About 20 percent of aircraft used by Indian airlines are leased from Chinese lessors
Chinese companies may have made significant inroads into several sectors in India. Relatively unknown, however, has been their growing role in the Indian aviation industry.
About 20 percent of the aircraft operated by Indian carriers have been leased from Chinese lessors, who have made their presence felt in less than a decade in a market that was otherwise dominated by leasing companies from Ireland and the US.
Moneycontrol collated the data, talking to industry executives who dipped into their databases.
Of the 480 aircraft that are operated by Indian carriers, 96 are leased from Chinese lessors. In total, about 650 aircraft are currently operational in India. Apart from the commercial airlines, the rest of the planes belong to the 'general aviation' category, including charter service providers.
"In the last few years some Chinese lessors have become quite competitive and as good as their older counterparts from Europe and the US," says Nitin Sarin, Managing Partner of Sarin & Co, which specialises in aviation law. "Chinese lessors have always been sought after, as their terms are cheaper and they are not so stickler for return conditions as compared to the well-established lessors," adds Sarin.
Mark Martin, Founder of aviation advisory firm Martin Consulting, agrees. "Leasing companies from China have been accommodating. That is one reason why airlines from Africa, Eastern Europe and CIS countries now increasingly lease planes from these players. They are pocket-friendly," he says.
With Indian low-cost carriers too looking to reduce their rental costs, it is not a surprise that they have also looked increasingly east, to expand their fleet.
The Chinese lessors
Who are these Chinese lessors?
Not surprisingly, most of the Chinese leasing companies are either backed or owned by local banks, giving them easy access to capital. For instance, CDB Leasing Company, which has leased out 30 planes to Indian carriers, is majority-owned by China Development Bank.
Similarly, Bank of China owns BOC Aviation, which has leased out 24 aircraft to Indian carriers. Other Chinese leasing companies active in India are - ICBC Leasing, China Aircraft Leasing Company Ltd, CMB Financial Leasing and Minsheng Financial Leasing.
Overall, there are over 20 leasing companies from China.
International reports point out that lessors from China have grown faster than their European and American counterparts, most noting the backing from Chinese banks. It has also helped that China has promoted Hong Kong as an alternative to Dublin, long seen as the leasing capital of the aviation world. Attractive tax incentives and a huge market in China, has now prompted even European and American lessors to set up base in Hong Kong.
In India though, the absence of a home-grown lessor is glaring. In a 2018 report, advisory firm CAPA India notes that "there are no indigenous Indian lessors," despite 81 percent of aircraft operating in India being leased. "This compares with a leased aircraft share of 52 percent in Asia overall, and 53 percent globally," CAPA said in the report.
The absence is particularly telling given Indian airlines have among the biggest order for aircraft, in the world. Indian carriers are expected to buy over 2,500 aircraft over 20 years.
Taking inspiration from China
Perhaps, it's time to bring the 'Aatmanirbhar' theme to the aircraft leasing industry in India.
Interestingly, the Rupee Raftaar report released by the government in 2019, asks the local aviation industry to take inspiration from the Chinese counterpart!The report noted that nearly Rs 10,000 crore is spent yearly by Indian airlines in lease rentals. To ensure that business remains in India, the report suggests providing tax incentives to develop a domestic leasing industry. "At present," notes Sarin, "It's 48 percent more expensive to lease from India."