Aircraft Leasing in Bangladesh: Cape Town, CAAB, Tax and Repossession in 2026

Aircraft leasing in Bangladesh: the 2026 framework

Aircraft leasing in Bangladesh is about to get much busier. In July 2026 Biman Bangladesh Airlines went to market for three Boeing 787-9s on six-year dry leases, and private carriers already lease a large share of their fleets. For lessors, financiers, airlines and insurers, the question is not whether a Bangladeshi lease can be signed. It is whether the lessor can collect rent in dollars, recover the aircraft when things go wrong and get it off the register and out of the country before its value disappears.

This guide explains how leases are structured, the CAAB approvals that apply, what Bangladesh actually declared when it acceded to the Cape Town Convention, how deregistration and repossession work in practice, what happens when a Bangladeshi airline fails, and the tax, foreign-exchange and insurance rules that shape the deal. It finishes with the lease terms that matter most for a Bangladeshi lessee and a sequence for getting a transaction closed.

Summary: Bangladesh has been party to the Cape Town Convention and its Aircraft Protocol since 1 April 2009, with lessor-friendly declarations: IDERAs, a 60-day insolvency waiting period and short deadlines for interim relief. Since October 2024, authorised dealer banks can remit aircraft lease rentals without case-by-case Bangladesh Bank approval. The real risks are practical: unpaid airport dues, slow courts, VAT and withholding on rentals, and the reinsurance chain behind the hull policy.

Key point: The 12 abandoned aircraft at Dhaka airport show what happens when a lessor's remedies are not planned in advance. They belonged to three defunct airlines that owed the regulator Tk 11.93 billion, and banks were competing for any auction proceeds. Build the IDERA, deregistration mechanics, airport-charges monitoring and insurance assignments into the deal before delivery.

At a glance

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Table of Contents

How aircraft leasing in Bangladesh is structured

Most aircraft leasing in Bangladesh falls into one of two commercial shapes, and the distinction drives everything that follows: which regulator approvals are needed, who carries the safety risk, how tax applies and what a lessor can do on default.

Dry leases and wet leases

A dry lease puts the bare aircraft in the airline's hands. Biman's July 2026 request for proposals described it this way: the lessee provides its own crew, maintenance, insurance and Air Operator Certificate.[12] The aircraft operates on the Bangladeshi airline's certificate and, in most cases, goes onto the Bangladesh register. A wet lease, often called ACMI (aircraft, crew, maintenance and insurance), is closer to a capacity contract. The foreign operator flies the aircraft on its own certificate, usually for a season, and the Bangladeshi carrier buys block hours. Wet leases are used for peak demand such as Hajj, for cover while aircraft are in heavy maintenance, and to test a new route before committing to a dry lease.

Operating leases and finance leases

The second distinction is economic. Under an operating lease the lessor keeps the residual value risk, takes the aircraft back at the end of the term and charges rent plus maintenance reserves. Under a finance lease, or a lease-purchase, the airline in substance buys the aircraft over time and title passes at the end, often for a nominal sum. Bangladeshi private carriers have relied heavily on operating leases of second-hand narrow-bodies and turboprops. The state carrier has used both purchase and lease, and in July 2026 it was preparing new six-year operating leases while separately planning a Boeing purchase.[12]

What a Bangladeshi request for proposals looks like

The Biman 787-9 request is a useful benchmark for what a Bangladeshi lessee will ask for. It sought three aircraft on 72-month terms, no more than 15 years old at 30 June 2027, with GEnx-1B engines, delivery preferably by 1 January 2027, a fresh C-check on arrival and no heavy checks or landing-gear overhauls due in the first 24 months. Bidders had to quote monthly rentals per aircraft, maintenance reserves and security deposits, and the evaluation weighted price at 75 per cent and technical criteria at 25 per cent, with negotiations to be held in Dhaka.[12] Lessors should read that as a market signal: Bangladeshi lessees compete hard on price and expect the commercial terms to be settled locally.

