**Aircraft Leasing in India: Opportunities and Challenges**
Importance of Developing an Aircraft Leasing Ecosystem at GIFT City
India’s growing aviation industry has led to an increase in aircraft leasing, which is expected to contribute significantly to the country’s economic growth. The Ministry of Civil Aviation has recognized the importance of developing an aircraft leasing ecosystem at GIFT City, which is a special economic zone (SEZ) located in Gandhinagar, Gujarat. To enable Indian banks and financial institutions to develop an aircraft-leasing ecosystem at GIFT City, the Ministry of Civil Aviation has sought support from the Ministry of Finance. To address the slow progress in developing aircraft leasing in India, the Ministry has emphasized the need for Indian banks to adopt globally aligned practices by undertaking asset-backed aircraft financing, supported by a stronger security framework enabled through the passage of the Cape Town Convention Bill. The Cape Town Convention is a global treaty that guarantees the rights of lessors to repossess leased high-value equipment such as aircraft, engines, and helicopters in the case of a payment default. Key Highlights:
• Indian banks have largely limited their exposure to balance sheets or working-capital financing for airlines. • This has led to unpleasant experiences, dampening their risk appetite. • The limited availability of domestic capital is a key obstacle in advancing aircraft leasing operations at GIFT City.
Opportunities for Indian Banks and Financial Institutions
• Indian banks have the potential to play a crucial role in developing an aircraft-leasing ecosystem at GIFT City. • The Ministry of Civil Aviation has proposed financial institutions establish aircraft leasing companies in GIFT City through subsidiaries or joint ventures. • This would reduce geopolitical risks and promote self-reliance, especially in the light of global disruption like the Russia-Ukraine conflict.
Challenges and Solutions
• Indian banks often approach aircraft financing like project financing, demanding additional collateral and offering little differentiation. • This poses a hurdle to the growth of aircraft leasing at GIFT City. • To address these gaps, regulatory interventions, financial incentives, and dedicated credit lines from local financial institutions are crucial.
Statistics
• Over 70 per cent of India’s aircraft fleet is on operating lease, showing dependence on foreign lessors to support airline capacity expansion. • This leasing model has led to an annual rental outflow exceeding $5 billion, representing a foreign-exchange burden and highlighting the need for developing a domestic aircraft-leasing ecosystem. • India’s fleet at the end of FY24 (837) is at a similar level as China’s more than two decades ago.
Government Initiatives
• On October 16, 2020, the government notified “aircraft leasing” under the International Financial Services Centres Authority Act, 2019. • The notification gave the status of “financial products” to operating and financial leasing — and a combination of the two — of aircraft, helicopters, and engines of aircraft or helicopters, or their any part. • The Union Budget of July 2019 had said the time was ripe for India to enter into aircraft financing and leasing on its own soil.
Opportunities for India’s Aircraft Leasing Market
• With an order book exceeding 1,500 aircraft, India is preparing to scale up its fleet capacity. • The country is the third-largest domestic aviation market in the world. • This expansion represents more than a $100 billion opportunity for aircraft leasing, financing, maintenance, and associated services, positioning India as a critical hub in the global aviation value chain.
International Comparison
• Ireland has a big leasing industry, and Dubai and Singapore have taken the lead in this industry.
Solutions for Growth
• Regulatory interventions, financial incentives, and dedicated credit lines from local financial institutions are crucial to address the gaps in the aircraft leasing ecosystem. • The Rajya Sabha passed the Protection of Interests in Aircraft Objects Bill, 2025, which seeks to implement international conventions on the leasing of aviation equipment. • Union Civil Aviation Minister Kinjarapu Rammohan Naidu said the new Bill would provide a boost to aircraft leasing.
Conclusion
The development of an aircraft-leasing ecosystem at GIFT City is crucial for India’s aviation industry, which is expected to contribute significantly to the country’s economic growth. Indian banks and financial institutions have the potential to play a crucial role in developing this ecosystem. However, the limited availability of domestic capital and the need for regulatory interventions, financial incentives, and dedicated credit lines from local financial institutions are key obstacles to overcome. With the passage of the Protection of Interests in Aircraft Objects Bill, 2025, and the establishment of aircraft leasing companies in GIFT City, India is poised to become a critical hub in the global aviation value chain.
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