INDIA: India Aircraft Leasing Summit 2021- Rupee Raftaar was recently held in New Delhi, and Smt. Nirmala Sitharaman, Union Finance Minister graced the event virtually as the Chief Guest. Shri Hardeep S Puri, MoS, I/C, Civil Aviation was the Guest of Honour and the summit was attended by the President, FICCI, Head of Airbus India, noted dignitaries from the ministry, and stakeholders from the Indian civil aviation sector and industry members.
Today, India’s aviation industry is sustainable, affordable, safe, and internationally competitive and connects to all parts of India and the world. India is the third-largest market, and the domestic passenger traffic has risen by over 100% in the period during FY 2013-14 to and 2019-20 at a growth of over 14% per annum. Domestic air cargo handling has also shown a rise of 8.24% between FY 2013-14 and FY 2019-20, and international air cargo grew by about 6% per annum.
Significant recovery to Pre-Covid levels
Shri Puri stated that India’s Indian aviation sector exhibited significant recovery to Pre-Covid levels, and time now has come to
leverage its growing air traffic to establish a robust aircraft leasing industry, which would finance new aircraft deliveries through its own policies and products. Addressing the India Aircraft Leasing Summit 2021- Rupee Raftaar, he further said that it is vital to develop this new line of business in India for financial services and add India to the map of global financial centers for international financial services.
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Shri Puri said that the COVID-19 pandemic has stagnated the economic activities globally, but the Indian aviation sector has shown resilience, recalibration, and resurgence despite the cascading impact of various aspects of world trade. He added that the Indian Aviation sector is on a path to recovery in terms of passenger movement and cargo operation. Concerted efforts are being made to attract new business into India, such as through aircraft leasing, financing, and MRO operations.
Road map to move ahead
Shri Puri informed that to commensurate with the growth potential of the Indian aviation sector, in the next 20 years, India will need 1,750-2,100 aircraft valued at over USD 290 billion, with an estimated 100 deliveries each year, i.e. about USD 5 billion of financing each year as per predictions of Airbus and Boeing. He added that the share of aircraft on lease globally has increased dramatically over the last few decades. It has escalated from 2 percent in 1980 to over 41 percent in 2018 and is estimated to have reached 50% in 2020.
Civil Aviation Minister highlighted that aircraft financing is the most profitable segment of the aviation value chain and currently, foreign financiers and lessors are the biggest beneficiaries of India’s growing opportunity. He informed that several initiatives have been taken by the Government to develop an Aviation leasing and Financing Hub in India which included Financing, MRO, manufacturing, etc. to rapidly expand this business in India.
He added that as the dynamic nature of business in IFSCs requires high inter-regulatory coordination, IFSCA (International Financial Services Centre Authority) has been established as a unified regulator to promote ease of doing business in IFSC and to provide the world-class regulatory environment.
Rupee Raftaar working group
Shri Puri shared that the Rupee Raftaar working group on aircraft leasing and financing, therefore, has holistically taken the 360-degree review of existing and foreseeable barriers to Aircraft Financing by local Indian financiers in India after extensive consultations with RBI, Banks, NBFCs – Asset financing/leasing companies, Airlines, Airports public, and Private corporations and other stakeholders. He added that in anticipation of the long-term requirements of the country’s aviation industry, the government envisages creating an eco-system through Gujarat International Finance Tec-City (GIFT) city which is an IFSC in India, wherein the flexibility of regulations needed in the industry will not affect the mainland regulations.
Potentials
India has created a highly effective system for aircraft leasing and financing which is comparable to that of Ireland, China, Hong Kong, Singapore, and elsewhere. The purpose is to grow India’s financing market which is critical to the development of the aviation industry, creating high aspirational jobs in the sector and in turn propelling India’s growth. The initiative has the potential to deliver the following key benefits:
- Develop a new line of business in India for International Financial Services
- Create additional high-end jobs opportunity in India
- Retain International Financial Services business in India and general additional business for Banks, NBFCs, Credit Guarantors, Insurance companies, other ancillary business, etc.
- Add India on the map of global financial centers for International financial services
- Generate additional revenues through the collection of taxes from ancillary industries and eventually through aircraft financing
- Bring various Foreign lessors to India
- Reduce foreign exchange outgo
- Foster an aviation financing system that supports the financing of airport development as well as the Make-in India initiative for manufacturing of aircraft, helicopters, drones, air taxis, etc., besides component and parts suppliers for the manufacturing of carriers as also global OEMs.
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