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AW Feature * The potential of GIFT City in transforming the aviation leasing business in India. * What are the scope and challenges faced the in aviation leasing business In India. * Scope of leasing bigger aircrafts through GIFT City ? By Dr. Arun Lohiya The aviation industry, after undergoing the hiatus due to Covid-19, has started displaying signs of growth and vast potential. By 2026, the Indian leasing market is expected to increase 4.8 times of its value in 2018, making India the third largest aviation market in the world. Moreover, around 80 per cent of the total commercial aircrafts are leased in India due to various reasons like price sensitivity of infrastructure and consumers, financial fragility and operational incentives Another reason for airlines looking for lessors abroad is scarcity of proper leasing companies in India. Finding lessors locally will help in ascertaining favourable terms and conditions, thus helping the lessees. It will also give a major boost to the economy, leading to increased GDP and better retention of financial business and services. The Ministry of Civil Aviation, Government of India made ‘Project Rupee Raftar’— a working group for development of avenues for aircraft financing and leasing activities. The aim behind the constitution of this committee was to develop a strong and indigenous leasing and financing structure. The group had aviation experts, lawyers and financial institutions to ponder on policy and implementation issues. On 20 December 2019, the International Financial Services Centre Authority Act (IFSCA) was enacted by the Parliament to establish an IFSC Authority. As a result, Gujarat International Finance Tec-City (GIFT City) came into existence. Then the Central Government categorised—aircraft leases (including operating and financial leases); any hybrid of operating and financial leases of aircraft or helicopters; and engines of aircraft or helicopters—as financial products under the IFSCA Act 2014. This opened prospects for formation of an aircraft leasing market in India, particularly in the GIFT City. Leasing in GIFT City includes an operating lease, sale leaseback, novation, purchase, transfer, assignment and any other related activity. “Touted as the country’s first operational green field smart city laced with best-in-class infrastructure to strengthen business and commerce, GIFT city is located in 105 hectares of special economic zone. An aircraft leasing company can set up themselves as an LLP, or a trust with a minimum capital of US$200,000 (or equivalent) and can deal in freely convertible currency and maintain a Rupee account to defray administrative expenses.” GIFT City also offers an elaborate range of tax incentives. In the 2021-22 Union budget, the government introduced various additional tax breaks like tax holiday for lessors and exemption from payment of withholding tax concessional corporate tax rates with the aim to encourage lessors to establish their units in IFSC. GIFT also provides a financially feasible environment with assemblage of financial agencies, including public and private sector banks, asset management companies and service providers. At present, India has 700 aircraft (commercial side) and India airlines have around 800 planes currently on order that are planned to be delivered in the next half a decade. However, despite this regulatory regime, there are numerous challenges and problems, aviation as an industry relies heavily on capital expenditure and funding from banks that are reluctant in financing aircraft because of the unclear regulatory regime. Furthermore, logistical issues like lack of airports poses a crucial challenge to aircraft lessors because newly leased aircraft are required to be stationed at a proper place. According to the current regime, an aircraft lessor at GIFT is excused from custom duty. However, uncertainty among custom officials is frequent resulting in procedural postponements. Even though the aircraft leasing and finance industry in India has growth prospects, it is imperative for the sector to identify and rectify the key bottlenecks. The country is required to build a conducive tax regime supported by authorities for private enterprise to grow and contest with the existing occupants. Moving on to some of the major bottlenecks to the airplane leasing industry—Competitive Tax Regime is a major hurdle in development of leasing businesses. The effective tax rates in countries like Singapore, Hong Kong, Ireland, etc. is between 10-17 per cent. In addition, firms in aircraft leasing businesses pay taxes at an even lower tax rate of 5-10 per cent in the above mentioned countries. The corporate tax rate in India, however, is 25 per cent for domestic businesses with turnover of up to Rs 250 crore and 30 per cent for businesses with higher turnover. This is much higher in comparison with countries with established leasing industries.Decreased and competitive tax rate for aircraft leasing firms is essential to build a viable leasing and financing market in the country. Secondly, withholding tax is a crucial decisive factor for the airline operators and also attracts most of the lessors’ attention. It is a general practice that lessors pass the withholding tax burden on to a lessee in the form of five years lease rentals. Since, withholding tax is levied on lease rental paid by the lessee or operator, a high withholding tax implies high cost of leasing to the airline operators. Based on the Airline Economics and AirFinance Journal conferences held in Dublin in May 2022, some of the most common trends are as following: 1.ESG: The upgradation of fleet and numerous green initiatives by major stakeholders have helped a great deal in reducing the sector’s carbon footprint. A common census, on making more efforts towards choosing eco-friendly ways, emerged from major players. Some of these solutions include increased use of SAF as supply increases and costs come down, and eventually use eVTOLs for lower capacity, short-haul transport. 2.Emergence of Alternate Capital Sources: For lessors, expanding funding channels remains to be a priority. Private equity’s existence is ever-growing and private equity firms have brought added competition in the debt markets. Especially while conventional financiers assumed a “wait and see” method, these substitute capital providers have shown an intention and capacity to step in and meet financing needs. 3.Potential Consolidation: A

