During 2021 and into the start of 2022 - given tight pre-owned market conditions - there was immense pressure to swiftly close a pre-owned aircraft transaction, which drove a cash solution for most buyers. However, the second half of 2022 has seen a gradual return toward a more normalised market with more inventory and as a result less pressure on transaction pacing. Although the number of pre-owned aircraft listed as being for sale has remained low, buyers are no longer automatically accepting seller terms and are taking a more cautious approach to aircraft acquisitions. Consequently, the finance community is benefiting from a longer time in which they can respond to the needs of their clients.

Financing an aircraft in India during 2022 has not seen any major impact related to new financing products or any notable regulatory changes from the Indian government impacting offerings. Demand for aircraft in India continues to grow, with buyers unsure about what options to follow to pay for an acquisition.

India has always been a challenging market in which to obtain financing. The DGCA regulatory requirements impacting aircraft registration and operational processes have not altered significantly. Importing the aircraft remains an extraordinarily complex and time-consuming procedure, with additional expenditures over and above the base aircraft acquisition cost due to taxes and import duties. Domestic Indian lenders will consider simple Rupee-denominated debt structures with very high-interest rates but will shy away from Operating Lease structures where the lender takes the residual value risk in the aircraft. Most overseas lenders do not like to finance an Indian-registered aircraft, further reducing the alternatives. Furthermore, offshore financing structures introduce the complexity of Indian withholding tax obligations on payments. This latter issue has become more challenging in recent years. The Indian tax authorities are stricter in their interpretation as to what qualifies as a structure eligible for double-taxation treaty relief, and the previously common route of using an Irish lessor has fallen away due to a lack of qualifying lessors in Ireland.

The GIFT City structure, which the Indian Government introduced a few years ago, aims to incentivise foreign lessors to enter the Indian market, but this structure is aimed primarily at the commercial aviation market, and business aircraft financiers are still rather cautious in moving to use this new solution. The GIFT City structure is positioned in a way to overcome the possible impact of withholding taxes on the finance payments, as well as helping to reduce delays related to the RBI approval process for foreign currency transactions.

One important note about GIFT City financings is the recent addition of a finance lease as a permitted sublease structure to an Indian client, thus broadening the product offerings available via a GIFT City lessor. While this latter change will help Indian buyers to acquire an aircraft with less bureaucracy, the lessee will still not be able to take advantage of tax depreciation on the aircraft as they will not be the legal owner of the aircraft. We recommend that any potential buyer engages in a detailed discussion with a tax lawyer and accountant to evaluate the most efficient manner of acquisition between traditional sources and a GIFT City solution.

India has always been a challenging market in which to obtain financing. The DGCA regulatory requirements impacting aircraft registration and operational processes have not altered significantly.

The recent trend of aircraft becoming based outside of India on foreign registrations and flying into India to pick up clients before flying them off to an international destination continues to become a more attractive alternative for many multinational companies. The obvious downfall to this structure is the inability to fly Indian-based clients between two domestic Indian airports due to cabotage regulations impacting the operation of a foreign-registered aircraft in India. Employing this approach is not ideal because it limits the use of the asset, which is why it may be helpful to engage the help of a financing partner with specific expertise within the Indian tax structure.

Global Jet Capital is an American-based lender and lessor with experience in financing Indian clients. One of our strengths is a focus in providing tax-efficient structures to acquire aircraft which will be used and registered in India. With over $2.0 billion in assets under management, Global Jet Capital specialises in financial solutions for the business aircraft market. The company is capitalised by world-class private investors with expertise in the global aviation industry like The Carlyle Group, AE Industrial Partners, and FS / KKR Advisor, LLC, a partnership between FS Investments and KKR Credit. The Global Jet Capital management team has served the business aircraft industry for a combined 250-plus years and has completed over 3,500 aircraft transactions. The Company has the expertise, financial strength, industry relationships and infrastructure necessary to offer a variety of flexible financing solutions at the speed the market requires.