Aviation Working Group cuts India's compliance rating amid Go First-lessor issues

Go First

The Aviation Working Group (AWG) has cut India’s rating in terms of compliance with the international law governing the leasing of aircraft amid lessors continuing efforts to take back planes leased out to the now-grounded Go First.

AWG — a not-for-profit legal entity comprised of major aviation manufacturers, leasing companies and financial institutions — has a negative outlook for the country. Under the Cape Town Convention (CTC), lessors can take back the possession of aircraft leased to airlines. Since Go First is undergoing an insolvency resolution process, a moratorium is in place and lessors are locked in a legal battle with Go First for taking back the leased planes. In an update, AWS said CTC remedies have not been made available to lessors nor have lessors been able to access aircraft to determine that their aircraft are being maintained in accordance with the leases as required by CTC.

"The time period since the commencement of the Go First insolvency proceedings is 130 days, which is more than double the period to which India has committed, in accordance with international law, to make the relevant CTC remedies available," it said on September 25. India is a signatory of CTC but is yet to ratify the convention. AWS, which maintains the CTC Compliance Index, has cut the rating score to 2 from 3.5, with a negative outlook.

The actions and inactions in the GoFirst insolvency proceedings are developments that materially and negatively implicate CTC non-compliance in India, it said, and added that the country’s variable A score is projected to be materially reduced under the compliance index formula from 3.5 to projected 2. "This projected variable A downgrade is necessary as gaps in CTC primacy, notably in respect of bankruptcy legislation, have resulted in material non-compliance by India, with substantial losses to relying upon creditors," AWG said.

Variable A pertains to legislation, regulations, and rules impacting CTC implementation. AWG includes Boeing and Airbus. Budget carrier Go First stopped flying on May 3 amid the grounding of many of its aircraft due to engine issues that resulted in financial woes.