Mumbai,7th August, 2022: Indians scouting for a holiday in Finland, can brace themselves as Finnair launched its maiden aircraft, AY125,to India at Mumbai Airport (CSMIA).The inaugural flight arrived in Mumbai on 07th August, 2022 at 0515hrsand flight AY126 departed from CSMIA on 07th August, 2022 at 0710 hrs. The maiden flight departed carrying full flight of passengers on board. With this new route, passengers travelling from CSMIA will have increased seamless access to Finland, United States, and major European cities. Headquartered in Helsinki, Finnair is a network airline, specializing in connecting passenger and cargo traffic between Asia, North America, and Europe. Finnair is a member of the one world alliance, and the airline intends to reduce its net emissions by 50% by the end of 2025 from the 2019 baseline and achieve carbon neutrality latest by the end of 2045. Speaking about Finnair starting operations from Mumbai, CSMIA spokesperson said “CSMIA is extremely delighted with the association with Finnair, one of the leading airlines catering to routes across Asia, U.S and Europe. With the promise of being a gateway to the Nordic country, this partnership further adds to the airport’s robust connectivity with the addition of a prominent hub like Helsinki toits route network. With an aim to provide passengers with unparalleled travel across geographies, the partnership is not just a step towards direct connectivity to Finland but is a testament to CSMIA’s constant effort to expand the portfolio of destinations around the world and vision to contribute to the global travel network.” Finnair’s General Manager India, Mr. Sakari Romu expressed that, “We are very excited to start our operations from Mumbai. Our three-weekly flights serve our customers not only in providing a connection to Finland but also to our network in the US and major European cities”. With an aim to maximise passenger delight, CSMIA continues to create distinctiveness through its experiential offering and easy access on the global network. CSMIA will continue to cater to passengers demands and add more prominent destinations, making CSMIA – a ‘Gateway to Goodness’.

Lucknow, 6th August 2022: AirAsia India, commenced operations with daily direct flights from Lucknow to Bangalore, Goa and New Delhi from 5th August 2022. The airlines will connect its other two hubs, Mumbai and Kolkata from 1st September 2022, with a total of 112 weekly direct flights connecting Lucknow to these cities. The occasion was marked by the presence of government officials including General (Dr.) VK Singh (Retd.) – Minister of State Civil Aviation, Rajiv Bansal – Secretary, Ministry of Civil Aviation (MoCA), Usha Padhee – Joint Secretary, MoCA,S.P. Goyal – Additional Chief Secretary to CM, Uttar Pradesh. As of now, AirAsia India flies over 50 direct and 100 connecting routes across India.

