India: Air Transport India - Part 2

21 How are slots allocated at congested airports?

As per guidelines (revised in May 2013) issued by the MoCA, a 'slot' is a permission given by a coordinator for a planned operation to use the full range of airport infrastructure necessary to arrive or depart at a Level 3 airport on a specific date and time. For the purpose of slot allocation, airports are generally categorised according to the following levels of congestion:

• Level 1: where the capacity of the airport infrastructure is generally adequate to meet the demands of airport users at all times.
• Level 2: where there is potential for congestion during some periods of the day, week, or season which can be resolved by voluntary cooperation between airlines.
• Level 3: where capacity is constrained due to lack of sufficient infrastructure.

For Level 3 airports, a coordinator is required to be designated to allocate slots to airlines and other aircraft operators using or planning to use the airport as a means of managing available capacity.

Guidelines have been formulated to reflect international best practice and are in accordance with the recommendations of the IATA Worldwide Slot Guidelines (WSG), as amended twice yearly. The WSG is the globally adopted standard for efficient slot allocation to optimise the use of severely congested airport infrastructure worldwide.

After leasing of the Delhi and Mumbai Airports to JVCs, and after setting up greenfield airports at Hyderabad and Bangalore, the MoCA had reviewed the slots allocation procedure and issued a revised procedure in its letter dated 10 September, 2007. This revised procedure allows the respective JV airport operators of Delhi and Mumbai to allocate slots for these airports, and the AAI for the other airports. Later, the revised procedures were also made applicable to the other JVCs at Hyderabad and Bangalore.

Part VII of the Guidelines deals with slot allocation.

Airlines are required to file their slot requests for initial allocation twice each year for the summer and winter seasons with the concerned coordinator for Level 3 airports. The actual deadline for filing this request is as provided for in the IATA WSG Coordination Calendar. As per CAR dated 1^st March 1994, the operator shall intimate slots and/or flights not operated for a considerable period to DGCA and all concerned agencies every month.

22 Are there any laws or rules specifically relating to ground handling?

Rule 92 of the Aircraft Rules, 1937 provides that the licensee of an aerodrome shall, while providing ground handling service by itself, ensure a competitive environment by allowing the airline operator at the airport to engage, without any restriction, any ground handling service provider permitted by the central government to provide such service. This is subject to a proviso that such ground handling service provider should have security clearance.

The DGCA has issued AIC No. 03/2010 dated 2 June 2010 on the subject of 'Grant of permission for providing ground handling services at airports other than those belonging to the Airports Authority of India'. Clause 1.2 of this Circular provides that in accordance with the Airports Authority of India (General Management, Entry for Ground Handling Services) Regulations, 2000, an airline operator may carry out ground handling services at an airport either by itself or engage the services of any of the following, namely: (i) AAI; (ii) Air India or Indian Airlines; and (iii) any other agency licensed by the AAI. Other circulars/guidelines such as the BCAS Circular No. 4/2007 dated 19 February 2007 contain instructions on deployment of ground handling agencies at the airports.

On 18 October 2007, the AAI in exercise of powers conferred by section 42 of the Airports Authority of India Act, 1994 formulated the Airports Authority of India (General Management, Entry for Ground Handling Services) Regulations, 2007. Regulation 1.3 thereof provides that these Regulations shall apply to all airports and civil enclaves managed by the AAI, provided that they shall not apply to defence installations or enclaves or enclosures at the airports.

Regulation 3 provides that:

These regulations were similar to DGCA Circular No. 7/2007 dated 28 September 2007 whose implementation date had been extended from time to time. The Ground Handling Regulations, 2007 supersede the Airports Authority of India (General Management, Entry for Ground Handling Services) Regulations, 2000.

The BCAS has also issued an AVSEC Order No. 3/2009 dated 21 August 2009 which specifically provides that the aircraft operators' aviation security functions listed therein 'cannot be mixed-up with other ground handling activities, and these AVSEC functions shall not be allowed by an aircraft operator/airport operator to be undertaken by a Ground Handling Agency'.

23 Who provides air traffic control services? And how are they regulated?

'Air traffic service' as per rule 3(1F) of the Aircraft Rules, 1937 means the flight information service, alerting service and air traffic advisory service and air traffic control service (area control service, approach control service or aerodrome control service). Part XII of the Rules deals with personnel of air traffic services. Rule 93(1) provides that only a person who holds a valid air traffic controller's licence shall engage himself in the provision of air traffic services in the Indian airspace or in any airspace outside Indian territory for which India has, pursuant to any international arrangement, undertaken to provide air traffic services. Rule 93(2) provides that the designated military authority may provide air traffic services to civil aircraft in the airspace designated for military use in accordance with the provisions of part XII and subject to the conditions specified by the DGCA. Rule 95 provides for grant or renewal of the licences by the licensing authority and the conditions for grant or renewal of the same. The DGCA's CAR dated 8 January 2010 (revised 28 November 2013) regulates airspace and air traffic management.

