Stiff Leasing Terms May Abort New Pvt Airlines Takeoff Face Stiff

New private airlines are finding it difficult to get airborne owing to high rentals and the stiff terms demanded by foreign aircraft leasing companies who find the once promising Indian market a risky proposition following problems in getting back planes leased to East West Airlines, ModiLuft and Damania.

Leading international aircraft leasing firms like Air and General Finance Limited, Aer Lingus of Portugal and Crossair have all but shunned India after the inordinate delay in flying out leased planes. The government policy of grounding the leased planes to recover its dues has also contributed to the negative image.

Waiting in the wings, ready for take-off are four start-up carriers, with the government earlier this year permitting Deccan Airlines, TransIndia Airlines, Assured Airways and Maharashi Industrial Business to bring in foreign equity upto 40 per cent.

 

Besides, there are four others with permission to import planes but who have not been able to do so due to stiff leasing conditions, official sources said.

A leasing company representative said the rentals for India had been marked up to 40 per cent to cover the cost of possible litigation in future. Moreover, stiff terms like a non performing insurance to cover the cost of grounding and political risk insurance to make up for changing government policy, were being demanded.

All this would naturally push up costs but If Indian operators want to lease planes, the cost will be heavy as the image of India as an aircraft market is really down, the representative said, adding that since his company was negotiating lease deals with one or two carriers on its terms, he would not like to be identified.

He said that in no other country did the government ground leased aircraft to recover its dues. An aircraft is an asset only when it flies. A grounded plane does not earn any money, but on the other hand incurs maintenance costs.

Planes of private airlines have been routinely grounded to recover pending Inland Air Travel Tax (IATT) and landing and navigation charges.

The government has at times threatened to prevent the lessors from flying planes out of the country, he said, adding that this is never done as the owner has the first rights to the plane and not the Indian government.

Among the other guarantees demanded is that the plane cannot be used in lieu for any other dues that the lessee might owe to the government.

Of the four new operators who have obtained foreign investment clearance, Deccan Airlines is minority-owned by Saab Aircraft of UK, an aircraft manufacturer who will lease planes to the carrier. The others will have to track commercial leasing companies at rates which have been hiked for India.