India looks to enter aircraft financing and leasing business

A Hindustan Times report, said experts feel India would need to create a tax regime to make aircraft leasing more attractive.

“The government’s proposal to introduce aircraft financing and leasing will bring down the costs for carriers hopefully,” said AirAsia India ME and CEO Sunil Bhaskaran.

In a document titled ‘Vision 2040’ the civil aviation ministry had said that by 2040, almost 90 per cent of aircraft being ordered in India should be financed by entities based in India.

“This does not cause any tax loss for the government since the aircraft leasing industry does not exist in India currently. A robust leasing industry in India will add to its GDP, prevent the perpetual drain of foreign exchange, reduce the leasing cost to Indian carriers and create high-end jobs,” the report has said.

There are around eight aircraft leasing companies around the world with assets of over USD 10 billion. Over 40 per cent of the global commercial aircraft fleet are leased ones. In India, over 70 per cent of the private airlines’ fleet operates on lease.

“For a fleet of 600 aircraft, assuming an annual lease rental of USD 4 million, the foreign exchange outflow is to the extent of USD 2.4 billion. The loss of jobs and taxes thereof are additional...With the gradual depreciation of the rupee, the cost of leasing in rupee terms will rise...,” HT said citing the government report.