“After much hard work and encouragement, the government can now claim the successful arrival of the GIFT City on the world aviation map.” This is how Ajay Kumar, managing partner of KLA Legal Advocates & Solicitors, responded to the news of Air India completing the acquisition of its first A350 aircraft through Gujarat International Finance Tec-City (GIFT City) India’s first and only International Financial Services Centre (IFSC).
In fact, on Friday (Sept 29, 2023) Air India announced that it has completed the acquisition of its first A350-900 aircraft, the first-ever wide-body aircraft to be leased through the GIFT City. Kumar said, “This is the first-ever finance lease transaction entered into by an Indian airline through GIFT City. This is a typical finance lease structure where the lender is HSBC.” The aircraft has been leased on a finance lease basis which means that Air India will have an option to purchase the aircraft at the end of the lease period.
Earlier this year Air India revealed its order for 250 Airbus and 220 new Boeing aircraft and the newly leased aircraft is the first among six A350-900s jets it ordered from Airbus.
Air India has a total firm order for 70 widebody planes from Boeing and Airbus.
Meanwhile, Kumar noted that the transaction was completed without much hiccup. “Thus,” he said, “GIFT City presents a viable alternate option to the time-tested Irish route. One can expect many more such transactions going forward not only involving Air India but other airlines too.”
IndiGo, for example, in September 2023 announced its plans to set up a unit in GIFT City with an investment of ₹30 crore.
In fact, a lawyer, who handles the aircraft lease transaction and who doesn't want to be identified, confirmed that IndiGo will also announce a very similar transaction through GIFT City soon and Bank of China is providing the finance.
It is important to note that the majority of aircraft leasing that happens in India are operating leases and not finance leases with which the airline becomes the owner of the aircraft at the end of the lease.
01/10/2023 Libin Chacko Kurian/ITLN
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