Indian Aviation Outlook – 2026

The Indian aviation sector continued to grow stronger in the year 2025, supported by increased capital commitments and large-scale infrastructure development. From IndiGo doubling its Airbus A350 orders to Air India placing additional orders for Boeing 737 MAX aircraft, the sector's growth has been both significant and strategically structured. In parallel, the Government advanced the third phase of airport privatization involving 11 airports, further expanding the footprint of the public private partnership (“PPP”) model in the sector. 

Taken together, these developments reflect a continued momentum across airlines, financing and infrastructure. Below is a quick overview of some of the key regulatory and commercial developments and what they could mean for airlines, lessors, financiers, airport operators and emerging aviation stakeholders. 

India Strengthens Aircraft Leasing Framework with Cape Town Implementation 

A major development in the past year has been India strengthening its aircraft leasing and financing framework witah the Protection of Interests in Aircraft Objects Act, 2025, which came into force on 1 May 2025. The Act gives full domestic effect to the Convention on International Interests in Mobile Equipment and its Aircraft Protocol. 

Although India had acceded to the Convention in 2008, the absence of implementing legislation led to conflicts with domestic insolvency laws. These gaps became particularly visible during the insolvency of Go First, when lessors faced prolonged delays in repossessing aircraft, prompting a downgrade by the Aviation Working Group. The 2025 Act addresses these inconsistencies, clarifies that the Convention framework prevails, and is expected to lower leasing costs for Indian carriers. 

The Protection of Interests in Aircraft Objects Rules, 2026 which was notified in January 2026, further support the implementation of Act by providing an operational framework of the regime. The Rules set out procedures for notifying and recording interests with the Directorate General of Civil Aviation (“DGCA”), require operators to maintain and submit details of specified aircraft-related dues, and introduce an electronic information system to enhance transparency for creditors. The Rules also clarify the DGCA's role in issuing directions and coordinating with stakeholders before creditors exercise their remedies, including during insolvency moratorium periods and in cases of default. 

Together, the Act and Rules mark a decisive step toward legal certainty and improved creditor protection. 

Aircraft Leasing and GIFT City 

Gujarat International Finance Tec-City (“GIFT City”) is emerging as a structurally safer and more commercially attractive jurisdiction for aircraft leasing due to strengthened creditor protections, tax clarity, and regulatory streamlining. Recent legislative reforms aligned with the Cape Town Convention framework improve enforceability of security interests, deregistration, and repossession rights, historically a key risk concern in India. Combined with long tax holidays, exemptions on certain lease-related taxes, and simplified cross-border structuring within the International Financial Services Centre regime, GIFT City allows lessors to optimize after-tax returns while maintaining stronger asset protection and dispute-resolution predictability. As a result, it is increasingly being viewed as a credible alternative to traditional offshore leasing hubs.

Air India, through its registered leasing entity in GIFT City, AI Fleet Services, has closed eight lease deals worth USD 1 billion, including with international lenders for Airbus A350s. Standard Chartered and Bank of India have provided a USD 215 million term loan to AI Fleet Services to finance six Boeing 777-300ER aircraft, which will be leased to Air India. Transactions such as these highlight how GIFT City is gradually evolving into a major hub for aviation financing, offering efficient and competitively structured foreign currency funding solutions. 

Drone Regulations 

India's drone ecosystem has also expanded rapidly in recent years. As of February 2026, India has built a regulated drone ecosystem with 38,500+ registered drones, 39,890 DGCA certified remote pilots, and 244 approved training organizations. What began as a niche technology has now grown into a dynamic ecosystem that is transforming public services, infrastructure oversight, agriculture, and national defense. 

The Government of India has established a comprehensive policy and financial framework to accelerate drone adoption and domestic manufacturing, aiming to foster innovation, simplify compliance, and strengthen the indigenous drone industry. The Drone Rules, 2021, and subsequent amendments in 2022 and 2023 have significantly liberalised the regulatory environment. Approval procedures were also streamlined, reducing the number of forms from 25 to 5 and approvals from 72 to 4, while fees were rationalised and delinked from drone size. Civilian operations are now permitted for drones up to 500 kg, and nearly 90% of Indian airspace has been declared a Green Zone, enabling flights up to 400 feet. 

Foreign players stand to benefit from India's liberalised drone ecosystem through streamlined regulatory procedures, reduced entry barriers, and expanded operational scope. Coupled with financial incentives for local manufacturing and research & development, these reforms create a cost-efficient, low-friction environment for partnerships with Indian firms, Drone-as-a-Service models, and technology deployment, positioning early entrants to capture market share in one of the world's fastest-growing drone markets.

Urban Air Mobility & eVTOLs 

Urban Air Mobility (“UAM”) is another emerging area that has started attracting regulatory and industry attention in India. UAM is centered around electric vertical take-off and landing (“eVTOL”) aircraft for short-range passenger and cargo transport. Globally, regulators such as the Federal Aviation Administration (FAA) and the European Union Aviation Safety Agency (EASA) have issued certification guidance for powered-lift aircraft, and India has followed with preliminary steps including DGCA guidelines on vertiport design, operation and authorization. In 2025, Maharashtra constituted a committee and appointed the Maharashtra Airport Development Company as the nodal agency for vertiport development, signaling early state-level planning. Indian startups such as Sarla Aviation and the ePlane Company, are also progressing with prototype development and testing of air taxi concepts, indicating growing private sector participation. While commercial operations might still take years to commence, regulatory groundwork and industry activity suggest that UAM is gradually moving from concept to coordinated policy discussion in India. For foreign investors and tech-companies, this could present opportunities to explore partnerships, joint ventures, and pilot projects as the ecosystem continues to evolve in India. 

Airport Infrastructure and Privatization 

Airport infrastructure development continues to remain a key focus area for the sector. The newly constructed Navi Mumbai International Airport formally beginning commercial flight operations on 25 December 2025. The greenfield airport, developed under a PPP model, is designed to ease congestion at the existing Mumbai airport and increase both passenger and cargo capacity for the region. Similarly, the DelhiNCR region is poised to operate multiple airports with the commencement of operations at the Noida airport scheduled for 2026, adding substantial passenger and cargo handling capacity as travel demand grows.

On the policy front, the Government is also moving ahead with the third phase of airport privatization under the National Monetization Pipeline. Eleven airports, including Amritsar, Varanasi, Bhubaneswar, Raipur and Tiruchirappalli, have been proposed for long-term leasing under the PPP model. These proposals aim to increase private sector involvement in airport management and strengthen airport infrastructure across various cities in India. 

Conclusion 

As India's aviation sector enters 2026, it stands on the cusp of transformative growth. Strengthened by resilient infrastructure, evolving regulatory frameworks, and innovative commercial strategies, the industry is well-positioned to meet rising passenger demand and expanding connectivity. With disciplined operations and robust financial foundations, Indian aviation is set to soar, offering unprecedented opportunities for stakeholders across the ecosystem.

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