Govt places curbs on aircraft leasing

Air Sahara, A-I, Indian to be hit.

In a move likely to constrain the flight of several Indian carriers, the government has directed them not to take aircraft on dry lease from international airlines or leasing companies that are part of an airline.

However, no restriction has been placed on wet-leasing, in which an aircraft is leased out with a crew to operate it, and which is only for a short period and specific routes.

The government's clampdown on dry-leasing of aircraft is designed to prevent any international carrier from exercising control on the operations of a domestic airline.

According to civil aviation ministry sources, the government has sent out a directive to all airlines, and will make it a part of the civil aviation guidelines.

The move is a step towards ensuring that no foreign airline has any direct or indirect holding in an Indian carrier, as intended by the civil aviation policy. In addition, no Indian carrier will be allowed to forge a management contract with a foreign airline.

Several Indian carriers operate aircraft that have been taken on dry lease from international carriers or leasing companies. Air Sahara's entire fleet is on lease.

Even state-run Air-India and Indian have a substantial part of their fleet on lease, as their aircraft-buying plans were delayed.

As part of the government's strategy to keep Indian carriers free of the influence of foreign airlines, it has also been stipulated that no Indian airline can raise money from a foreign fund which has an airline as an equity partner.

The guidelines, however, do allow foreign funds without an airline as an equity partner to take up to 26 per cent equity in an Indian carrier. At the same time, a foreign partner can have only a minority say on the board of the airline.