Rajya Sabha Passes Bill for Airline Leasing Issues

Context

The Rajya Sabha recently passed the Protection of Interests in Aircraft Objects Bill, 2025, a landmark legislation aimed at addressing legal and financial challenges in India’s aviation leasing industry. This bill seeks to align India’s domestic laws with international standards, particularly the Cape Town Convention and Aircraft Protocol, to enhance legal security for aircraft lessors and lessees.

Objectives of the Bill

The bill has several key objectives:

• Legal Framework: Establish a comprehensive framework for recognizing and enforcing international interests in aircraft objects.
• Cape Town Convention Compliance: Implement the Cape Town Convention and Aircraft Protocol to harmonize India’s aviation laws with global practices.
• Protection for Lessors: Provide enhanced remedies for lessors, including swift repossession of aircraft in cases of default.
• Cost Reduction: Reduce leasing costs and operational expenses for Indian airlines, thereby rationalizing airfares.

Key Features

• Legal Backing for International Agreements: The bill gives legal effect to the Cape Town Convention (2001) and its Aircraft Protocol, which India acceded to in 2008. These agreements ensure uniformity in securing rights for high-value aviation assets.
• Enhanced Remedies for Lessors: Lessors can reclaim leased aircraft within two months of default or a mutually agreed period, ensuring quick resolution of disputes. The bill introduces mechanisms like Irrevocable De-registration and Export Request Authorisation (IDERA) to facilitate repossession.
• Regulatory Oversight by DGCA: The Directorate General of Civil Aviation (DGCA) will maintain a registry of aircraft and monitor dues owed by airlines to lessors. Airlines must periodically update DGCA on pending payments, creating transparency and accountability.
• Impact on Leasing Costs: The legislation is expected to reduce leasing costs by 8–10%, benefiting airlines like Air India, IndiGo, and Akasa Air. Lower leasing costs will trickle down to passengers through reduced airfares.

Significance for Indian Aviation

• Boost to Leasing Industry: With 84.6% of India’s 840 operating aircraft under leasing models, the bill aims to strengthen domestic aircraft leasing capabilities. It addresses regulatory inconsistencies that previously discouraged lessors from operating in India.
• Improved Compliance Index: India’s compliance score under the Cape Town Convention will improve significantly, attracting more investment in aviation finance.
• Economic Benefits: Rationalized airfares due to lower operational costs will make air travel more affordable. Enhanced legal security will encourage banks and financiers to invest in aviation assets.

Challenges Addressed

The bill resolves several long standing issues:

• Default Cases: Past defaults by Indian carriers like Jet Airways (2019) and GoAir led to higher leasing costs and reduced fleet sizes.
• Grey Areas: It clears confusion around repossession rights and regulatory oversight, creating clarity for stakeholders.

Future Prospects

Civil Aviation Minister Kinjarapu Rammohan Naidu emphasized that this legislation is critical for India’s growing aviation market. The government plans to expand infrastructure by building 50 new airports over five years, further supporting industry growth. Additionally, cities like Kolkata are being considered for second airports to meet rising demand.

Conclusion

The Protection of Interests in Aircraft Objects Bill, 2025 is a transformative step toward strengthening India’s aviation sector. By aligning domestic laws with international standards, it ensures legal security for lessors while reducing operational costs for airlines. This legislation not only addresses existing challenges but also positions India as a favorable destination for aviation finance and leasing activities.

Source: The Hindu

UPSC Prelims Practice Question

Q. Consider the following statements regarding aircraft leasing in India:

1. The International Financial Services Centre (IFSC) at GIFT City, Gujarat, has been developed to promote aircraft leasing in India.
2. Most of India’s commercial aircraft fleet is owned by domestic airlines rather than leased from foreign lessors.
3. Aircraft leasing is regulated by the Directorate General of Civil Aviation (DGCA) in India.

Which of the statements given above is/are correct?

(a) 1 only
(b) 1 and 3 only
(c) 2 and 3 only
(d) 1, 2, and 3

Answer: (a)

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