CAAB approvals and aircraft registration

Every dry lease of an aircraft for a Bangladeshi operator passes through the Civil Aviation Authority of Bangladesh. CAAB is a statutory body under the Civil Aviation Authority Act 2017 (Act No. III of 2017), which replaced the 1985 ordinance. The Act gives CAAB power over civil airports, air routes and air traffic, lets it charge fees for certificates and other services, and empowers the Chairman to issue Air Navigation Orders in line with the annexes to the Chicago Convention.[5]

The rulebook is changing in 2026

The detailed technical rules still sit largely in the Civil Aviation Rules 1984. In July 2026 the Ministry of Civil Aviation and Tourism published draft Civil Aviation Rules 2026 under the Civil Aviation Act 2017 to replace them, ahead of an ICAO audit scheduled for October. The draft adds noise certification for Bangladesh-registered aircraft on international routes, carbon reduction plans for airlines and wider CAAB powers over aviation IT systems.[6] Industry sources said some provisions appeared inconsistent with ICAO standards. For a lessor, that means the registration and airworthiness rules that apply at delivery may not be the rules in force at return, and the lease should put the cost of regulatory change on the operator.

Registration and nationality marks

Bangladesh-registered aircraft carry S2- marks; the derelict Regent Airways Boeing 737-800 at Dhaka, for example, was S2-AIO.[10] In practice, the lessor needs four things from the registration process: a certificate of registration that correctly records the aircraft and its operator, a CAAB-accepted certificate of airworthiness, the operator's approval to put the type on its certificate, and CAAB's acknowledgement of the lessor's deregistration rights. The last item is where deals slip, because it is easy to postpone until after delivery and very hard to obtain once the relationship has broken down.

Operator approvals for wet leases

A wet-leased foreign aircraft stays on its home register and is operated by the foreign carrier, but the Bangladeshi airline still needs CAAB clearance for the arrangement and the routes, and destination states may impose their own conditions. Commercial carriers should check landing rights and any restrictions on leased aircraft for each route before signing an ACMI contract, not after the aircraft has been positioned to Dhaka.

The Cape Town Convention and aircraft leasing in Bangladesh

The single most important legal fact about aircraft leasing in Bangladesh is that the country is a Cape Town state. Bangladesh acceded to the Aircraft Protocol on 15 December 2008, and it entered into force for Bangladesh on 1 April 2009.[1] International interests in airframes, engines and helicopters can therefore be registered on the International Registry, and the Protocol's remedies are available on paper.

What Bangladesh declared

The value of Cape Town depends on the opt-in declarations a state makes. Bangladesh made the declarations lessors want:

• Choice of law, assistance and IDERA: Bangladesh declared that it will apply Article VIII (choice of law), Article XII (assistance by the registry and authorities) and Article XIII (the irrevocable deregistration and export request authorisation, or IDERA).[2]
• Speed of interim relief: Bangladesh applies Article X in full. Interim relief preserving, taking possession of or immobilising the aircraft must be available within ten calendar days of filing, and relief for leasing or managing it within thirty calendar days.[3]
• Insolvency: Bangladesh applies Article XI, Alternative A, in its entirety to all types of insolvency proceeding, with a waiting period of sixty calendar days.[4]

How an IDERA works in practice

An IDERA is a standard-form authorisation the airline signs at delivery, addressed to CAAB, which allows the lessor or its nominee to request deregistration and export without further consent from the airline. Because Bangladesh has opted into Article XIII, CAAB is expected to record the IDERA and honour a request made under it. The practical steps are simple but must be done at closing: the IDERA must be executed in the Protocol form, lodged with CAAB, and acknowledged in writing. A lessor should also hold a separate deregistration power of attorney as a fallback, and keep current copies of the aircraft documents outside Bangladesh.

