The Indian government’s recent move to protect aircraft lessors when an airline is under insolvency could prevent an estimated loss of $ 1.2 to 1.3 billion that Indian airlines were at the risk of incurring due to increased risk perception, according to the Ministry of Civil Aviation.
“India is committed to keeping lessors’ confidence in the Indian aviation market intact by reducing their risks,” the Ministry said in a press statement on Friday. This follows a Ministry of Corporate Affair’s notification on October 3 that said aircraft, engines, airframes and helicopters were exempted from protection granted under a moratorium to a corporate debtor undergoing insolvency proceedings as per the Insolvency and Bankruptcy Code (IBC) 2016.
It added that the legal entities dealing with aircraft financing and leasing estimated that impediments in repossessing aircraft by lessors was costing Indian airlines an extra $1.2 to 1.3 billion more than before in terms of lease costs. These concerns were highlighted when Go First moved for insolvency and the National Company Law Tribunal granted it a moratorium from recoveries from lenders, including aircraft lessors who had moved Director General of Civil Aviation for de-registration of their aircraft over pending dues.
Following the recent Corporate Affairs Ministry notification, the global leasing watchdog, the Aviation Working Group, issued a positive watchlist notice for India on Thursday. This follows two negative watch list notices since May over concerns emerging from Go First’s legal battle.
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