BOC Aviation is a top-tier global aircraft operating and leasing company. Robert J Martin, Managing Director and Chief Executive Officer, has been personally involved with India since 1993.
He said on the sidelines of the 77th annual general meeting of the International Air Transport Association (IATA) in Boston that BOC Aviation is currently doing its research on setting up an office in GIFT City.
“We will do the research and it is a matter of how long it takes under the government regulations,” he said.
BOC Aviation’s core business model is focused on purchasing new, fuel-efficient, in-demand aircraft at competitive prices, directly from aircraft manufacturers, and placing them on long-term operating leases, globally, and selling them to maintain a young fleet.
In India, BOC Aviation’s largest customer is Vistara. It has also done business with IndiGo and has a smaller exposure to SpiceJet and GoAir (now GoFirst). Edited excerpts:
Q: Now India is bound by both the protocols of the Cape Town Convention on aircraft registration. Has it helped you?
A: Yes, it has -- particularly, the Cape Town Convention Protocols. We were involved in Cape Town Conventions very early on. Remember, now, with the setting up of the GIFT City in Gujarat, we are in favour of this.
Q: Are you looking to set up something in GIFT City?
A: We may look at setting up something. We are doing our research and that will probably take us into the next year.
Q: Will that be for leasing of aircraft in India?
A: We will buy an aircraft into an entity in India and lease it to airlines in India.
Q: How much will that help in bringing down leasing costs?
A: That is what we need to check. We need to understand all the state and provincial tax laws.
Q: How do Indian tax laws in GIFT City compare with those in Ireland, which is where most of the aircraft are leased from?
A: The taxes are favourable but the key question is what will be the cost to fund the entity in GIFT City. Generally, when we lease an aircraft, we borrow our funding in US dollars in the international market. The question is: can we do the same into a vehicle in GIFT City? That is the kind of research we need to do.
Q: Have you been in touch with the Indian government on this?
A: No, we are just starting.
Q: So, will it be a separate entity which BOC Aviation will open, possibly in 2022?
A: Yes. We will do the research and then it is a matter of how long it takes under government regulations.
Q: How do you view the Indian market?
A: There is huge potential. The key question is how you can fund the vehicle in India, which is going to own the aircraft in India.
Q: Can you explain this?
A: When we do financing, for example, in Singapore, we raise our money in the international bond market. There are some difficulties with that in India. At the moment, the market is not liquid enough. That is something which we are looking at before we decide to come to India.
Q: There have been a lot of controversies with some of the airlines with which you have leased aircraft and you have had to take them to court. Is that normal?
A: In the leasing business, when you get to a point where you are not paid, what you would do is that you will take your aircraft back and lease them to another customer. Actually, we have been to court only once in India. That was a long time ago, in the early days of SpiceJet. In the end, we came to a settlement.
The only other time people have generally been to court is when they have had difficulty in getting their aircraft out after they have terminated their leases. But it is a better situation today than 10 years ago.
Q: In what way? Even now, when an Indian airlines decide to acquire an aircraft, the lease deeds are all signed abroad. They are not signed in India. Is that one thing that bothers you?
A: What we will always do, no matter in which country we deal in, will normally be based on either English law or New York law. So, it is perfectly normal for the leasing business.
(Ashwini Phadnis was in Boston at the invitation of IATA)
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