Treaty rights and local reality

Bangladesh's declarations are among the stronger ones in the region, but they are only part of the picture. Bangladesh gives effect to treaties through domestic law and practice, and we have not seen a reported Bangladeshi judgment in which a lessor has relied on the ten-day Article X timetable or the Alternative A waiting period to repossess an aircraft. The sensible approach is to treat Cape Town as the framework that strengthens a lessor's hand with CAAB and the courts, while still documenting every remedy contractually and in Bangladeshi form.

Deregistration and repossession risks

The clearest lesson in aircraft leasing in Bangladesh sits on the apron at Hazrat Shahjalal International Airport. As of February 2025, CAAB was trying to sell 12 abandoned aircraft to recover part of the Tk 11.93 billion owed to it by three defunct airlines: eight belonged to United Airways, two to Regent Airways, one to GMG Airlines and one to Angel Airways.[11] GMG had stopped flying in 2012, United in 2016 and Regent in March 2020.

Why aircraft get stuck

The reasons are instructive. CAAB had filed 15 money suits against the three airlines in courts across six cities, its panel lawyer said such suits take five to seven years if contested, and lending banks had written to CAAB demanding a share of any auction proceeds.[11] Each of those claims competes with an owner or lessor that wants the aircraft back. Airport and navigation charges, unpaid taxes and bank claims accumulate while the aircraft sits, and the asset loses value every month it is not maintained.

Protecting the asset before default

Repossession in Bangladesh is won or lost long before default. The steps that matter are these:

• Monitor airport and CAAB charges: require monthly evidence that CAAB, airport and navigation charges are paid, and make non-payment an event of default.
• Keep the records current: technical records, back-to-birth documentation and maintenance programme data must be accessible to the lessor at all times, or the aircraft will be worth far less on return.
• Act at the first sign of distress: grounding, unpaid salaries or a suspended operating permit are signals to exercise inspection rights and serve notices, not to agree another deferral.
• Separate engines from airframes: engines are frequently swapped between aircraft; title annexation clauses and engine-specific registrations on the International Registry prevent a lessor's engine being trapped on another aircraft.

Repossession routes

Where the airline cooperates, a consensual return and an IDERA-based deregistration request to CAAB is the fastest exit. Where it does not, the lessor will need court relief, typically from the High Court Division, for possession and to restrain removal or use of the aircraft, alongside the deregistration request. The aviation disputes and aircraft finance work in our aviation and aerospace disputes practice is built around running those steps in parallel.

Airline insolvency and the lessor's position

The Regent Airways case is the most significant lessor-led airline insolvency in Bangladesh. Wilmington Trust Company applied to wind up Regent after it defaulted on aircraft lease payments, and the High Court accepted the winding-up application on 29 March 2023 in Company Matter No. 242 of 2020, which had first been heard in November 2020. Ten other Habib Group companies had reportedly guaranteed Regent's obligations, and the eleven companies together owed about Tk 30 billion to aviation and non-aviation creditors.[10]

What the case teaches

Three points stand out. First, a winding-up petition is a real lever in Bangladesh, but it is slow: more than two years passed between first hearing and acceptance. Second, group guarantees widen the pool of assets and put pressure on the sponsors, which is why lessors to Bangladeshi carriers should insist on them. Third, by the time the order came the airline had not flown for three years, and its aircraft were already among those parked at Dhaka. Our guides to winding up a company in Bangladesh and bankruptcy law in Bangladesh explain the domestic procedure.

Where Alternative A fits

Alternative A is designed to stop that drift. Once an insolvency-related event occurs, the airline or its administrator must, within the sixty-day waiting period, either cure all defaults and agree to perform or give possession of the aircraft to the creditor.[4] In a Bangladeshi winding-up, lessors should invoke Alternative A expressly, notify CAAB and the official liquidator at once, and ask the court to give effect to the Protocol timetable. Without that push, a parked aircraft becomes one more asset in a long liquidation.

