The Indian government will push through the Cape Town Convention Bill (CTC) in the upcoming parliamentary session, making good on earlier promises to enact laws to support the 2018 treaty, and easing lessor concerns about placing their aircraft in the country.
Shri Rajiv Bansal, secretary at India's Ministry of Civil Aviation, told Reuters at the 2023 Paris Air Show that the government was working to resolve the "discrepancy" between the CTC and India's bankruptcy laws that have seen scores of aircraft stuck in India, despite the efforts of lessors to repatriate them.
The recent Go First (GOW, Mumbai International) insolvency and the uncertainty surrounding SpiceJet (SG, Delhi International) is reportedly spooking lessors, with talk of increased lease rates for the Indian market to offset a perceived credit risk. Lessors had moved to repossess aircraft from both carriers, including before Go First voluntarily filed for bankruptcy protection, only to have the National Company Law Tribunal (NCLT) step in and block the repossessions. When India finally legislates the CTC, it will take precedence over domestic bankruptcy law.
The CTC requires the person handling an airline's insolvency to return aircraft within 60 days of the insolvency proceeding commencing. Currently, India's Insolvency and Bankruptcy Board says this can take over 600 days. The CTC establishes a universal regime for lessors to retrieve high-value equipment such as aircraft frames and engines. It is designed to provide lessors and their financiers with some certainty, thereby lowering leasing costs for local operators.
While India has ratified the CTC, the government has neglected to introduce the necessary supporting legislation. Bansal says he expects to know more in the "next few weeks." The NCLT ban on lessors retrieving aircraft from Go First and the resulting lessor disquiet is believed to have provoked the government into action. While draft legislation was drawn up in 2018, it has languished since then.
"The risk reduction will reduce the cost of aviation credit and will also bring down the lease rentals. This will be of immense help to the Indian aviation industry. It will also benefit the passengers and other end users by pass-through price reductions and increased levels of service," read the draft legislation.
