Aviation leasing watchdog cuts India's compliance rating amid Go First tussle (updated)

BOC Aviation

25/09/2023 19:36

(Adds context in paragraphs 1, 7, 8)
    By Aditi Shah and Shivam Patel
       NEW DELHI, Sept 25 (Reuters) - A global aviation leasing
watchdog has for the second time cut India's compliance rating
with international leasing laws and kept the country on a
watchlist with a negative outlook amid a dispute between local
airline Go First and its aircraft lessors.
    The move by the Aviation Working Group (AWG), a UK-based
entity that monitors leasing and financing laws, comes as
bankrupt budget carrier Go First is locked in a legal tussle
with aircraft lessors seeking to repossess jets. 
    The courtroom battle started after Go First was granted
bankruptcy protection in May. Under Indian law, that prevented
lessors from recovering 50-plus grounded Airbus  AIR.PA  planes.
The lessors have complained that critical plane parts are now
corroding or getting "robbed".
    The AWG said 130 days had passed since the lessors' request
to repossess their aircraft, more than double the maximum
waiting period of 60 days according to India's obligations under
the Cape Town Convention, an international treaty protecting the
repossession rights of lessors. 
    India has ratified the Cape Town Convention but has yet to
pass a law resolving conflicts with the country's insolvency and
bankruptcy code, which is backed by parliament.
    "The prolonged failure to make remedies, including
repossession and deregistration, available to creditors ... and
provide for asset maintenance and value preservation ...
negatively impact scoring," the AWG's notice said, warning of
further rating downgrades.
    The AWG, a not-for-profit entity co-chaired by Airbus and
Boeing  BA.N , has reduced India's score to 2 from 3.5 out of 5.
The negative outlook from AWG is under what it calls the
compliance index, which addresses whether requirements under the
Cape Town Convention are met in practice.
    This is the second such downgrade by AWG, which first placed
India on a watchlist in May and assigned the country a negative
outlook for its failure to process lessors' plane repossesion
applications before the freeze on Go First's assets. 
    The move could further hurt lessor confidence in the world's
third-largest aviation market, warned AWG, whose members include
major lessors and financial institutions such as Aircastle, BOC
Aviation, SMBC Aviation Capital, Deutsche Bank, Goldman Sachs
and Morgan Stanley.
    SMBC, the world's second-largest aircraft lessor, which also
has some planes leased to Go First, warned in May that India's
decision to block leasing firms from reclaiming the airline's
jets would hit lessors' confidence in that market.

 (Reporting by Aditi Shah and Shivam Patel in New Delhi
Editing by Mark Potter)
 ((Shivam.Patel@thomsonreuters.com;))