Industry

Plane leasing firms may get a boost

SMOOTH TAKE-OFF: The Centre will soon unveil the final regional connectivity scheme that aims to promote the use of smaller aircraft. —FILE PHOTO

SMOOTH TAKE-OFF: The Centre will soon unveil the final regional connectivity scheme that aims to promote the use of smaller aircraft. —FILE PHOTO  

Centre’s move aimed at making regional connectivity scheme even more attractive for lessors

The Centre plans to ease norms for aircraft leasing firms to enable them to take back aircraft quickly from defaulting airlines in a bid to make its regional connectivity scheme more attractive for such lessors, according to a top government official.

“We are exploring ways to de-risk the leasing business,” R.N. Choubey, Civil Aviation Secretary told The Hindu.

“If the airline defaults on its terms, the leasing company or the owner of the aircraft could be allowed to take it out of the country quickly. This will reduce the risk,” he said.

Aircraft re-possession

The official said companies are often not comfortable leasing aircraft to start-up airlines. “If we permit lessors to take back the aircraft, in case of a default, within a week or ten days, even for smaller aircraft they will have some faith in the system and attract them more towards the Indian market,” said Mr. Choubey.The re-possession of aircraft depends upon the nature of the leasing agreement at present, he said.

“At times, the lessors are prevented from taking back the aircraft due to outstanding dues, such as airport charges, on the part of the airline,” said a senior civil aviation ministry official.

De-registering aircraft

When Kingfisher Airlines had ceased operations in 2012, the lessors faced legal hurdles in re-possessing the aircraft as the DGCA was not deregistering the aircraft which was an essential requirement for taking back the planes.

The Centre will soon release the final regional connectivity scheme that aims to promote the use of smaller aircraft.

It offers several sops to regional airlines, while capping fares for passengers at Rs.2,500 for an hour’s journey under the scheme.

“The regional connectivity scheme seeks to attract a lot of regional airlines who will be looking to lease planes to commence operations as it is very cost-effective compared to buying aircraft. Leasing business will be a critical part of the scheme,” a top civil aviation ministry official said.

However, the country’s regional airlines have faced financial troubles with their lessors recently, prompting the government to say that smaller airlines should configure their business model to be able to meet their leasing commitments. The lessors of Bengaluru-based regional airline Air Pegasus had approached the Directorate General of Civil Aviation with a request to de-register its plane before they can take it back.

Air Pegasus had suspended its operations last month owing to financial and operational difficulties.

Another regional airline Air Costa also ran into trouble with its leasing company last week due to “some financial issues” forcing it to suspend all its flights for a day, a company official said.

“The financial and regulatory aspects need to be taken care of to win the confidence of lessors towards the Indian market,” said Dr. Anurag Jain, aviation consultant. “While financial faith is reposed with due diligence on the part of the leasing company, regulatory comfort on the part of the government is a must,” he said.

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Printable version | Feb 18, 2020 3:27:17 AM | https://www.thehindu.com/business/Industry/Plane-leasing-firms-may-get-a-boost/article14571373.ece

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