India's New Aircraft Act: Will Cape Town Convention Lower Leasing Costs?

For years, India's aviation sector faced a legal risk. This risk quietly raised the cost of financing aircraft. Although India joined the Cape Town Convention in 2008, it never fully enforced the treaty at home.

This legal uncertainty created a credibility problem. Global aircraft lessors doubted legal certainty, not airline demand. As a result, lease rentals rose, and security deposits increased. Financing aircraft in India became more expensive than in comparable markets. These higher costs ultimately flowed into passenger fares.

The New Law: Protection of Interests in Aircraft Objects Act, 2025

The Protection of Interests in Aircraft Objects Act, 2025, marks a critical correction. The Act gives the Cape Town Convention and its Aircraft Protocol direct statutory force. For the first time, international aircraft-finance rules are enforceable law in India.

This move was urgent following recent airline failures. The Go First insolvency impact showed the conflict between international rules and domestic law. Lessors were blocked from repossession by the Insolvency and Bankruptcy Code (IBC) moratorium.

Core Changes for Lessors and Airlines

1. Enforceability of International Interests: The Act recognizes and enforces international interests in aircraft and engines. This provides the capital certainty lessors require.

2. Insolvency and Repossession: The Act applies Article XI (Alternative A) of the Aircraft Protocol. This allows lessors to repossess aircraft even during insolvency proceedings. The moratorium period is reduced to a maximum of 40-60 days. This directly addresses the Insolvency and Bankruptcy Code conflict.

3. DGCA's Role: The Directorate General of Civil Aviation (DGCA aircraft deregistration) is now empowered to implement the Convention. This turns the DGCA from a potential obstacle into an executing authority.

Economic Impact and Global Standing

India's domestic operators lease over 86% of their fleets. This heavy reliance makes the new law vital for fleet expansion. Industry analysis suggests the reform could lower leasing costs by 8–15% for Indian carriers. This is a significant saving for airlines like IndiGo and Airbus customers.

• Boosted Confidence: The Act is expected to boost investor confidence. It helps India shed its reputation as a high-risk jurisdiction.
• Lower Costs: Reduced risk premiums mean lower aircraft leasing costs India. This can translate to more affordable air travel.

Compliance Versus Competitiveness

While the Act achieves compliance, it maintains sovereign controls. India's declarations preserve wide state and tax priorities. The Act explicitly protects government dues and aircraft detention powers. This is a sovereignty-balanced approach.

Therefore, India has chosen compliance over full market competitiveness—for now. The true test will be the speed of court decisions. It will also depend on how lightly the State uses its preserved power. The goal is to become a true Indian aviation finance landscape leader. This will require simple rules and limited state interference. Read more commercial aviation news at flying.flights.

In the end, the Protection of Interests in Aircraft Objects Act fixes a long-standing legal failure. It restores trust with global aircraft finance lenders. Whether India can surpass the global standard remains an open question.