AerCap says better India plane reclaim rules to boost investor morale

By Aditi Shah

HYDERABAD, India (Reuters) – Foreign investors would feel more confident about increasing their aircraft leasing business in India if the country firmed up legislation on the repossession rights of lessors, a top executive at AerCap Holdings said.

Debate over the rights of lessors in India came to the fore last year when budget carrier GoFirst filed for bankruptcy, a move that blocked lessors from repossessing their aircraft.

This sparked a confidence crisis among lessors who warned of rising leasing costs in future. Many are still embroiled in a legal battle to recover their assets.

India in 2008 ratified the Cape Town Convention, an international treaty protecting rights of lessors over their aircraft in case of defaults by airlines, but has yet to pass a law.

“Legislating the Cape Town Convention is going to give the confidence to the world that India understands what it takes to manage when foreign investors put mobile assets into a country,” Suthesh Selvaratnam, vice president, leasing for Asia Pacific at AerCap told Reuters.

India amended its insolvency law in October with an aim to bring its laws in line with the Cape Town Convention, thereby helping shore up financing of its airline industry.

Despite rumours of a pullback from international lessors after the GoFirst incident, Indian airlines are not short of financing offers from foreign investors, Selvaratnam said.

“But what it does do is it skews the attractiveness for foreign investors to go into the market and finance the financially stronger airlines.”

The world’s fastest growing aviation market has faced challenging times with Go First following Kingfisher and Jet Airways – both of which went bankrupt over the last decade or more.

India is a critical market for lessors, in which sale-and-leaseback deals accounted for 75% of plane deliveries from 2018 to 2022, compared with a global average of 35%, according to analytics firm Cirium.

The country has over 1,000 new planes on order from IndiGo, Air India and Akasa Air, which placed a fresh order for 150 aircraft on Thursday, is yet to take deliveries of earlier orders.

(Reporting by Aditi Shah; Writing by Tanvi Mehta; Editing by Mark Potter)