India passes bill in boost for aircraft lessors
The Indian Parliament passed a bill on Thursday that will make it easier for aircraft leasing companies to recover planes and engines when an airline defaults on payments. This marks a significant victory for international lessors in a key market, Reuters reported.
The bill, titled the “Protection of Interests in Aeronautical Objects,” will fully implement the Cape Town Convention and Protocol, an international agreement on asset-based financing.
Solution to a Long-Standing Issue
The debate over the need for this law intensified in 2023 when companies like SMBC Aviation faced hurdles in recovering aircraft leased to Go First after the airline declared bankruptcy. In that case, local regulations took precedence over global aircraft leasing rules, creating uncertainty in the sector.
With the new legislation, the situation changes dramatically, offering greater legal security to lessors and strengthening India’s position in the global aviation market.
Market and Passenger Impact
The bill now only awaits the president’s signature to take effect. According to Lovejeet Singh, a partner at Chandhiok & Mahajan and an expert in aviation law, this measure will boost lessors’ confidence in India and could help emerging airlines secure more favorable leasing terms.
Additionally, reduced leasing costs are expected to positively impact airfares, directly benefiting passengers.
A Growing Industry
The Go First case jeopardized India’s reputation as a reliable destination for aircraft leasing. At the time, lessors struggled to recover more than 50 Airbus aircraft, leading the country to be labeled a “risky jurisdiction” for such operations.
Nevertheless, India’s aviation sector continues to expand rapidly. Since 2022, the country’s airlines have ordered over 1,300 aircraft from Boeing and Airbus, driven by a surge in air travel demand.
India’s Civil Aviation Minister emphasized that this legislation is a “key step toward making aircraft leasing more economical, benefiting both airlines and passengers.”
Given that most aircraft operating in India are leased under dry lease agreements or sale-and-leaseback contracts, this reform could mark a turning point for the country’s aviation industry.
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