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

NEW DELHI: India can now speed up long-overdue legislation Cape Town Convention (CTC) I count following the Go First case to allay the concerns of aircraft lessors and ensure leased planes don’t become more expensive for desi carriers, say people in the know.
In October 2018 the aviation ministry had asked for comments on the CTC Bill 2018 to implement the treaty that India signed in 2008 to basically guarantee the lessors that their expensive assets like aircraft and engines would not get stuck here when the carriers Indians did not pay their rentals or went belly up. However the move has remained stalled ever since.
But events over the past few days in which lessors have been unable to repossess 45 of Go First’s 54 Airbus A320s after NCLT conceded the airline’s voluntary insolvency filing may now lead to the dusting of this 2018 proposal. Because bankruptcy law takes precedence over CTC, Go First planes cannot be repossessed for at least six months to a year. This led the AWG aircraft leasing watchdog to issue a “watchlist notice” for India. He warned that this case “would have a direct and material impact on future financing and leases of Indian airlines”. The Aviation Working Group (AWG) is a non-profit body co-chaired by Airbus and Boeing and includes the world’s largest aviation manufacturers, leasing companies and financial institutions.
Now sources say the government may finally consider passing this bill to ensure Indian aviation history is not affected by leasing becoming more expensive. Once a law, CTC will carry the same weight as the bankruptcy law. “The urgency of the CTC Bill passage comes from the fact that the lessors are really alarmed and are trying to repossess aircraft from vulnerable airlines. If more desi airlines take the NCLT route to avoid aircraft repossession then things will get worse for serious Indian While a law cannot be passed retroactively, it can prevent more planes from being stranded here at the IBC if more airlines go bankrupt,” insiders said.
US aerospace giant Boeing on Friday called on India to “fully ratify” the Cape Town Convention. President of Boeing India Salil Gupte he said once this happens, “Lessors will get more comfort. We are trying to mitigate CTC concerns (for India) by pushing for full ratification to happen here. We encourage the aviation ministry to advance such legislation and help resolve this situation (mistrust).” Although India is a signatory to the Cape Town Convention which allows lessors to take aircraft from defaulting or defunct airlines, the bankruptcy law takes precedence over it.
In the 10 days since Go First filed for involuntary insolvency on May 2, the lessors have filed applications with the DGCA to repossess 50 aircraft under Irrevocable De-registration and Export Request Authorizations (IDERA).
“The average lease of an Airbus A320/Boeing 737 is $3,500,000 a month. Multiply that by 50 and you get a hit of $175 million a month. Then you understand the panic among lessors,” an airline official said .
It sought to introduce the 2018 CTC Bill “to implement the Cape Town Convention/Protocol in India in order to fulfill the obligations of the treaty and to take full advantage of India’s accession to the treaty,” the bill states of 2018. “….inputs from the industry have revealed that to achieve full implementation of the Convention/Protocol in India, separate legislation is needed as there are some provisions of the Convention/Protocol which conflict with the provisions of some other laws, which are outside the jurisdiction of the Department of Civil Aviation, such as the Civil Procedure Code 2008, the specific Relief Act 1963, the Companies Act 2013 and the Insolvency and Bankruptcy Code 2016…. L The Organization for Economic Co-operation and Development (OECD) has established a rule that a 10% discount on the processing fee for an aircraft acquisition loan will be granted to airlines from any country party to the convention/protocol of Cape Town, provided that implementing legislation has been passed by that country,” states the 2018 draft.
“The reduction of risk will result in a reduction in the cost of air credit and will also reduce the lease charges. This will be of immense help to the Indian aviation industry. Passengers and other end users will also benefit due to the pass price reductions and increases in service levels,” he says.


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