At the third Airline Economics Growth Frontiers India conference in New Delhi, Satyendra Pandey, managing partner of aviation services firm AT-TV, captivated the audience with a review of the astonishing changes made to the Indian aviation market in just a year – from consolidation to liquidations and record capital raises along the way.
India’s total orderbook of more than 1,700 aircraft is significant. Pandey noted that one in every eight aircraft produced by airframe manufacturers is headed for India, adding that additional orders could not be ruled out. That substantial orderbook needs to be financed. Conservative estimates for the total financing requirements are placed at between $50-70 billion dollars in the next five years and well north of $100 billion in the next decade. But layer in foreign exchange (FX) trends and the market finds itself in a world of dollar promises and rupee realities, said Pandey.
The structure of the India market has also witnessed significant changes. From seven scheduled commercial airlines a decade ago, the market now only has four. Pandey noted that effectively, the Indian airline market is now a duopoly, but as a whole the market still delivers a negative return on capital. He explained that for 2025, with revenue of approximately $16bn, the Indian aviation industry would report a loss of $800 million. Added to the OEM production and other challenges, this represents a significant hurdle especially for airlines without a strong balance sheet or a strong parent company that provides for capital and/or guarantees.
The foundations for growth in India remain strong. All forecasts still indicate that by 2030 India will firmly establish itself as the world’s third largest aviation market. Pandey noted that India’s macroeconomic elements are aligned, and the country is on track to register 6% - 7% GDP growth. However, he said that whether this growth will be even or segmented is a topic of hot debate. In addition, costs continue to creep up. The troika of fuel, financing and FX are impacting costs adversely. This will have to be made up via quality of revenue and/or the revenue mix.
Finally, Pandey highlighted that airline failures are not a popular topic but described then as an inevitable reality. He said that for India, the policies have been “torture tested” especially given the recent bankruptcies most notably that of GoFirst. The journey for aircraft lessors has included a slow move through the legal system, working with vague policies, and a bureaucracy driven by process and paperwork. This came to a head where the country’s risk rating was downgraded by the Aviation Working Group (AWG) and then as changes were implemented including the recently tabled Cape Town Bill. The country’s risk rating is gradually improving. But it is nowhere near where it needs to be.
Pandey ended his remarks by highlighting the themes of the conference that included conversations by stakeholder, lessors and engine lessors speaking on India market opportunities and challenges; diversification on funding; new insurance backed products; India’s GIFT City’s leasing initiative; OEM forecasts; and financing the orderbook. The question posed was whether India’s aviation boom is an economic force aligning with its global rise—or a bubble waiting to deflate.
Lessors embrace India
The sizeable narrowbody aircraft orders have changed the market dynamics in India. With well-capitalised Indian carriers sharing their widebody aspirations – notably Air India and Indigo – the fast-growing Indian aviation market has attracted the attention of many aircraft lessors especially as OEM capacity limits those market growth ambitions. The lessor discussion panel at the event, moderated by James Bradley, partner at Morgan, Lewis & Bockius, noted that Indian carriers took delivery of 120 aircraft last year – 60 by Indigo alone – which were deliveries from orders placed in 2015/6, which as Sankalp Garg, SVP APAC at Castlelake said should be considered in that context. Fellow panellists noted that carriers in the region should focus on the secondary market for access to lift considering the saturated OEM capacity.
The lessor panel – which also comprised DAE Capital’s Daniel Cunningham, Joey Zhao, head of Asia-Pacific, ex-Japan at ABL Aviation, and Air Lease’s Kishore Korde – discussed whether Indian aviation is being viewed as positive because yields have held high mostly due to the shortage of capacity and whether this is a sustainable proposition as capacity challenges alleviate and significant capacity starts to be inducted by the end of the decade. Zhao made very key observations comparing India with China. He highlighted that India’s aviation growth was quite similar to that witnessed by China some 20-30 years ago. And that with comparable populations, China had a significantly higher number of airlines suggesting that there is clearly space for more airlines in India as long as they are adequately capitalised. On the financing side, Zhao also noted that that Japanese Operating Leases (JOLs) and Japanese Operating Leases with Call Option (JOLCOs) structures may make their way into the Indian market given the cost of funds in Japan and minimal credit risk of the two strong airlines in India.
