The Indian Director General of Civil Aviation (‘DGCA’) has amended the Civil Aviation Requirements (‘CAR’) on registration and de-registration of aircraft with the aim of simplifying the process of import and repossession of aircraft for Gujarat International Finance Tec-City (‘GIFT City’) based aircraft lessors and empowering such lessors to ensure the value of aircraft is preserved following repossession.

With effect from April 12, 2024, an aircraft leasing company registered with the International Financial Services Centre (‘IFSC’) and approved by the IFSC for undertaking aircraft leasing activities (a ‘GIFT City Lessor’), has been granted the following benefits upon repossession:

1. Registration as Aircraft ‘Operator’: Upon repossession of aircraft due to expiry or termination of the lease, the aircraft may be registered in the name of such GIFT City Lessor as ‘Operator’, for the sole purpose of preservation and maintenance of the aircraft. The GIFT City Lessor cannot use the aircraft for commercial or revenue operations for passengers, cargo, training, or other aerial work.

The GIFT City Lessor may, based on the special flight permit issued by the DGCA, undertake a flight for a maintenance check, demonstration, or positioning. The GIFT City Lessor will need to have either their own or a contracted DGCA approved Continuing Airworthiness Management Organisation (CAMO).

2. Import Permission Exemption: GIFT City Lessors are exempt from obtaining the permission to import aircraft/permission for local acquisition.

Impact of Changes for GIFT City Lessors

The amendments impact leasing through GIFT City in a positive manner, as follows:

i.    GIFT City Lessors can take control of the aircraft as ‘Operators’ which empower them with the critical right to ensure that the value of the aircraft is preserved and maintained. A GIFT City Lessor can approach the DGCA for special flight permits so that the aircraft can be transported for maintenance checks without delay; and

ii.   The exemption from obtaining the permission to import aircraft upon repossession also gives GIFT City Lessors an advantage over other aircraft lessors from a time and cost efficiency perspective. Repossessed aircraft may be able to return to commercial operations earlier than if imported through the ordinary course by operators.

In an instance of repossession, prior to the amendment, the lessor would need to (i) export the aircraft from India; (ii) obtain foreign registration of the aircraft; and (iii) where such aircraft is to be leased to an Indian airline, the aircraft would need to be de-registered from the foreign registry and an import permission would need to be obtained. Only after such import permission is obtained, can the aircraft registration formalities be commenced by the new lessee.

After the amendments in the CAR, the aforementioned steps do not apply in the case of aircraft repossessions by GIFT City Lessors. This change will result in significant reduction of costs, timelines, grounding time, and the administrative burden for GIFT City Lessors. Indian airlines who may be looking to increase their fleet may also benefit from a shorter aircraft delivery and induction process.

The amended CAR on registration and de-registration of aircraft should go a long way in assuring the non-resident aircraft leasing community of the Indian Government’s proactive approach in taking meaningful steps to make aircraft leasing activities through GIFT City attractive.