On Thursday, the Lok Sabha passed the Bill, a few days after it was cleared by the Rajya Sabha
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ANI
India’s Parliament on Thursday passed the ‘Protection of Interests in Aircraft Objects Bill, 2025’ which is expected to accelerate the growth of civil sector by lowering the operating cost of airlines as well as airfares.
On Thursday, the Lok Sabha passed the Bill, a few days after it was cleared by the Rajya Sabha.
Earlier in the week, Civil Aviation Minister Ram Mohan Naidu had stated “Upon the enactment of this legislation, we improve India’s compliance score in the AWG’s (Aviation Working Group) outlook, making Indian airlines eligible for CTC (Cape Town Convention) discounts, which will significantly reduce leasing costs by approximately 8 to 10 per cent. These are the costs that will trickle down to passengers and airfares as well. That is why this becomes very important for us.”
Aim of the Bill
The Bill aims to ease the procedure for global lessors to repossess their leased equipment in case of a payment default by the lessee, thereby boosting their confidence in doing business in India.
Notably, the resultant Act guarantees absolute rights to lessors by ratifying the Cape Town Convention, which is a legal instrument that 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).
Presently, India is a signatory to the convention, but the Parliament had not ratified the same. The unique situation has given precedence to local courts’ judgements over the norms of the convention, giving rise to legal conundrums like the ones faced by lessors during the Go First crisis.
The Go First case had made global lessors concerned about leasing aircraft to domestic-based airlines. Consequently, India was deemed as a risky jurisdiction, and high premium charges were applied to cover the leased equipment to the domestic airlines.
Meanwhile, the industry expects that the reduction in risk premium will lead to lower leasing and financing costs of aircraft for airlines, ultimately containing airfares.
As per some industry estimates, India-based airlines would have had to bear the brunt of nearly ₹10,000 crore due to high-risk premiums if a bill such as the ‘Aircraft Objects Bill, 2024’ was not considered.
Currently, the majority of commercial aircraft in India are leased, with another 1,700 on order.
The proposed Act is also expected to aid in achieving efficient financing of high-value equipment, thereby making operations cost-effective.
Published on April 3, 2025