Simplify the Rules

There are any number of stories of how private aircraft acquisition in India have been delayed or stalled or cancelled. The primary reason, of course, remains the labrynthine acquisition procedures of the Ministry of Civil Aviation and as a corollary to that is the ignorance on the part of the buyer. Aircraft acquisition is not like buying a car wherein all one has to do is sign on the chequebook and the car is delivered home. If things were that simpler, then India would be having at least three times the number of private aircraft that are now flying. India is said to be currently 18th ranked in terms of number of private jets and if procedures are simplified and infrastructure is developed, it has potential to be in the top five.

But that is not likely to happen soon, considering the umpteen number of clearances one has to get before getting delivery of an aircraft. Yes, there are consultancy firms, authorised representatives, consultants and others who do ‘hand-holding’, but it comes with a price.

Despite the bureaucratic hurdles, private aircraft acquisition is happening. There are several firms and individuals who value time and productivity and have gone in for a private jet or a general aviation aircraft (fixed or rotary-wing). It is estimated that the general aviation industry will witness exponential growth to reach about 2,000 private jets and helicopters in the next five years.

ACCESS TO FINANCE

If this has to happen, one of the first things that needs to be eased is access to finance. The smallest of the aircraft costs huge sum of money and there are individuals and corporate houses who look for the ‘right financing’ options. The investments are high and the return on investment is measured in terms of time saved and profitability in the case of charter operators. Finance is not easy to come, particularly when the banking industry has categorised aircraft under ‘mobile equipments’ and not under ‘assets’. They have their own procedures and guidelines to finance, considering that it is high risk business.

AIRCRAFT UTILISATION

One of the first things that a buyer has to do is decide why he or she wants to buy an aircraft, keeping in mind the utilisation factor. The more the aircraft is on the ground than up in the sky, the aircraft is certainly not giving the due returns on investment, unless, of course, the person buying is an Ambani or a Birla who can afford to keep the aircraft in the hangar for longish periods. A charter operator certainly has to look at maximum utilisation. Once that is decided, then comes choosing the ‘right’ aircraft – seating capacity-wise, rangewise, price-wise, and utility wise. The budget has to be determined, after factoring in the cost of operation, maintenance costs, insurance and other miscellaneous costs. After determining these costs, with the help of consultants, the buyer can get a pre-approved loan from aircraft lenders or banks.

‘RIGHT’ AIRCRAFT

Depending on fixed-wing or rotary, the buyer has to decide on the type of aircraft. For instance a Phenom 100 is ideal for short distance and economical flying; or a Cessna Citation XL for long distance; or a Beechcraft which can fly using shorter runways. These are simple examples, but the aircraft specifications can give an insight into its utilisation. The features of the aircraft have to be carefully studied before buying the right aircraft. There are different types of aircraft – very light jets, light jets, midsize jets, large jets, and huge jets – to choose from.

CIVIL AVIATION REQUIREMENTS

While one is tying up funds, one has to parallelly work on getting clearances from the Ministry of Civil Aviation (MoCA) and its various bodies, particularly the Directorate General of Civil Aviation (DGCA) which not only certifies the aircraft but also registers the aircraft. The Civil Aviation Requirement (CAR) Section 3 Air Transport Series ‘C’ Part III has listed out comprehensively the modalities for certification/registration. The CAR contains the minimum airworthiness and operational requirements and also the procedural requirements for grant of a non-scheduled operators permit (NSOP). The requirements for grant of NSOP (passenger) and NSOP (charter) have been amalgamated and a uniform code for operation of non-scheduled air transport services has been laid down.

NSOP REQUIREMENTS

Here in this article we are looking at only a few rules. The DGCA states that non-scheduled passengers and/or cargo operations may be carried out by using:

• Single or multi-engine aeroplanes, seaplanes and helicopters duly certified/accepted by DGCA in accordance with the Type Certificate issued by the US Federal Aviation Administration (FAA) or the European Aviation Safety Agency (EASA) or other authorities acceptable to DGCA, and under conditions, if any, as stipulated by DGCA.
• Single engine, turbine powered aeroplanes may be operated day/night, VFR/IFR weather conditions as per their certification and operating procedures stipulated in flight manual. Single engine piston airplanes shall not be operated at night or in Instrument Meteorological conditions. However, they may be operated under special VFR subject to the limitations contained in the type certificate.
• Operations with single engine aeroplanes shall be conducted only on domestic sectors except for medical evacuation flights and shall be operated along such routes or within such areas for which surfaces are available which permit a safe forced landing to be executed.
• The carriage of passengers by a non-scheduled operator’s permit holder may be performed on per seat basis or by way of chartering the whole aircraft on per flight basis, or both. There is no bar on the same aircraft being used for either purpose as per the requirement of customers from time to time. The operator is also free to operate a series of flights on any sector within India by selling individual seats but will not be permitted to publish timetable for such flights.
• A non-scheduled operator is also allowed to operate revenue charter flights for a company within its group companies, subsidiary companies, sister concerns, associated companies, own employees, including Chairman and members of the Board of Directors of the company and their family members, provided it is operated for remuneration, whether such service consists of a single flight or series of flights over any period of time.

