Insolvency and Bankruptcy Code tweaked for airlines

The government recently made changes to the Insolvency and Bankruptcy Code (IBC) to better meet the needs of the aviation industry. One clause in the IBC, called the moratorium, prevents companies from disposing of or selling assets during insolvency proceedings, which can last for several months. This has caused issues for suppliers and lessors associated with airline companies, such as Go First, who are unable to retrieve their assets or lease them to others. Despite the Cape Town Convention (CTC), which allows lessors to repossess assets in case of default, the IBC moratorium clause takes precedence and renders the CTC provisions ineffective. This situation poses challenges for India's aviation sector, as most of its commercial fleet is leased, and if lessors are unable to recover assets, it could result in higher lease costs and difficulty in securing lease deals.