The group of global aircraft lessors has asked India to reconsider its draft aviation rule; they formally requested the Ministry of Civil Aviation of India. They claim that the draft would alter the task of reclaiming aircraft from distress careers. This move became a growing concern among the leasing companies about the risk involved due to the draft bill.
Why it Matters
India is one of the most important markets for lessors, since 80% of commercial aircraft is leased rather than owned, by the likes of Air India and Indigo, well above the global average of 58%. Due to its scale, Indian regulatory framework will have a significant influence on international leasing companies’ operation and its financial framework.
What Does the Draft Rule Propose
The draft rule introduced in September under India’s new aviation law framework, states that the government taxes and employee wages shall have priority and would need to be cleared by lessors before they reclaim their aircraft. In other terms, the lessors may have to cover unpaid employee salaries, airport operator charges, fuel charges, and other operational debt of the airline before the lessors can take back their assets. Seeing this situation, one of the aviation lawyers claimed that “it’s like we took two steps ahead with the law, and then we took four steps back with the rules”.
Why the Lessors are Reluctant
The Aviation Working Group (AWG) represents major lessors including AerCap, Avolon, planemakers Boeing, and Airbus. The AWG asked the ministry to reconsider the draft, raising concerns like:
- Lessors are subjected to additional liabilities beyond those outlined in the actual contract.
- The obligation to pay employee salaries or airport debt before a leased aircraft can be repossessed, which will increase the expense and risk for the lessors.
- This responsibility can delay the process of aircraft repossession, which would reduce the value of leasing in India and may deter potential buyers.
Why This Issue Already Exists
The dispute is not a matter of theory. After Go First failed in 2023, lessors rushed to try to recover their planes, but they came up against a complex set of laws governing distressed airlines in India, which delayed their recovery efforts. Earlier, a similar issue arose with Jet Airways (2019) and Kingfisher airlines (2012), when large unpaid government debts and problems with staff salaries left lessors with unpaid bills and uncertain asset recovery. That prompted New Delhi’s new rule to ease repossession.
Dialogues and Discussion
The draft rules were published for public consultation until 17 October and are not yet finalized. AWG has indicated willingness to engage and submitted detailed comments to the government. In the next weeks, conversations between AWG representatives and ministry officials are likely to be discussed.
In order to avoid being held entirely responsible for any previous airline debts that they did not directly incur, lessors have proposed a possible compromise. They expressed a willingness to cover certain charges tied to their leased aircraft for 30 to 60 days prior to repossession. The question here is will the final regulation make leasing aircraft for lessors easrier or stricter clauses will make investors less interested.
Prime Minister Modi has faced many challenges in his quest to turn India into an aviation hub. But the newly proposed draft rules raise serious worries about the regulatory-risk environment. While the government must keep a balance between employee protection, tax compliance, and investment attractiveness, lessors argue that the rules stack new liabilities onto them.
The outcome of this discussion will have an impact on India’s aviation aspiration and on international leasing firms, as they decide how much to invest in one of the biggest rising markets in the world.
