment to getting the 2-Reg services. So I think that's definitely something that we want to work on. I'm expecting at the end of July, to really have our first meeting with those stakeholders so that we can really come together and make a conscious effort. I think Guernsey as an economy provides such stability that a lot of things have happened in the last 10 years, very naturally, that just happen because of how the efficiencies in Guernsey revolve. What I really want to now do is make that an effort which is intentional, and make it an effort where all of us can really sit down and emphasise on our USPs together so that we're not one of the leading players, but we are the leading player in this, and I think Guernsey has the potential, 100% has the potential to do that.
Brandon 28:36
Brilliant well, sounds like some bold stuff. Thank you very much for joining us on the podcast today.
Sidhant 28:41
Thank you very much.
Brandon 28:42
Thank you. It was great to talk through the aircraft registration space, and where you think Guernsey stands in the world of aviation as well. So thank you, and thanks also to you for listening. If you enjoyed this discussion, we have a backlog of interviews on the We Are Guernsey podcast channel, you can check them out by searching for We Are Guernsey on your preferred podcast platform. We also have links to Sidhant and 2-Reg in our show notes so check them out to hear more from them. To find out more about Guernsey and its specialist financial services industry, head over to our website weareguernsey.com. We look forward to welcoming you back to the podcast soon but until then it's goodbye from Guernsey.
Transcribed by https://otter.ai