Air India to Set up Aircraft Leasing at GIFT City

The popularity of GIFT City has been climbing the charts for the last couple of years, and to give this journey a tremendous boost, Air India has announced to launch of its leasing subsidiary at this IFSC centre. This to-be-launched AI-owned leasing subsidiary is estimated to be an INR 7,253 crore project and will be recognized as AI Fleet Services IFSC Ltd. Presently, the domestic entity finances its aircraft leasing through countries like Singapore, Ireland and Hong Kong. Air India will receive six A350-900s later this year, leased through AI Fleet Services IFSC Limited. The Chief Financial Officer, Vinod Hejmadi, and company secretary, Kalpana Rao, will take on senior management and board positions at the leasing entity, which will have an authorized capital of INR 500 million and a paid-up capital of INR 300 million. In addition to the six A350s, AI Fleet Services IFSC Limited will provide Air India and its subsidiary airlines with aircraft through operating and finance leases. Earlier this year, Air India ordered a total of 470 aircraft from both Boeing and Airbus. While some planes will be purchased outright, most will be obtained through sale/lease-back agreements. The first planes to be delivered as part of this order are the A350-900s, originally intended for Russian airlines.  According to sources from a committee meeting on August 7th, the IFSC Special Economic Zone approval committee has projected that the value of services exported (inflow) will be INR 16.85 billion over five years, while the projected import (outflow) of foreign exchange will be INR 16.75 billion. This results in a net foreign exchange of INR 93 million. The estimated cost of the project is INR 72.53 billion. The development director of the IFSC center, Dipesh Shah, shared with the news outlet that “GIFT IFSC provides a level playing field for undertaking aircraft leasing services. We have already registered around 22 leasing firms and 100+ Indian assets. We welcome AI India’s move and hope it pushes other airlines to follow suit.” The director also stated that the special economic zone was working to attract airline leasing customers, offering tax breaks for ten years from business profits, no capital gain tax, no stamp duty, and no GST on transactions carried out through the entity. IFSC Gift City, inspired by Dublin's example, offers numerous incentives to businesses, such as tax benefits for 10 years on business profits, no capital gain tax, no stamp duty, and no GST on transactions carried out through the entity. The government has encouraged aviation players to establish themselves in Gift City for the past two and a half years. Thanks to regulatory support from IFSCA, 19 property owners have already set up shop at GIFT IFSC, leasing 29 assets from IFSC in India and overseas, including fixed-wing aircraft, helicopters, engines, and ground support equipment. IFSCA anticipates a significant increase in the number of aircraft leased from GIFT City due to taxation equality. GIFT City - The New Aircraft Leasing Hub India has become the largest aviation market worldwide in the past few years and has opened a doorway to financing opportunities up to $100 billion in the next 20 years of this aircraft leasing segment. Primus Partners stated that 80% of the country’s total commercial fleet is leased, compared to 53% globally. The sources also stated in one release that “ with growing passenger traffic, India's demand for aircraft is predicted to reach around 2,100 in the next 20 years. An enabling and conducive aviation eco-system with ample focus on the domestic leasing industry can propel India's capability to tap into the $100 billion financing opportunity in the next 20 years." According to Primus Partners, leasing assets overseas means Indian funds are being sent out of the country. This highlights the need for the government to take action to develop a successful leasing industry in India. "There is a dire need to streamline processes and the regulatory environment, with Gujarat International Finance Tec-City International Financial Services Centre (GIFT IFSC) possessing the sufficient potential to become the face of aircraft leasing in India," Primus Partners added. The report has recommended specific steps to enhance the aircraft leasing sector, which has a global value of over $150 billion. So, what more do you need to invest in GIFT City? Believe it or not, GIFT City has become a commercial investment magnet, and this is the best opportunity for investing in this emerging commercial and financial revolution city. Reach us, your best commercial property consultant, RES Management, for the best investment guidance in this exceptional city.