A body that monitors countries’ compliance with the Cape Town Convention has placed India on a watchlist after lessor requests to de-register aircraft belonging to struggling local carrier Go First were not enacted prior to it entering insolvency proceedings.
Twenty-three Go First aircraft were listed by the Indian civil aviation regulator DGCA as having de-registration requests from lessors submitted as of 4 May, while a further 13 were submitted in the days that followed. Under the Cape Town Convention, aircraft owners can request de-registration and export – known as ‘IDERA’ – in the event of default.
Go First on 10 May had an application granted with India’s National Company Law Tribunal for resolution under its insolvency bankruptcy code. That included a moratorium, which among other things, blocks the recovery of aircraft by lessors from that point.
However, the Aviation Working Group (AWG), which monitors countries’ compliance with the Cape Town Convention – a protocol intended to protect the rights of lessors – has now put India’s compliance on a watchlist for a failure to enact de-registrations in line with aviation regulator DGCA’s rules prior to the moratorium. In its watchlist notice, the AWG notes that as of 11 May, a five-working-day timetable for the de-registration of aircraft had lapsed for certain applications with no requested de-registrations effected.
It says the DGCA’s "failure to process IDERA de-registration applications for aircraft whose leases were terminated prior to the imposition of the moratorium within the timetable results" is a negative outlook for India under its compliance index formula.
Go First suspended operations on 2 May, citing the large number of its Airbus A320neos that were grounded amid ongoing supply challenges with its Pratt & Whitney PW1100G engines. Services remain suspended until 19 May, though the airline is now working to restrcture under an insolvency process.
However, Nilaya Varma, chief executive, public policy realisation at Indian consultancy Primus Partners, argues the decision to allow Go Frist to enter a voluntary insolvency process raises concerns among lessors and creditors about risks associated with aircraft leasing in India.
"The perception of India as a high-risk jurisdiction could translate into higher risk premiums to other local airlines," Varma says. "This means higher lease rentals for domestic carriers and increase in the cost of doing business, implying higher costs being passed on to passengers in the form of high ticket prices, thereby making it more difficult for Indian airlines to compete with their international counterparts."
