Transfer Pricing Tool
for Transportation

Transfer pricing for Transportation: OECD methodology

Transportation companies — airlines, shipping lines, rail operators, and road haulage groups — face transfer pricing challenges primarily around fleet leasing, shared management services, and operational services between group entities. The capital-intensive nature of transportation means fleet assets are often held by leasing entities in favourable jurisdictions and leased to operating subsidiaries, creating significant intercompany flows that must be priced at arm's length.

For fleet leasing (aircraft, vessels, rolling stock), the CUP method is the preferred approach where market lease rates are available. Aircraft dry lease rates are widely published by aviation consultants (Ascend by Cirium, Avitas), and vessel charter rates are published by the Baltic Exchange and Clarksons. The intercompany lease rate should reflect the arm's length rate for comparable equipment of similar age, specification, and condition, adjusted for maintenance obligations, return conditions, and utilisation levels. OECD Chapter X principles on financial transactions may also apply to leasing arrangements, particularly where the lease contains financing elements.

For management and shared services — operations coordination, safety management, crew training, IT systems, revenue management, and commercial services — Cost Plus is the standard method. Typical markups range from 3% to 10% depending on the complexity and specialisation of the services. Airlines are particularly complex due to codeshare arrangements, alliance revenue sharing, and crew/aircraft sharing between group entities. Where revenue and cost allocation between related carriers goes beyond simple service provision, a profit split approach may be necessary — though this is not implemented in this tool. Ground handling and MRO services have well-established market pricing, making CUP feasible for these transaction types.

Recommended method: Cost Plus Method

For transportation entities, the cost plus method is typically the most appropriate transfer pricing method. This tool pre-selects this method based on industry best practice and OECD guidance. Typical arm's length ranges for transportation are 3–10%.

Typical Transportation intercompany transactions

Fleet leasing between affiliates: Aircraft, vessels, or vehicles leased between group entities. CUP applies where market lease rates for comparable equipment are available. Preferred method: CUP (Comparable Uncontrolled Price).

Management and shared services: Centralised management services (operations, safety, HR, IT) provided to operating subsidiaries. Cost Plus for routine services. Preferred method: Cost Plus Method.

Ground handling and maintenance services: Related-party ground handling, aircraft maintenance (MRO), or port services provided at below-market or above-market rates. CUP where market rates are available. Preferred method: CUP (Comparable Uncontrolled Price).

Regulatory context

Aviation TP interacts with bilateral air service agreements and airline tax exemptions (Chicago Convention Article 24). Shipping TP interacts with tonnage tax regimes. Fleet leasing structures through Ireland, Singapore, and Bermuda face specific anti-avoidance scrutiny.

Limitation: This tool supports CUP for fleet leasing and Cost Plus for services. For airline alliance revenue sharing or codeshare profit allocation, profit split analysis may be needed — consult a specialist.