Air India gets reprieve in UK court over aircraft lease payments

Air India has got some reprieve from a UK court as it allowed India’s flag carrier time until early January to make payments in a case of unpaid dues of over USD 17.6 million, with the judge accepting the “broad thrust” of the airline’s financial difficulties, especially due to the grounding of flights during the COVID-19 lockdown.

Judge Simon Salzedo, however, issued a strong rebuke to Air India for its “unsatisfactory and discourteous” conduct in relation to the case by not engaging with the process in a timely manner.

The hearing, held remotely at the Commercial Court division here on Friday, involved unpaid dues of over USD 17.6 million to China Aircraft Leasing Company Limited (CALC) as part of an aircraft lease agreement for rent and maintenance.

“I accept the broad thrust of Air India’s submission of the financial difficulties it has been facing along with the rest of the aviation sector and also note that it has been making some payments to the lessors,” the judge noted, as he granted Air India until January 11, 2021, to clear the overdue payments.

However, that extension is conditional on the airline paying in the already committed amount for the month of December, amounting to a total of USD 5 million.

The counsel for CALC, a global aircraft leasing company, had sought immediate payment and argued that Air India being a state-owned airline can always seek funds from the Indian government and is only seeking to delay matters for its client, who has been waiting for nearly a year for the payments.

Air India, on the other hand, argued that it does not dispute that the claimant is entitled to payments for leased aircraft, but as a result of severe constraints on the airline industry, most of its aircraft have remained grounded. The airline claimed that while it had managed to strike rent reduction and payment plans with other lessors, talks with CALC had been unproductive.

It urged the court for time until January 29 for the payments in order to avoid disruptions to its UK and Europe operations, especially over the Christmas and New Year holiday period, which would go on to further “hinder” its ability to pay.

The judge struck a compromise and has given Air India until January 11 to clear the sums outstanding.

The Indian state-owned carrier has been seeking a buyer for some time now as the government wants to divest its 100 per cent stake in Air India and budget carrier AI Express.