East West in US deadlock

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The vagaries of the youthful private Indian aviation sector are starting to manifest themselves in the courts, as the number of cases of litigation against the independents by foreign lessors starts to rise.

The most prominent case that has come to court is between East West Airlines and San Francisco-based PLM. The US lessor is claiming US$3.3 million in unpaid rental charges on three B737-200s the airline has on a five-year lease until 1997.

At presstime, the two parties were in mediation following a Supreme Court ruling overturning a lower court order for the aircraft to be impounded and returned to the lessor. Instead, it ordered East West to make an interim payment of US$700,000 by mid-April. The case comes against a backdrop of threats by the DGCA to limit East West's operations unless it flies the thinner category II routes.

Along with the widespread liquidity crunch, the current problems appear to stem from naivety. 'The problems East West are facing could be the beginning of a new trend. When most of the lease agreements were signed, private airlines were in the initial stages of the learning curve,' says Kapil Kaul, East West's vice-president.

Indeed, feeder carrier KCV Airways is being sued by Dornier for non-payment of lease charges on its Do228. ModiLuft - already caught up in a drawn-out dispute with US consultants Genesis Aviation - is now being threatened with a winding up order by Dublin-based Parc Aviation for failure to pay the salaries of flight crews, hired by the carrier for two months but never used because the DGCA refused clearance.

Ravi Prasad