An Indian tribunal last month granted a request from India's sixth-largest carrier for bankruptcy protection, putting into effect a moratorium on its assets that prevents foreign aircraft lessors from taking planes out for almost a year.

In an interview, AerCap Chief Executive Aengus Kelly said the world's largest leasing company had earlier recovered planes from Go First, previously called Go Air, but called the court move "wrong and unfair" and warned of its wider implications.

India's bankruptcy rules allow a maximum of 330 days to find a resolution, failing which a court can initiate insolvency.

Lessors have argued such rules are only designed to cover assets the airline actually owns. They say the 2001 Cape Town Convention, which India has ratified but not fully implemented, overrides local law - something denied by Indian regulators.

"The airline doesn't own these assets," Kelly said. "The decision by the courts will cost Indian companies".

Aircraft lessors control about half the world's fleet including three-quarters of jets recently delivered to India.

AerCap's warnings come days after SMBC Aviation Capital, the world's second largest lessor, warned the stand-off could shake confidence in the world's fastest-growing aviation market.

India's aviation regulator has told the Indian tribunal that lessors' requests have been put on hold because local laws prevail over any international treaty signed by India.

India ratified the Cape Town Convention in 2008 but has yet to pass a law resolving conflicts with its bankruptcy code.

Civil Aviation Minister Jyotiraditya Scindia told Reuters in April a bill implementing the treaty was "very much in the works".

Kelly said new lease rates had already begun rising for airlines in India, which would now face a risk premium.

"We know that there are people who have pulled back from the Indian market a little bit in certain instances until they see a resolution of this," Kelly said.

"Hopefully, the Indian authorities will realise that this isn't the way forward and they will allow the lessors to take equipment out."

KEY MARKET

The UK-based Aviation Working Group, which monitors leasing practices, has put India on a watchlist with a negative outlook.

Standard Chartered's Pembroke Aircraft Leasing, CDB Aviation's GY Aviation Leasing and BOC Aviation have initiated proceedings to repossess planes from Go First.

India is a critical market for lessors, in which sale-and-leaseback deals accounted for 75% of plane deliveries from 2018 to 2022, compared with a global average of 35%, according to analytics firm Cirium.

But it has also been a challenging one with Go First following Kingfisher and Jet Airways - both of which went bankrupt over the last decade-plus. There are also growing concerns among some lessors about carrier SpiceJet against which Aircastle has sought to initiate bankruptcy proceedings.

SpiceJet has said it is in the process of reviving its grounded fleet and has "no plans whatsoever" to file for insolvency.

(Reporting by Tim Hepher, Aditi Shah; Editing by Emelia Sithole-Matarise)

By Tim Hepher and Aditi Shah