Irish aircraft lessors have taken the first steps towards repossessing aircraft that they have leased to troubled Indian airline Jet Airways.
Several Irish businesses that buy aircraft and rent them to airlines have leased planes to Jet, whose cash troubles have forced the grounding of more than three-quarters of its 120-strong fleet.
Dublin-based Avolon and SMBC, two of global aviation finance’s biggest players, confirmed on Friday that they have asked Indian authorities to deregister craft leased to Jet.
The move is often a first step towards a lessor repossessing craft where an airline is not paying the agreed rent.
The next step is to re-register the planes in another jurisdiction and then seek permission to fly them out of the country in which they are based.
Assuming that the two Irish leasing companies do this, they can still return the craft to Jet and agree new leases, if efforts to rescue the airline succeed.
In a statement SMBC said it decided to terminate the leases of four Boeing 737 craft with Jet Airways following continued deterioration of the airline’s finances.
“We have worked closely with Jet Airways and the airline’s senior management team in recent months as it sought to resolve its ongoing financial difficulties,” said SMBC.
“We will continue to work closely with Jet Airways in the hope that its financial situation improves during this challenging period for the airline and its staff.”
SMBC pointed out that the craft have been grounded since February 26th and that it is seeking their deregistration by the Directorate General of Civil Aviation in India.
“This is a normal course of action under these circumstances,” the company added.
Avolon has taken the same step with two 737-800s that are leased to Jet.
Sources say neither company should have difficulty in finding new customers for its craft as global air travel’s continued growth means demand is strong.
In addition, regulators have withheld approval for Boeing’s new 737 Max following two crashes, leaving airlines that ordered these craft for this year short of planes and seeking alternatives.
Another Irish lessor, Aergo, withdrew its request to India’s aviation directorate to deregister seven ATR craft, smaller jets used on regional routes.
The company did not comment but it is understood that Aergo hopes efforts to rescue Jet Airways will succeed, in which case maintaining the leases on its craft will be easier if they remain registered.
Similarly, it is thought that Aergo believes that taking this course will ensure repossessing the seven craft would be straightforward should Jet Airways fail.
The Indian airline’s financial troubles emerged last November and it is now under the control of its creditors.
The company leases many of its craft but has been unable to pay rent due on them.
Both the Republic and India are parties to the Cape Town Treaty, which safeguards the rights of businesses that lease valuable mobile assets such as aircraft.
Avolon and SMBC are two of the top five aircraft lessors in the world.