Changes made to India’s Insolvency and Bankruptcy Code will facilitate aircraft lessors in reclaiming aircraft frames and engines in the event of a customer’s insolvency or default.
These changes align India’s domestic laws with the 2001 Cape Town Convention and are seen as a response to recent airline insolvencies, including Go First.
On October 3, 2023, India’s Ministry of Corporate Affairs announced the modification of section 14(1) of the Insolvency and Bankruptcy Code, exempting aircraft-related transactions from court-imposed moratoriums that previously hindered lessors from repossessing their assets.
This move aims to address past instances where lessors, many of them based in Ireland, were unable to retrieve their leased aircraft after airlines like Kingfisher Airlines, Jet Airways, and Go First ceased operations or went bankrupt.
Under the new exemption, lessors can terminate lease agreements and repossess assets in the event of default, in line with the provisions of the Cape Town Convention.
CEOs of major Indian airlines, including Air India, Vistara, SpiceJet, and an IndiGo Airlines representative, met with India’s Civil Aviation Minister to express their support for the changes, citing reduced leasing costs and risk mitigation for lessors as benefits of the revised policy. The Aviation Working Group has also provided a positive assessment for India following these modifications.
