The “Protection of Interests in Aircraft Objects Bill, 2025,” passed by the Rajya Sabha on Tuesday, April 1, 2025, after its introduction on February 10, 2025, and Union Cabinet approval on January 16, 2025, marks a transformative step for India’s aviation sector. This legislation gives legal force to the Cape Town Convention of 2001 and its Aircraft Protocol—agreements India acceded to in 2008 but hadn’t ratified until now—standardizing transactions for aviation assets like aircraft, helicopters, and engines.
Civil Aviation Minister Kinjarapu Rammohan Naidu, replying to the Rajya Sabha discussion, emphasized that the bill provides security for lessors and lessees, resolves long-standing misunderstandings, and boosts the aviation leasing industry.
He said the ‘inconsistencies’ in handling default by Indian carriers to their lessors in the absence of appropriate legislation, as evidenced by the 2015 SpiceJet case, the 2019 Jet Airways bankruptcy and the GoAir case led to the country’s score of 50 on the Cape Town convention compliance index, which is maintained by the Aviation Working Group (AWG) around the world. The government is aiming to raise the AWG score to 90, which has increased marginally to 62.
The financiers’ right to repossess aircraft will increase confidence in the financing market and will lead to further access to aircrafts for companies. With the passing of the Bill, AWG may upgrade its rating for the Indian market to positive. Further, the cost savings will provide a boost to the domestic market. For example, it has been generally estimated that the adoption of CTC has amounted to cost savings of around $ 7-8 billion in the last 20 years.
“The increased confidence and presence of foreign lessors will result in cheaper lease rates for airlines, something that fledgling airline companies may utilise to have more aircraft in their fleet. This would be crucial to their survival, since the low profit margins typical in the airline industry necessitate the generation of revenue and profit through increased traffic,” said Dhananjay Kumar, Partner (Head- Insolvency & Restructuring), Cyril Amarchand Mangaldas.
It also increased lease expenses for carriers in India. As a result, they were forced to lower fleet sizes, which increased airfares while demand remained high, Naidu added.
Citing statements in support of the bill from carriers such as Air India, Indigo, and Akasa Air, Naidu stated, “Once by getting this Act into place, you’re reducing the leasing cost by 8 to 10%. Now, these are the costs which are going to trickle down to the passengers and the airfares also. That is why this becomes very, very important for us.”
Strengthening Financial Stability Through Lessor Settlements and Cost Reduction
The Protection of Interests in Aircraft Objects Bill, 2025 marks a pivotal step in aligning India’s aviation finance framework with global best practices. Its most significant merit lies in the certainty it offers to international lessors and financiers. By incorporating the Cape Town Convention into domestic law, the Bill provides enforceable rights around repossession, deregistration, and asset recovery—mechanisms that had long been mired in ambiguity. The anticipated outcome is a lowering of the risk premium historically associated with Indian lessees, thereby reducing leasing costs and improving access to global capital.
That said, the effectiveness of the Bill hinges on its execution. Without seamless coordination between regulatory bodies such as DGCA, courts, and customs authorities, the promise of efficiency may falter. “Additionally, the potential friction with India’s Insolvency and Bankruptcy Code (IBC)—especially in relation to moratorium provisions—could pose interpretational and practical challenges. The legislation may unduly favour foreign creditors over domestic stakeholders, particularly airport operators and service providers with legitimate dues,” says Kanika Chugh, Partner, SKV Law Offices.
For SpiceJet, with over 60 mostly leased aircraft, the bill enhances financial stability by aligning with its recent turnaround efforts. It ensures lessors can repossess planes within 60 days during defaults—or a mutually agreed term—overriding Insolvency and Bankruptcy Code (IBC) conflicts that delayed recoveries, as in 2015, per Naidu’s examples. This clarity, requiring creditors to notify the Directorate General of Civil Aviation (DGCA) before remedies, lowers leasing risks, potentially cutting costs by 8-10%. Since raising ₹3,000 crore via a Qualified Institutional Placement (QIP) in September 2024 and ₹294.09 crore from promoter Ajay Singh in early 2025, SpiceJet has settled dues with nearly all lessors, boosting their confidence. Key resolutions include: Genesis ($16 million, December 2024, $6 million cash, $4 million equity at ₹100/share); Aircastle and Wilmington Trust ($23.39 million, October 2024, $5 million plus engine deals); BBAM ($132 million, October 2024, terms undisclosed); Carlyle Aviation ($50 million, September 2024, equity at ₹100/share); Willis Lease Finance (March 2025, insolvency withdrawn); Engine Lease Finance Corporation ($16.7 million, September 2024); and Nordic Aviation Capital (₹100 crore, June 2023). SpiceJet’s revitalized financial health leverages the bill’s cost savings to revive grounded planes and aim for 200 aircraft in two years.