NSOP ONLY FOR INDIANS

An NSOP is granted only to: (a) a citizen of India; or (b) a company or a body corporate provided that: (i) it is registered and has its principal place of business within India; (ii) its chairman and at least twothirds of its directors are citizens of India; and (iii) its substantial ownership and effective control is vested in Indian nationals.

FDI UP TO 100 PER CENT

Foreign direct investment (FDI) up to 74 per cent and investment by non-resident Indians (NRIs) up to 100 per cent is allowed through automatic route. For helicopter services/seaplane services, wherein FDI up to 100 per cent is allowed through automatic route, the composition of Board of Directors and the substantial ownership and effective control of the management should be: (i) The majority of Directors on the Board of the company shall be Indian citizens; (ii) The positions of the Chairman, Managing Director, Chief Executive Officer (CEO) and/or Chief Financial Officer (CFO), if held by foreign nationals, would require to be security vetted by Ministry of Home Affairs (MHA) on an annual basis.

Based on the approval granted by the Ministry, the DGCA may grant the applicant NOC for acquisition/import of the aircraft upon being satisfied that the applicant has achieved a reasonable level of preparedness

An applicant for the grant of an NSOP should be: (a) in possession of at least one aircraft, either by outright purchase or on lease (without crew), and should be registered in India, having a valid Certificate of Airworthiness in normal passenger category; (b) have a minimum paid-up capital of Rs. 2 crore for up to two aeroplanes or helicopters.

IMPORT OF AIRCRAFT

An applicant desirous of obtaining an NSOP should first apply for an initial ‘no objection certificate’ (NOC). The application (eight copies) for this purpose should be submitted to the Ministry of Civil Aviation along with a bank draft of Rs. 25,000. The applicant should also submit along with his application the particulars of Board Members of the company. The applicant should also give the type and number of aircraft proposed to be imported/acquired for the purpose of non-scheduled operations.

The applicant is also required to submit a project feasibility report, giving a declaration that he or she will comply with the guidelines given in AIC No. 7/2008 dated 30.06.2008 on foreign direct investment in the civil aviation sector.

Based on the approval granted by the Ministry, the DGCA may grant the applicant NOC for acquisition/import of the aircraft upon being satisfied that the applicant has achieved a reasonable level of preparedness. The operator is required to show his preparedness in accordance with provisions of paragraph 7 by filling the checklist given at Annexure IX. Additionally, he or she may also be called upon to demonstrate the same at a preparedness meeting convened by the DGCA.

The NOC for import of aircraft given by DGCA is valid for one year or till the date of expiry of the initial NOC given by the Ministry, whichever is earlier. It may be extended on one time basis by three months on genuine grounds provided the initial NOC is valid. However, where the aircraft proposed to be imported is a new one with a definite delivery schedule, the validity of import permission should be given by DGCA in accordance with the delivery schedule provided the initial NOC remains valid. If the delivery schedule goes beyond the expiry of the initial NOC, the applicant should apply for an extension.

100 PER CENT FDI IN HELICOPTER SERVICES

Up to 100 per cent FDI is permitted under the automatic route for helicopter services. A tie-up with a foreign operator is also permitted in such cases. An applicant who intends to avail of the 100 per cent FDI facility should indicate this fact clearly in the application for grant of initial NOC. The operator is not permitted to induct fixedwing aircraft in his fleet.

Pressurised aircraft to be imported for non-scheduled operations should not be more than 15 years in age or should not have completed 75 per cent of its design economic life or 45,000 pressurisation cycles whichever is earlier. However, this requirement is not applicable for Indian registered aircraft maintained in accordance with DGCA requirements.

For the import of unpressurised aircraft, the DGCA takes decision on a case to case basis depending on a complete examination of the records and, if required, inspection of the aircraft being procured. However, DGCA would normally not allow import of more than 20 years old aircraft.

PILOT LICENCE IS KEY

The DGCA clearly states that any private aircraft should be flown by a person holding a valid pilot’s licence issued. It emphasises that a private aircraft should not be flown by a person holding (a) a Student Pilot’s licence; (b) by a person holding a Private Pilot’s licence for remuneration or hire of any kind; (c) a private aircraft carrying passengers at night, should not be flown by a person holding a Private Pilot’s licence, without having a valid night rating.

The above requirements are only indicative and an individual/corporate entity has to go through the entire rigmarole of procedures and there is no escaping that. The best option is to hire a consultant and get through the procedures quick and fast.