In this August 2024 edition of our newsletter, we bring you a concise analysis of the rapid growth in India's civil aviation sector, now the world's third-largest domestic market. As the industry evolves to improve connectivity, enhance operational efficiency, and embrace sustainability, we highlight key regulatory changes, major infrastructure approvals, and recent legal precedents that are shaping the future of aviation in India and globally.
We hope this issue offers valuable insights as we continue to track the latest developments and opportunities in this dynamic sector.
A. KEY UPDATES - INDIA
(a) Centre approves Singapore Airlines' Foreign Direct Investment ("FDI") proposal for Air India-Vistara Merger
August 30, 2024 – The Directorate General of Civil Aviation ("DGCA") has approved the integration of aircraft line maintenance operations between Air India and Vistara, both part of the Tata Group. Under CAR 145, this consolidation will see Vistara's maintenance activities moved to Air India's facilities, streamlining operations and improving efficiency. Additionally, Singapore Airlines ("SIA") has received Indian government approval for its foreign direct investment as part of the merger. SIA, which previously owned 49% of Vistara, will acquire a 25.1% stake in the merged entity with an investment of INR 2,059 Crore. The Tata Group will hold a 74.9% stake in the newly unified Air India.
Source: The Economic Times
(b) Directorate General of Civil Aviation ("DGCA") takes action against Airlines
August 29, 2024 – The DGCA has taken regulatory action against three airlines. SpiceJet has been placed under enhanced surveillance following a special audit on August 7 - 8, 2024, revealing significant safety deficiencies amid ongoing flight cancellations and financial issues. Air India Express has been fined INR 10 Lakh for failing to compensate passengers for cancelled flights, identified during an inspection as part of the Annual Surveillance Programme ("ASP") 2024. Akasa Air has received a show-cause notice for regulatory breaches, including conducting pilot training without necessary approvals. These actions underscore the DGCA's commitment to maintaining safety and regulatory compliance within the aviation sector.
Source: The Economic Times
(c) The International Civil Aviation Organization ("ICAO") begins nine-day audit of India's Aviation Security
August 27, 2024 – ICAO has launched a nine-day audit of India's aviation security, focusing on the Bureau of Civil Aviation Security ("BCAS") at Delhi and Kolkata airports. The audit, involving experts from ten countries, will assess compliance with global security standards. This review comes after concerns raised in the 2018 audit and recent incidents such as the Air India Express crash. The outcome of the audit will be critical for India's international aviation operations and safety compliance.
Source: The Economic Times
(d) Directorate General of Civil Aviation ("DGCA") fines Air India for crew qualification lapse
August 24, 2024 – DGCA fined Air India INR 90 Lakh for a crew qualification lapse on a Mumbai-Riyadh flight operated on July 9, 2024. The flight was commanded by a non-trainer captain paired with an unqualified first officer, raising serious safety concerns. The DGCA also imposed fines of INR 6 Lakh on Air India's Director of Operations and INR 3 Lakh on its Director of Training for their roles in the incident. The error was discovered through a voluntary report from the airline and was investigated by the DGCA, which included a review of operational documentation and a spot check of scheduling practices.
Source: The Economic Times
(e) DGCA suspends approval of an Aircraft Maintenance Organization after crash
August 23, 2024 – DGCA suspended the approval of Bhopal-based International Aircraft Sales Pvt Ltd for failing to meet regulatory standards. The suspension follows a Cessna 152 crash during a flight test on August 11, 2024, operated by Belagavi Aviation, with an engine overhauled by International Aircraft Sales. A DGCA audit uncovered serious maintenance deficiencies, prompting the action. This follows a similar suspension last year of Red Bird Flight Training Academy, which was only lifted after thorough recertification.
Source: Business Standard
(f) IndiGo wins 'Award of Honour' at Indo-US Tourism and Hospitality Summit
August 23, 2024 – IndiGo received the 'Award of Honour' at the Indo-US Tourism and Hospitality Summit for its outstanding contribution to the Indian aviation industry. The award was presented to Vinay Malhotra, IndiGo's Head of Global Sales, by R. Venkataramani, Attorney General of India. Organized by the Indo-American Chamber of Commerce ("IACC"), the summit recognizes leaders driving growth in travel and tourism. Established in 1968, IACC fosters economic ties between India and the US across various sectors.