Cross-border pressure points

Most lessors are outside Bangladesh, and an insolvency often runs in more than one country: the lessor's own jurisdiction, the trust structure that holds title and the lessee's home forum. Coordinating those proceedings, and choosing which court to approach first, is often decisive. TRW advises on that coordination through its cross-border insolvency practice.

Tax, VAT and customs on leased aircraft

Tax is where aircraft leasing in Bangladesh most often loses money quietly. The lease must answer three separate questions: VAT on the rentals, income tax withheld on payments to the foreign lessor, and duties on import.

VAT on lease rentals

Aircraft leases have carried 15 per cent VAT. Because new Boeing purchases were already VAT-exempt but leases were not, and most airlines lease, the purchase exemption went largely unused for years. In June 2025 the Finance Ordinance 2025 waived VAT on the lease of Boeing aircraft, which operators said should lower lease costs; they noted that other taxes, including those on spare parts, remained a burden.[9] For other types the VAT position must be checked against the Finance Act and VAT orders in force for the year of each payment, and the lease should say clearly which party bears it.

Withholding tax on rentals to foreign lessors

Payments from a Bangladeshi airline to a non-resident lessor are subject to tax deducted at source. Under the rates summarised by PwC in July 2026, rental of machinery, equipment and similar assets paid to a non-resident attracts 7.5 per cent, with a 20 per cent catch-all for payments not otherwise listed. Where the non-resident has no permanent establishment, the deduction is its final tax, and the National Board of Revenue can certify a lower or nil rate where a tax treaty applies.[8] Classification matters: lessors should obtain an agreed view on which head applies before pricing.

Treaty planning and the Irish question

Many aircraft lessors are Irish. PwC's list of Bangladesh's tax treaties does not include Ireland, although it includes the United Kingdom, Singapore, the Netherlands, the United Arab Emirates and the United States among others.[8] An Irish lessor leasing directly into Bangladesh should therefore assume domestic withholding with no treaty relief, and either price for it or negotiate a full tax gross-up. Where a treaty is available, the lessor must hold a tax residence certificate and the NBR certificate before the first payment, not after.

Customs and import

Bringing a leased aircraft into Bangladesh is an import, and spare engines and parts follow their own tariff lines. Duty, advance tax and VAT treatment change through each year's budget and statutory regulatory orders, and operators have repeatedly lobbied for relief on parts and fuel. Check the classification and any exemption order before the aircraft is ferried, and agree who bears the cost if an exemption is withdrawn mid-term. Our guides to customs law in Bangladesh and withholding tax in Bangladesh set out the general rules.

Paying the rent: Bangladesh Bank and foreign exchange

For years the biggest commercial risk in aircraft leasing in Bangladesh was not credit but convertibility: whether a solvent airline could get dollars out of the country on time. Until October 2024, each remittance of aircraft lease rentals needed specific Bangladesh Bank approval on a case-by-case basis.[7]

FE Circular No. 21 of 2024

Bangladesh Bank's FE Circular No. 21 of 17 October 2024 changed that. Authorised dealer banks may now remit lease rentals for airlines incorporated in Bangladesh without case-by-case central bank approval. The airline files its application with the relevant documentation and must comply with all applicable regulations; if the conditions are met, the AD bank approves the remittance.[7]

Building the payment file

In practice the AD bank will want to see that the lease has been approved for operation by CAAB, the lease agreement and invoices, evidence that applicable taxes have been paid or exempted, and that the airline is up to date with its Bangladesh Bank reporting. The lessor's interest is to make sure that file is complete at signing. A rental that is delayed because a tax challan is missing is still a late payment, but it is an avoidable one.

Drafting for convertibility risk

The circular removed a formal barrier, not the market risk. Bangladesh has had periods of acute dollar shortage, and an AD bank with limited foreign currency can still delay. The lease should make the airline's obligation to pay in dollars absolute, exclude foreign-exchange restrictions from force majeure, provide for default interest, and allow the lessor to draw on a security deposit or letter of credit held outside Bangladesh. Our guides to foreign exchange regulations in Bangladesh and outward remittance from Bangladesh cover the wider rules.

