Aircraft Repossession vs Going-Concern Value: How India’s New Insolvency Framework Changes The Position Of Aircraft Lessors

Introduction

Airline insolvency presents a particularly difficult problem for insolvency law because the assets most critical to keeping the airline operational may not belong to the airline at all. Aircraft are frequently held under operating leases. When an airline enters insolvency, therefore, the resolution professional (“RP”) may be required to preserve the corporate debtor as a going concern while the aircraft lessor seeks to enforce its contractual and international-law rights to recover possession of its aircraft.

This tension was brought sharply into focus during the insolvency proceedings of Jet Airways (India) Limited and Go Airlines (India) Limited (Go First). In both cases, aircraft lessors faced significant uncertainty concerning the interaction between the moratorium under the Insolvency and Bankruptcy Code, 2016 (“IBC”), the terms of the aircraft leases, the Irrevocable Deregistration and Export Request Authorisation (“IDERA”) mechanism and India’s obligations under