As a part of its attempt to take the aviation sector in India to greater heights, the government cleared one more new bill in hand; this reformed the country’s norms of aircraft leasing. This newly proposed legislation was going to cause significant savings of cost in lease for the airlines and turn out to be more lease-friendly as a nation for India. The interests of the new bill are brought towards achieving concord between global norms in leasing and Indian bankruptcy laws with regards to over conflicting terms. This is about placing lease as one of their issues.
Innovative provisions of the New Bill
The Union Cabinet also approved the Protection and Enforcement of Interests in Aircraft Objects Bill, which would be taken during the next Parliament session. The new bill dwells upon a very critical issue: recovery of aircraft in case of lease payment defaults by the lessee/airlines. New rules will help make the process simpler and provide legal certainty over retrieval of leased aircraft when airlines are under financial stress.
The most dramatic shift is to be seen in the emphasis being laid on the Cape Town Convention-an international treaty on aircraft leasing. This world body has come as a worry in India since domestic laws such as the IBC, 2016 had often complicated the situation for lessors in the country. Hence, India is trying to adapt to the international leasing standards and build confidence in investors about the Indian aviation market by giving precedence of Cape Town Convention over domestic laws.
Impact of the NCLT Ruling
Urgency to the passage of this bill was triggered by a NCLT decision on the case of Go First, an Indian airline. A court order in that case provided for a moratorium on the repossessing of aircraft and put off many global lessors’ view on leasing aircraft to India. With its assets locked into lengthy legal litigation, global lessors increased the risk premium with resultant higher cost of leasing for Indian airlines.
Higher lease rentals have increased the cost of operations of airlines in India. The increase in leasing costs is a significant burden on Indian airlines as they cannot remain competitive on the price front with the addition of more aircraft in their fleet.
Indian Airlines has taken it well
This has been greeted very warmly by airlines in India who view this as being the right decision. For one, IndiGo, India’s largest airline was very bold and extremely positive about its prospect. The airline pointed out that it would augur well with the leasing environment. The airline further stated that the Indian government had more capital needed to support its high growth in its aviation sector and that the adoption of international conventions like the Cape Town Convention would bring clarity and confidence to the leasing community.
Other stake holders in the aviation industry have embraced this. For instance a new Indian airline, Akasa Air said that the bill will boost image of India as a place to lease aircraft. Secondly, both domestic financiers and international financiers will be even better placed especially in terms of security thus the prospects of low financing prices in the near future.
Legal and Financial Considerations
India acceded to the Cape Town Convention in 2008 with little effect so far because there were no country-specific domestic laws to support the Convention. This attitude gave room for the overlying local law, thereby creating uncertainty and lack of confidence amongst the lessors. The new bill remedies this issue by providing the legal backing necessary to properly enforce the provisions of the Cape Town Convention.
Even according to Nitin Sarin, managing partner of Sarin & Co, heads believes that this piece of legislation is going to provide overall security and betterment towards aircraft leasing in India. The reduction in the cost for aircraft leasing and financing would be brought about by protecting the financiers and lessor, resulting in a savings benefit for the airlines, their passengers, and the aviation sector in general.
Benefits for the Aviation Sector
It’s a bill having wider implications in the Indian air world. As it is quite clear that increasingly, international leasing companies are destined to come into India with the motive of strong competition, affordable service terms and thereby increase of the Indian airliner fleets that offer convenient air journey to people easily along with this affordable price too.
Conclusion
The new aircraft leasing bill easing the rules will be a landmark decision for the government of India, as this brings India closer to international standards, especially the Cape Town Convention, to make the environment more inviting for aircraft leasing, reduce the costs of airlines, and stimulate growth in the aviation sector. It promises to give a bright future to the aviation market of India, now duly supported by the legislative move in the air along with this.
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For more updates on the latest developments in the Aviation sector, check out our article on Budget 2025: Solutions for India’s Aviation Sector Growth