The latest Budget announcement of a tax holiday for capital gains for aircraft leasing companies along with tax exemptions for aircraft lease rentals paid to foreign lessors operating out of the International Financial Services Centre in GIFT City could be a game changer, aviation analysts feel.

Remi Maillard Chair, Civil Aviation Committee of FICCI and President and MD, Airbus India & South Asia, feels that the government has made some forward-leaning announcements for the aviation sector.

He adds that this measure is significant for multiple reason including that it will provide some relief to Indian carriers which are bleeding cash because of the Covid-19 pandemic.

“The proposal sits well with India’s desire to develop a local aircraft leasing and financing industry to accelerate the maturity and ‘Atmanirbharta’ of the Indian aviation industry. The tax support for aircraft leasing and rentals will help grow the fleet size in India as a vast majority of these aircraft will likely be leased,” Maillard says.

‘Will create ecosystem’

Jagannarayan Padmanabhan Director & Practice Leader – Transport & Logistics Crisil Infrastructure Advisory, said that in a post pandemic scenario, there may not be an immediate impact on the lease rates, but this will certainly augur well for creating an ecosystem for aircraft leasing in India.

Nripendra Singh, Industry Principal, Aerospace, Defense & Security Practice, Frost & Sullivan, said that India is unique in terms of the aircraft operating on lease. In India, almost 80 per cent of the aircraft operating are on lease, compared to approximately 52-53 per cent in the rest of the world.

“The latest government move will help give birth to aircraft leasing companies in India. This will also help bring down operating costs of domestic airlines by 9-10 per cent in tax terms, which will act as a big boost to their bottom lines as they are operating on wafer-thin margins,” he says. The fact that airlines in India are expected to bring in about 850 aircraft in the next few years should act as a fillip for Indian players to enter the domestic aircraft leasing space.

Kapil Kaul, Chief Executive Officer and Director, CAPA Advisory, added that tax exemption was necessary to create a starting base for investors to consider aircraft leasing seriously.

Ajay Sahwney, Partner, Cyril Amarchand Mangaldas , pointed out that this will not only boost investments in the aircraft leasing sector in India and make India a hub for financing aircraft purchases and leasing, but also leverage business opportunities in the aviation sector.

Aircraft leasing costs are among the top five costs that an airline in India has to bear.

The Finance Minister also announced that the next lot of airports in tier II and III cities will be monetised for operations and management concessions. Adani Enterprises Limited has already bagged six airports including Thiruvanathapuram, Mangaluru and Guwahati for operating, managing and developing these airports for 50 years.

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