Bill: Go First fallout: India considers passing Cape Town Convention Bill to comfort foreign aircraft lessors


NEW DELHI: India can now accelerate passage of long-pending legislation Cape Town Convention (CTC) The invoice Follow the go-first case to allay plane lessors’ concerns and ensure desi airlines don’t get more expensive to lease planes, insiders say.
The Air Ministry had in October 2018 sought comment on the CTC Act 2018 implementing the treaty that India signed in 2008 as a general reassurance to lessors that their expensive assets such as aircraft and engines will not be left hanging here when Indian airlines operate with the default on rent or go broke. However, the move has since stalled.
But the events of the past few days, which saw lessors failing to take back 45 of Go First’s 54 Airbus A320 aircraft after NCLT admitted the airline’s filing for voluntary bankruptcy, could now see that proposal dated 2018 fails. Because bankruptcy law takes precedence over the CTC, Go First aircraft can be taken back after six months to a year at the earliest. This led to the aircraft leasing regulator, AWG, issuing a “watch list notice” for India. It warned that this case “would have a direct and material impact on future financing and leases with Indian airlines”. The Aviation Working Group (AWG) is a non-profit organization co-chaired by Airbus and Boeing and made up of the world’s largest aircraft manufacturers, leasing companies and financial institutions.
Now, sources say the government may finally consider passing this law to ensure India’s aviation history isn’t marred by rising leasing prices. Once there is a law, the CTC will have the same meaning as the Bankruptcy Act. “The urgent passage of the CTC law comes as lessors are genuinely alarmed and are trying to repossess planes from vulnerable airlines. If more Desi airlines choose the NCLT route to avoid taking back planes, things will only get worse for the serious Indian.” “While a law cannot be passed with retroactive effect, it can prevent even more planes from being taken get stuck here as more airlines file for bankruptcy,” industry insiders said.
US aerospace giant Boeing called on India on Friday to “fully ratify” the Cape Town Convention. President of Boeing India Salil Gupte said once that happens, “lessors will get more comfort. We are trying to mitigate the CTC concerns (for India) by pushing for full ratification here. We encourage the Air Ministry to push this legislation forward and help resolve this situation (lessor mistrust).” While India is a signatory to the Cape Town Agreement, which allows lessors to take over aircraft from insolvent or defunct airlines, bankruptcy law takes precedence.
In the 10 days since Go First filed for bankruptcy on May 2, lessors have applied to the DGCA for repossession of 50 aircraft under an IDERA (Irrevocable De-registration and Export Request Authorizations).
“The average lease rent for an Airbus A320/Boeing 737 is $3.50,000 per month. Multiply that by 50 and you get $175 million per month. Then you understand the panic among the lessors,” said an airline employee.
The CTC Bill 2018 was to be introduced “to implement the Cape Town Convention/Protocol in India to fulfill the treaty obligations and to take full advantage of India’s accession to the treaty,” the 2018 Bill states. “.. .Industry input has shown that separate legislation is required for the full implementation of the Convention/Protocol in India as there are certain provisions of the Convention/Protocol which conflict with the provisions of some other legislation which is outside the jurisdiction of the Department of Civil Aviation, such as Such as the Code of Civil Procedure 2008, the Specific Relief Act 1963, the Companies Act 2013 and the Insolvency and Bankruptcy Code 2016…. The Organization for Economic Cooperation and Development (OECD) has established a standard by which a A 10% discount on the processing fee for a loan for the purchase of aircraft is granted to airlines of a country that is a party to the Cape Town Convention/Protocol, provided that an implementing law has been passed for that country,” reads the 2018 draft.
“De-risking will lead to a reduction in the cost of aviation credit and will also reduce leasing rates. This will be of tremendous help to the Indian aviation industry. In addition, passengers and other end-users will benefit from the onward price reductions and higher service levels,” it said.

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