The panel also spoke of credit risk in India and how this is layered with jurisdiction risk. Interestingly, for two of the large airlines (Air India and Indigo), it was noted that lessors are not pricing in any repossession risk given the balance sheet strength and capitalisation. Kishore Korde highlighted that while lessors don't price airline re-possession risk; in the event of a bankruptcy they extract aircraft value by redeploying them. He also noted that privatisation of Air India created opportunities; well-capitalised airlines benefit the country. The panel agreed that India regularly sees new airlines highlighting that there are three potential airlines that are looking to launch but capacity remains a challenge. Newer airlines will emerge, but the timing remains uncertain, concluded the panel.
Aircraft Leasing and Asset Management panellists with moderator Randeep Bubbra, partner at Watson, Farley & Williams, spoke about the ongoing issue of aircraft shortages, which has been pushing up leasing costs for airlines, prompting them to explore third-party options and that flying older aircraft for longer. Although the latter option decreases costs it increases risk, making it essential to balance cost savings with risk management. Vishok Mansingh, CEO of VMAN Aviation Service, noted that India’s airlines (notably Indigo and SpiceJet) have been seeking extensions and wet leasing options, with the DGCA providing a six-month window for such arrangements to help airlines use aircraft for longer periods.
Zach Hall, vice president of business development at AvAir, said that the low availability of widebody aircraft due to productions issues, has led to an increase in the demand for parts with sustained levels of pricing. He said that the gap in supply and demand necessitates more dynamic aircraft lease management and agile asset management to optimize resource utilization – which also effectively includes the use and procurement of parts. That increased presence of older aircraft in fleets may force airlines to push back their sustainability goals, potentially impacting their ability to meet 2030 targets. Hall further indicated that AvAir is focused on building relationships with partners such as Challenge Airlines (that was also present in the conference) and that building partnerships based on trust and confidence of the availability of spares would be crucial to address challenges going forward.
On the topic of asset management, the panel – which also included Wiz Aviation’s Satish Modi, Prabhjeet Kaur, VP at Novus Aviation Capital and ICF’s Joost Groenenboom – discussed the fact that aircraft leasing and asset management requires adaptability, innovative problem-solving, and collaborative partnerships to navigate challenges and capitalize on opportunities. It was noted that the importance of effective contract management and record-keeping cannot be overstated, as these factors significantly impact the efficiency and cost-effectiveness of leasing and asset management operations.
The panel also touched upon the topic of GIFT city, discussing the opinion that the new operating lease structure offers few advantages for newer airlines. Novus Aviation indicated that they have no plans as such to setup in GIFT city but are keeping a keen eye on the developments. VMAN aviation is already setup in GIFT city and focused on smaller aircraft. They also highlighted the need for tailored solutions to support emerging industry players.
Financing the Indian airline orderbook
The supply chain disruption continues to affect the industry and has shifted a significant advantage to lessors with available aircraft. Today, lessors are clearly in the driving seat given that there are many options on where to place aircraft. Sankalp Garg from Castlelake, speaking on the transactions panel, made a point of differentiating the industry between lessors with orderbooks and airlines with orderbooks and how both have a unique advantage in the current market. He stressed that lessors should not only focus on pricing but more on the need to build a long-term lease, adding that the current market was an opportunity for lessors to build their balance sheets.
On the same panel, Rohit Tomar from Vietjet spoke about how lessors are moving away from a pure operating lease model to a mix of operating and finance leases. For Vietjet this mix is now at approximately 60% and 40%. He also made the point that the pool of aircraft available to airlines is further restricted as some countries have laws around the age of the aircraft especially when on operating leases, which further adds to the complexity for airlines without an orderbook.
Priya Mehra from Akasa highlighted the fact that the airline is inducting new aircraft while working through challenges. Akasa has concluded financings via GIFT city and is also working on operating leases noting that lessors are in a position to sit and negotiate long-term deals in the current environment.
The consistent theme from the transactions panel was the current supply-demand mismatch but that situation will not persist long-term. India overall is primarily a market for new aircraft. By 2030 Airbus and Boeing will overcome the curve and the supply of new aircraft will be substantial impacting asset values on older aircraft.
With the expected influx of new planes, India has to diversify its funding sources and this is already happening. Recently, Castlelake closed an insurance-backed lease to Indigo which was structured via GIFT city.
Gujarat International Finance Tec-City, popularly known as GIFT City, is located on the banks of the Sabarmati River between the financial capital of Gujrat, Ahmedabad, and the political hub, Gandhinagar. Spread across 88 acres of land is India’s first operational greenfield smart city borne from an idea formed 14 years ago to build a self-reliant aircraft leasing hub in India along the lines of Dublin or Singapore, to serve India’s burgeoning aviation sector.
