The UK High Court has ordered Air India to pay over £13.4 million ($17.6mn) for failing to pay leasing dues. China Aircraft Leasing Company Limited sued Air India for failing to pay charges on five Airbus A320-200s, first delivered in 2015. The flag carrier now has until January to pay the full amount, a step taken in light of the downturn this year.
Unpaid dues
The case began with China Aircraft Leasing Company Limited (CALC) taking action against Air India for failing to live up to its leasing agreement. The airline currently operates a fleet of nine A320-200s, five of which are from CALC and have an all-economy configuration. According to Bangalore Aviation, these five aircraft were delivered on a 12-year lease to Air India.
All deliveries were made in 2015, meaning Air India is almost halfway into the planes’ lease. However, it seems the carrier stopped making lease payments on these aircraft a while ago, resulting in the current dispute. It’s unclear how many months the airline skipped payments, but the court arguments point to non-payment due to COVID-19 financial issues this year.
Air India will now have to pay over £13.4 million ($17.6mn) for its non-payment of dues. This ruling will be a strong blow to the carrier’s weak finances, forcing it to take short-term loans to finance other aircraft.
Court provides temporary relief
While the court firmly sided with CALC, it also took note of the current aviation crisis and extended the payment deadline, according to Business Today. Instead of ordering immediate payment, Air India now has until January 11th, 2021, for the full amount, provided they pay $5 million this month. The short delay could help the carrier request government funds to pay off its debt.
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Air India isn’t the only Indian airline to find itself defaulting on aircraft payments, with low-cost rival SpiceJet struggling too. SpiceJet was sued earlier this year for $27 million after failing to pay rent on six of its 737s for over a year. The court filing also revealed the exact price the airline pays for its aircraft, a rare public figure.
Further blow to Air India
Like many large airlines, Air India has had a difficult year with low passenger demand and revenue. The carrier has spent most of the year flying thousands of flights repatriation flights under the Vande Bharat Mission. While repatriation has helped the airline stay mostly above water, it has faced many difficulties.
The current court dispute comes just weeks before the bids for Air India’s privatization come to a close. With no bidders making their intentions known, the Tata Group (majority owners of Vistara and AirAsia India) are the frontrunners. The Air India privatization was due to happen this summer but the pandemic has pushed this timeline well into 2021 and beyond.
What do you think about Air India’s chances of privatization? Let us know your thoughts in the comments!