Emerging hub: IFSC Gift City sees registrations from 26 aircraft leasing companies

Source: The hindu Businessline

IFSC Gift city has seen the registration of 26 aircraft leasing companies in the past three years, with over 129 transactions, officials in the know told businessline.

In February 2021, the International Financial Services Centre Authority (IFSCA) issued a framework for aircraft leasing in India. Sources say, since then, 26-odd aircraft leasing companies have set up shop here, and activities are picking up in the sector. “Over the past three months alone, three companies have been given approvals to set up aircraft leasing unit at Gift city,” the official said.

his was subsequently followed by IndiGo. The Adani Group has joined the ranks as well, although it is awaiting formal approval.

Vman Aviation Services IFSC was the pioneer in setting up shop at IFSC Gift City.

Currently, the lion’s share of global aircraft leasing is done through Ireland and China. According to a PWC report, around 80 per cent of the total commercial fleet in India is leased, compared with 53 per cent globally.

Sources said that, so far, “Over 129 aviation assets have been leased through Gift city, including 18 aircraft, 55 engines and 56 ground support.” However, the person did not give a total amount of the transactions.

Air India has already leased its first A350 from the Gift city. The company said its A350s will come through the leasing firm AI Fleet Services IFSC Ltd under a financial lease. The estimated project cost is ₹7,253 crore.

IndiGo too established an aircraft leasing venture and said that the company would invest approximately ₹11,500 crore in the IFSC aircraft leasing segment.

Taking learnings from Dublin, IFSC Gift City provides several incentives including tax benefits for 10 years from business profits, no capital gain tax, no stamp duty and no GST on transactions carried out through the entity among others. The government has been trying to get aviation players to set up shop at Gift City for the past two and half years.

Last year, amendments to the Insolvency and Bankruptcy Code (IBC) excluded transactions related to aircraft, aircraft engines, airframes, and helicopters from the moratorium upon admission of an insolvency plea, creating a more favorable environment for stakeholders in the sector.

However, despite the positive momentum, there are challenges to be addressed.

Out of the 26 aircraft leasing firms established, only 10 have actually engaged in transactions, revealing existing gaps.

An industry player at IFSC noted the lack of a conducive ecosystem in India and concerns over aircraft repossession norms. The PWC report also mentions the same. “At this junction, it is vital to develop this business line in the IFSC in India, given the immense demand for aircraft from airlines, high growth in passenger traffic and aircraft leasing’s position as the most profitable leg in the aviation supply chain,” it noted.

The report further added that in order to promote aircraft leasing in the IFSC, it was “imperative to benchmark the ecosystem with leading regimes,” along with “tremendous focus and support from the Central Government.”