The Aviation Working Group (AWG), which monitors
leasing and financial laws affecting aircraft manufacturers and lessors, has
expressed support for India’s recent Bill to protect lessors, but has placed
the country on its watch list, with a score still lower than Pakistan's.
In January 2024, the Union Cabinet approved the
‘Protection and Enforcement of Interests in Aircraft Objects Bill, 2024’ (Cape
Town Convention Bill), which aims to simplify the repossession of aircraft and
engines by lessors if Indian airlines default on their obligations.
Despite the positive outlook for India’s adherence to the Cape Town Convention (CTC), AWG has placed India in the medium compliance category, with a score of 61—lower than Pakistan's score of 71. India’s aviation market saw 327 million passengers in 2023, far surpassing Pakistan's 7.6 million, yet it still lags behind in compliance.
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AWG stated that the introduction of the CTC
Bill represents a significant move toward improving India’s compliance, and its
successful enactment could further enhance the country’s score. AWG referenced
several insolvency cases, including those involving SpiceJet, Supertech, Jet
Airways, and Go First, in its analysis, noting that if the bill were to
prioritize CTC over conflicting national laws, India’s score would improve.
AWG, which is co-chaired by Airbus and Boeing,
includes global aircraft lessors such as AerCap (the world’s largest) and
financial institutions like Deutsche Bank and Standard Chartered. SMBC Aviation
Capital, the world’s second-largest aircraft lessor and AWG member, is
currently involved in legal battles to repossess aircraft leased to Go First.
The Go First bankruptcy has heightened concerns among lessors, as they were prevented from reclaiming their assets, which negatively affected India's aviation market, where most aircraft are leased. In response, AWG downgraded India's compliance score, prompting stricter leasing norms that may result in higher leasing costs.
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In May 2024, India's Directorate General of
Civil Aviation (DGCA) deregistered all 54 aircraft leased to Go First,
following a Delhi High Court order, bringing relief to lessors and improving
the situation for future leasing operations.
Global financiers and lessors will continue to closely monitor AWG’s assessments of India, given the country’s critical role in global aviation.
Source: Financial Express