New Aviation Bill Set To Change India's Aircraft Leasing Rules

The Protection of Interests in Aircraft Objects Bill, 2025, finally introduced in the Rajya Sabha on Monday, will allow aircraft leasing companies to reclaim planes if airlines default on rental payments.

The bill assumes significance as it is expected to lower costs for airlines as well as ensure a more secure and investor-friendly aviation sector.

The urgency for this legislation arose after a National Company Law Tribunal ruling in the Go First case, which imposed a moratorium preventing lessors from repossessing aircraft. This led to lengthy court battles, driving up lease costs for other airlines and damaging lessors' confidence.

Efforts to introduce this bill was initiated seven years ago, but it could only be tabled in the Parliament now. First proposed by the Ministry of Civil Aviation in 2018 and again in 2021, the proposed legislation would prioritise the Cape Town Convention —a global treaty it signed over a decade ago— in the event of any conflicts with local laws, particularly the Insolvency and Bankruptcy Code of 2016.

"It [the proposed bill] is a key reform aimed at strengthening aircraft financing, boosting investor confidence, and aligning with global aviation standards," Civil Aviation Minister Kinjarapu Rammohan Naidu wrote in a social media post. "With this, we take a significant step towards making India a global aviation hub."

"This is the biggest step taken by India till now to properly implement the Convention into local law," said Nitin Sarin, managing partner at law firm Sarin & Co, which advises lessors and airlines.

The bill is expected to reduce the moratorium period for reclaiming aircraft in bankruptcy cases from 60 to 40 days, while lessors must settle pending dues, such as airport charges, within 60 days, according to officials.

If passed, the bill is also expected to increase accessibility to air travel in the country, with domestic passenger traffic projected to rise by 7–10% and international traffic by 15–20% this year. A recent Boeing report also indicates that India's sustained economic growth and emerging middle class could spur annual traffic growth of 7.4% over the next two decades.

Last year, the Aviation Working Group, a global aviation leasing group, downgraded India with the projected score set to decline further after non-compliance of Cape Town Convention and substantial losses to creditors under the Go First row. Lessors were unable to reclaim planes from Go First after more than four months of insolvency proceedings, it said.

In response, the Ministry of Corporate Affairs exempted aircraft and engines from the mandatory moratorium.

“While the moratorium exclusion is a positive step, the continued lack of clarity as to its applicability to the GoFirst insolvency proceedings and the lack of general CTC [Cape Town Convention] primacy leads to low confidence that will be enforced,” the group had said.

Despite India's accession to the Cape Town Convention in 2008, domestic laws to enforce its provisions are lacking, leading to conflicts favoring local airlines. The proposed bill is designed to facilitate the acquisition of over 1,000 new aircraft by the end of the decade, according to sources.