Source: IndiGo Press Release
(g) Union Minister launches simplified guidelines for Seaplane Operations
August 22, 2024 – Union Civil Aviation Minister, Shri Kinjarapu Rammohan Naidu, has unveiled simplified guidelines for seaplane operations in India, aimed at boosting regional connectivity through the country's rivers, lakes, and coastlines. The new framework under the Non-Scheduled Operator Permit ("NSOP") includes Viability Gap Funding ("VGF") to support initial operations and streamlined procedures for water aerodromes. To further sustainability efforts, provisions for research into electric seaplanes have been introduced. Additionally, the updated UDAN 5.4 scheme will invite fresh bids for routes previously canceled, enhancing connectivity to underserved regions.
Source: Press Information Bureau
(h) Alhind Group secured Air Operator Certificate ("AOC")
August 22, 2024 – Alhind Group is set to launch its airline, Alhind Air, by the end of the year, having secured the AOC from the DGCA. The airline will start with three ATR-72 turboprop planes and an initial investment of INR 200 to INR 500 Crore, with plans to expand to five ATR planes focusing on regional routes in southern India, including Cochin, Bengaluru, Thiruvananthapuram, and Chennai. Long-term plans include national expansion and launching international flights within two years, aiming for a fleet size of over 20 planes.
With a significant background in the travel industry, Alhind Group leverages its established sales network and market expertise for this new venture. The group, which generates over INR 600 crore monthly from air ticketing, aims to use its strong regional connections and route planning experience to ensure Alhind Air's success. This venture is the second Kerala-based airline to gain approval, following Air Kerala, and seeks to build on Kerala's aviation legacy.
Source: 100 Knots
(i) Alliance Air struggles financially
August 22, 2024 - Alliance Air, India's state-owned regional carrier, has requested INR 700 Crore in fresh working capital from the central government amid ongoing financial and operational challenges. With a debt of around INR 4,000 Crore, the airline previously received INR 600 Crore last year, which was used primarily to service interest liabilities, leaving it still burdened by substantial debt.
In addition to financial struggles, Alliance Air faces severe supply chain disruptions and fleet issues, including five grounded aircraft due to engine problems. These issues have hampered its operations, particularly in remote areas. The requested funds could provide temporary relief but addressing the airline's deep-rooted financial and operational issues will be crucial for its long-term sustainability and effectiveness in connecting India's remote regions.
Source: 100 Knots
(j) IndiGo to challenge GST penalty order totaling INR 3.5 Lakh
August 21, 2024 – IndiGo has announced plans to challenge two penalty orders related to GST input tax credit claims. The first, INR 1,77,046 penalty was imposed in Odisha for the 2017-18 fiscal year, and after an unsuccessful appeal, the airline intends to escalate the case to an appellate tribunal. Additionally, IndiGo is disputing an INR 1,73,253 penalty in Kerala, where a tax officer disallowed its input tax credit claim. The airline is pursuing both cases through the appropriate appellate channels.
Source: The Economic Times
(k) Cabinet approves major aviation infrastructure projects at Bagdogra and Bihta airports
August 16, 2024 – The Cabinet Committee on Economic Affairs ("CCEA") has approved the development of new civil enclaves at Bagdogra Airport in West Bengal and Bihta Airport in Bihar. These projects involve investments of INR 1,549 crores for Bagdogra and INR 1,413 crores for Bihta, totaling INR 2,962 crores.
Union Minister for Civil Aviation, Shri Rammohan Naidu, highlighted that these investments are aimed at enhancing regional connectivity and accommodating the increasing demand for air travel. The Bagdogra project will include the construction of a 70,390 square meter terminal, designed to handle 10 million passengers annually. Meanwhile, the Bihta project will involve the development of a 66,000 square meter terminal with an initial capacity for 5 million passengers, with provisions for future expansion to accommodate up to 10 million passengers.
These projects are part of the government's broader strategy to strengthen aviation infrastructure and support the growing needs of the sector.