Delhi, 25 July 2022: Vistara, Indian full-service carrier will introduce e-tech logbook solution to go paperless in its operations. It has appointed ULTRAMAIN ELB for this service, which will fully replace aircraft paper technical log, cabin log, journey log, damage log, and fueling log providing a validated electronic Certificate of Release to Service (e-CRS) on flights operated by Vistara. Currently in the airborne proving stage, the ELB application will be used by Flight Crew, Cabin Crew, and Engineers on iOS devices to provide integrated workflows with Vistara’s maintenance and operational systems. The airline is seeking necessary approvals from relevant authorities before fully integrating this solution across its operations. Once implemented, ULTRAMAIN ELB will enable accurate, real-time global operational visibility of the Vistara fleet resulting in more efficient maintenance, higher dispatch reliability, and increased aircraft utilization. “Vistara is delighted to partner with Ultramain Systems, which will provide the first Electronic Logbook to seek operational approval to operate a fully electronic Technical and Cabin Logbook in India. Ultramain ELB will be integrated with various live processes like AMOS, ACARS, and ARMS for seamless operations. This application, with its completeness and ease of use, is one step towards building enterprise application integration while also focussing on sustainable operations.”, said Sisira Kanta Dash, Senior Vice President – Engineering & Maintenance, Vistara. “As Vistara marches on its Digital Transformational journey, the focus on digital data capture, integration and automation will continue. ULTRAMAIN ELB will help digitize our aircraft paper logs and improve operational effectiveness.” said Vinod Bhat, Chief Information Officer, Vistara. “We are pleased to welcome Vistara to the ULTRAMAIN ELB family. As well as our well proven defect management functions. Vistara will be using ELB’s refuel / defuel functions, which enable real time capture of refueling documentation using Ultramain’s e-Signature capabilities. This is another important step towards the automation of Line Maintenance Operations” said Mark McCausland – President and CEO of Ultramain Systems.

Mumbai, 25th July,2022: ModAir an entity registered in GIFT City, Gandhi Nagar, Gujarat as an aircraft leasing company leased out its first aircraft which is an Italian trainer twin engine Aircraft (Tecnam) to a flight training academy in Jalgaon, Maharashtra through a lease of IFSC city, Ahmedabad. This is the first time a trainer aircraft is leased in India to an FTO. ModAir has set a benchmark in Indian Aviation by leasing an aircraft which will be helpful for the aspiring pilots of our country. The aircraft was brought from jalgaon and towed into the Air India MRO at MIHAN SEZ after landing at Nagpur’s Dr. BabasahebAmbedkar International Airport. Parking and warehouse services were provided by Air India MRO. Atul Jain, Managing Director of Mod Air, said “The Company plans to bring 20 more trainer aircrafts by the end of 2025 through GIFT CITY. We are happy to lease the aircraft to a Flying Training Organisation through GIFT CITY for the first time in the country. With this initiative, we want to ensure that leasing of aircraft to FTO’s becomes achievable in India. Flight training in India can take upto three years to finish what international does in 8 to 12 months. An absence of flying machines also hinders potential training. Flight schools often finance the purchase of new airplanes for their training fleet. Leasing can improve a flight training operators’ cash flow situation by allowing them to continue modernisation with technologically advanced aircraft even in challenging economic times. We are ready to help to lease more aircrafts to FTO’s to make this model successful under AtmaNirbhar Bharat.”

