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Aircraft Leasing & Financing: Opening New Opportunities For All

India offers a stable financial market, a booming aviation industry, resilient airlines, India is a major talent hub and it is expanding its infrastructure.

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Over the past decade, India has been a red-hot market for aviation growth. If the pace of growth surprised the world, many are now watching with attention the Indian aviation industry’s agility and resilience through the unprecedented challenges of the Covid-19 pandemic.

Much of this has been possible because of an enabling policy ecosystem that has allowed the Indian aviation and aerospace sector to develop as a safe, affordable, competitive and sustainable industry. Today, India offers a stable financial market, a booming aviation industry, resilient airlines, India is a major talent hub and it is expanding its infrastructure.

Aviation financing was probably the only missing piece of the puzzle that has now fallen into place with the announcement of the first-ever aircraft leasing contract out of the GIFT City. As a matter of fact, Vman Aviation Services IFSC Pvt Ltd has chosen the Airbus H125 helicopter to launch its leasing business from GIFT City. The company will lease the aircraft to a commercial operator for passenger transport and other aerial work missions. It is only a matter of time before India sees more aircraft leasing deals.

The timing could not have been better. India is growing, its people are becoming more aspirational and the UDAN scheme is connecting newer towns and cities every other day. Developing a robust indigenous leasing and financing infrastructure will play a significant role in helping India emerge as an integrated aviation destination not only in the region but also in the world.

With this objective, the government established a unified authority known as International Financial Services Centres Authority (IFSCA) to regulate all financial services in International Financial Services Centres (IFSCs) in the country. Tax incentives, competitive financing options, ease of compliance and a framework to implement globally used efficient structures are now available. The hum of activities at GIFT City is a testament to the assured success of this venture.

It is well known that the centre of gravity for the aircraft leasing industry has been steadily moving from the West to the East. Today five out of the twelve biggest lessors belong to Asia. India too has the right ingredients to succeed as a base for aircraft leasing – sustained high demand for aircraft from airlines, strong passenger traffic growth and aircraft leasing’s value as the most profitable segment in the aviation value chain. Add to that liquid credit markets, low-interest rates and competitive taxation. A strong leasing industry makes a lot of sense in a country where 85% of all aircraft are on lease. India must leverage not only its large passenger market but also the promising air cargo segment to grow its aircraft leasing industry.

The presence of local lessors will not only help the airlines obtain better leasing terms but also hedge currency fluctuation risks, thus reducing uncertainties in their operational framework and improving their financial position. With most of the market being served by Low-Cost Carriers (LCCs), the price remains a major differentiator in India.

And it is not just aviation. A world of lucrative opportunities awaits finance professionals, accountants, lawyers, arbiters and other professionals in India who are waiting to provide the necessary supportive ecosystem for the aircraft financing and leasing industry.

The sector opens up new opportunities for financial players and becomes critical to developing India’s skillset to improve self-reliance in the industry. It will be a ‘Make in India’ moment for India-based airlines and contribute significantly to the growth of the economy in terms of higher tax revenue collections, new employment generation and affordable air travel for the citizens.

The ambition is bold – to take India from being a consumer of financial products to a producer of financial products when it comes to aircraft leasing. The time to do it is now.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

Rémi Maillard

Chairman, FICCI - Civil Aviation Committee President & MD - Airbus India and South Asia

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