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Lessors oppose some Indian draft aviation rules on

repossession

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AWG calls rules impractical, urges reconsideration

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India's aviation market crucial for lessors

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Modi wants to make India a major aviation hub

By Abhijith Ganapavaram

NEW DELHI, Oct 22 (Reuters) - A group of global lessors

has asked India to reconsider draft aviation rules they say

complicate the task of reclaiming aircraft from distressed

carriers by requiring lessors to first clear airline taxes and

salaries, sources said.

India is a key market for lessors as hundreds of new planes

are on order by the likes of Air India and IndiGo.

About 80% of commercial passenger jets in the country are leased

rather than owned, well above the global average of 58%.

The bankruptcy of Indian airline Go First in 2023 left

lessors scrambling to reclaim planes as they negotiated its

complex laws, leading some to call India a risky jurisdiction.

That prompted New Delhi's new law this year to ease

repossession.

But the draft rules released in September to give effect to

the law say wages to employees and government taxes owed by a

distressed airline "shall have priority and would need to be

cleared" by lessors before they can take their planes back.

The rules are impractical and could delay plane

repossessions, the Aviation Working Group (AWG), has told

India's civil aviation ministry in a letter, said three industry

sources with knowledge of the confidential communication.

The AWG represents leasing giants such as AerCap ( AER ) and

Avolon, as well as planemakers Boeing ( BA ) and Airbus

.

The ministry did not respond to Reuters queries. The sources

sought anonymity as AWG's letter is confidential.

INDIAN RULES WORRY GLOBAL LESSORS

The AWG has asked the ministry to reconsider the rules,

which were open for public consultation until October 17 and

have yet to be finalised.

"It's like we took two steps ahead with the law, and then we

took four steps back with the rules ... Some dues being sought

are not even related to the aircraft," said Mansi Singh, an

aviation lawyer with BTG Advaya, which advises lessors.

The new draft rules state no reason why lessors are liable

for other airline dues before they can recover their planes.

But the demise of Kingfisher Airlines in 2012 and Jet

Airways in 2019 left millions of dollars in unpaid dues owed to

government bodies and scores of employees without salaries.

Among the debts the draft rules require lessors to pay

before taking possession of their planes are items such as

unpaid wages of airline employees, airport operators' charges,

including landing charges, and even fuel charges.

DISCUSSIONS SET TO TAKE PLACE

One of the sources said lessors were amenable to paying some

levies concerning their planes for 30 days to 60 days before

they take them back, but worried about being held responsible

overall for all the past charges.

Jeffrey Wool, the secretary general of AWG, confirmed it had

submitted detailed comments to the government on the draft rules

which "would materially benefit the Indian aviation sector", but

did not comment on the lessors' concerns.

Prime Minister Narendra Modi has faced many challenges in

his quest to turn India into an aviation hub.

In 2023, when Go First went bankrupt, lessors complained

about not getting back their planes in time, with one even

claiming that aircraft "were robbed" of some components.

AWG representatives and ministry officials are set to hold

talks on the new rules in coming weeks, one source said.

Aviation lawyer Ravi Nath, AWG's coordinator in India, declined

to comment.