Source: Press Information Bureau
(l) Lok Sabha passed the Bhartiya Vayuyan Vidheyak Bill 2024 to replace the Aircraft Act of 1934
August 9, 2024 – Lok Sabha has passed the Bhartiya Vayuyan Vidheyak Bill 2024 ("the Bill") to replace the Aircraft Act of 1934 ("the Act"), which has undergone 21 amendments over the past 90 years.
The Act regulates the civil aviation sector. It sets up three statutory authorities: (i) DGCA for performing regulatory functions and overseeing safety, (ii) Bureau of Civil Aviation Security ("BCAS") for overseeing security, and (iii) Aircraft Accidents Investigation Bureau for investigation of aircraft accidents. The Bill adds that appeals against an order of DGCA or BCAS will lie before the central government. No further appeals will be allowed against the central government's orders.
According to the statement of objects and reasons, the Bill is intended to enhance safety, oversight, and regulatory efficiency to support sustainable growth in the aviation sector. It aims to ensure compliance with international conventions and foster a more dynamic industry while retaining the regulatory structure and most provisions of the Aircraft Act, 1934.
Source: PRS Legislative Research
(m) Unification of GST slabs for Maintenance, Repair, and Overhaul ("MRO") components
August 9, 2024 – The Government's recent unification of GST slabs for MRO components marks a significant reform in the GST structure, simplifying the taxation process for MRO services. Effective from July 15, 2024, the uniform 5% IGST rate for all aircraft components is expected to drive substantial growth in India's MRO industry, with projections estimating a valuation of USD 4 billion by 2031. This reform, combined with domestic airlines placing orders for over 1,100 aircraft, is anticipated to double the industry's size from USD 2 billion to USD 4 billion over the next seven years.
Source: Press Information Bureau
(n) The Directorate General of GST Intelligence ("DGGI") issues show cause notices to foreign airlines
August 07, 2024 – The DGGI has issued show cause notices to ten foreign airlines, including Emirates, Lufthansa Cargo, British Airways, Singapore Airlines, Etihad Airways, Saudia, Air Arabia, Thai Airways International, Qatar Airways, and Oman Air. These notices pertain to an alleged non-payment of taxes amounting to INR 10,000 crores in GST on expenses incurred by their international headquarters for the period from July 2017 to March 2024.
International Air Transport Association ("IATA") has expressed disappointment over the move, criticizing DGGI's stance as flawed. IATA's regional vice president for North Asia and Asia Pacific, Xie Xingquan, stated that DGGI's assertion that GST should apply to headquarters' expenses is inconsistent with international air transport conventions.
Source: Business Standard
(o) India expands Global Air Connectivity through Bilateral Air Services Agreements ("ASAs")
August 05, 2024 – Minister of State Murlidhar Mohol in response to a question from Dr. John Brittas during the Rajya Sabha session, provided an update on India's Bilateral ASAs.
India has now signed ASAs with 116 countries, enhancing its global air connectivity with major partners like Australia, Canada, China, France, Germany, Japan, the United Kingdom, the United States, and the UAE.
Key Highlights:
- City-Based Designations: ASAs specify cities, not states, as Points of Call ("PoCs"), enabling multiple airports within a city to be included and streamlining operations.
- Designated Cities: Major cities under these ASAs include Delhi, Mumbai, Bangalore, Chennai, and Kolkata, along with other key locations across India.
Minister Mohol emphasized that the city-based PoC designations are intended to boost operational efficiency and avoid state-level listings.
Source: The Economic Times
(p) Government enhances Aircraft MRO services in India through policy and regulatory changes
August 02, 2024 – In a written reply to the Lok Sabha, Shri Murlidhar Mohol from the Ministry of Civil Aviation outlined several initiatives to boost India's MRO sector. Key measures include allowing 100% FDI through the automatic route, reducing GST on MRO services from 18% to 5%, extending export and re-import periods for repair goods, exempting customs duty on tools, and simplifying clearance processes. The updated MRO guidelines, effective from September 01, 2021, have eliminated royalties and introduced transparent land allotments at Airports Authority of India ("AAI") airports.
Further, the 2024-25 Union Budget proposes legislative support for aircraft and ship leasing and introduces a financing mechanism via pooled private equity. It also adds "Blended Aviation Turbine Fuel" to the Customs Tariff Act, with a 5% duty rate.
