India’s aviation rule-book pivoted dramatically in early 2025. Parliament enacted the Protection of Interests in Aircraft Objects Act 2025 (“Aircraft Objects Act”), giving the Cape Town Convention and its Aircraft Protocol direct force of law from 1 May 2025. Almost in parallel, the Government confirmed that every domestic flight must uplift a 1 percent blend of sustainable aviation fuel (SAF) from 2025. One reform slashes enforcement friction; the other introduces a new cost curve. Together they will shape every lease, financing and risk model tied to Indian-registered aircraft.
Go First: the trigger event
When Go First filed for insolvency protection in 2023 an IBC moratorium froze more than fifty Airbus narrow-bodies. Lessors, though armed with Cape-Town-based deregistration requests, could not recover their assets for months. The episode prompted the Aviation Working Group (AWG) to downgrade India’s compliance score and warned of higher lease-rate factors across the entire market. The policy response was swift: the Aircraft Objects Bill was tabled in February 2025, cleared both Houses in April and became law just ten weeks later.
How the Aircraft Objects Act rewrites repossession
The statute achieves four headline changes:
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Supremacy of the Convention. A clear override clause states that the Convention and Protocol prevail over any inconsistent Indian law, including the Insolvency and Bankruptcy Code.
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Five-day deregistration rule. The Directorate-General of Civil Aviation (DGCA) must cancel an aircraft’s registration within five working days of receiving a valid IDERA request from the secured creditor.
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Absolute priority for registered interests. Security interests recorded at the International Registry now outrank unregistered local liens or taxes.
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High-Court exclusivity. Only High Courts may hear Cape-Town-related disputes, limiting satellite litigation in lower courts.
In practice, lessors who pre-file the IDERA and deregistration power of attorney now possess a statutory escape hatch: five working days from default notice to deregistration, followed by the two-month “Alternative A” possession clock.
Immediate market reaction
AWG has already signalled that India’s compliance rating will move back to “positive”. Analysts anticipate a twenty-to-thirty-five-basis-point drop in lease-rate factors for narrow-body deliveries. Lessors are also dusting off plans to domicile special-purpose vehicles in Gujarat’s GIFT City, which offers a ten-year income-tax holiday and zero GST on lease rentals— incentives that looked risky before repossession certainty returned.
The new SAF cost curve
Policy snapshot. The civil-aviation and petroleum ministries have reiterated a hard 1 percent SAF blend on all domestic uplift by 2025. Indian Oil Corporation has publicly committed to meeting that blend between July and September 2025. The target equates to roughly 140 million litres of SAF a year.
Cost pressure. The International Air Transport Association estimates that average SAF prices in Europe still run at roughly double the cost of conventional Jet-A1. India expects domestic production to soften that premium: Uttar Pradesh has issued a draft policy promising land and tax subsidies of up to eighty percent to anchor new SAF plants.
Contract drafting is already changing
Alternative A meets SAF default. Lawyers are pairing Cape-Town-style Alternative A default language with green-fuel clauses. A typical provision now states that failure to procure the mandated SAF blend—or to absorb price swings beyond a negotiated cap—constitutes an event of default that triggers the statutory repossession clock.
Pre-delivery filings. Lessors increasingly insist that the IDERA, deregistration power of attorney and export-permit undertakings are filed on the day of delivery, ensuring the five-day DGCA countdown begins immediately on default.
Tax optimisation. Parties also consider routing lease structures through GIFT-City SPVs to capture GST exemptions and hard-currency funding, while relying on the new Act for domestic enforcement.
GIFT City: from concept to contender
Gujarat’s International Financial Services Centre now offers aircraft-leasing entities a ten-year income-tax holiday, zero GST on lease rentals and permission to transact entirely in foreign currency. With repossession risk dramatically reduced, multiple lessors have signalled plans to redomicile Dublin or Singapore platforms into the zone.
Implementation milestones to watch
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By 31 August 2025 the DGCA must release electronic forms and a portal for filing defaults, IDERA requests and deregistration.
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In the fourth quarter of 2025 the petroleum ministry is expected to publish binding SAF-purchase obligations, locking airlines into the 1 percent blend and clarifying cost allocation between carriers and financiers.
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In April 2026 AWG will rerun India’s Cape-Town compliance index; an upgrade could compress lease spreads even further.
Action checklist
Lessors and financiers should pre-file all deregistration documentation, align default clauses with Alternative A plus SAF triggers, and evaluate GIFT-City SPVs for tax efficiency.
Airlines need to secure long-term SAF supply contracts, model pass-through or surcharge strategies for the fuel premium, and maintain documentary trails for SAF provenance audits.
OEMs and MROs will face rising demand for engine retrofits and data solutions that record lifecycle emissions.
“India’s new Act delivers Cape-Town certainty; the SAF mandate injects cost discipline. Financing will be cheaper, operations more complex—success depends on synchronising both.”
– Krrishan Singhania
India now combines some of the world’s strongest creditor protections with an early national SAF mandate. Lessors and financiers gain speed and certainty; airlines shoulder a new cost premium that demands contractual precision. Whether the country’s record 1 300-aircraft order book translates into delivered metal will depend on how skilfully stakeholders weave Cape-Town remedies and SAF economics into every deal. The reforms place India on a path toward global best practice—provided industry players keep pace with the dual goals of enforcement efficiency and environmental accountability.