Insurance and reinsurance

In aircraft leasing in Bangladesh, hull and liability insurance is usually written locally and reinsured abroad, and that chain is where a lessor's protection can leak away. The US-Bangla Airlines Q400 that crashed at Kathmandu, killing 49 people, shows how it works: the carrier bought USD 100 million of cover from Sena Kalyan Insurance Company, which ceded half to the state-owned Sadharan Bima Corporation, and most of the risk was then passed to foreign reinsurers. Halifax, described as a Lloyd's subsidiary, and General Insurance Corporation of India together held 98.5 per cent of the coverage, while Sadharan Bima kept 0.95 per cent.[13]

The 50 per cent reinsurance rule and its reform

Under the current law, private non-life insurers must reinsure 50 per cent of their risks with Sadharan Bima Corporation, and business connected with government property and foreign-financed projects must be underwritten by the corporation. In December 2025 the regulator, IDRA, had drafted an Insurance Corporation (Amendment) Ordinance 2025 to remove the compulsory reinsurance share and allow companies to reinsure abroad freely.[14] Whether and how that reform is completed will change the reinsurance chain behind every Bangladeshi hull policy.

What the lessor needs

Whatever the structure, the lessor needs to be named as contract party and loss payee on the hull policy, to receive a broker's letter of undertaking, and to have a cut-through clause or an assignment of reinsurances so that it can claim directly from the reinsurers if the local insurer fails or delays. Because the local insurer may retain only a small fraction of the risk, the strength of the reinsurance wording matters more than the local policy. Our guide to insurance law in Bangladesh explains the regulatory framework.

Governing law, courts and arbitration

International contracts for aircraft leasing in Bangladesh are almost always governed by English or New York law, and Bangladesh's Article VIII declaration supports the parties' choice of law for the rights and obligations covered by the Protocol.[2] But choice of law does not decide where enforcement happens. The aircraft, the airline's revenues and its bank accounts are in Bangladesh, and that is where the lessor will ultimately need an order.

Choosing the forum

There are two realistic models. The first is exclusive or non-exclusive jurisdiction of the English courts, with a lessor-only option to sue in Bangladesh; this works well for urgent possession and preservation claims, which will be brought in Bangladesh in any event. The second is arbitration, usually seated in London or Singapore, which gives an award enforceable in Bangladesh through the Arbitration Act 2001. For a lessor, the best structure often combines both: arbitration for the money claims, with an express carve-out preserving the right to seek interim relief and possession in the Bangladeshi courts. Our analysis of enforcing arbitral awards in Bangladesh explains the enforcement stage.

Local process agents and documents

The lease should name a process agent, provide that documents may be produced in English, and require the airline to keep its CAAB approvals and corporate authorisations current. Board resolutions, the airline's memorandum and articles and any Bangladeshi security documents should be prepared and stamped in Bangladeshi form, so that a court is not asked to accept them on faith during an urgent hearing.

Key lease terms to negotiate for aircraft leasing in Bangladesh

Most of the protection a lessor has in aircraft leasing in Bangladesh comes from the lease itself. The table below sets out the terms that most often decide outcomes. On a phone, scroll it sideways.

Two further points apply to every deal. First, the airline's sponsors are often a wider business group; a guarantee from the group, as in the Regent case, makes a default far more expensive for the people who control the airline. Second, the lessor should agree return conditions with the same precision as delivery conditions. Bangladeshi lessees, like Biman in its 2026 request, specify fresh checks and no major maintenance in the first two years.[12] The lessor is entitled to equivalent clarity at the end.

Who does what: the institutions involved

A lease into Bangladesh touches several authorities, and the timetable depends on each of them.

The aviation regulatory and transactional work in TRW's aviation regulation and airport projects practice covers each of those touchpoints.

