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In a significant move to boost investor confidence and streamline the aviation sector, the Indian Parliament has passed the Protection of Interests in Aircraft Objects Bill, 2025. This legislation is pivotal for aligning India's aircraft leasing and financing ecosystem with global standards, making it a crucial step in the country's journey to become a leading player in the global aviation industry. By addressing gaps in legal enforcement and aligning with the Cape Town Convention of 2001, the bill is set to transform how aircraft are financed, leased, and protected in India, ultimately contributing to more affordable flights for passengers.
The Protection of Interests in Aircraft Objects Bill, 2025, introduced by Civil Aviation Minister Ram Mohan Naidu, aims to give legal effect to two key international agreements:
These agreements were signed by India in 2008 but faced implementation challenges. The bill seeks to create a uniform and predictable system for securing rights over high-value mobile assets like aircraft, helicopters, and engines, ensuring legal clarity and uniformity in the aviation leasing space[1][2].
The Protection of Interests in Aircraft Objects Bill includes several key provisions designed to enhance the aviation leasing process in India:
Designation of Registry Authority: The Directorate General of Civil Aviation (DGCA) is designated as the registry authority. This empowers the DGCA to manage the registration and de-registration of aircraft under the Convention[2][5].
Remedies for Creditors: In the event of a default, creditors have the right to recover assets within two months or a mutually agreed period. Before exercising any remedy, creditors must notify the DGCA, ensuring transparency and oversight[5].
Obligations of Debtors: Debtors are required to submit records of dues to the DGCA, bolstering accountability and compliance with international standards[2].
The passage of this bill is expected to have a positive impact on airfares in several ways:
Reduction in Leasing Costs: By aligning with global standards, India aims to reduce its currently high aircraft leasing costs, typically 8 to 10 percent higher than other countries. This reduction will help stabilize and potentially lower operational expenses for airlines, which can then be passed on to consumers[1][3].
Increased Investor Confidence: With clearer legal frameworks and enhanced security for creditors, more investors are likely to enter the Indian aviation market. Increased competition can lead to more efficient operations and better pricing for consumers[3].
Streamlined Processes: Simplified leasing processes will reduce bureaucratic hurdles, making it easier for airlines to acquire necessary aircraft and maintain fleet efficiency, which can lead to cost savings[1].
Economic Growth and Job Creation: As the aviation sector grows, it will create more jobs and stimulate economic activity. These broader economic benefits can indirectly contribute to more affordable air travel by enhancing regional connectivity and economic opportunities[3].
India's aviation industry has witnessed remarkable growth. The number of passengers flying annually in India has more than doubled from 10 crore 38 lakh in 2014 to 22 crore 81 lakh in 2024. Similarly, the number of airports increased from 74 to 159 over the same period[1][3]. This rapid expansion underscores the need for reforms like the Protection of Interests in Aircraft Objects Bill to ensure sustainable growth.
While this bill addresses significant challenges in aircraft financing and leasing, other hurdles remain, such as the high cost of Aviation Turbine Fuel (ATF), which accounts for nearly 45% of an airline's operational costs. Variations in ATF taxes across states also pose challenges[1][3]. To address these issues, the government is advocating for lower taxes and promoting Sustainable Aviation Fuel (SAF) to reduce environmental impact and operational costs in the long term[1].
The passage of the Protection of Interests in Aircraft Objects Bill, 2025, marks a significant milestone in India's aviation sector reform efforts. By aligning with international standards and streamlining leasing processes, the bill sets the stage for a more vibrant and competitive aviation market. While airfare reduction is a gradual process influenced by multiple factors, this legislation is a crucial step in making aviation more accessible and affordable for the masses, contributing to India's vision of becoming a global aviation leader.
By embracing these reforms and addressing broader challenges in the sector, India is poised to not only become a more significant player in the aviation industry but also to make air travel more accessible and affordable for its citizens.
