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New legal row over Kingfisher

New Delhi, April 20, 2013

 

Indian airports have claimed that international law must take a back seat to local courts in a row with foreign aircraft leasing firms over the future of grounded Kingfisher Airlines jets, according to government minutes.
 
The stance taken by Mumbai and Delhi airports could further complicate the leasing firms' attempts to recover jets supplied to Kingfisher, as other creditors also try to recoup some of the $2.5 billion of debt left when the airline halted flights in October.
 
That in turn could affect leasing firms' willingness to deal with Indian airlines in future, or at least make financing for local carriers more expensive, analysts said.
 
Aircraft leasing firms like ILFC are at the heart of the $100 billionn-a-year passenger jet industry. Their role has grown dramatically as cash-pinched airlines try to contain their capital spending, and experts say lessors now account for about 40 per cent of the modern jetliner fleet.
 
An international treaty aimed at making it attractive for leasing firms to invest offers lessors similar rights to repossess unpaid jets as in the US.
 
The treaty, the Cape Town Convention, is a key part of efforts to harmonise trade with developing countries.
 
However, efforts by foreign lessors to repossess more than a dozen Airbus jets parked at airports in India have been hampered by disputes over competing claims and confusion over the power of international agreements to trump local courts.
 
Both lessors and airports are owed money by Kingfisher, along with staff, tax authorities and other creditors. Lessors say the jets do not belong to Kingfisher and can't be touched.
 
At the March 26 meeting attended by airport officials, as well as government and tax authorities, it was agreed that jets already de-registered by India must be released, according to minutes of the gathering held at the aviation ministry.
 
Despite this, lessors led by US-based ILFC have so far said most of the jets leased to Kingfisher remain stranded.
 
Airports Authority of India chairman V P Agrawal sought to defuse the row by announcing after the meeting that India is bound by international convention to let the planes go.
 
However, representatives of Mumbai and Delhi airports argued inside the talks that Indian laws prevailed over international laws, which meant they could not ignore a "stay" or freeze order from the Delhi High Court, according to the minutes.-Reuters



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