Aviation Ministry, MCA take different flight paths on IBC moratorium

economictimes.indiatimes.com:

insolvency resolution of an airline, persons aware of the details said. Under the Insolvency and Bankruptcy Code (IBC), once resolution proceedings are initiated, the transfer or disposal of assets of the stressed firm is effectively barred through a moratorium.

The issue has come to the fore after Wadia-owned Go First declared voluntary bankruptcy in May. The civil aviation ministry has reasoned that such a moratorium could inflate leasing costs for all carriers, as global lessors would build such a risk into pricing, one of the persons told ET.

It has proposed an asset moratorium exemption for airlines through a notification by the Ministry of Corporate Affairs (MCA), he added. The MCA has opposed this on the ground that any dilution of the moratorium clause would dissuade potential investors from submitting resolution plans for an insolvent airline, or at least make the stressed firm less attractive, said another person.

Moratorium exemption would allow lessors to repossess aircraft, denting the chances of the airline taking to the skies again.Cape Town Convention Bill The MCA is also worried that an exemption for aviation could spur similar demands from other sectors, undermining the insolvency resolution process. The MCA has already raised concerns over such an exemption provision in the civil aviation ministry's Cape Town Convention Bill, which intends to make it easier for lessors to take back planes if airlines (insolvent or otherwise) default on rental payments, said the second person.