Aviation leasing watchdog issues warning to India over plane repossessions

BOC Aviation

12/05/2023 08:51

By Aditi Shah and Aditya Kalra
       NEW DELHI, May 12 (Reuters) - A global aviation leasing
watchdog has put India on a watchlist with a negative outlook
saying it failed to comply with international aircraft
repossession norms after airline Go First was granted bankruptcy
protection.
    The move from the Aviation Working Group (AWG), a UK-based
entity that monitors leasing and financing laws on behalf of
planemakers and lessors, could raise leasing costs for Indian
airlines and further jolt lessors' confidence in the world's
third-largest domestic aviation market.
    The inability to repossess Go First's planes in a timely
manner comes as Indian air travel is booming and hundreds of new
jets have been ordered by local carriers, who regularly turn to
lessors to help finance plane purchases.
    Go Airlines (India) Ltd filed for bankruptcy protection last
week, blaming "faulty" Pratt & Whitney (P&W) engines for the
grounding of about half its 54 Airbus  AIR.PA  A320neos. P&W,
part of Raytheon Technologies  RTX.N , says the airline's claims
are without evidence.
    In granting protection, the Indian tribunal ordered a freeze
on Go First's assets even though some lessors had already
terminated their leases with the airline and placed requests
with the aviation regulator to repossess more than 40 planes.
    Failure to process deregistration applications for aircraft
with leases terminated before the freeze was imposed, "results
in a negative outlook", AWG said in its watchlist notice.
    The government and the aviation regulator were not
immediately available to comment. 
    Go First's lessors include SMBC Aviation Capital, CDB
Aviation's GY Aviation Leasing, Jackson Square Aviation and Bank
of China Aviation.    
    The negative outlook by AWG is under what it calls the
compliance index, which addresses whether requirements under the
Cape Town Convention, an international treaty on plane
repossessions, are met in practice. 
    India's score has been reduced to 3 from 3.5 earlier. 
        India made it easier for lessors to take back planes if
airlines default on payments after joining the Cape Town
Convention in 2008, but bankruptcy protection supersedes
repossession requests under its local laws.    
    AWG is a not-for-profit entity co-chaired by Airbus and
Boeing  BA.N . Its members include major lessors and financial
institutions like Aircastle, BOC Aviation, SMBC Aviation
Capital, Deutsche Bank, Goldman Sachs and Morgan Stanley.
    "The Go First insolvency proceedings are a material
development that implicates Cape Town Convention compliance in
India," AWG said.

 (Reporting by Aditi Shah and Aditya Kalra; Editing by Jamie
Freed and Sharon Singleton)
 ((aditi.shah@tr.com; +91-11-4954 8023, +91-11-3015 8023;
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