Aircraft Leasing: SpiceJet, HAL Among 6 To Set Up Shop In GIFT City

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SpiceJet, Hindustan Aeronautics Ltd, Acumen Aviation, VMan Aero, Investec and JetSetGo are among six companies looking to open aircraft leasing services in India, with their base in GIFT City in Ahmedabad.

The announcement was made at the India Aircraft Leasing Summit 2021 – Rupee Raftaar held in New Delhi on Friday by Civil Aviation Secretary Pradeep Singh Kharola.

Presenting the Union Budget 2021, Finance Minister Nirmala Sitharaman had proposed a tax exemption for aircraft leasing companies, a move that a moneycontrol report said was expected to help India getting its first player in this aviation segment.

Govt for Robust Aircraft Leasing Industry

Till now, the Indian aviation industry has been dominated by lessors from Ireland and Hong Kong. Currently, it’s 48 percent more expensive to do this from India than from Ireland. While Acumen is headquartered in Ireland, Investec is based in London. Both are counted among the bigger aircraft leasing companies in the world.

Speaking at the event, Union Minister of State for Civil Aviation (Independent Charge), Hardeep S Puri has said that India must leverage its growing air traffic to establish a robust aircraft leasing industry, which would finance new aircraft deliveries through its own policies and products.

Mr. Puri said that it is vital to develop this new line of business in India for financial services and add India on the map of global financial centers for international financial services.

Nirmala Sitharaman, Union Finance Minister was the Chief Guest and graced the event with her virtual presence. Pradeep Singh Kharola, Secretary, Ministry of Civil Aviation, Injeti Srinivas, Chairperson, International Financial Services Centre Authority, Vandana Aggarwal, Senior Economic Advisor, Ministry of Civil Aviation, Uday Shankar, President, FICCI, Remi Maillard, Head of Airbus India, and stakeholders from the Indian civil aviation sector and industry members were in attendance at the event.

Hardeep S Puri said that the COVID-19 pandemic has stagnated the economic activities globally, but Indian aviation sector, has shown resilience, recalibration and resurgence despite the cascading impact of various aspects of world trade.

“The Indian aviation sector is on a path to recovery and has exhibited significant recovery to pre-COVID levels in terms of passenger movement and cargo operation. Concerted efforts are being made to attract new business into India, such as through aircraft leasing, financing, and MRO operations,” he said.

Mr. Puri informed that to commensurate with the growth potential of Indian aviation sector, in the next 20 years, India will need 1,750-2,100 aircraft valued at over ₹20,40,000 crore (~USD 290 billion), with an estimated 100 deliveries each year, i.e. about ₹35,000 crore or USD 5 billion of financing each year as per predictions of Airbus and Boeing.

The Minister added that the share of aircraft on lease globally has increased dramatically over the last few decades. It has escalated from 2 per cent in 1980 to over 41 per cent in 2018, and is estimated to have reached 50% in 2020.

Highlighting that aircraft financing is the most profitable segment of the aviation value chain and currently, Mr. Puri said foreign financiers and lessors are the biggest beneficiaries of India’s growing opportunity.

The Minister informed that several initiatives have been taken by the Government to develop aviation leasing and Financing Hub in India which included Financing, MRO, manufacturing etc. to rapidly expand this business in India.

Mr. Puri said that as dynamic nature of business in IFSCs requires high inter-regulatory coordination, IFSCA (International Financial Services Centre Authority) has been established as unified regulator to promote ease of doing business in IFSC and to provide world class regulatory environment.

“The Rupee Raftaar working group on aircraft leasing and financing therefore has holistically taken the 360 degree review of existing and foreseeable barriers to Aircraft Financing by local Indian financiers in India after extensive consultations with RBI, Banks, NBFCs – asset financing/leasing companies, airlines, airports public and private corporations and other stakeholders,” he said.

The Minister added that in anticipation of the long-term requirements of the country’s aviation industry, the government envisages to create an eco-system through Gujarat International Finance Tec-City (GIFT) city which is an IFSC in India, wherein the flexibility of regulations needed in the industry will not affect the mainland regulations.

India has created a highly effective system for aircraft leasing and financing which is comparable to that of Ireland, China, Hong Kong, Singapore and elsewhere. The purpose is to grow India’s financing market which is critical to the development of aviation industry, creating high aspirational jobs in the sector and in turn propelling India’s growth.

The initiative has the potential to deliver following key benefits:

  • Develop new line of business in India for International Financial Services
  • Create additional high-end jobs opportunity in India
  • Retain International Financial Services business in India and general additional business for Banks, NBFCs, Credit Guarantors, Insurance companies, other ancillary business etc.
  • Add India on the map of global financial centres for International financial service
  • Generate additional revenues through collection of taxes from ancillary industries and eventually through aircraft financing
  • Bring various Foreign lessors in India
  • Reduce foreign exchange outgo
  • Foster an aviation financing system that supports financing of airport development as well as the Make-in India initiative for manufacturing of aircraft, helicopters, drones, air taxis etc, beside component and parts suppliers for manufacturing of carriers as also global OEMs.

Mr. Kharola said SpiceJet is considering to lease seaplanes through GIFT City.

“Aircraft leasing is the most profitable segment of the aviation value chain. Unfortunately, not one aircraft has been leased from India and that is one big challenge that we face,” Mr. Kharola said.

SpiceJet Chairman and Managing Director Ajay Singh who was part of a panel discussion said the airline will eventually look to set up its own leasing unit in GIFT City. HAL is setting up a leasing unit for the Dornier aircraft, while VMan is based in Mumbai. JetSetGo is a private charter player.

 

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