VIEWPOINT: India’s aviation finance market ready for take-off

The opportunities for aviation finance in India are significant. Aviation analytics company Cirium expects India to be the fastest growing market for aircraft deliveries over the next 10-20 years. According to analysis by S&P Global, more than US$170 billion will be required to support India’s aviation traffic boom over the next five years to 2030, with most of the funding allocated to purchasing new aircraft. Ever since the general relaxation of its economic controls in 1991, India’s aviation market has been characterised by just a handful of players. Historically, Indian carriers have met the bulk of their aircraft‑funding needs through international lenders, a pattern that reflects the comparatively nascent development of specialised aviation‑finance capabilities within the domestic banking sector. As a corollary, local banks have had limited opportunities to cultivate the deep technical expertise that aviation‑finance transactions demand. Two important developments Two important recent developments have the potential to turbocharge the development of the Indian aviation finance market. First, in March, the inaugural USD-denominated aircraft financing transaction to be executed by an Indian bank was announced by Mumbai-headquartered Axis Bank. The landmark deal was completed for AI Fleet Services Ltd (AIFS), the leasing arm and wholly owned subsidiary of Air India. It involved a long-term loan for the purchase of 34 training aircraft and was affected through Axis Bank’s International Banking Unit (IBU) at GIFT City, India’s International Financial Services Centre (IFSC) based in Gandhinagar. Since its establishment in 2015, the IFSC has served as a special economic zone where divisions of Indian banks can set up as a foreign branch, allowing them to deal in US dollars and other foreign currencies. This arrangement allows for the development of domestic, economically competitive aviation finance structures, which supports the Indian government’s vision to promote GIFT City as an alternative to other global aviation finance centres, such as Ireland, for domestic carriers. The Axis/AIFS deal is significant as it shows a pathway for the development of homegrown aviation finance solutions in India. If GIFT City is to develop as a credible centre for financing Indian aviation, Indian financial institutions will need to show foreign investors they are capable of materially supporting the sector. Transactions such as this are important both to demonstrate to the wider market that Indian banks can arrange and execute these deals, and to build knowledge within Indian financial institutions themselves. It is also important for India’s aviation finance industry to develop in line with international practices (for example, using English law-governed financing documentation), not least to ensure an ability to syndicate and potentially securitise loans in the international financial markets. While there is a large pool of domestic talent to assist the industry, there is also a need to utilise technical expertise and experience from international specialists to enable India’s industry to meet its potential. Cape Town Convention The second development is of systemic importance to the nascent Indian aviation finance industry and the development of GIFT City as an aviation finance centre. On 1 April 2025, the Rajya Sabha (the Upper House or the Council of States of the Indian Parliament) passed the Protection of Interests in Aircraft Objects Bill, 2025 (the CTC Bill) and the Lok Sabha (the Lower House or the House of the People) followed on 3 April 2025. With the approval of both houses, the Bill now (as of mid-April 2025) awaits the President’s assent to become law. The new legislation aims to ensure primacy in Indian law for the Cape Town Convention, a widely adopted international treaty that standardises the protection of creditors in transactions involving commercial aircraft. This follows a series of airline insolvencies in Indias’ recent past in which protections that creditors had assumed would be available were found not to be robust due to conflicts with India’s domestic bankruptcy code. The CTC Bill gives treaty provisions overriding effect across India, expressly superseding inconsistent statutes including the Insolvency and Bankruptcy Code, 2016 whenever aircraft objects are involved. Creditors gain a statutory right to repossess the aircraft within two calendar months, enforced through an irrevocable deregistration and export request authorisation (IDERA) that the Directorate General of Civil Aviation must honour within five working days. Interests recorded on the International Registry for mobile assets established under the Cape Town Convention will enjoy automatic priority without further local filings. These measures close the enforcement gap exposed in recent airline failures, lift India’s compliance rating with the Aviation Working Group and should translate into lower lease‑rate factors. The reform cannot rewrite past incidents, but by de‑risking lease enforcement in a market where roughly 86% of aircraft are leased, it is expected to curb future incidents, whether caused by insolvency events or otherwise, compress financing costs and, over time, ease fares for passengers. Once it comes into effect, India’s access to aviation investor markets will be significantly expanded, and alternative, competitively priced financing methods such as Enhanced Equipment Trust Certificates will ultimately become available to Indian operators. Taken together, these reforms position GIFT City to rival Dublin and Singapore as an aviation‑finance hub. (NOTE: Namita Das is a partner in the Corporate and Commercial practice at Dentons Link Legal in New Delhi; Donal Keane and Sarah Dyke, are partners in Dentons Aviation Finance practice, based in Dublin and London.) For Editorial Inquiries Contact: Editor Matt Driskill at [email protected] For Advertising Inquiries Contact: Head of Sales Kay Rolland at [email protected]