GIFT City offers a hoard of tax incentives including: 100% exemption on corporate tax for 10 years, tax depreciation allowance on the aircraft at 40% written-down value, zero withholding tax on the lease rental paid to lessors, GST on lease payments by Indian airlines at 5%, zero stamp duty, and no capital tax provided the lessor has commenced operations on or before March 31, 2024, a 100% tax holiday for a decade to businesses that set up within the hub’s International Financial Services Centre, or IFSC.
The Airbus and Friends panel spoke about the about the leasing ecosystem in India with a special emphasis on GIFT city. It was noted that GIFT city, or the intention behind the architecture of the city, is that it provides simplicity and promotes airline business, making it easier for aircraft financing. Lessors indicated that for any structure to work, the legal framework should be understandable and acceptance of the Cape Town Convention as a standard is a must, as it would enable lessors to focus on credit risk rather than country risk.
In India, the key to financing is diversification, including state finance, commercial loans, private insurance, and export credit, Export credit is a crucial tool in crisis management, as the aviation business faces numerous challenges. Insurance companies should be willing to experiment and convince new entrants to deploy capacity. Thomas Engoulevent from Marsh noted that insurance relies on experiments and convincing new entrants, which will have a strong impact on deploying over $500 million in capacity over the next 10 years.
A further challenge for GIFT city is that local finance (Indian banks) is expensive. Financing is longer term ambition in GIFT City and the government of India is seeking feedback from lessors.
Amit Mittal, CEO of ModAir Aviation Services, speaking on the Aircraft Investment panel, observed that traditional leasing companies in India focus on smaller aircraft, while foreign lessors play a significant role in GIFT city. Local leasing companies in India face challenges, including the inability to repossess aircraft due to statute law. The Cape Town Convention’s implementation was seen as a positive development but fellow panellist Vinamra Longani with SGI opined that implementation remains a significant question, with concerns about its effectiveness. The de-registration of Jet Airways aircraft for example highlights the need for a clear implementation of the Cape Town Convention.
Overcoming red tape
The issue of aircraft repossession was a constant theme throughout the event. The first panel of the conference, moderated by Ravi Nath, manging partner of RNCLegal, addressed the subject head on beginning with the recent insolvency and repossession challenges of GoFirst where 54 aircraft were on the ground with lessors unable to repossess them. It was noted that the DGCA's inaction led to negative publicity for government agencies. After multiple legal representations, the high court passed a judgement which favoured the lessors, setting a precedent for other courts. As of now, 23 aircraft from GoFirst remain on the ground due to inability to get engines to fly out the aircraft (GTF engines).
On the technical side of repossession, Amit Tyagi from Acumen noted that repossession also includes a host of steps post the physical repossession. For instance, the lessor must inspect and prepare aircraft for delivery to next lessee; the lessor must find MRO support for aircraft maintenance; any missing engines must be located and/or replaced them; and the lessor must set up new delivery conditions with the lessee. For the interim from the lease termination to repossession, lessor must find ground support for aircraft; inspect major assemblies on aircraft; and obtain status sheet and reports from lessee. Finally, there is the customs clearance, statutory dues that must be cleared and fly worthiness of the aircraft. As the panel demonstrated, it takes months to prepare aircraft for delivery to next lessee and that challenge is exacerbated in a repossession scenario especially where the airline is not working together with the lessor, which was the case with the GoFirst bankruptcy in the initial part of the proceedings.
Ravi Nath noted that without documentation and complete documentation, an aircraft just becomes a piece of metal as it is unable to fly.
The repossession panel also debated the Protection and Enforcement of Interests in Aircraft Objects Bill, 2025 that was recently passed but at the time of the conference had just been tabled in parliament. The bill includes provisions for debtor and creditor, with debtor informing DGCA of dues, and it gives importance to the Cape Town Convention, with DGCA de-registering aircraft within five days as per IDERA. Article 11 of the Cape Town protocol was discussed by the panel and it was noted that this applies only if state has applied declaration, with two-month waiting period. Overall, the consensus view was that the bill is a great step forward however, the proof will be in the implementation. And the sad reality is that the implementation can only be fully tested during an airline insolvency or other black swan event.
While they spoke on a variety of topics the most interesting aspect was that the panel included two firms that are on opposite sides of a repossession matter pertaining to SpiceJet with Precept-Law representing the airline and Sarin & Co. representing a lessor to the airline.