In 2021, the aircraft leasing business started in GIFT City, located in Gujarat. In February month of 2021, the International Financial Services Centre Authority (IFSCA) issued a framework for aircraft leasing in India. Since then, the aircraft leasing business has been slowly growing in the country.
Gujarat International Finance Tech City (GIFT City) is a global financial and technological hub located in Gandhinagar, Gujarat. With its cutting-edge infrastructure and legal framework, it hopes to become India’s hub for global trade and finance, drawing in financial services and tech firms. GIFT City is intended to make conducting business easier and stimulate the financial industry’s economy.
Leasing Performance of India
Currently, countries like China and Ireland manage most of the global aircraft leasing business. Globally, 53% of aircraft operated by scheduled airlines are leased jets. In India, this number goes above 80 percent.
In the past three years since inception, 26 aircraft leasing companies have been established in GIFT City. Out of these 26 leasing companies, only 10 have engaged in active transactions.
These 10 companies have conducted 129 transactions since inception. These 129 transactions include 18 aircraft, 55 engines, and 56 ground support equipment.
Big Players Interested
The first genuine aviation lessor to set up its shop was Vman Aviation Services IFSC Private Limited. The lessor came into the limelight when it leased two ATR 72 aircraft to FlyBig. As of now, both the aircraft have been returned to Vman after the lessor along with a bank filed a fraud case against the airline.
In the last 3 months of 2023, major players in the Aviation sector entered the leasing industry. The first player was Air India, which announced its plan to lease 6 Airbus A350-900 aircraft from its GIFT City-based subsidiary – AI Fleet Services IFSC Pvt Ltd. The total estimated project cost of the Air India subsidiary is Rs 7,253 crore. The first Airbus A350 has been delivered to Air India. Partial payment of the first-ever Airbus A350 was done in collaboration with Japanese lender SMBC Corporation.
After this, the parent company of IndiGo – Interglobe Aviation also entered into the leasing business. The largest airline in India announced its intent to invest Rs 11,500 crore in its subsidiary for leasing 10 Airbus A320 jets. The airline received approval in December month.
After airlines, Airport Operator Adani Group also made its entry into the growing market. Adani Enterprises, in an exchange filing, announced that the company has incorporated a new company named Udanvat Leasing IFSC Pvt Ltd in GIFT City. This subsidiary was incorporated by Adani Ports and Special Economic Zone (APSEZ).
Learning From the West
GIFT City has introduced some incentives for those companies, who set leasing units in the corridor. These incentives include:
- Tax benefits for 10 years from profit
- No Capital Gain Tax
- No Stamp Duty
- No Goods & Services Tax (GST)
An industry player incorporated in GIFT City said that the government should increase its focus and should fully support the creation of a conductive ecosystem. At this point, aircraft demand is peaking in India.
In October 2023, the Ministry of Corporate Affairs announced an amendment to the Insolvency & Bankruptcy Code (IBC). The amendment was done in order to provide relief to aircraft lessors. The amendment excludes aircraft, engines, airframes, and helicopters from the moratorium. This means that if an airline goes bankrupt, the lessor can claim the return of its assets.
Global lessors are not happy with the Indian market right now. Due to a court tussle between lessors and GoFirst, the Aviation Working Group (AWG) has downgraded India’s ratings to negative. This move can prove to be dangerous for regional players in India as they can expect an increment in rental charges by the lessor.
Source: The Hindu Business Line