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India – Aviation sector roundup

Following India's amendment to its Aircraft Rules in 2015 to recognize the provisions of the Convention on International Interests in Mobile Equipment (Cape Town Convention) and the Protocol to the Convention on International Interests in Mobile Equipment on Matters Specific to Aircraft Equipment (Protocol) (to a certain extent); the year 2016 and the beginning of 2017 have seen increased regulatory activity in the Indian aviation sector.

We review two noteworthy measures in this article which, if suitably implemented, should have considerable bearing on the Indian aviation sector and its continued growth story.

Cape Town Convention – Its continued implementation

Following India's amendment to its Aircraft Rules in 2015 to give effect to certain provisions of the Cape Town Convention and the Protocol, India has, in March 2017 amended its Aircraft Rules in 2017 to provide for a definite time frame dealing with the export of an aircraft in relation to which an application for export has been made by an IDERA Holder. Rule 30(7) which was introduced in 2015, has been amended to now specify a definite time period within which the registration of an aircraft registered in India, to which the provisions of the Cape Town Convention or Cape Town Protocol apply, shall be cancelled by the Central Government. A time period of 5 working days has now been provided for in the said Rule 30(7) pursuant to the amendment.

Also, a new Rule 32A has been inserted, which now also provides a definite time period (of 5 days) for export of the aircraft in relation to which the registration has been cancelled based upon an application under Rule 30(7). This however remains subject to Government and other liens.

With this amendment, India has once again taken a step towards further implementing the provisions of the Cape Town Convention into its domestic legislation. As this is only a recent development, its manner of implementation by the relevant authorities on a practical front remains to be seen.

National Civil Aviation Policy

Triggered by reforms that started almost two decades ago, the long-awaited National Civil Aviation Policy (NCAP), India's first integrated policy dealing with the aviation sector, was unveiled in mid-2016. The NCAP, which in all covers 22 areas relating to the aviation sector in India, sets out a roadmap to support 300 million air travellers in 5 years, 500 million air travellers in the next 10 years, and steps to make flying affordable and convenient. The NCAP also envisages an increase in cargo volumes, hoping for volumes to increase to 10 million tonnes by the 2027.

In broad terms, the NCAP deals with issues relating to regional connectivity, easing of norms for flying abroad, liberalisation of the open skies regime, development of cargo hubs, aviation security, maintenance repair and overhaul and upgradation of airports.

Some of the points of interest under the NCAP are as under:

Doing away with the 5/20 Rule

India's unique 5/20 stipulation for international operations which was brought into effect back in 2004, which required a domestic airline to fly on domestic routes for 5 years and have a fleet of 20 aircraft prior to being granted permission to undertake international operations has been done away with under the NCAP and now a domestic airline will need 20 aircraft or will need to fly 20 per cent of their capacity on domestic routes.

This is intended to provide a level playing field and allows airlines, both new and old, to commence international operations provided they continue to meet certain specified obligations for domestic operations.

Regional Connectivity Scheme

The Regional Connectivity Scheme set out under the NCAP and which has already come into effect from March 2017, seeks to improve air passenger traffic in the country by stimulating demand on regional routes and is expected to be in operation for a period of 10 years, provide air connectivity to unserved and remote routes with airfare being capped at Rs. 2,500 (approximately US$ 40) for an hour's journey of around 500 km. This scheme extends to both passenger services as also cargo services.

The implementation of this connectivity scheme has already resulted in increased business activity as Indian airline operators look to procure smaller aircraft as part of their fleet which will enable them to service regional airports with narrower runways under this scheme.

Bilateral traffic rights

The Government plans to liberalize the regime of bilateral rights, which have their origin in the Chicago Convention, 1944, leading to greater ease of doing business and wider choice to passengers.

The Government proposes to enter into 'Open Sky' air service agreements on a reciprocal basis with South Asian Association for Regional Cooperation (SAARC) countries, and countries located beyond 5000 km from India's capital, New Delhi.

India has already commenced discussions with certain countries, however, these are reportedly progressing slowly as India is looking to formulate a long-term policy on this issue.

Maintenance, Repair and Overhaul

Presently, most Indian carriers utilize facilities outside of India for maintenance of their aircraft. With a view to develop India as a leading maintenance hub in Asia and have not only Indian carriers, but also foreign airlines fly into India for their maintenance related activities, the NCAP has provided various concessions relating to this sector, such as prompt issue of visas to experts in this field, issue of temporary landing permits, financial concessions and availability of adequate land in upcoming airport projects for setting up maintenance facilities.

The successful implementation of this policy under the NCAP can have a cascading effect on various limbs of the Indian economy, giving rise to both skilled and unskilled employment as also increase in home-grown technology in the maintenance, repair and overhaul sector.

Safety

The NCAP focusses on pre-empting and preventing accidents/ incidents in the aviation sector in India and provides that the Directorate General of Civil Aviation (DGCA) will be given administrative and financial autonomy for an effective aviation safety oversight system.

The NCAP also contemplates setting up of a single-window clearance system for all aviation related transactions, queries and complaints. The DGCA, in furtherance of the NCAP, is in the process of putting into place an online system for dealing with various matters, including flight clearances, issue of medical certificates and various other applications and requests.

Review of Civil Aviation Requirements

Civil Aviation Requirements issued under the Aircraft Act and Rules are proposed to be reviewed from time to time and at least once in every 5 years starting from financial year 2016-2017. The NCAP also provides that the review may be done by engaging experts for a limited period.

This is a much-needed step in the right direction, as this will help in keeping the various circulars currents and in sync with the various requirements of the aviation sector (both regionally as also globally) and its developments.

Conclusion

Foreign industry players in the aviation sector are keeping a keen eye on the recent developments in the Indian aviation industry, and with the Cape Town Convention and Protocol being more fully implemented into India's domestic legislation, and the NCAP setting out a broad framework for the aviation sector in India, the aviation industry is all set to be one of frontrunners in India's growth story.

Whilst every effort has been made to make sure that the above article is accurate in all respects, this article is not an exhaustive examination of the area of law discussed. Wadia Ghandy & Co. cannot accept responsibility for any loss incurred by any person acting or abstaining to act as a result of the publication of this article. Should you require any advice concerning a particular matter/ transaction, please engage a professional having expertise in the relevant field.