Concerned About Aircraft Lease Rates If NCLT Order Stands: Boeing

Aerospace giant Boeing is concerned about the impact on aircraft lease rates in India due to the recent National Company Law Tribunal (NCLT) order debarring aircraft lessors from repossessing their planes from insolvent Go First.

About 88 per cent of 673 commercial planes with Indian carriers were on lease as on May 3, according to aviation analytics firm Cirium’s data. Therefore, airlines in India pay a big chunk of their revenues as lease rent.

Before the NCLT order of May 10, lessors had put in applications with the Directorate General of Civil Aviation (DGCA) to repossess more than 40 of Go First’s 54 planes.

At least three lessors -- SMBC Aviation Capital, SFV Aircraft Holdings, and GY Aviation Lease -- have filed an appeal at National Company Law Appellate Tribunal (NCLAT) against the May 10 order.

When asked if the aircraft lease rates for the Indian carriers would increase due to the NCLT order, Ryan Weir, vice-president (sales and marketing for India), Boeing Commercial Airplanes, told reporters on Friday: “It is probably too early to comment on the outcome. We are concerned about what will happen with the lease rates if the current order stands.”

“Pushing Cape Town treaty through legislation is the single-most important thing India can do to appease the lessors and create a framework that works. It is proven to work in other jurisdictions. Once it is ratified, it will do the same thing in India. In doing so, the lessors will be provided more comfort in placing their extremely expensive asset in the country,” he added.

India signed the Cape Town Convention (CTC) and Protocol, an international treaty to reduce the risks for aircraft lessors and financiers, in 2008.

India introduced a Bill in 2018 and a new Bill in 2022 to implement the CTC, but it has not yet been passed by Parliament.

Weir noted: “I don’t think we know what the impact is going to be (due to Go First’s situation). It is an unfortunate set of circumstances for the airlines, lessors, and the travelling public. We are certainly working very closely with our customers to identify and discuss any impact of the court rulings. We are working with lessors to understand their perspective as well.”

About 20 per cent of commercial planes operating in India have been manufactured by Boeing.

Aviation Watch Group, a not-for-profit organisation, on Thursday put India on the watch list with a negative outlook over its failure to deregister Go First aircraft upon the termination of their leases.

AWG, which monitors the compliance of CTC, comprises aircraft manufacturers, lessors, and financial institutions.

AWG keeps a compliance index that serves as a risk assessment tool for aircraft lessors.

Go First stopped all flights from May 3 after filing an insolvency application with the NCLT. The airline has squarely blamed engine maker Pratt and Whitney for its cash crunch, stating that almost half its 54 aircraft fleet were grounded due to delay in supplying engines.

SMBC Aviation Capital has stated in its application before the NCLAT that “lessors and international aircraft owners see India as a risky jurisdiction for aircraft leasing”.

David Schulte, Boeing’s managing director of marketing for India, South East Asia, and Asia Pacific, said high fuel costs, lowest airfare costs in the world, and high volumes of transactions in dollars were three biggest challenges in the Indian aviation market.

Can the engine issues hamper air travel’s resurgence in India?

Weir said: “I think any impact will be temporary. We have a lot of confidence in our engine partner for the 737 Max.”