Aircraft Leasing and Financing-Issues and Challenges

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Aircraft Leasing and Financing-Issues and Challenges

By | December 2010
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Aircraft Leasing and Financing-Issues and Challenges
Shaik Nazim Ahmed Shafi, Research Scholar, NALSAR University of Law, Hyderabad, India

International carriage by air is one of the greatest marvels of this remarkable age of science and technology and India has emerged as one of the most promising and fastest growing aviation markets in the world. To keep pace with this growth, large orders for aircraft acquisition have been placed by almost all airlines in India. Thus, finding enough capital for their ambitious fleet expansion programme is one of the key concerns of all Indian Airlines.

Before discussing on the phrase ‘Aircraft Leasing’, it is pertinent to note that an aircraft cannot be leased but can be bailed. Under Transfer of Property Act, 1882 a lease is defined under Section 107 but relates only to immoveable property but not to movable property. So the appropriate word to be used is ‘Bailment of an Aircraft’ defined under Section 148 of the Indian Contract Act, 1872. Generally in common parlance it is used as ‘Leasing of Aircraft’.

Aircraft Leasing has become a common technique to acquire an aircraft, since this asset has become expensive and always subject to a variety of laws and regulations. One of its main advantages is that it assists to settle cost considerably. The players in Airline industry can be categorized in three groups like Public Players, Private Players and Startup Players.

Owning an aircraft is an expensive affair. An Airliner’s decision to acquire an aircraft is invariably accompanied by the question of whether the aircraft is to be taken on lease or to be purchased. The answer largely depends on the airline’s requirements, cost of the aircraft, availability of capital, legal constraints and taxation issues. Prior to the 1980’s purchasing an aircraft was the primary choice for the airlines – but new aircrafts were becoming an unattractive proposition for airline operators to buy aircrafts. Therefore, it is a common...
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