The court battle among airport operators,tax authorities and Kingfisher Airlines’ lessors over repossession of its planes may have a negative impact on other Indian carriers leasing aircraft from global leasing companies,a leading aviation consultancy firm has said.
Major aircraft leasing companies and financers have started adopting a cautious approach towards Indian carriers,with some even threatening to pull out of India,it said.
Keeping this in mind,the Civil Aviation Ministry is contemplating issuing some guidelines to airport operators and government agencies not to hold on to or seize aircraft as security for unpaid dues of an airline,official sources said.
The primary aim of these guidelines would be to prevent foreign lessors from avoiding the India market by telling the airport operators and other agencies not to take aircraft as collateral from an airline company,they said.
In the latest report,the Centre for Asia Pacific Aviation (CAPA) said,”There is a real danger that this (situation) could add a further cost element to the already high-cost
operating environment through increased leasing and financing costs. Some lessors and financiers have threatened to withdraw from the market entirely.”
The lessors were also contemplating to attach “a higher risk premium to the Indian market amid concerns they will continue to face challenges recovering their assets in the event of a default”.
Leasing firms like US-based ILFC and aviation financer Germany’s DVB Bank have been the most vocal about the challenges in the market,with both encountering ongoing and costly problems in repossessing aircraft so far operated by Kingfisher,it said.
Some leasing companies,including the German aviation bank,had moved the Delhi High Court,which recently ordered that the lessors had a right over these aircraft. An Airbus A-321 plane of Kingfisher,leased by ILFC,was released after the court order.