Aircraft Deregistration and Repossession in India: Lessons from Kingfisher and SpiceJet

Katten Muchin Rosenman LLP

In 2012, Kingfisher Airlines, one of India's major airlines, ceased operations. India and its courts delayed responses to the request of lessors and financiers to deregister and repossess their aircraft, upsetting the market for aircraft leasing and financing in India. The Cape Town Convention on International Interests in Mobile Equipment (Cape Town Treaty), designed to address such situations, could not protect the lessors and financiers because India ratified the treaty after the delivery of the aircraft at issue. Many commentators believe that India's response to the Kingfisher case foreshadows India's responses to future airline bankruptcies within the scope of the Cape Town Treaty, and requests for aircraft deregistration and repossession.

Although India ratified the Cape Town Treaty in 2008, it has not passed legislation to give the treaty effect. Thus, aircraft lessors and financiers are still left to the mercy of local laws. Further, the issue of aircraft repossession is complicated by the intersection of India's bankruptcy, tax and private international law obligations, as well as its general airline industry. The Indian Directorate General of Civil Aviation (DGCA) may provide the largest hurdle to aircraft financiers and lessors attempting to deregister and repossess their aircraft, as it did in the Kingfisher case.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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