The demand for international air travel has surged over recent decades, prompting economies worldwide to expand and modernize their aviation sectors. Despite increasing passenger traffic, airlines continue to face critical financing challenges due to the high costs of aircraft acquisition, maintenance, and operation. These challenges are amplified during insolvency proceedings, where the absence of effective legal mechanisms for repossession of aircraft significantly heightens creditor risk and raises the cost of financing.
Given the inherently mobile and transnational nature of aircraft, asset recovery across borders has historically posed difficulties. Jurisdictional inconsistencies and inadequate domestic protections often left lessors and financiers vulnerable in the event of airline defaults. This legal uncertainty discouraged cross border investment and led to a cautious approach from creditors, particularly in emerging aviation markets.
To address these systemic concerns, the international community adopted the Convention on International Interests in Mobile Equipment in 2001, alongside the Protocol to the Convention on International Interests in Mobile Equipment on Matters Specific to Aircraft Equipment, commonly referred to as the Aircraft Protocol. These instruments, collectively known as the Cape Town Convention, aim to harmonize and strengthen international legal standards related to the creation, registration, and enforcement of security interests in high value mobile equipment, including aircraft, airframes, engines, and helicopters. At present, over 80 countries have ratified the Aircraft Protocol, thereby committing to a common legal framework that enhances creditor protection and facilitates asset based financing.
The Role and Scope of Article XIII
A cornerstone of the Aircraft Protocol is Article XIII, which introduces the mechanism of an Irrevocable Deregistration and Export Request Authorisation (IDERA). This provision allows creditors, primarily lessors and financiers, to secure the right to deregister and export aircraft from a Contracting State in case of debtor default, without requiring further judicial intervention or consent from the operator. The IDERA, once executed and filed with the relevant aircraft registry, grants the authorised party the ability to promptly enforce repossession rights, thereby reducing the uncertainty and procedural delays typically associated with cross border aircraft recovery.
The CTC Aircraft Protocol applies to three specific categories of aircraft objects: airframes that are type-certified to transport at least eight persons including crew or goods in excess of 2,750 kilograms; aircraft engines that produce a minimum of 1,750 pounds of thrust if jet propulsion powered, or at least 550 rated take-off shaft horsepower if turbine-powered or piston-powered; and helicopters that are type-certified to carry at least five persons including crew or goods exceeding 450 kilograms.
Article XIII obligates national authorities to honor the IDERA “expeditiously” and in accordance with domestic laws and procedures. However, the ambiguity of the term “expeditiously” presents interpretational challenges. While the provision clearly aims to standardize enforcement, it does not specify a precise timeframe, which may result in inconsistent implementation across jurisdictions. The effectiveness of Article XIII thus depends heavily on national legislation that defines and supports a clear enforcement process.
In practice, aircraft financiers typically require both a Deregistration Power of Attorney (DPoA) and an IDERA. While the DPoA allows representation for deregistration, it can be revoked; the IDERA, by contrast, is irrevocable and protected under international law. Once recorded, the IDERA becomes a powerful tool, enabling the creditor to bypass debtor non cooperation and initiate asset recovery directly.
India’s Adoption of the Cape Town Convention and Legislative Implementation
In 2025, India ratified the Cape Town Convention and the Aircraft Protocol, marking a significant shift in its aviation and insolvency jurisprudence. The move followed the grounding and insolvency of Go First Airlines, a case that brought to light serious concerns regarding asset recovery and the treatment of foreign lessors during insolvency. Recognising the need to restore confidence in its aviation finance ecosystem, the Indian government enacted the Protection of Interests in Aircraft Objects Act, 2025, referred to as the Cape Town Act.
The Cape Town Act incorporates key provisions from the Convention and the Protocol, including the recognition and enforceability of IDERAs. It directs Indian authorities, particularly the Directorate General of Civil Aviation (DGCA), to give effect to IDERAs filed by creditors, allowing them to repossess and export aircraft without undue delay, provided certain regulatory and fiscal obligations are met. Importantly, the Act ensures that such enforcement is not subject to court approval, thereby aligning India with international best practices in secured aviation transactions.
It is important to note the impact of the Go First Airlines insolvency, where a moratorium was imposed that prevented lessors from reclaiming their aircraft. This raised serious concerns, particularly in relation to high-value assets like aircraft, which, if left idle and without maintenance, can develop critical technical issues that may affect their airworthiness. As a result, lessors could be forced to incur substantial expenses on maintenance and upkeep once the aircraft is finally repossessed. The legal complication arose from a conflict between India’s Insolvency and Bankruptcy Code and the fact that, although India had signed the Cape Town Convention, it had not formally ratified it. Following the Go First crisis, the Aviation Working Group classified India as a risky jurisdiction for aircraft financing. By incorporating the Cape Town Convention into domestic law through the Protection of Interests in Aircraft Objects Act, 2025, the government took a vital step toward restoring investor confidence.
Economic Impact and Relevance Amid Global Aircraft Delivery Delays
India’s alignment with the Cape Town Convention has far reaching implications beyond legal harmonisation. One of the key benefits of the Convention, especially Article XIII, is the reduction in leasing and financing costs. In jurisdictions where recovery of aircraft assets is uncertain, creditors impose risk premiums, thereby increasing the cost of leasing. Conversely, where strong recovery mechanisms are in place, such as through IDERA enforcement, the reduced risk profile translates into lower financing costs for airlines.
This legal certainty comes at a critical time. The global aviation industry is currently grappling with delays in aircraft deliveries due to post pandemic supply chain disruptions and production constraints. As a result, airlines are increasingly dependent on leasing to maintain and grow their fleets. By ensuring creditors can efficiently recover aircraft, India’s legislative reforms position the country as a reliable and attractive jurisdiction for aircraft leasing and finance. It encourages global lessors to offer competitive terms and reduces dependence on litigative procedures in times of financial distress.
Article XIII of the Protocol to the Convention on International Interests in Mobile Equipment on Matters Specific to Aircraft Equipment is a foundational provision that strengthens the rights of secured creditors in aviation finance. The IDERA mechanism establishes has proven to be a practical and enforceable tool for asset recovery in the event of debtor default or insolvency. However, its success depends on robust domestic implementation that minimizes ambiguity and procedural delay.
India’s recent ratification of the Cape Town Convention and the enactment of the Cape Town Act, 2025, mark a significant development in the country’s aviation regulatory framework. This legislative move reflects India’s growing commitment to aligning with international standards, strengthening creditor confidence, and lowering the cost of aircraft leasing. At a time when aircraft availability is limited and financing needs are high, Article XIII and the broader Cape Town framework stand out as key tools for stabilising and strengthening aviation markets, both within India and globally.
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