Rajya Sabha Approves Bill To Protect Aircraft Lessors' Rights In India

New Delhi: The Rajya Sabha on Tuesday approved the Protection of Interests in Aircraft Objects Bill 2025, an important move to protect aircraft lessors' rights while lowering airline leasing costs in India.

The bill will be sent to the Lok Sabha for approval before it can be enforced. Union Civil Aviation Minister Ram Mohan Naidu, introduced the bill as a response to the need for current legislation in civil aviation. “At a time when civil aviation is growing in India, we need to have proper legislations in place so that we can bring in more aircraft into the country,” he stated. Aviation expert Harsh Vardhan told ETV Bharat, “India has been considered a high-risk country for aircraft leasing by leasing companies. The success or failure of an airline largely depends on economic operations, but a persistent issue has been the challenges faced by leasing companies in reclaiming their aircraft".

A major concern is that operators often do not maintain regulatory compliance adequately. Additionally, legal interventions and court delays make repossession difficult. By the time an aircraft is recovered, its value has significantly depreciated. As a result, leasing companies have been hesitant to lease aircraft to Indian operators, particularly smaller aircraft, as the financial prospects and viability are lower.

With the new legislation, the government aims to address such concerns. While previous ordinances and policy initiatives attempted to tackle the issue, they were not quite effective. This legislation allows aircraft to be repossessed in cases of operator default without requiring lengthy legal action. The move is expected to boost confidence among leasing companies, encouraging more of them to lease aircraft in India.

Regarding international markets, while prices may not change substantially, availability and participation in leasing are likely to increase. "The government has also introduced a legal framework that allows companies to register as lessors in India while benefiting from policies applicable to foreign operators. Overall, its was a much-needed reform that addresses key challenges in the aviation industry. More leasing companies are now expected to enter the Indian market, leading to greater aircraft availability and increased competitiveness," Harsh Vardhan said.

Enhanced Rights for Lessors and Airlines

Introducing Irrevocable De-registration and Export Request Authorisation (IDERA), the bill will expedite the process of re-possessing aircraft when there is a payment default. The provision is expected to make India a more attractive market for lessors and financiers, helping reduce lease rentals and operational costs for airlines. Of the 840 operational aircraft in India at the moment, 84.6% are leased.

"Air India has said that the legislation will improve India’s complying score in the Aviation Working Group outlook, which will significantly reduce the (aircraft) leasing cost by approximately 8 to 10 per cent. IndiGo said that in the absence of legislation, it might be possible that other lessors may reduce their exposure in India or increase their pricing between another five to ten percent over and above. Akasa Air said that in the absence of the legislation, lease rates may increase by an additional USD 15,000 per month,” Naidu explained.

DGCA to Maintain Leasing Transparency

The Directorate General of Civil Aviation (DGCA) will oversee an updated aircraft registry, ensuring airlines regularly disclose pending dues to lessors. Lessors, in turn, will be required to keep the DGCA informed about their agreements with airlines, addressing long-standing concerns over transparency and financial security in leasing arrangements. Naidu described the bill as a much-needed reform: “It (the bill) is going to create a lot more clarity. We hope this is going to give a lot of push for the leasing industry, which is the need of the hour.”

Growing Demand for More Airports

The minister admitted the need for more airport infrastructure, especially in Bengaluru, Chennai and Kolkata. “Kolkata city also needs a second airport. The state government should look at having an alternate airport because it’s much required today,” he said. The government plans to build 50 more airports within the next five years in order to meet the growing number of passengers each year.

Aviation Boom in India

Over the years, the aviation sector in India has witnessed stunning growth. From 60.7 million in 2014, domestic passengers soared to 161.3 million in 2024, while international passengers increased from 43 million to 66.8 million during the period. The fleet of aircraft in India has more than doubled from 359 in 2014 to 840 in 2024, with around 4,000 flights operating in the country daily. The updated aircraft registry managed by the Directorate General of Civil Aviation (DGCA) will ensure that airlines continuously inform lessors on dues not paid. There will also be a requirement for lessors to keep the DGCA informed about their agreements with airlines, to tackle long-standing issues surrounding transparency and financial security in leasing arrangements.