Go First crisis: Global aviation leasing watchdog puts India on watchlist with negative outlook

Global aviation leasing watchdog, Aviation Working Group (AWG), that monitors leasing and financial laws on behalf of planemakers and lessors, has put India on a watchlist with a negative outlook. It reasoned that India failed to comply with international aircraft repossession norms after Go First was granted protection under the insolvency proceedings. 

The UK-based AWG’s negative outlook comes under the Cape Town Convention, an international treaty on plane repossessions. India’s score was reduced from 3.5 to 3, as mentioned in a report by Reuters. The watchdog said that India’s inability to process deregistration applications for aircraft, whose leases got terminated before the freeze was imposed, resulted in a negative outlook. 

"The Go First insolvency proceedings are a material development that implicates Cape Town Convention compliance in India," AWG said, as per the report. 

This move could make leasing airplanes a costlier affair for Indian airlines, which could in turn impact lessors’ confidence in the world’s third largest domestic aviation market. 

After India joined the Cape Town Convention in 2008, it made it easier for lessors to take back planes if airlines defaulted on payments, but the NCLT’s bankruptcy protection supersedes the repossession requests, the report added. 

AWG is a not-for-profit entity, co-chaired by Airbus and Boeing. 

Go First, in its application to NCLT, had sought protection from lessors as well as from DGCA against any adverse actions. The NCLT, while admitting its plea, allowed it under a moratorium from recovery by lessors and lenders.

SMBC, one of the largest lessors in the world, approached the NCLAT, challenging the protection offered by the NCLT order. It said that the Delhi bench denied an opportunity to the lessors to present their case. SMBC added that Go First’s leases were terminated before NCLT granted a moratorium. 

Also read: Go First crisis: NCLT says resolution professional to take over carrier