Monday, May 24, 2021

SpiceJet gets relief on aircraft lease default case in British court

New Delhi: A UK court has asked Irish aircraft lessor Goshawk and Indian low-cost airline SpiceJet to mutually mediate, despite recognising that the airline has defaulted on payment of lease.

Goshawk and its trustees had sued SpiceJet for $16.2 million, which the airline has been unable to pay.

In a summary judgment, the court, despite ruling that Goshawk is right to claim the amount, refused to take any action against SpiceJet on the grounds that forcing the airline to pay at this stage could result in its insolvency.

This clearly isn’t in Goshawk's best interest. It has instead asked the airline and the lessor to opt for an alternative dispute resolution (ADR).

The judgment, said airline executives, is a relief for airlines such as SpiceJet, which have been unable to pay lease rentals due to the impact of the Covid-19 pandemic.

But executives of leasing firms termed it “disappointing”, saying it weakened the ‘hell or high water’ clause which is part of the lease agreement. Such a clause compels airlines to pay lease rentals, irrespective of a force majeure.

“Normally, lease agreements are covered under the ‘hell or high water’ clause, which implies that lessees ( in this case, airlines) should continue paying lease rentals, irrespective of any issues like financial losses. This judgment casts a doubt on that protection and gives a breather to airlines,” said an executive of a leasing firm.

24/05/21 Arindam Majumder/Business Standard

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