Govt may expedite Bill that assures lessors on repossession of aircraft

NCLT had on May 10 barred lessors from repossessing their planes from insolvent Go First

The central government may expedite legislating the Bill that implements the Cape Town Convention (CTC) and Protocol, making it easier for lessors to repossess their planes from an insolvent airline, sources said on Monday.

After Go First stopped operating flights from May 3, its lessors had put in applications with the Directorate General of Civil Aviation (DGCA) to repossess more than 40 of the airline's 54 planes. However, on May 10, the National Company Law Tribunal (NCLT) put a moratorium on all Go First's assets, barring the lessors from taking their planes back.

At least three lessors – SMBC Aviation Capital, SFV Aircraft Holdings and GY Aviation Lease – have filed an appeal before the National Company Law Appellate Tribunal (NCLAT) against the May 10 order. 
 

India signed the CTC — an international treaty to reduce the risks for aircraft lessors and financiers – in 2008. And in 2018, it introduced a Bill to implement the CTC.

In 2022, the Ministry of Civil Aviation put forward a new Bill – Protection and Enforcement of Interests in Aircraft Objects Bill – for consultation. Once the Bill is passed, it will have primacy over the insolvency law, allowing the lessors to easily repossess their aircraft, sources said.

On May 11, Aviation Working Group (AWG), a UK-based not-for-profit that monitors leasing and financing laws, put India on a watch list with a negative outlook over its failure to deregister Go First aircraft. AWG – which monitors the compliance of CTC – comprises aircraft manufacturers, lessors and financial institutions. AWG keeps a compliance index that serves as a risk assessment tool for aircraft lessors.

Aerospace giant Boeing had on May 12 expressed concern over the impact on aircraft lease rates in India due to NCLT’s May 10 order. Sources said the government may expedite legislating the aforementioned Bill to alleviate all such concerns.

About 88 per cent of 673 commercial planes with Indian carriers were on lease as on May 3, according to aviation analytics firm Cirium. Airlines in India, therefore, pay a big chunk of their revenues as lease rent.

When asked if the aircraft lease rates for the Indian carriers will increase due to the NCLT order, Ryan Weir, vice president (Sales and Marketing for India), Boeing Commercial Airplanes, told reporters on May 12: "It is probably too early to comment on the outcome. We are concerned about what will happen with the lease rates if the current order stands."

"Pushing Cape Town treaty through the legislation is the single most important thing India can do to appease the lessors and create a framework that works,” he said, adding, “It is proven to work in other jurisdictions. Once it is fully ratified, it will do the same thing in India. In doing so, the lessors will be provided more comfort in placing their extremely expensive asset in the country."