'Air traffic service' is also defined in section 2(d) of the Airports Authority of India Act, 1994. Section 22 provides that the AAI may, with the previous approval of the central government, charge fees or rent for providing air traffic services etc. There is a Manual of Air Traffic Services issued by the AAI. Chapter 4 of this manual deals with air traffic services – its objectives, divisions, classification of airspaces, responsibility for control etc. A Department of Air Traffic Management under the AAI provides air traffic services to all arriving, departing and enroute aircraft over Indian airspace, establishment of air routes, realignment of existing air routes in consultation with user airlines and international bodies such as IATA and ICAO, manpower planning, training and award of ratings to air traffic controllers in conformity with ICAO rules and regulations as stated in annex I (Personnel Licensing), monitoring of standards and procedures in the provision of ATC, etc.

The AAI has drawn up plans to upgrade the air traffic management infrastructure in the country both in terms of conditional provision of automation systems and upgrading of technology which also involves shifting from ground-based navigation to satellite-based navigation. A Communication, Navigation and Surveillance (CNS) Planning Department deals with planning, procurement and commissioning of CNS facilities and support systems for air navigation.

Liability and accidents

24 Are there any special rules in respect of death of, or injury to, passengers or loss or damage to baggage or cargo in respect of domestic carriage?

The relevant statute is the Carriage by Air Act 1972, which in section 8 provides that the central government may, by notification in the Official Gazette, apply the rules contained in the schedules to the Act to such carriage by air, not being international carriage by air, subject to such exceptions, adaptations and modifications as may be specified. Pursuant to the said section, the DGCA has issued an AIC No.2/2014 dated 14^th February 2014 which refers to a MoCA notification of 17^th January 2014 which provides that from the date of publication of the notification, the provisions of Section 5 of the 1972 Act and the rules contained in the Third Schedule to the said Act shall apply to all carriage by air not being international carriage subject to the exceptions, adaptations and modifications mentioned therein. For death or bodily injury, the carrier's liability cannot exceed Rs. 2 Million. In case of damage caused by delay, liability is limited to Rs.80,000/-. In the carriage of baggage, the liability for destruction, loss, damage or delay is limited to Rs.20,000/- unless there is a special declaration and in the carriage of cargo, the liability for destruction, loss, damage or delay is limited to Rs.350/- per Kg. unless there is a special declaration in place. As per Rule 24, these units of liability are to be reviewed by the central Government every 5 years based on the cost inflation index as notified by the Central Government. In the 2011 case of S Abdul Salam v Union of India (the Union), the Union (and their insurers) attempted to pay about 3 million rupees instead of at least 100,000 SDR to the family of a passenger killed in an Air India crash at Mangalore. This was considered discriminatory by the Kerala High Court, which directed full payment as per the Montreal Convention. The judgment is under appeal in the Supreme Court of India. The 1972 Act, as amended, enforces the 1929 Warsaw Convention (first schedule), the 1955 Hague Protocol (second schedule) and the 1999 Montreal Convention (third schedule), which practically applies for most international carriage by air. Chapter III deals with the liability of a carrier. As per rule 17 of all three schedules, a carrier is liable for damage sustained in the event of the death or wounding of a passenger or any other bodily injury suffered by a passenger, if the accident that caused the damage sustained took place onboard the aircraft or in the course of any of the operations of embarking or disembarking. Rule 18 (of all three schedules) provides that a carrier is liable for damage sustained in the event of the destruction or loss of, or of damage to, any registered luggage/baggage or any goods/cargo, if the occurrence that caused the damage sustained took place during the carriage by air. Unfortunately there is still a dearth of case law on the clear exception in rule 17 limiting remedies to physical injury (lésion corporelle) and the consumer fora in India still tend to award compensation for mental agony and inconvenience. In Interglobe Aviation limited vs. N. Satchidanand, (2011) 7 SCC 463 the Hon'ble Supreme Court held, "What is relevant is whether there was any cause of action for claiming damages, that is, whether there was any deficiency in service or whether there was any negligence in providing faclilitation. If the delay was due to reasons beyond the control of the airline and if the appellant and its crew have acted reasonably and in a bona fide manner, the appellant cannot be made liable to pay damages even if there has been some inconvenience or hardship to a passenger on account of the delay".

