The story so far
Parliament passed the Protection of Interests in Aircraft Objects Bill, 2025 to resolve disputes between airlines and lessors over high-value aviation assets like aircraft and helicopters.
The Bill aligns India’s aviation laws with international standards, boosting investor confidence and helping resolve issues like those faced by GoFirst in 2023.
Despite these advancements, the aviation industry still faces challenges due to complicated tax laws and business operations in India.
What is the Bill and what are its provisions?
The Bill implements the Cape Town Convention and Protocol, an international treaty aimed at standardizing transactions involving aviation assets and offering remedies for creditors in case of financial defaults.
It provides legal clarity for the leasing industry, especially regarding disputes seen with airlines like SpiceJet and GoFirst.
The Bill designates the Directorate General of Civil Aviation (DGCA) as the registry authority for implementing the Cape Town Convention.
It specifies the process for repossession of assets in case of default and ensures that the Bill’s provisions override other inconsistent laws.
Why has the Bill been introduced?
The Bill addresses legal challenges faced by international lessors, including issues seen with the insolvencies of Kingfisher Airlines and GoFirst.
It aims to align India with global norms, improve its compliance score on the Cape Town Convention Index, and reduce the financial burden on airlines.
The law will help resolve issues related to repossession and maintenance of aircraft during insolvency situations, as seen with GoFirst’s shutdown.
How has the decision been received by the leasing industry?
The Bill has been welcomed by the leasing industry, especially in terms of resolving disputes and repossession issues, but some view it as too little too late, given past challenges with airlines like GoFirst and SpiceJet.
While the Bill is expected to lower the risk of doing business in India, it is not expected to significantly reduce leasing costs or airfares, as these are influenced by other factors.
Smaller airlines and startups may benefit from a 10% interest rate rebate for aircraft leasing, but there are concerns over India’s complicated tax regime.
The taxation system has led to some leasing companies operating through Special Purpose Vehicles (SPVs) and facing issues with IT notices, discouraging them from setting up operations in India’s GIFT City.
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