By Akhilesh Tilotia | Ashutosh Sharma

India’s civil aviation sector, one of the largest and fastest-growing in the world, is a cornerstone of its economic transformation. With India’s aspirations of becoming a developed economy by 2047, civil aviation will play a critical role in connecting geographies, enabling trade, and fostering tourism. Over this period, the capital outlay required for acquiring commercial aircraft is expected to run into hundreds of billions of dollars: the financing ecosystem will hence play a critical role in the growth of the local aviation industry.

Globally, the aviation financing value chain includes various stakeholders such as leasing companies, institutional investors, financial institutions, and export credit agencies. India is developing an aviation leasing and financing ecosystem by encouraging global as well as domestic investors to establish aircraft leasing and financing companies in Gujarat International Financial Tech City (GIFT) International Financial Services Centre (IFSC). We believe that the introduction of the Protection of Interests in Aircraft Objects (PIAO) Bill, 2025, in the Rajya Sabha marks a milestone in reshaping the landscape of aircraft leasing and financing in India.

Aviation as a catalyst for growth

Supported by rising demand, competitive market dynamics, and progressive policies, the Indian aviation industry has transformed in recent years to become the third largest domestic market in the world after the US and China.

The number of operational airports in the past decade has almost doubled to 157 with a stated aim of the government to increase it to more than 350 by 2047. Compared to other large economies, consumption of seats per head of population in India is still low. Apart from the growth of the domestic market, international connectivity from India is expected to rise as Indian airlines and airports build large symbiotic hubs.

Major Indian airlines have already placed orders for over 1,900 aircraft with manufacturers globally. With each aircraft requiring investment upwards of $50-100 million, these large aircraft orders amount to a requirement of hundreds of billions of dollars of financing. Airlines have the option to either buy or lease aircraft. With more than 58% of the world’s commercial aircraft fleet being leased, leasing has emerged as a preferred option among airlines. The ratio in India is much higher than the global average, with around 80% of India’s commercial aircraft being leased from foreign lessors.

Considering the strategic importance of the industry and the critical role of financing, India is developing an aircraft leasing and financing hub at GIFT IFSC.

Role of GIFT IFSC

GIFT City’s IFSC is emerging as a hub for aircraft leasing and financing, both for Indian airlines and potentially regional ones too. With its tax incentives, regulatory agility, access to global financial markets, low operating costs, and a progressive approach by the IFSC Authority, GIFT IFSC is swiftly positioning itself as a compelling value proposition for aircraft financing and leasing.

Over the past few years, the IFSCA has introduced a specialised framework tailored for aircraft leasing to bring the aircraft leasing and financing business onshore. As of December 2024, 33 aircraft leasing companies had established their presence in GIFT IFSC and leased more than 60 aircraft including wide-body, narrow-body, commercial and corporate jets and a similar number of aircraft engines.

The proposed Bill can add another layer of strategic advantage to GIFT IFSC-based aircraft lessors and can make India a more attractive destination for leasing activities. Like other countries, India too has seen bankruptcies of airlines: lessors, who are the aircraft owners, need an ability to pull their assets out in such a corporate event.

A game changer for financing

The Cape Town Convention (CTC), which India signed in 2008, establishes a global framework for protecting the rights of lessors and financiers. The CTC is a treaty that is designed to facilitate asset-based leasing and financing of aircraft: its implementation can potentially reduce the cost for the airlines or lessees, by increasing the legal predictability in the transaction.

The implementation of PIAO Bill improves mechanisms for lessor’s protections, including repossession rights in case of defaults, reducing disputes, and fostering investor confidence. Implementation of the CTC is expected to elevate India’s rating in the Aircraft Working Group’s (AWG) compliance index. A higher AWG rating can lower financing costs for Indian airlines, enhancing their competitiveness. By reducing risks and financing costs, the PIAO Bill should enable airlines to access more favourable lease terms, supporting fleet modernisation and expansion.

The Bill’s enactment can attract global lessors and financiers to GIFT IFSC, providing more regulatory certainty in case of default and recovery mechanisms, fostering the growth of a domestic aircraft leasing and financing ecosystem. This can be a good diversification of funding sources for Indian airlines that are dependent on foreign jurisdictions. They can benefit from reduced lease costs, streamlined financing processes, and a more resilient supply chain that is critical to achieve ambitious expansion plans to cater to growing demand. A more efficient and cost-effective aviation ecosystem ultimately benefits passengers, as reduced financing costs can translate into lower airfares, better connectivity, and enhanced travel experiences.

A holistic vision for the future

The PIAO Bill represents a strategic step to integrating India into the global aviation financing ecosystem and complements the positioning of GIFT IFSC as a financial centre. To sustain this momentum, it is essential to promote awareness among global aviation stakeholders about the advantages of operating from GIFT IFSC, strengthen collaborations between airlines, lessors, and financial institutions, and invest in capability and capacity-building by creating a talent pool specialising in aircraft financing and leasing.

As India charts its course towards becoming an economic behemoth by 2047, the PIAO Bill and GIFT IFSC can provide the perfect runway for India’s aviation financing ambitions. By creating an enabling environment for aircraft leasing and financing, India can unlock opportunities for fostering economic growth and creating high-value jobs locally.

The writers are respectively member, standing committee for the development of aircraft leasing and financing ecosystem at GIFT IFSC, & chief general manager (development), IFSCA.

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