Not Just Another Contract: The Hidden Risks in Aircraft Transactions in India

An Indian aviation perspective under DGCA oversight

In India’s rapidly evolving aviation ecosystem, buying, selling, leasing, or importing an aircraft is never “just another commercial transaction.” It is a tightly interwoven process involving regulatory compliance, operational structuring, taxation, customs, and long-term strategic intent. Even well-capitalized owners and experienced corporate groups have found themselves caught in avoidable complications simply because aviation-specific legal expertise was brought in too late – or not at all.

As business aviation, charter operations, and aircraft leasing gain momentum in India, industry experts increasingly agree on one point: engaging specialized aviation legal counsel early in an aircraft transaction is not optional – it is essential.

A Highly Regulated Operating Environment

Unlike many other asset classes, aircraft are not governed by a single authority or a single law. In India, aircraft transactions fall under the combined scrutiny of:

• The Directorate General of Civil Aviation (DGCA),
• Customs and indirect tax authorities,
• The Ministry of Civil Aviation,
• Foreign exchange and cross-border remittance regulations,
• And, in certain cases, defence and security clearances.

Each of these stakeholders interprets compliance through its own lens. A transaction that appears commercially sound can still falter if regulatory sequencing, documentation, or operational intent is misaligned.

This complexity is magnified for first-time aircraft owners, corporate flight departments, foreign lessors entering India, or operators transitioning aircraft between private, charter (NSOP), and specialized operations.

Why General Legal Advice Alone Is Not Enough

Most aircraft owners understandably rely on their general corporate legal teams to negotiate contracts, manage risk, and ensure compliance. While this is necessary, it is often insufficient.

Aviation law is a niche discipline. DGCA CARs, aircraft registration requirements, continuing airworthiness obligations, and operational limitations are not intuitive – even to seasoned corporate lawyers.

An aviation legal specialist acts as a translator and integrator, aligning:

• Commercial intent,
• Regulatory expectations,
• Operational feasibility,
• And long-term compliance sustainability.

Without this bridge, transactions can slow down, derail, or worse – appear compliant initially but unravel later under scrutiny.

India-Specific Pitfalls: Lessons from the Field

India’s aviation history offers several non-litigious, illustrative examples that underscore the importance of early aviation legal involvement.

Import and Ownership Structuring Challenges

In multiple cases, aircraft imported under lease or special purpose structures were later questioned due to ambiguities in beneficial ownership, lease classification, or valuation methodology. While aircraft were initially inducted into operations, retrospective reviews led to prolonged grounding and financial exposure.

The issue was not wrongdoing – but misaligned structuring at the documentation stage.

NSOP Compliance Drift After Acquisition

Some charter operators acquired aircraft through commercially sound agreements but failed to fully align operating structures with evolving DGCA NSOP CARs. The aircraft themselves were compliant; the operational framework was not. Temporary suspension of operations followed, until restructuring was completed.

Aviation legal foresight at the acquisition stage could have prevented operational disruption.

Deregistration and Export Delays

Cross-border sale of India-registered aircraft has frequently faced delays due to inconsistencies in deregistration powers of attorney, mortgage filings, or lien releases. Transactions expected to close in weeks extended into months because documentation was not DGCA-ready when drafted.

In aviation, documents must be regulator-proof – not just contractually valid.

Aircraft Transactions Are Not Standard Corporate Deals

Aircraft transactions differ fundamentally from conventional M&A or asset purchases. They involve a unique set of deliverables, timelines, and dependencies:

• Pre-purchase inspections and technical status,
• Continuing airworthiness and maintenance records,
• Operating approvals and changes in use,
• Tax treatment linked to usage, not ownership alone,
• Regulatory approvals that cannot be retrofitted later.

Well-meaning advisors unfamiliar with aviation may focus on standard corporate risk mitigation tools that simply do not work in this domain. In some cases, this can result in unintended regulatory violations, loss of tax benefits, or irreversible operational constraints.

As many aviation professionals caution:
“You don’t know what you don’t know – until the regulator asks the question.”

Orchestrating the Transaction, Not Just Closing It

An aviation legal expert does far more than draft or review agreements. They help orchestrate the transaction so that:

• Flight departments can focus on operations,
• Technical teams can address airworthiness,
• Commercial teams can manage timelines and cost,
• And ownership can maintain strategic clarity.

Critically, aviation counsel can often identify simpler, more compliant structures that achieve the same business objective—reducing complexity, cost, and regulatory exposure.

In India, where regulatory interpretation continues to evolve alongside market growth, this orchestration is not a luxury; it is a safeguard.

The Cost of Getting It Wrong

Aircraft transactions are high-value, high-visibility, and high-risk. Errors are rarely reversible. Once an aircraft is imported, registered, or placed into operation, corrective options narrow dramatically.

Consequences may include:

• Grounding of aircraft,
• Loss of charter revenue,
• Penalties and interest exposure,
• Reputational damage with regulators,
• And erosion of asset value.

These risks far outweigh the upfront cost of specialized aviation legal and advisory involvement.

The Role of Integrated Aviation Advisory

Increasingly, Indian aviation stakeholders recognize that successful transactions require coordination across legal, technical, regulatory, tax, and operational domains. No single advisor can operate in isolation.

Independent aviation advisory platforms – working alongside aviation attorneys, tax advisors, and technical experts – play a critical role in anticipating regulatory expectations, sequencing approvals, and aligning long-term operational strategy with compliance realities.

Such advisory involvement is particularly valuable for:

• First-time aircraft owners,
• Foreign lessors and financiers entering India,
• Charter operators scaling operations,
• Owners transitioning aircraft between private and commercial use.

A Strategic Imperative, Not a Formality

As India’s aviation sector matures, scrutiny will increase – not decrease. Regulators are becoming more data-driven, more interconnected, and more consistent in enforcement. In this environment, early legal and advisory strategy is a competitive advantage.

Aircraft transactions are not the time to treat aviation law as an afterthought or “just another contract.” They demand precision, foresight, and domain expertise.

As many in the industry have learned – often the hard way – 
in aviation, prevention is not only better than cure; it is far less expensive.

“In Indian aviation, most transaction failures are not due to intent – but due to missed regulatory nuance at the structuring stage.”

Note: Aviatech360 works in close collaboration with a select panel of independent aviation law firms to jointly support clients through complex aircraft transactions, regulatory structuring, and compliance challenges. By integrating technical, operational, and legal expertise, these partnerships help reduce client risk and transaction stress while enabling smoother, well-governed outcomes. Aviation law practices with relevant experience may share their credentials for consideration as part of this collaborative ecosystem