New Delhi: Indian airlines have welcomed the latest change made by the ministry of corporate affairs (MCA) in the Insolvency and Bankruptcy Code (IBC) allowing aircraft lessors to recover their assets even after commencement of insolvency proceedings.
“The latest amendment to the IBC comes as a positive step that will provide lessors the confidence to lease more aircraft to Indian airlines, at commercially favourable rates. This will help the industry as a whole to grow, which is critical for the economic progress of our nation,” Vinay Dube, founder and chief executive, Akasa Air, told Mint.
Under a 3 October notification, MCA notified that the provisions of Section 14(1) of IBC, which imposes a moratorium upon the admission of an insolvency plea, shall not apply to transactions, arrangements, or agreements related to aircraft, aircraft engines, airframes and helicopters. The moratorium prohibits the transfer of any assets by a corporate debtor and bars recovery of any property by an owner or lessor where such property is occupied by or in the possession of the debtor.
“As current players continue to expand their operations and the industry carves space for new players, India will need continued support from lessors to cater to this growth,” he added.
Around 80% of the commercial fleet in India is leased compared with 53% globally, with Ireland, Singapore and Hong Kong being centres for aircraft-related leasing activities for most Indian airlines on account of liberal legal and tax considerations, according to consultancy firm Primus Partners.
The latest data as of June shows that India’s largest airline IndiGo has 300 out of its 316 aircraft on operating lease or nearly 95% leased fleet.
“This is a much-needed and positive development that will significantly boost lessor confidence in the Indian aviation sector. It not only reinforces the stability and credibility of the industry but also reaffirms India’s commitment to fostering a conducive environment for aviation stakeholders,” a SpiceJet spokesperson said.
Go First’s future hangs in balance after these developments, as stakeholders like the airline and aircraft lessors wait for an interpretation of notification either from court or civil aviation regulator.
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Updated: 05 Oct 2023, 11:31 PM IST