German bank and leading lender to Indian airlines for plane purchases, DVB Bank SE, has filed a case in the Delhi High Court against the Directorate General of Civil Aviation (DGCA) seeking de-registering of two aircraft that it has repossessed from Kingfisher Airlines.
The German bank repossessed two Airbus A320s from Kingfisher Airlines earlier this year due to non-payment of dues. However, the two planes have not yet been de-registered by the DGCA, which has meant that DVB has not been able to redeploy the planes elsewhere.
?We have been trying to resolve the matter for the last six months but there was no breakthrough and ultimately we had to seek legal action,? Bertrand Grabowski, managing director for aviation and rail at Frankfurt-based DVB Bank, told FE.
The bank through its subsidiary DVB Aviation Finance Asia filed a case against the DGCA in the Delhi High Court on December 3. The first hearing was on December 10 and the next date of hearing has been fixed for April 8, 2013.
Arun Mishra, the DGCA was unavailable for comment. Another senior official of the DGCA declined to comment on the matter as the matter was sub-judice. As per the latest DGCA data, Kingfisher Airlines still has 41 aircraft registered.
The bank has also decided to suspend lending to any Indian carriers. The decision has been driven largely as a result of the delay in de-registering of the aircraft by the DGCA. The bank?s total exposure to the Indian aviation market stands at 375 million euros (R2,716 crore approximately). Out of all the aircraft flow by Indian airlines, DVB has directly and indirectly funded the purchase of 20 aircraft flown by IndiGo, Jet Airways and Air India.
Globally, the bank?s exposure to aviation funding stands at 10 billion euros.
?Apart from Kingfisher Airlines, our experience in India has been pretty good,? said Grabowski. ?We have worked with Jet Airways, Air India and IndiGo which has been very good. But we are suspending the funding in the country?s aviation sector because holding security over an aircraft registered in India does not provide acceptable protection to the owner and mortgagees,? he added.
Despite the suspension of funding, DVB still views India as a growth market. ?India is not a big market for us but it is one of the growth markets,? said Grabowski. ?We haven?t stopped operations completely, we have just suspended it.?
?If the environment becomes conducive, we can return,? he added.
The Kingfisher fiasco and the difficulty in repossessing planes has already affected the business sentiment of leading lessors. FE had reported on October 23 that most of Kingfisher?s lessors won?t seek legal recourse to reclaim their assets due to the high cost of litigation and small exposure to the airline.
In October, Nirvan Veerasamy, managing director of Mauritius-based aircraft leasing firm Veling told the media that over the long term, difficulties in repossessing Kingfisher?s planes would have ?catastrophic effect? on the business of aircraft leasing in India.
?Today DVB is suspending financing tomorrow it could be ILFC (International Lease Finance Corporation),? said a senior official with a private airline on condition of anonymity. ?It is unfair that because of one issue the others have to suffer. Definitely the lessors need to be allowed to repossess planes if there is a case of repeated default.?
