The Protection and Enforcement of Interests in Aircraft Objects Bill, 2024, is expected to lower airfares and ease the aviation sector’s business environment. businessline explains the Bill and its expected outcomes.

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Significance

The Protection and Enforcement of Interests in Aircraft Objects Bill, 2024, as passed by the Union Cabinet, will guarantee the rights of aircraft lessors to repossess their leased equipment.

Notably, the Bill will now be presented before the Parliament. If passed, the resulting Protection and Enforcement of Interests in Aircraft Objects Act, 2024, will ratify the Cape Town Convention.

The convention is a global treaty that guarantees the rights of lessors to repossess their leased high-value equipment, such as aircraft, helicopters, and engines, in case of payment defaults.

Accordingly, the legal instrument was adopted at a diplomatic conference held in Cape Town in November 2001 under the auspices of the International Civil Aviation Organisation (ICAO) and the International Institute for the Unification of Private Law (UNIDROIT).

Besides, India is a signatory to the convention, but Parliament has not ratified it. This unique situation has given precedence to local courts’ judgements over the norms of the convention. 

Ease of doing business

The Bill, once passed by the Parliament into an Act will ratify the Cape Town Convention, thereby automatically guaranteeing the rights of lessors to repossess their leased equipment.

This repossession right will avert issues like the ones faced by lessors during the Go First crisis. The incident made global lessors concerned about leasing aircraft to domestic-based airlines, as India was deemed  a ’risky jurisdiction’. 

The proposed Act is expected to resolve any conflict that arises by applying  CTC provisions and any other law, as it will empower the Centre to make rules to implement the convention and protocol in India.

Confidence booster

On an overall basis, the proposed Act will boost aircraft lessors’ confidence in India-based airlines.

The global lessors have been demanding the ratification of the Bill into an Act of Parliament. For this purpose, an inter-ministerial consultation process was kicked off to revise the Bill, which was first tabled in the Parliament in 2018.

If passed by Parliament, the reworked Bill will avert legal conundrums by settling cases between lessors and airlines under the CTC provisions.

Lower costs, affordable airfares

One of the main aims of the Bill is to lower the lease rentals in India. At present, the country has a high-risk premium.

The reduction in risk premium will lead to lower aircraft leasing and financing costs for airlines. Consequently, the process will reduce airfares.

At present, the majority of around 700 or so passenger commercial aircraft in the country are leased.

The country’s civil aviation sector is expected to receive over 1,000 more aircraft by the end of the decade, most of which will be leased.

In addition, the proposed Act will help achieve efficient financing of high-value mobile equipment making  the operations as cost-effective as possible.

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