25 Are there any special rules about the liability of aircraft operators for surface damage?

The Rome Convention, 1952 has been enacted to ensure adequate compensation for persons who suffer damage caused on the surface by foreign aircraft, while limiting in a reasonable manner the extent of the liabilities incurred for such damage so as not to hinder the development of international civil air transport. Chapter II deals with the extent of liability. India signed the Convention in 1955.

26 What system and procedures are in place for the investigation of air accidents?

Section 7 of the Aircraft Act, 1934 outlines the power of the central government to make rules for investigation of accidents or incidents arising out of or in the course of the navigation in or over India of any aircraft, or anywhere of aircraft registered in India. Accordingly, the Aircraft (Investigation of Accidents and Incidents) Rules, 2012 have been notified. Rule 12 provides for the setting up of an Aircraft Accident Investigation Bureau of India (the Bureau) for the purposes of carrying out investigation into accidents, serious incidents and incidents referred to in rule 5(1), (2) and (4). Rule 9 provides for a preliminary investigation and rule 12 provides details on the formal investigation for which the central government shall appoint a competent person referred to as the court who shall have, for the purposes of investigation, all the powers of a civil court under the Code of Civil Procedure, 1908. As per rule 13, the DGCA may order investigation of any incident or serious incident involving an aircraft covered under rule 5(1)(c) and may appoint a competent and qualified person as inquiry officer for the purposes of carrying out the investigation. The inquiry officer has the same powers as an aircraft accident investigator under rule 10 and shall make a report to the DGCA in the format specified by the Bureau. The DGCA shall forward the report of the inquiry officer to the central government.

The AAI has also issued an Air Traffic Management Circular No. 7 of 2012 on the 'Procedure to be followed in case of Aircraft Accidents and Serious Incidents'. Clause 2.1 provides that the purpose of this Circular is to make air traffic controllers (ATCOs) aware of the procedure to be followed in case of aircraft accidents and serious incidents and the role of ATCOs regarding notification of accidents and serious incidents along with preservation of air traffic service records.

The DGCA CARs under section 5 – Air Safety on the 'Procedure for Accident/ Incident Investigation' (series 'C') and 'Prevention of Accidents/Incidents' (series 'F') cover aircraft accidents and serious incidents and also provide for investigation, protection and preservation of the wreckage, evidence, disclosure of records, and submission of reports.

27 Is there a mandatory accident and incident reporting system, and if so, how does it operate?

Rule 18 of the Aircraft (Investigation of Accidents and Incidents) Rules, 2012 provides for a mandatory incident reporting system. This system requires the relevant persons, service providers and stakeholders to notify all accidents and incidents by the most suitable and quickest means to the Aircraft Accident Investigation Bureau and the DGCA, but in any case not later than 24 hours. The DGCA is required to immediately notify the Bureau about the accidents and incidents containing information as specified above. Rule 18(4) outlines who is included in 'relevant persons, service providers and stakeholders'. There is also a voluntary incident reporting system provided for in rule 19.

Competition law

28 Do sector-specific competition rules apply to aviation? If not, do the general competition law rules apply?

There are no specific competition rules (although rule 135 of the Aircraft Rules, 1937 does prohibit an 'oligopolistic' or anti-competitive practice) for aviation. The Competition Act, 2002 (notified in 2009) applies and prohibits anti-competitive agreements (section 3), prohibits abuse of dominance (section 4) and regulates combinations including mergers (sections 5 and 6).

An anti-competitive agreement case filed by travel agents against several airlines was dismissed by the Competition Commission of India (CCI) in 2011 along with their appeal to the Competition Appellate Tribunal in 2012. A planned acquisition of 24 per cent of Jet Airways by Etihad was approved by the CCI in 2013. The CCI can approve such combinations if the same have no appreciable adverse affect on competition. If the CCI fails to accord approval within 210 days, or if it does not pass any order or issue any directions, then the combination is deemed to be approved. The Competition Appellate Tribunal has issued notice to the CCI on an appeal challenging the clearance given to the Rs.20.6 Billion (US $343 Million) Jet-Etihad deal.

