India has emerged as the world's third-largest domestic aviation market, driven by rapid growth in passenger numbers and transformational policy interventions like the regional connectivity scheme. India's domestic traffic has surged 30%, international traffic has risen from 55 million to 72 million, and in April 2025, domestic air traffic registered an annual growth of ~ 10%, outpacing the global growth rate of 8%.
Indian carriers have placed orders for over 2,000 aircraft and India is investing heavily in airport infrastructure to meet the growing demand for air travel. New airports to serve Delhi NCR and Mumbai, India's two largest cities, are likely to start operations this year.
Second airports are also planned in Chennai and Kolkata metropolitan areas, among others. The government plans to pump over INR 920 billion for the construction of new airports and the expansion of existing ones. India is expected to have two hundred airports by the end of this year, while two hundred more airports will be developed in the next two decades.
Expanding Leasing Market
Indian operators rely heavily on foreign lessors, mostly based in Ireland, Singapore, and Dubai. Around 80-85% of Indian airline fleets are on operating lease agreements as leasing helps airlines avoid high upfront capital expenditure and supports rapid expansion.
Dublin headquartered Aercap and SMBC Aviation Capital, Singapore based BOC Aviation, Dubai based DAE Capital, and US based Jackson Square Aviation are among the prominent lessors to Indian operators.
Repossession, reform and risk: What lessors need to know about India
The Protection of Interests in Aircraft Objects Act, 2025 (“Act”) came into force in India on May 1, 2025. The Act seeks to implement the Cape Town Convention on International Interests in Mobile Equipment (“Cape Town Convention”) and the Protocol to the Convention on International Interests in Mobile Equipment on Matters Specific to Aircraft Equipment (“Protocol”).
This Act comes in response to the insolvency cases of Jet Airways and Go First Airlines. The aircraft lessors to the insolvent airlines faced difficulty in repossessing and deregistering their aircraft in India due to a mandatory moratorium period imposed by the Indian Insolvency and Bankruptcy Code, 2016 (“IBC”). With Go First, the lessors were prevented from even inspecting their aircraft, let alone repossessing them.
The IBC applied to corporate insolvencies across all sectors and did not contain any carve outs for aviation assets despite India acceding to the Cape Town Convention. The Act now bestows rights to the lessors to repossess their aircraft as well as deregister them quickly in case of any default by the airline lessee. The Act has overriding effect in case of inconsistency with any other India law such as IBC. Accordingly, the lessors would now be able to swiftly repossess their aircraft where an operator files for bankruptcy, potentially mitigating leasing risks with India.
Gift City and aircraft leasing
India wants to develop GIFT City as a global aircraft leasing hub like Dublin and Singapore. There are a range of tax benefits to units established in the GIFT City including a tax holiday for any ten consecutive years out of fifteen years of operation, exemption from capital gains tax on aircraft sales during the tax holiday period, and similar exemptions for non-residents selling shares in special purpose vehicles (SPVs). There is no minimum alternate tax for those opting for the new tax regime, tax exemptions on royalty and interest income for non-resident lessors leasing to GIFT City units, and waivers on customs duties for aircraft imports and stamp duties related to unit setup and property acquisition.
Progress so far
In the last year, there has been a surge in activity from GIFT City, with more than thirty aircraft lessors already registered and more than 120 aviation assets leased from GIFT City.
Leasing transactions have been executed for wide body aircraft, narrow body aircraft, turbo props commercial jets, helicopters, business jets and engines.
Flying Freight: Development of air cargo market
India is looking to position itself as a strategic logistics hub in South Asia. The Government's ambitious target to increase air cargo volumes to ten million tonnes by 2030 is fuelling optimism across the industry, supported by major infrastructure upgrades and export-oriented policy reforms. Air freight is increasingly favoured for its speed and reliability, particularly for time-sensitive, high-value, and perishable goods such as pharmaceuticals, fresh produce, and electronics, making it a critical enabler of India's economic growth.
Wings of Self-reliance: India's defense manufacturing
The Indian aerospace and defense market presents an attractive opportunity across the supply chain. India has a defense budget of ~1.90% of its GDP. It is one of the largest importers of conventional defense equipment and spends about 40% of its total defense budget on capital acquisitions. Recognizing this, in a first, Airbus has set up production in India in a joint venture with the Tata Group. The first Made in India Airbus C295 is expected to roll out of the Vadodara facility in September 2026. Further, Airbus and Tata are setting up India's first private sector helicopter final assembly line for the H125.
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