Last year saw India's aviation sector move through significant legal shifts and regulatory changes, as airlines navigated court battles, restructuring efforts, and new compliance frameworks. From the Go First liquidation and its trouble with lessors, to SpiceJet's financial restructuring and the implementation of new regulatory frameworks, the year witnessed several pivotal moments that will influence the sector's trajectory in 2025.
At the heart of these developments was the Go First liquidation, which exposed critical gaps in the country's aviation regulations while simultaneously creating new precedents. The case concluded in January 2025 with the National Company Law Tribunal ordering liquidation, which involved debts of approximately 110 billion Indian rupees ($1.27 billion) spread across banks, lessors, and other creditors.
The case's ripple effects led to substantial regulatory reforms, especially regarding lessor rights. An October 2024 notification exempted aircraft from the moratorium period under the Insolvency and Bankruptcy Code, a direct response to criticism from global aviation stakeholders. However, this came too late to prevent India's downgrade in its Cape Town Convention compliance rating by the Aviation Working Group.
This has had real consequences for Indian carriers. "The downgrade impacts the cost of aircraft leasing," says Vihang Virkar, lead partner of DMD Advocates’ Mumbai office, who has been advising Go First on legal and contractual matters since 2005. "Banks and credit rating agencies attribute higher risk to the region based on its relatively lower Cape Town Convention compliance ratings, resulting in increased lease rates for Indian airlines compared to operators in jurisdictions with higher ratings."
The Go Air case proved particularly significant in opening new avenues in litigation funding, Virkar points out. "The Go Air liquidation is likely to be a notable instance of litigation funding in India. This development is likely to be game-changing, with several litigation funders expected to show increased interest in Indian aviation and other sectors over the next few years,” he explains.
Another regulatory outcome, prompted in part by the lessons learned from the Go First case, has been the government's move to finally incorporate the Cape Town Convention into Indian law in early 2025. The Union Cabinet's approval of the Protection and Enforcement of Interests in Aircraft Objects Bill in January marks a significant shift in India's approach to lessor rights. This legislation, aimed at adopting the convention's protocols, addresses a long-standing demand from the global aviation financing community, and will allow aircraft leasing companies to reclaim their assets from defaulting airlines more efficiently.
The year 2024 also witnessed significant consolidation in the sector, with the completion of Air India and Vistara's merger creating a formidable full-service carrier. Simultaneously, Air India Express and AIX Connect merged to form a substantial low-cost entity. These strategic moves, alongside major aircraft orders from both Air India and IndiGo, reshaped the competitive landscape and generated substantial legal work in aircraft financing and leasing arrangements.
SpiceJet's story emerged as another major thread throughout 2024, as the airline worked through legal challenges and financial restructuring. Through settlements and financial innovation, including a successful QIP, the airline has shown resilience. “SpiceJet appears to have managed to clear up a fair bit of their past financial worries. They have also managed to convert some of the outstanding debt to lessors into equity," Virkar observes. However, market watchers remain split on its prospects for the year ahead.
The introduction of the Bharatiya Vayuyan Vidheyak (BVV) marked another key development, replacing the decades-old Aircraft Act. This new framework aims to modernise India's aviation regulations, notably adding a second appeal mechanism for dispute resolution.
“We anticipate substantial growth in aviation financing and leasing activities, driven by fleet expansion by major carriers. The sector may see increased complexity in regulatory compliance with the new bill seeking to incorporate the Cape Town Convention into Indian law.”—Vihang Virkar, DMD Advocates
The GIFT City initiative gained some traction last year, with around 30 aircraft lessors registered and more than 120 aviation assets, including aircraft, helicopters and engines leased from GIFT City. But the expected movement of aircraft financiers to GIFT City is yet to pan out, notes Virkar. Industry experts point to India's unpredictable tax jurisdiction, strong competition from established hubs like Dublin, and ongoing debates about lease classification in the tax system as key challenges.
Looking ahead, the sector is poised for increased leasing and financing activity, driven by major carriers' expansion plans. The consolidation created by Air India and Vistara's merger is expected to bring fresh legal questions around competition and route rights. Meanwhile, the MRO (maintenance, repair and overhaul) sector shows promise following new tax structures, though more regulatory fine-tuning may be needed.
Regarding the legal outlook for 2025, Virkar projects: "We anticipate substantial growth in aviation financing and leasing activities, driven by fleet expansion by major carriers. The sector may see increased complexity in regulatory compliance with the new bill seeking to incorporate the Cape Town Convention into Indian law. Further, with more foreign airlines looking at Indian destinations, we expect increased activity around code-share arrangements and allocation of international route rights. The GIFT City initiative will continue to evolve, though its success will depend on addressing key concerns around tax predictability and lessor protection."
