The Economics of Flying
Aircraft Leasing: Why Airlines Rent Their Planes
Why most Indian airlines lease rather than own their aircraft, how the global leasing industry works, and India's efforts to build a leasing hub at GIFT City.
A new commercial jet costs tens of millions of dollars. Rather than buying, most Indian airlines lease their aircraft from specialised companies called lessors. A large majority of India’s commercial fleet is leased.
Types of lease
- Operating lease: the airline rents the aircraft for a period, often several years, then returns it. The lessor owns it.
- Finance lease: the airline effectively buys the aircraft over time.
- Sale and leaseback: the airline buys a plane, sells it to a lessor and leases it back, freeing up cash.
Why lease?
- Less capital needed: airlines don’t tie up huge sums in aircraft.
- Flexibility: fleets can grow or shrink with demand.
- Newer aircraft: shorter leases make it easier to modernise fleets.
- Risk transfer: the lessor bears the risk of the aircraft’s future value.
The global leasing industry
Much of the world’s aircraft leasing business is based in Ireland, thanks to favourable tax rules and legal systems. Lessors own a large share of the world’s commercial aircraft.
The repossession problem
When Go First filed for insolvency in 2023, lessors struggled to take back their aircraft because Indian insolvency rules froze assets. This alarmed global lessors, who saw India as risky, and could raise lease costs for Indian airlines.
In response, India moved to strengthen its implementation of the Cape Town Convention, an international treaty protecting lessors’ rights to repossess aircraft, including legislation passed in 2025.
GIFT City
India wants to capture more of the leasing business itself. The International Financial Services Centre at GIFT City in Gujarat offers tax incentives and simpler rules to attract aircraft leasing companies. Several firms have set up there.
A lessor considers leasing aircraft to an Indian airline. If it believes it can quickly repossess planes if the airline fails, it charges a lower rent. After the Go First case, lessors demanded higher rents or deposits until rules were strengthened.
Most Indian airlines lease the large majority of their fleets from specialised lessors.
- Most of India's commercial fleet is leased rather than owned.
- Operating leases, finance leases and sale-and-leaseback are common.
- The Go First case raised lessors' concerns about repossession in India.
- India strengthened lessor protections and is building a leasing hub at GIFT City.
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