Source: Press Information Bureau
B. KEY INTERNATIONAL UPDATES
(a) Jetstart Airways facing turbulence by a class action suit
August 23, 2024 – Jetstar Airways is facing a class action lawsuit in the Federal Court of Australia, alleging it failed to refund payments for canceled international flights between 2020 and 2022. The case, Kaye Perkins vs. Jetstar Airways Pty Limited is led by Echo Law, which previously sued Qantas for similar issues. Both airlines are part of the Qantas Group, which has been criticized for its pandemic-era cancellation and refund practices. The lawsuit is supported by litigation funder Court House Capital.
Source:100 Knots
(b) Air Canada pilots vote to authorize strike
August 23, 2024 – Air Canada pilots, represented by the Air Line Pilots Association ("ALPA"), have overwhelmingly voted to authorize a strike as negotiations for a new contract continue to stall. The union reports that 98% of its over 5,400 members participated in the vote, with 98% in favor of striking if necessary. The pilots' key concerns include fair compensation, improved retirement benefits, and quality-of-life enhancements. ALPA has warned that job action could begin as early as mid-September if no agreement is reached.
Air Canada acknowledged the vote and expressed its commitment to the bargaining process. The airline, which reported a CAD 410 million profit in the second quarter, saw a 50% drop in profits compared to the previous year, citing rising costs and declining yields in a challenging market.
Source: Flight Global
(c) Qatar Airways to make 25% equity investment in South African carrier Airlink
August 20, 2024 – Qatar Airways will acquire a 25% stake in South Africa-based regional carrier Airlink, aiming to enhance services and boost passenger numbers across Africa. This represents the maximum foreign ownership allowed by South African regulations.
Qatar Airways will gain two seats on Airlink's 14-member board, with 25% shareholder voting rights. Qatar Airways, a state-owned carrier, also holds stakes in International Airlines Group (British Airways), Latam Airlines, Cathay Pacific, and China Southern Airlines. The investment value has not been disclosed.
Source: Reuters
(d) Boeing's 737 Max production faces turbulence
August 15, 2024 – Boeing is facing significant hurdles in its effort to increase 737 MAX production from 25 jets per month to 38 by the end of 2024.
Analysts from Moody's and S&P Global Ratings are skeptical, predicting this goal may be delayed until 2025 due to production issues and quality control problems, highlighted by a January 2024 mid-air panel blowout on a 737 MAX 9. Boeing has been experiencing cash flow issues, burning through US Dollar 8.3 billion in the first half of 2024 and expecting negative free cash flow for the year. Production delays are partly due to quality improvements and labor disruptions, with supply chain bottlenecks, particularly from Spirit AeroSystems, compounding the challenges.
Despite Boeing's optimistic projections, including recent statements from its finance chief about meeting the production target by year-end, skepticism remains high. The company's ability to meet its 2024 production targets is crucial for investor confidence and financial stability, with the coming year being critical for the future of the 737 MAX program.
Source: 100 Knots
(e) Air New Zealand delays 2030 emissions reduction target amid industry challenges
August 2, 2024 - Air New Zealand has postponed its 2030 carbon emissions reduction target, citing delays in acquiring fuel-efficient aircraft and high costs of green fuel. This marks the first major move by an airline to withdraw from such a commitment, raising significant questions about the feasibility of short-term climate targets in aviation. The airline's CEO, Greg Foran, noted that global supply chain issues and the need to retain older aircraft are key factors in this decision.
Despite stepping back from its 2030 goal, Air New Zealand remains committed to achieving net-zero emissions by 2050 and is working on a new near-term target. This shift underscores the broader challenges faced by the aviation industry, which contributes about 2% of global emissions and struggles with the slow development of Sustainable Aviation Fuels ("SAF") and new technologies. The decision has sparked concern among environmental advocates, who worry it might hinder progress toward long-term climate goals.
Source: Sustainability News
C. SIGNIFICANT DEVELOPMENTS
(a) Kempegowda International Airport becomes first in Asia to achieve Airports Council International ("ACI") highest level five accreditation
August 16, 2024 - Kempegowda International Airport, operated by Bangalore International Airport Limited ("BIAL"), has achieved the highest level five accreditation from ACI, becoming the first airport in Asia to receive the same. This accreditation, effective from May 05, 2024, underscores the airport's significant strides in sustainability.