Mitigating Bankruptcy Risks Through Enhanced Lessor Protections
The recent airline bankruptcies that India witnessed, were not on account of the Bill not being in place. Systemic and operational issues were probably responsible for these airline closures. However, if the Cape Town Convention had been implemented fully in India, as this Bills seeks to do, many lessors and financiers of these airlines would have been able to secure and repossess their aircraft sooner and in a more efficient manner. “On account of the delays in enforcement of creditor and lessor rights, timely repossession of several aircraft was hampered. The Bill will hopefully prevent such delays in the future,” said Vihang Virkar, Lead Partner, DMD Advocates.
For Go First, bankrupt since May 2023, the bill’s earlier enforcement might have mitigated—but not prevented—collapse. Driven by Pratt & Whitney engine delays grounding half its 54-plane fleet, $7 billion in industry losses, and competition, its ₹2,600 crore default to lessors like SMBC Aviation, CDB Aviation, Jackson Square Aviation, and BOC Aviation sparked the NCLT’s 2023 insolvency ruling. This delayed repossession for over four months under the IBC moratorium, prompting an AWG downgrade, as Naidu noted. The bill’s 60-day repossession rule (initially proposed at 40 days, per Economic Times) could have pressured Go First to negotiate payment plans, preserving fleet capacity after six lease terminations. Lower leasing costs (8-10%) might have eased cash flow for its 80% leased fleet, funding maintenance or debt, though renegotiation mid-crisis isn’t assured. Lessor trust could have avoided premium hikes, but grounded planes crippled revenue—a problem beyond the bill’s asset-focused scope. Naidu cited Jet Airways and Kingfisher to show legal gaps don’t fully explain failures; the bill might have delayed insolvency and aided creditors (who must settle 60 days of dues post-moratorium), but engine fixes or a bailout were needed to save it.
While the new Protection of Interests in Aircraft Objects Bill addresses the issue of high aircraft leasing costs and offers more protection to lessors, it’s unlikely it could have single-handedly prevented the collapse of airlines like Kingfisher and Jet Airways. “Their failures stemmed from a combination of factors including financial mismanagement and high fuel costs, which the current bill doesn’t directly tackle. However, the bill might have allowed for quicker repossession of aircraft, potentially limiting losses for lessors in cases like Go First,” says Aviral Kapoor, Partner, Alagh & Kapoor Law Offices.
Boosting Market Dominance Through Fleet Expansion and Efficiency
IndiGo, with over 350 mostly leased aircraft and a 60% market share, leverages the bill to reinforce its dominance. The 60-day repossession clarity reduces lessor risks, cutting lease rates by 8-10%, as Naidu confirmed with IndiGo’s backing. For its high-volume, low-cost model, savings amplify across the fleet, boosting profitability or lowering fares—aligning with Naidu’s airfare reduction goal. Enhanced global leasing access, tied to India’s rising AWG score, supports IndiGo’s 900+ aircraft orders, including widebodies. Cheaper financing accelerates deliveries of A320neos and A350s, cutting fuel costs and enhancing sustainability. The GIFT City hub, per Naidu’s vision for large-scale leasing, offers tax benefits, motivating smaller operators to scale. With 86.4% of India’s fleet leased, IndiGo’s strong financials minimize default risks, ensuring the bill cements its lead as more planes boost the market, as Naidu envisioned.
Supporting New Entrants Through Competitive Leasing Advantages
Akasa Air, with 24 leased Boeing 737 MAX aircraft and a 2% market share, gains a competitive edge from the bill. Lower leasing costs—8-10%, per Naidu and Akasa’s support—help its lean structure rival IndiGo, funding network growth or marketing in its early years. International alignment eases access to foreign lessors, vital for scaling to 72 aircraft by 2027. Affordable fleet upgrades support its low-cost, high-service model, while GIFT City offers long-term relief. Naidu highlighted that more planes benefit operators and the market; Akasa’s youth requires stability to avoid repossession risks, ensuring steady expansion. With 80% of India’s fleet leased (2023 PwC report), the bill levels the playing field for new entrants like Akasa, fulfilling Naidu’s push for industry growth.
Facilitating Legacy Revival Through Modernization and Fiscal Discipline
Air India, under Tata’s revival with 140 aircraft (many leased) and 470 on order, uses the bill to accelerate transformation. The 60-day repossession clarity cuts lease costs by 8-10%, per Naidu and Air India’s endorsement, vital given past high premiums from India’s legal gaps and pre-privatization struggles. Savings fund its $70 billion fleet overhaul with A350s and 787s, while improved financing terms, tied to Cape Town compliance, support this shift. GIFT City reduces foreign lease reliance, aligning with Air India’s premium, India-centric vision. The bill’s discipline—swift repossession and creditor notification to DGCA—ensures fiscal rigor, aiding its global ambitions. Naidu’s emphasis on resolving inconsistencies benefits legacy carriers, boosting the leasing industry as 86.4% of planes are leased, per his data.
The bill, as Naidu stated, clarifies a misunderstood sector, strengthening SpiceJet’s stability with cost relief and settlements, while for Go First, it might have delayed collapse but not fixed systemic flaws. IndiGo boosts dominance, Akasa gains competitive footing, and Air India facilitates revival. By reducing costs, boosting lessor trust, and supporting an 86.4% leased ecosystem, it aims to lower airfares and fleet sizes—though success hinges on financial health and execution
