Aircraft leasing companies could find it easier to do business in India with a proposed law likely to lend more credibility to the leasing culture in the country. The legislation seeks to align India’s rules with those of the Cape Town Convention (CTC) that protect the creditor's interests and create a system of fair legal procedures for disputes.
Changing landscape
India’s Ministry of Civil Aviation (MoCA) has proposed a new law that will work in the interest of international aircraft leasing companies if they need to repossess and move airplanes out of the country.
According to a report by The Hindu, the aviation ministry has asked for comments from all the stakeholders involved on the proposed legislation called the Protection and Enforcement of Interests in Aircraft Objects Bill, 2022.
India has been a signatory to the CTC for 14 years but so far has not been able to fully implement the provisions of the Convention on International Interests in Mobile Equipment and Protocol on Matters Specific to Aircraft Equipment adopted during the conference in 2001. The proposed bill seeks to change that.
MoCA has explained in a note stating that current Indian laws, such as the Companies Act, 2013 and the Insolvency and Bankruptcy Code, 2016, do not align with the CTC and Protocol. The draft bill will help facilitate the repossession of aircraft, its sale, lease, and collection of income from its use, as well as de-registration and export of planes.
Previous attempts
The call to amend the rules surrounding the repossession of airplanes in India has been around for years. They became particularly strong around the time of Kingfisher Airlines' demise and the difficulties faced by lessors to reclaim their planes.
According to Sarin & Co., a law firm specializing in Indian and international law, the Aviation Working Group (“AWG”) in India has been trying to assist the government in aligning its laws with those of the CTC for years.
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In 2013, India sought the help of a European consultant group to frame rules making it easier for leasing companies to move their planes out. Then, in 2015, MoCA amended the Aircraft Rules 1937, incorporating provisions of the CTC, making it easier for aircraft owners and lessors to repossess planes on cancellation of lease agreements.
Hurdles faced by leasing companies
India’s reputation in the aircraft leasing industry has taken a hit in the last decade to the point where the country’s airlines have had to face higher lease charges, with many regional carriers even refused airplanes for rent.
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When Kingfisher Airlines went bust in 2012, leasing companies such as International Lease Finance Corp. (ILFC) and Germany’s DVB Bank faced many roadblocks in recovering their planes. Other companies filing petitions in Indian courts seeking de-registration of six Boeing 737 leased to SpiceJet in 2015 or the challenges faced in reclaiming aircraft when Jet Airways shut down in 2019 haven’t helped matters either.
However, many feel that at a time when many smaller airlines in India are struggling to get leased aircraft, the proposed legislation is exactly what is required to instill confidence in international leasing companies to bring more business to India.
What do you feel about the aircraft leasing situation in India? Do share your thoughts in the comment section below.
Source: The Hindu, Mint, Sarin & Co.