India aids SpiceJet to keep aircraft

INDIA’s government will support SpiceJet to help the airline retain its aircraft even as lessors battle in court to take possession of their planes, a civil aviation ministry official said.

SpiceJet, a budget airline that ran into financial difficulties last year and has been bailed out by a group of investors, said last week some lessors have approached India’s regulator and filed court notices seeking to take back the airline. SpiceJet, which owes payment to the leasing companies, is still operating planes the lessors are seeking.

The government needs to put the interest of its carriers before lessors even if it is a signatory to the Cape Town Convention, said the official, who asked not to be identified as the information is not public. India in 2008 acceded to the Cape Town Convention, which defines the rights of aircraft owners or lessors in case of a default on payments, letting them get their equipment back if there is no resolution.

The conflict is reminiscent of events two years ago when lessors battled to retrieve six Airbus aircraft formerly operated by Kingfisher Airlines.

Several Indian carriers have posted losses in the past five years as below-cost fares bleed the companies, forcing them to seek extensions to payments due to aircraft-leasing companies and others.

“The leasing and finance community has been working very hard with the Indian authorities post-Kingfisher to find common ground in a safe application of Cape Town. This is not working and Indian authorities seem to have little idea of the damage caused to their industry,” said Bertrand Grabowski, MD for transport at DVB Bank in Frankfurt.

The bank was among financial groups that went to court in 2013 to get help in reregistering planes that had been leased to Kingfisher. The airline failed and went out of business.

The financial community has been working to find an orderly manner to deal with situations where Indian lessors default on payments, he said.