BIAL has reduced its Scope 1 and 2 greenhouse gas emissions by 95.6%, surpassing its 2030 target seven years ahead of the schedule. The airport now operates on 100% renewable electricity and has implemented various green infrastructure and sustainable mobility initiatives. To further its commitment, BIAL has procured ACI-approved carbon units to offset residual emissions and will continue to invest in green landscape projects.
Source: The Economic Times
(b) Etihad Airways unveils Airbus A380 for Mumbai-Abu Dhabi route to celebrate 20 years of its operations in Mumbai
August 14, 2024 - Etihad Airways will mark two decades of operations in Mumbai by deploying its Airbus A380 on the route from September 01 to December 31, 2024. The airline will operate the double-decker aircraft three times a week between Abu Dhabi and Mumbai. This special deployment highlights the deepened relationship between Etihad and India since its first flight to Mumbai in 2004.
Source: The Economic Times
D. KEY JUDICIAL PRECEDENTS
(a) SC Orders Submission of Nagpur Airport Tender Files
August 21, 2024 – The Supreme Court directed the Civil Aviation Ministry to submit documents related to the annulled Nagpur airport tender. The dispute involves the Ministry, AAI, and GMR Group, which was initially awarded the contract in 2019. The Maharashtra government canceled the contract in 2020, leading GMR to challenge the decision. The Bombay High Court and later the Supreme Court ruled in GMR's favor, deeming the cancellation "arbitrary and unfair". The Supreme Court has now mandated the Ministry to provide the relevant file notes by August 23, 2024.
Source: SCI Website
(b) Reality star sues American Airlines at Manhattan Supreme Court after consuming drink containing 'broken plastic and shards'
August 17, 2024 - Shana Wall, a 50-year-old actress and former contestant on The Amazing Race, has filed a lawsuit against American Airlines after sustaining severe internal injuries from consuming a beverage containing plastic shards during a flight from New York to Rome. The contaminated drink caused damage to her throat, esophagus, vocal cords, and digestive system, leaving her bedridden and requiring medical care.
The lawsuit, filed in Manhattan Supreme Court, argues that American Airlines failed in its duty to provide safe and uncontaminated beverages.
Source: Hindustan Times
(c) Delhi High Court to hear SpiceJet's appeal against order to ground and return engines
August 16, 2024 - The Delhi High Court has agreed to hear SpiceJet's appeal challenging the August 14, 2024, ruling in Team France 01 SAS vs. SpiceJet Limited, CS(COMM) 908/2023 and CS(COMM) 909/2023, wherein the court ordered the airline to ground three engines leased from French lessors Team France 01 SAS and Sunbird France 02 SAS.
The initial decision, issued by Justice Manmeet Pritam Singh Arora, mandated that SpiceJet cease operations of the engines by August 16, 2024 and return them within 15 days. Additionally, SpiceJet was required to facilitate an inspection of the engines by the lessors' representatives at Delhi Airport within seven days and provide necessary access passes.
The court's order also directed SpiceJet to address the outstanding amount of US Dollar 4.8 million and any additional weekly payments related to the use of the engines. This ruling follows claims by the lessors for substantial unpaid dues, with the court determining that SpiceJet had defaulted and did not possess the legal or contractual right to retain the engines.
Source: The Economic Times
(d) Irish lessor and Frontier airline dispute
August 12, 2024 – The legal dispute between AMCK Aviation, now under Carlyle Aviation Partners, and Frontier Airlines has intensified. After a June 2024 US court awarded Frontier US Dollar 48.6 million in damages over a terminated sale and leaseback contract for six Airbus A320-200s, AMCK has appealed the ruling. The case, which began in 2019, was complicated by pandemic-related disruptions. AMCK terminated the contract in May 2020 due to non-payment, leading Frontier to seek alternative, costlier leasing arrangements and file a lawsuit.
The court's June decision found AMCK's termination unjustified, prompting AMCK to appeal on July 16, 2024, seeking a reversal or reduction of damages. The outcome of the appeal will be closely watched for its implications on pandemic-related aviation disputes.
Source: 100 Knots
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
