AIRCRAFT OBJECTS BILL 2025 : POLITY
NEWS: Behind the beauty of Kochi’s bioluminescent backwaters lies a looming crisis
WHAT’S IN THE NEWS?
The Rajya Sabha passed the Protection of Interests in Aircraft Objects Bill, 2025 to enforce the Cape Town Convention, ensuring quicker aircraft repossession and legal protection for lessors. This move aims to reduce leasing costs, attract global investors, and strengthen India's aviation finance ecosystem.
Rajya Sabha Passes Protection of Interests in Aircraft Objects Bill, 2025 – Full Overview
1. Introduction to the Bill
• The Rajya Sabha has passed the Protection of Interests in Aircraft Objects Bill, 2025, a key legislation aimed at aligning India’s domestic laws with global aviation finance standards.
• This bill enables the effective implementation of two international agreements: the Cape Town Convention and its Aircraft Protocol, which India had ratified in 2007 but had not legally operationalised till now.
2. About the Cape Town Convention and Aircraft Protocol
a. Background and Purpose
• Adopted in 2001 under the International Civil Aviation Organization (ICAO), the Cape Town Convention provides a global legal framework for the financing and leasing of high-value mobile equipment like aircraft and engines.
• The Aircraft Protocol is a specific component of the Convention that applies to aircraft, helicopters, and aircraft engines.
b. Objectives of the Convention
• To protect the financial interests of lessors and creditors globally.
• To provide clear and quick legal remedies in case of payment defaults or lease violations.
• To reduce legal uncertainties and delays in cross-border aircraft leasing and financing.
• To ensure faster repossession and deregistration of aircraft when obligations are not fulfilled.
c. India’s Ratification Status
• India ratified the Cape Town Convention and Aircraft Protocol in 2007.
• However, due to the absence of enabling domestic legislation, the rights granted under the Convention were not enforceable in Indian law until now.
3. Key Provisions of the Protection of Interests in Aircraft Objects Bill, 2025
a. Legal Enforcement
• The bill gives legal recognition to the Cape Town Convention and Protocol, making them enforceable under Indian law.
• This ensures that international leasing companies and creditors will now have legal recourse in Indian courts and regulatory bodies.
b. Remedies for Creditors and Lessors
• In case of default by an airline, creditors or lessors can repossess the aircraft within two months or within a contractually agreed timeframe.
• This provision significantly speeds up asset recovery, reducing losses for financiers.
c. Designation of DGCA as Domestic Registry
• The Directorate General of Civil Aviation (DGCA) will serve as the domestic registry for aircraft-related international interests.
• It will maintain records of:
Ownership and lease agreements
Financial dues on a per-aircraft basis
International claims and registrations
d. Mandatory Reporting Obligations
• Airlines are required to report all dues owed to lessors, broken down aircraft-wise, to DGCA.
• Lessors must also inform DGCA about their ownership, leasing rights, and financial claims on Indian-registered aircraft.
e. Clarity During Bankruptcy and Insolvency
• In situations where an airline files for bankruptcy under Indian laws, the bill ensures that lessors can still recover their aircraft without delay.
• It reduces the possibility of prolonged litigation or asset locking during insolvency proceedings, which has been a major concern in past airline failures.
4. Anticipated Benefits and Impact
a. Reduction in Leasing Costs
• The bill is expected to lower aircraft leasing costs by 8–10% because lessors face reduced risk and faster enforcement of contracts.
b. Boost to Aviation Sector Growth
• Lower leasing costs will improve airline profitability and reduce capital expenditure.
• Over time, these cost reductions could lead to more affordable airfares for consumers.
c. Increased Investor and Lessor Confidence
• With legal protections clearly in place, global lessors and financing institutions are likely to be more open to investing and leasing aircraft to Indian carriers.
d. Development of India as a Leasing Hub
• India could evolve as a regional aviation finance hub, similar to international centres like Dublin, Ireland and Singapore, especially with its large and growing aviation market.
e. Strengthening India’s Aviation Ecosystem
• India currently relies heavily on leased aircraft — more than 70–80% of airline fleets are leased.
• By ensuring creditor protection, the law creates a robust financial and legal ecosystem that will support the long-term expansion of India’s aviation industry.
5. Background and Context
a. Past Challenges
• In the absence of legal enforcement of the Cape Town Convention, global lessors faced difficulties in repossessing aircraft from Indian carriers.
• Notable examples include the bankruptcies of Jet Airways (2019) and Go First (2023), where lessors faced prolonged legal battles and financial uncertainty.
b. Need for Reform
• Without legal clarity, India was seen as a high-risk market by global leasing companies, leading to higher lease premiums and fewer financing options.
• This bill closes the legal gap and brings India into compliance with international best practices.
6. Core Meaning and Significance of the Reform
• The Protection of Interests in Aircraft Objects Bill, 2025 is not just a technical legal reform, but a transformative step in modernising India’s aviation finance landscape.
• It brings predictability, transparency, and investor security — all crucial for attracting foreign investment and ensuring the sustainable growth of Indian aviation.
• The legislation also sends a strong signal that India is committed to becoming a reliable and competitive player in the global aviation industry.
Source: https://www.downtoearth.org.in/environment/behind-the-beauty-of-kochis-bioluminescent-backwaters-lies-a-looming-crisis