Delhi, July 22, 2022: Akasa Air, India’s newest airline, has today opened bookings for ticket sales of its first commercial flights with an initial network including Ahmedabad, Bengaluru, Mumbai, and Kochi. In the inaugural phase of its network development, Akasa Air will launch its operations by offering 28 weekly flights between Mumbai and Ahmedabad starting August 7, 2022. Following this, starting August 13, the airline will start operating an additional 28 weekly flights between Bengaluru and Kochi. All flights are open for sale with immediate effect. Vinay Dube, Founder and Chief Executive Officer, Akasa Air said, “We are extremely excited to finally be able to offer up our flights for sale. We are also excited to reveal our product which promises to be unlike anything experienced in the category thus far. With Akasa employees providing warm and efficient customer service, a reliable and dependable network, and affordable fares – we look forward to serving our customers with a flying experience that I am sure they will find delightful”. Developing a strong pan-India presence Commenting on Akasa Air’s network expansion plans, Praveen Iyer, Co-founder and Chief Commercial Officer, Akasa Air said, “Akasa Air’s network strategy is focused on establishing a strong pan-India presence and providing linkages from metro to tier 2 and tier 3 cities across the country. We kick-start operations with flights between Mumbai and Ahmedabad, with the brand-new Boeing 737 MAX aircraft. We will adopt a phased approach to support our network expansion plans, progressively connecting more cities, as we add two aircraft to our fleet each month, in our first year”. Bookings for flights on Akasa Air will be available via the Mobile App, Mobile Web & Desktop website www.akasaair.com, through travel agents and several OTAs across the country. Customers can look out for fare specials being announced as the airline makes its foray into each new sector across the country. Warm and efficient customer experience Describing the experience that passengers flying with Akasa Air can expect, Belson Coutinho, Co-founder and Chief Marketing and Experiences Officer, Akasa Air said, “We want to be a compassionate airline with a focus on being dependable, warm, efficient, and reliable. We will provide our passengers with category-first product choices and a happy travel experience which is tech-forward, inclusive, environmentally progressive – all in the Akasa way”. Inside the brand-new cabin, flyers will be treated to softer seat cushions, spacious leg room and USB ports that will be available for every passenger. The fresh cabin environment will provide a relaxed atmosphere and a sense of spaciousness – enhanced with the Boeing Sky Interior, highlighted by modern sculpted sidewalls, window reveals and mood lighting. Akasa Air’s signature service is designed to deliver a warm and efficient experience, brought to life by its employees, across all touchpoints. Cabin crew will sport their freshly minted, uniquely designed, comfortable uniforms including high-functioning, branded sneakers. Employees on ground, as well as our Akasa Care Officers at the Akasa Care Centre, will augment this experience and will be ready to assist and guide our customers for all their needs. Café Akasa Akasa Air’s buy-on-board meal service will be available at Café Akasa – offering a wide choice of tasty, healthy, and quality meals to provide customers an indulgent experience in the skies. A selection of quality fusion meals, farm-inspired and plant-based offerings, varied menu options like pasta, Vietnamese rice rolls, hot chocolate and a year-round festival menu inspired by Indian cuisines and celebrations, is guaranteed to thrill taste buds. As an environmentally progressive airline, Akasa Air’s packaging of perishable meals is ethically sourced from sustainably grown crops.

Event Date: 7th-8th November 2022 Venue/City: Riyadh, Saudi Arabia Format: Physical Media Partner: Aviation World Saudi Airport Exhibition is the leading Airport Development event in Saudi Arabia, attracting thousands of global industry officials, suppliers, investors and professionals. Focusing on EXPANSION, INNOVATION and COLLABORATION, the event gives you the tools and connections to be part of Saudi Arabia’s ambitious US$100 Billion aviation investment programme.Saudi Airport Exhibition will feature multiple platforms for attendees to learn from global industry leaders, view the latest technologies from around the world and build new partnerships to enhance their own business. The event will also provide a critical platform to host bilateral discussions between Saudi aviation leaders and the global supply chain to enhance the Kingdom’s airports industry, as well as promote Saudi government and commercial entities to global attendees, thus directly contributing to Saudi Arabia’s GDP. For more information, login:https://www.saudiairportexhibition.com/

Event Date: 3rd-4th Nov 2022 Venue: Pride Plaza, New Delhi Format: Physical Organiser: MRO Association of India Media Partner: Aviation WorldAero MRO India Aerospace & Defence 2022 is the premier event of India and the region for the commercial and military air transport maintenance, repair and overhaul industry, designed for thought leaders and innovators from the leading and trusted brand in the aviation/aerospace industry. The event connects the global and regional community of airlines, MROs, OEMs and suppliers. For more information, login: www.mroassociation.in