6.2.1 Kingfisher Airlines
Kingfisher, an Indian airline started commercial operations in 2005 with four new Airbus A320-200
aircraft and quickly grew until it had a fleet of 60 aircraft. Despite the airline routinely posting losses,
it continued to grow its fleet and at one point placed orders with Airbus totalling more than 100
aircraft. Unfortunately, Kingfisher's financial troubles continued, and it was forced to cease
operations in 2012, having recorded losses of USD 1 billion. The authorities suspended its operating
certificate. In the normal course, one would expect that de-registration and export of the aircraft from
an airline would be relatively simple to accomplish in such circumstances. Indeed, DVB Aviation
Finance Asia PTE Ltd (DVB), a German financier of two Airbus A320-232 aircraft leased to
Kingfisher, in pre-Cape Town Convention transactions, was able to seize the aircraft outside of India
(in Turkey) where the aircraft were located at the time the leases were terminated. The only issue to
attend to was the de-registration of the aircraft in accordance with the remedies accorded under the
operating lease agreements. Following receipt by the DGCA of letters from DVB requesting de-
registration and notwithstanding that DVB possessed a de-registration power of attorney, Kingfisher
notified the DGCA that it objected to the de-registration and unilateral termination of the operating
lease and that it had competing proprietary interest in the aircraft. Thereafter, the DGCA required
DVB to supply a certificate from Kingfisher confirming that it had no objection before processing the
de-registration, forcing DVB to commence court proceedings against Kingfisher and the DGCA
seeking among other things, an order directing DGCA to immediately de-register the aircraft. The
court eventually directed DGCA to de-register the aircraft and directed that Kingfisher’s no objection
certificate was not required if DVB had the benefit of a de-registration power of attorney, empowering
it to de-register the aircraft (which it did). The delay in achieving de-registration of the aircraft greatly
inhibited the remarketing effort, and in turn limited loss mitigation on the lessor's part.
It is important to highlight that Kingfisher was not subject to the CTC, as the aircraft were leased to
Kingfisher before India ratified the CTC. This demonstrates an important due diligence point, for
example for financiers in securitisation structures which involve merely an assignment of leases
leaving the original contract intact.
6.2.2 SpiceJet
Similarly, SpiceJet came under severe financial pressure, resulting in termination by several lessors
of their agreements and demands for the return of their aircraft. Two key lessors, Wilmington Trust
SP Services (Dublin) Limited and AWAS, brought proceedings in the Delhi High Court to de-register
and repossess their aircraft. The court held that the DGCA is obliged to deregister the aircraft and
has no discretion in the matter, so long as the conditions in the sub-rule are met.
The resulting delay arising from the involvement of a court procedure in both cases propagated
uncertainty for financiers and lessors of aircraft in India in relation to the ease of repossessing
aircraft which has a knock-on effect on the cost of aircraft financing.
The decision as to whether the aircraft is to be de-registered or not is a decision for the DGCA. The
DGCA may cancel a registration at any time provided it is satisfied that, as per rule 30(6) of the
Aircraft Rules, 1937:
• such registration is not in conformity with paragraph 3.1 of the Aircraft Rules;