New Delhi, Dec 7 (IANS): Global watchdog group Aviation Working Group (AWG) downgraded India to "negative" from "positive" on Thursday as foreign lessors have not been able to get back their aircraft from Wadia group’s grounded airline Go First, which declared bankruptcy seven months ago.

AWG's downgrade is expected to increase the cost of leasing planes for India’s commercial airlines such as Air India, IndiGo, Spicejet and Akasa.

AWG had issued a positive watchlist notice in their CTC compliance index with a projected increase in India’s score after the government issued a notification dated Oct 3, 2023 providing that the moratorium under the Insolvency and Bankruptcy Code, 2016 will not apply to aircraft, aircraft engines, airframes and helicopters governed by the Cape Town Convention.

This had come as a positive development as AWG had put India on a watchlist with a negative outlook in May, saying the country failed to comply with international aircraft repossession norms after foreign lessors were unable to recover their leased planes from bankrupt Go First.

The government's notification to exempt transactions involving aircraft, aircraft engines, and helicopters from the Insolvency and Bankruptcy Code (IBC) was issued in consonance with India’s international treaty obligations as the country was a signatory to the Cape Town Convention and it Aircraft Protocol (CTC).

The Cape Town Convention is a global treaty designed to increase financing and leasing of aircraft, engine and spare parts by reducing a lessor's risk and by enhancing legal predictability in these transactions, including in the case of an airline's insolvency or default.