Overview: Aircraft Assets Protection Act, Enacted in 2025
A New Era for Aviation Finance: The Protection of Interests in Aircraft Objects Act, 2025
India has taken a significant step forward in its aviation sector with the implementation of the Protection of Interests in Aircraft Objects Act, 2025. This new legislation aligns India with the international Cape Town Convention (CTC) and its Aircraft Protocol, enhancing aircraft repossession rights and procedures for lessors and financiers.
The Act provides a fixed two-month window for lessors to repossess aircraft once payments stop, a significant change that brings clarity and efficiency to the repossession process. This change is expected to promote the growth of a more competitive and resilient aviation finance market in India.
One of the key benefits of the Act is the elimination of the automatic moratorium on aircraft-related assets during insolvency proceedings. This means that lessors can repossess leased aircraft even if the airline is undergoing insolvency, preventing previous delays caused by legal moratoriums.
The Act also designates the Directorate General of Civil Aviation (DGCA) as the domestic authority for registering international interests and overseeing the enforcement provisions under the Act. This streamlines dispute resolution and asset management, making the process more efficient for all parties involved.
The Act is also expected to reduce legal and transaction costs, as aligning with global standards reduces systemic risks and compliance costs. This encourages investment and leasing in India’s aviation sector, benefiting airlines through lower leasing costs and easier fleet expansion.
Creditors and aircraft lessors also gain clearer and expedited legal mechanisms to protect their interests and repossess aircraft promptly. This strengthens India’s competitiveness in the global aviation finance market.
For transactions involving GIFT City-based lessors, the Act treats such arrangements as "domestic transactions." This provision is expected to further boost the aviation finance market in the GIFT City, a financial hub in India.
In summary, the Protection of Interests in Aircraft Objects Act, 2025, ushers in a modern legal framework that protects aircraft financiers’ rights by enabling more efficient aircraft repossession and dispute resolution, harmonizing India’s laws with international conventions, and fostering a more investor-friendly aviation leasing environment. The Act significantly strengthens the legal and financial infrastructure underpinning aircraft leasing in India, paving the way for a more robust and competitive aviation sector.
- In the finance industry, the Protection of Interests in Aircraft Objects Act, 2025, helps lessors comply with international standards like the Cape Town Convention (CTC) and its Aircraft Protocol.
- Compliance with this Act will also aid businesses in the aerospace sector, particularly those based in GIFT City, as it treats their transactions as domestic, potentially boosting the aviation finance market in the region.
- To ensure smoother business operations, the Act empowers financiers by providing clearer and expedited legal mechanisms to protect their interests and repossess aircraft promptly in case of non-payment or insolvency proceedings.
