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India Plans to Boost Air Connectivity with Development of 300 Airstrips
Context:
The Ministry of Civil Aviation is planning to enhance air connectivity by amending rules and expanding runways at both major and minor airports.
More on News:
- Civil Aviation Secretary announces plans for brownfield airstrip development and co-development of defence airfields for civil use during CAPA India Aviation Summit 2024 in New Delhi.
- The Centre is exploring 300 airstrips across the country to develop them as brownfield airports to enhance air connectivity.
- The ministry has evaluated all 453 airstrips across the country and discovered that approximately 157 are currently operational.
Key Highlights
- Brownfield Airports: The government aims to convert existing airstrips into brownfield airports, especially in tier-2 and tier-3 cities.
- Cape Town Convention (CTC): The government is finalising the ratification of the Convention on the Repossession of Aircraft that offers time-bound solutions for aircraft lessors.
- Airport Ecosystem Development: India aims to develop an entire airport ecosystem over a 25-year period.
- Smaller airports can feed traffic to larger ones, similar to how smaller airlines operate out of major airports.
- Recent Aircraft Orders: To meet the growing demand in the country’s air travel market, Indian carriers have placed substantial aircraft orders.
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- For instance:
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- In February 2023, the Tata-run Air India Group ordered 470 planes (250 from Airbus and 220 from Boeing).
- In June 2023, IndiGo made the world’s largest aircraft order by signing a deal for 500 A320neo family planes from Airbus.
- In January 2024, the new airline Akasa Air placed an order for 150 B737 Max aircraft with Boeing.
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Brownfield Airports:
About CTC
The Cape Town Convention is a global treaty designed to enhance financing and leasing of aircraft by reducing the risk for lessors.
- High-value leased equipment (such as aircraft, engines, and helicopters).
- It was adopted in November 2001 under the International Civil Aviation Organisation (ICAO) and the International Institute for the Unification of Private Law (UNIDROIT).
- The CTC addresses challenges related to aviation assets, which lack a fixed location due to their nature.
Status in India
India plans to introduce the Cape Town Convention Bill during the upcoming monsoon session of Parliament this year.
- India is a signatory to the agreement but has not yet ratified it.
- Currently, Indian law prohibits the recovery of assets after a company initiates bankruptcy proceedings.
- Go First’s bankruptcy resolution petition has raised concerns among lessors about leasing aircraft to Indian airlines, as they view India as a “risky jurisdiction” for such transactions.
- Purpose of the Bill:
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- The proposed Bill aims to simplify the process for aircraft leasing companies to repossess planes from airlines that miss rental payments.
- The legal framework prioritises the CTC in cases of conflicts with other local laws, specifically the Insolvency and Bankruptcy Code (IBC), 2016.
- Provisions of the Proposed Bill:
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- The Cape Town Convention Act will guarantee lessors’ rights to repossess leased equipment.
- It will empower the Centre to make rules for implementing the convention and protocol in India.
- Expected to boost lessors’ confidence in the Indian civil aviation sector.
- Aimed at lowering lease rentals and aiding the financing of high-value mobile equipment (e.g., airframes, helicopters, engines).
- Impact on Other Airlines: SpiceJet is facing insolvency issues as lenders have filed for the deregistration of six aircraft due to default on lease rentals.
- CTC Compliance and International Perception:
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- The Aviation Working Group (AWG) placed India on the ‘CTC Compliance Watchlist.’
- Insolvency resolution typically takes over 600 days, preventing lessors from recovering aircraft due to moratoriums.
- Proposed Changes in Legislation:
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- The draft Bill will mandate the return of aircraft to lessors within two months of starting the bankruptcy process.
- No current domestic laws enforce the Cape Town Convention provisions in India.
- Legal Conflicts and Industry Feedback: The provisions of this convention are believed to conflict with laws outside the jurisdiction of the Ministry of Civil Aviation, due to which the lenders are seeking legal backing for the amendment.
- Benefits of Separate Legislation: Indian airlines would benefit as countries implementing the CTC receive a 10% discount on loan processing fees for acquiring aircraft.