Aviation Leasing Watch AWG Downgrades India’s Compliance Rating As Go First's Dispute With Lessors Continues

The AWG is a not-for-profit entity, co-chaired by Airbus and Boeing. It monitors leasing and financing laws and has reduced India’s rating from 3.5 out of 5 to 2.

Global aviation leasing watchdog, the Aviation Working Group (AWG), has downgraded India’s compliance rating with international leasing laws for the second time. The watchdog has given India a negative outlook and kept the country on a watchlist, as the dispute plays between airline Go First and it’s aircraft lessors. 

According to a report by Reuters, the UK-based AWG gave this rating as the Go First airline is stuck in a legal battle with aircraft lessors looking to repossess jets. The AWG is a not-for-profit entity and it monitors leasing and financing laws. The body is co-chaired by Airbus and Boeing. It reduced India’s rating from 3.5 out of 5 to 2. This negative rating has been given by the AMG in the compliance index, which assesses if the requirements under the Cape Town Convention are met. 

Notably, Go First was provided bankruptcy protection in India. This stopped lessors from repossessing more than 50 grounded Airbus planes from the airline, as per the Indian laws. The lessors complained that important plane parts had been corroding or getting robbed.

In the matter, the AWG said that 130 days have passed since the lessors’ requested for repossession of their aircraft. This is more than twice the maximum waiting period of 60 days allowed under the Cape Town Convention, which aims to protect the repossession rights of lessors. While India has consented to the convention, it still hasn’t passed a resolution to solve the disputes arising from the insolvency and bankruptcy laws in the country. 

Warning about more downgrades, the AWG in it’s notice said, “The prolonged failure to make remedies, including repossession and deregistration, available to creditors ... and provide for asset maintenance and value preservation ... negatively impact scoring.”

Earlier in May, the AWG placed India on a watchlist and gave a negative outlook for the country after it failed to process the repossession applications filed by the lessors before Go First’s assets were frozen. Notably, at the time, the airline cancelled it’s flights and initiated the application for voluntary bankruptcy before the National Company Law Tribunal (NCLT) citing delays caused by the US-based engine maker Pratt and Whitney, resulting in the company grounding it’s fleet. 

The AWG further cautioned that this decision can further decrease lessor confidence in the country’s aviation industry. Major lessors and financial institutions such as Aircastle, BOC Aviation, SMBC Aviation Capital, Deutsche Bank, Goldman Sachs, and Morgan Stanley are members of the AWG.