After struggling to get back their aircraft from Go First following the airline’s abrupt stoppage of operations, lessors are seeking the legislative protection provided by the Cape Town Convention (CTC) to shield themselves from a repeat of the events.
By filing for voluntary insolvency proceeding in May last year, Wadia group promoted no frills carrier Go First prevented its leasing partners from repossessing their assets claiming that the aircraft formed the core of its business.
The Directorate General of Civil Aviation (DGCA) in the same month stalled requests from lessors for repossession of the aircraft assets. Though the ministry of corporate affairs through an amendment in the Insolvency and Bankruptcy Code, 2016, removed leased aircraft from the ambit of moratorium from a retrospective basis, its application in Go First case needs to be ratified by the Delhi high court.
Global aviation leasing body, Aviation Working Group (AWG), which monitors leasing and financial laws on behalf of aircraft manufacturers and lessors, downgraded India to negative looking at the problems of lessors in repossessing their aircraft in Go First case.
The ministry of civil aviation last year proposed to introduce the Protection and Enforcement of Interest in Aircraft Objects Bill, 2022 (CTC Bill) government for public consultations.
Speaking on the sidelines of the Wings India event in this city, Vumlunmang Vualnam, secretary, ministry of civil aviation, said that the Bill is ready and has been presented to the authorities.
“We have drafted the Bill and it is ready. The process would be for the Union Cabinet to approve it and for us to take that approval to the parliament. It is ready and has been explained and presented to the authorities for understanding,” Vualnam said.
The CTC Bill provides for various remedies in case of any default/declared default under the agreement, the chargee may work towards taking possession or control of the aircraft, to sell or grant a lease of such aircraft, to collect or receive any income or profits arising from the management or use of such aircraft.
Vualnam further added that since the lessors and Go First have approached the courts, it is beyond the control of the government to intervene. Lessors are awaiting repossession of more than 50 aircraft of Go First which are lying at various airports.
AerCap, one of the biggest lessors of aircraft and engines to Indian airlines, is one of the affected companies following the grounding of Go First. The Singapore-based company said that India has ratified but not fully implemented the CTC.
SA Suthesh, vice president leasing, Asia-Pacific, AerCap said, “Generally, when there is growth like the one seen in India, what tends to happen is that inefficiencies in the ecosystem can get lost and not addressed. If the Cape Town Convention (CTC) gets legislated it would bring about a huge confidence boost to foreign investors and leasing companies wanting to do business in India”.
After the grounding of Go First and the subsequent negative stance towards aircraft possession taken by the government, lessors adopted a cautious approach where larger airlines, with financially sound profiles became preferred partners.
“After the Go First incident, there was a talk in the industry that there may be a pullback in investments. It certainly skewed the attractiveness for foreign investors to fund the financially stronger airlines. I don’t think that is beneficial for India Inc because you want to strengthen other airlines that are not as strong and make it attractive for lessors and foreign investors,” Suthesh added.