India Changes Airline Bankruptcy Rules After Go First Leased Aircraft Drama

The country is reportedly working to resolve discrepancies between its national and global leasing laws

SUMMARY

• In the case of airline bankruptcy leased aircraft would not be subject to a moratorium according to an amendment to India’s insolvency legislation
•  The action was taken in response to lessors’ difficulties regaining aircraft from insolvent low cost airline Go First
•  The goal of the adjustments is to shed India’s image as a dangerous place to rent engines and plane

According to reports India has revised its insolvency laws preventing leased aircraft from receiving deferred payments in the event that an airline files for bankruptcy the change may be a means of resolving conflicts or discrepancies that exist between bankruptcy laws and international leasing regulations

It follows after Mumbai based Go First which filed for bankruptcy earlier this year had difficulties trying to reclaim its planes and a failing relationship with lessors The airline’s intentions to restart operations have surely been impacted by the legal issue

Mending the repute

The modifications were announced by the Indian government in a notification that was made public on Tuesday according to Reuters It also stated that certain restrictions would not apply to transactions involving aircraft engines airframes and helicopters and that leased aircraft would be exempt from a moratorium that starts when an airline files for bankruptcy

Photo: Soos Jozsef/Shutterstock

In a statement to Reuters Ramesh Vaidyana than the managing partner of the Indian legal company BTG Advaya discussed the modifications Section 14 of India’s Insolvency & Bankruptcy Code imposes the moratorium Reportedly India Changes Airline Bankruptcy the nation said that it would not abide by international aircraft leasing regulations established by the Cape Town Convention which safeguards the right of repossession

An ineffectual agreement

The International Civil Aviation Organization states that the Convention attempts to address the issues that come up while securing particular and opposing rights to high value aviation assets In addition to being cost effective it enhances predictability with respect to the opposability of the securities and the interest held by sellers of aviation assets

According to the ICAO the Convention encourages the granting of credit for the purchase of more contemporary and fuel efficient aircraft hence lowering the risks for creditors and the costs of borrowing for debtors Although India is said to have signed the pact it is useless since no local laws have been passed to enforce it

According to reports India aviation secretary said in June that the nation is attempting to reconcile discrepancies between international aircraft leasing norms and domestic bankruptcy laws

Key Changes in India’s Airline Bankruptcy Rules

Numerous setbacks

Following budget airline Go First’s bankruptcy the carrier has been in the process of making a comeback the carrier was granted $12 million to cover urgent financial liabilities and stay afloat

However in an attempt to retrieve India Changes Airline Bankruptcy its aircraft which have been grounded since May it has been embroiled in legal disputes with its lessors Reports of rust found on several aircraft appeared last month According to Aviation Explore a greenish deposit was discovered on the body of an Airbus A320neo that was around a year old

Photo: Soos Jozsef/Shutterstock

After inspections ACG Aircraft Leasing one of Go First’s lessors notified an Indian court that important components were missing from at least two of its Airbus A320s

According to the lessor an escape slide and the captain’s sidestick which aids in guiding the aircraft when it is on the ground were taken out In addition the engine fan blades were completely removed and part of a toilet seat was missing

The results were released when hundreds of Go First pilots made the decision to quit the airline According to recent sources the airline barely has 100 pilots on staff after around 500 of them left in the previous several months

Source Sources: Reuters, International Civil Aviation Organization