Closing a lease: a practical sequence

The following sequence reflects how we run a dry lease into Bangladesh from heads of terms to the first rental payment.

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The steps that are most often left late are the IDERA acknowledgement from CAAB, the withholding tax certificate and the reinsurance cut-through. Each of them is easy at closing and very difficult at default.

What to watch in 2026 and 2027

Four developments will shape aircraft leasing in Bangladesh over the next year. First, demand: Biman's 787-9 tender, with deliveries targeted for early 2027, marks a return of the state carrier to the wide-body leasing market.[12] Second, the draft Civil Aviation Rules 2026 and the October 2026 ICAO audit will reset the technical rulebook that governs registration and airworthiness.[6] Third, the reinsurance reform drafted in 2025 could remove the compulsory Sadharan Bima share.[14] Fourth, VAT and duty relief for aviation changes with every budget, so the tax clause must be drafted for change.

For lessors and financiers, the conclusion is straightforward. Bangladesh has the treaty framework and a workable remittance regime; the risk lies in execution. TRW's aircraft finance and leasing practice advises lessors, lenders, airlines and insurers on structuring, CAAB approvals, Cape Town filings, tax and repossession. To discuss a transaction or a distressed lease, contact our Dhaka team.

Frequently asked questions

Is Bangladesh a party to the Cape Town Convention?

Yes. Bangladesh acceded to the Aircraft Protocol on 15 December 2008, and it has been in force for Bangladesh since 1 April 2009.[1]

Does Bangladesh recognise IDERAs?

Yes. Bangladesh declared that it will apply Article XIII of the Aircraft Protocol, which provides for irrevocable deregistration and export request authorisations, together with Articles VIII and XII.[2] The IDERA should be lodged with and acknowledged by CAAB at delivery.

What is the insolvency waiting period for aircraft in Bangladesh?

Bangladesh applies Article XI, Alternative A, to all insolvency proceedings, with a waiting period of sixty calendar days. Within that period the airline or its administrator must cure defaults and agree to perform, or give up the aircraft.[4]

How fast must Bangladeshi courts grant interim relief to a lessor?

Under Bangladesh's Article X declaration, relief to preserve, take possession of or immobilise an aircraft should be available within ten calendar days of filing, and relief to lease or manage it within thirty calendar days.[3]

Does an airline need Bangladesh Bank approval to pay lease rentals abroad?

Not case by case. Since FE Circular No. 21 of 17 October 2024, authorised dealer banks can remit lease rentals for Bangladesh-incorporated airlines once the documentation and regulatory conditions are met.[7]

Is VAT charged on aircraft lease rentals in Bangladesh?

Aircraft leases have carried 15 per cent VAT. The Finance Ordinance 2025 waived VAT on the lease of Boeing aircraft; for other types, check the VAT orders in force for each payment year.[9]

What withholding tax applies to rentals paid to a foreign lessor?

Payments to non-residents for rental of machinery and equipment are summarised at 7.5 per cent, with 20 per cent for other unlisted payments, subject to any treaty relief certified by the NBR.[8] The correct head for an aircraft lease should be confirmed before pricing.

What is the difference between a dry lease and a wet lease?

In a dry lease the Bangladeshi airline provides its own crew, maintenance, insurance and Air Operator Certificate.[12] In a wet lease the foreign operator provides the aircraft with crew, maintenance and insurance and operates it on its own certificate.

Can a lessor wind up a Bangladeshi airline?

Yes. In the Regent Airways case, a lessor's trustee applied to wind up the airline after lease defaults, and the High Court accepted the application in March 2023 in Company Matter No. 242 of 2020.[10]

Who reinsures aviation risks written in Bangladesh?

Private insurers must currently reinsure half of their risks with Sadharan Bima Corporation, and the rest can go to it or foreign reinsurers. A 2025 draft amendment proposed removing that compulsory share.[14]