Lessons from KFA default: Norms to be eased for aircraft leasing firms
India is drafting new rules that would make it easier for lessors to repossess aircraft, if any airline defaults on payments.business Updated: Aug 17, 2016 11:38 IST
India is drafting new rules that would make it easier for lessors to repossess aircraft, if any airline defaults on payments.
Aircraft leasing companies have been wary of leasing planes in India after having burnt their fingers with Kingfisher Airlines (KFA), and more recently with Air Pegasus, where lessors , or aircraft owners, have still not managed to get their planes de-registered.
The aftermath of the Kingfisher crisis, and the delays faced by lessors to get their planes back, had resulted in aircraft owners hiking lease rentals and increasing security deposits for the Indian market.
Sources said the aviation ministry is drafting new rules to “bring down the risks” for lessors, and ensure that any such incident doesn’t impact the credibility of other Indian airlines.
“If the lessee defaults on the lease, the lessor should be able to take their aircraft out quickly. That’s our main focus. If that happens, it will also bring down the country risk that is associated in the leasing business,” said a senior aviation ministry official.
“KFA’s grounding in October 2012 and the delay by the government to de-register the aircraft it was operating, despite being a signatory to the Cape Town Convention, had dented India’s reputation. Other carriers suffered as lessors raised leasing rentals,” said aviation expert Rajji Rai.
Aviation ministry feels the move will help gaining confidence of the lessors.
“These rules will help start-up airlines. The government can’t ask lessors to charge lower rentals, but if we can bring down their risk of doing business in India, the rentals and interest rates will automatically go down,” said another ministry official.
As first reported by HT on July 29, lessors have approached the Directorate General of Civil Aviation to de-register aircraft operated by Bangalore-based Air Pegasus after the regional carrier defaulted on payments.
“The matter is still under process,” said a DGCA official.