What does the Bill entail?
- Implements the Cape Town Convention and Aircraft Protocol, signed by India in 2008.
- Establishes a legal framework for aircraft leasing and repossession, aligning Indian aviation law with international standards.
- Applies to aircraft, helicopters, engines, and other aviation assets.
Relevance : GS 2(Governance , International Relations)
Key Provisions of the Bill
- Designates DGCA as the Registry Authority for registering and deregistering aircraft.
- Obligates airlines (debtors) to report dues and comply with lease terms.
- Grants lessors the right to repossess aircraft in case of default within 2 calendar months or a shorter agreed period.
- Contains an overriding clause—the Bill takes precedence over any other Indian law in case of conflict.
What is the Cape Town Convention and Protocol?
- A UN-backed international treaty (ICAO, 2001) for protecting creditors’ interests in high-value mobile equipment.
- Standardizes leasing transactions globally, offering legal remedies to lessors in case of default.
- India ratified it in 2008, but implementation lagged due to lack of enabling legislation.
Why was the Bill necessary?
- Past disputes (e.g. GoFirst, SpiceJet, Kingfisher) highlighted inconsistencies between Indian insolvency law and global norms.
- The Insolvency and Bankruptcy Code (IBC) gave protection to airlines (e.g. GoFirst moratorium), preventing lessors from repossessing aircraft.
- Aimed to improve India’s Cape Town Compliance Index score (moved from 50 to 62, target 90).
- Encourages aircraft leasing via GIFT City, Gujarat.
Impact on Leasing Industry
Positive Aspects:
- Brings legal clarity and reduces dispute resolution time.
- May encourage foreign lessors to lease to Indian carriers.
- Expected to lower perceived risk, especially for new or smaller airlines.
- Possibility of lower leasing rates (8-10%) and improved airfare affordability (though contested).
Concerns Raised:
- Taxation regime remains complex, with unpredictable enforcement.
- Lessors face IT notices for operating via SPVs without a permanent establishment in India.
- Government seen as pushing for domestic leasing through GIFT City—viewed by some as coercive.
- Creditworthiness and business fundamentals of airlines, not just legal framework, drive leasing decisions.
- Impact on airfares likely marginal, as pricing is demand-driven.
Conclusion: Will aviation disputes be easier to resolve?
Yes, in terms of legal process and repossession timelines—the Bill is a step forward.
No, if broader ecosystem issues like taxation, compliance burden, and business risks remain unaddressed.
