Will Aircraft Leasing Set-Up Pay Off For Aviation?

A domestic leasing ecosystem has several advantages but there are challenges, too, say industry watchers.

- Ashwini Phadnis

In a move that is meant to have a far-reaching impact on Indian aviation, Union Budget 2019-20 talks about creating an ecosystem in the country under which aircraft can be leased in India.

Airlines across the board use two types of aircraft — those that they purchase directly from aircraft manufacturers and others that they lease out from leasing companies.

Under a leasing arrangement, a leasing company buys aircraft from the manufacturer and then leases them out to airlines. Till now, only foreign leasing companies like GECAS and BOC Aviation have been leasing out aircraft to airlines across the world, including in India.

Now, with the government’s new proposal, all this is set to change. So far, Indian carriers in particular have been facing a challenge in leasing aircraft because the deals are structured in foreign exchange and any fluctuations in forex affect an Indian airline's operations as it usually has to pay more for leasing an aircraft.

If the leasing companies are set up here and lease rentals are in rupees, airlines can save valuable foreign exchange. They will also be in a better position to manage their costs.

However, though the government’s move has been hailed by some as being progressive, there are going to be many challenges before it becomes a reality.

But first, what are the advantages of allowing leasing aircraft within the country?

Viable proposition