Apart from the above matter relating to a combination, there have been a few cases that have come for adjudication before the CCI in relation to both abuse of dominance and anti-competitive agreements. In a 2011 case (Uniglobe v Travel Agents' Association of India or TAAI and others), the CCI penalised three travel agent associations for indulging in the anti-competitive practice of boycotting airlines that had shifted to zero per cent commission; the CCI also passed cease-and-desist orders on the practice. In TAAI v British Airways, decided in 2010, the CCI dismissed a complaint against the carrier alleging abuse of dominance for having restricted sale of their tickets only through certain accredited travel agents, as the Commission found that British Airways was not dominant in the relevant market. In 2011, the CCI dismissed a complaint, and then in 2012 the Competition Appellate Tribunal (Compat) dismissed an appeal involving TAAI against nine airlines on the ground that the airlines had (acting as a cartel) been guilty of abuse of dominance in moving to the zero per cent commission system. The CCI and Compat both rejected the city-pair argument (that being the relevant market) and held that the airlines taken together were not dominant, did not act in concert so there was no agreement and hence dismissed the complaint and appeal.

29 Is there a sector-specific regulator or are competition rules applied by the general competition authority?

Both competition agencies and regulators usually have some overlapping mandate to achieve economic efficiency. However, the conceptual framework reflects that sectoral regulators such as the DGCA have specific functions relating to that sector but not market functions, which is the domain of the general competition authority (ie, the Competition Commission of India). Therefore there are generally no sector-specific competition laws or rules that can be applied by the competition authority, however the provisions of rule 135 cited in reply to question 28 referring to oligopolistic practices are an exception that is not usually resorted to by the regulator or the DGCA.

30 How is the relevant market for the purposes of a competition assessment in the aviation sector defined by the competition authorities?

The Competition Act 2002 defines 'relevant market' under section 2(r). Ascertaining the relevant market is a pertinent step to analysing whether there is an adverse effect on competition. The relevant market is determined in a two-pronged manner [section 19(5)]: one needs to ascertain the relevant geographic market as prescribed under section 19(6) and also determine the relevant product market as prescribed under section 19(7). Attempts have been made to define a geographic market by reference to city-pairs in the aviation sector, but the Competition Commission and the Competition Appellate Tribunal have not accepted this argument, generally preferring the view that the market is international flights to and from India.

31 What are the main standards for assessing the competitive effect of a transaction?

The standard for assessing the competitive impact of a transaction is by determining whether such transaction has an appreciable adverse effect on competition. Appreciable adverse effect on competition can be determined by the presence of any kind of anti-competitive agreements between parties or whether such transaction would result in an abuse of dominance, foreclosure of market, etc. Even in the case of a combination (merger or acquisition), the standard used is the same: that is, whether such a combination would result in or is likely to cause an appreciable adverse effect on competition.

32 What types of remedies have been imposed to remedy concerns identified by the competition authorities?

The CCI may make inquiries into certain types of agreements (under section 19) and combinations (under section 20, provided they are above the statutory threshold limit) to see whether they are anti-competitive. The CCI also has the power to take up these inquiries suo moto (of its own motion). Upon finding a contravention of the Act, the CCI may pass an order directing the responsible enterprises to discontinue the contravention and impose such penalties as it deems fit. The penalties can be up to 10 per cent of the offender's average turnover for the preceding three financial years. In the case of a cartel, the CCI may impose a greater penalty equal to three times the profit for each year that the contravention was carried on by the cartel. The CCI can by order modify agreements, award compensation or pass such order as it may deem fit.

In the case of a combination that is likely to or will cause an appreciable adverse effect on competition, the CCI has the power to stop such a combination from coming into effect, modify the combination suitably or propose appropriate modifications so as to eliminate any adverse effect on competition. If the parties do not agree with the modifications suggested by the CCI, such parties may amend the proposed suggestion and seek the CCI's approval within 30 days. The CCI, in its effort to tackle cartels, also has a leniency programme in place. In April 2014, the Competition Appellate Tribunal has disposed of an appeal seeking to restrain implementation of IATA's cargo accounts settlement system. The tribunal upheld the CCI's ruling that had rejected an Air Cargo Agents Association of India complaint in this regard. In a case decided by the CCI on 11^th January 2012 titled In re.: Domestic Air Lines,the CCI considered whether exorbitant fares of various Indian airlines for tickets and "shifting seats from lower buckets to higher buckets" (allegedly due to a strike called by Air India pilots), violated Section 3(3) of the Act. It was held that price parallelism in this case was established but "this on its own cannot be said to be indicative of any 'practice' being carried on in terms of section 3(3) of the Act". The CCI held, "...it cannot be concluded that the airlines had been carrying on any anti-competitive practice in violation of section 3(3) of the Act".

Financial support and state aid

33 Are there sector-specific rules regulating direct or indirect financial support to companies by the government or government-controlled agencies or companies (state aid) in the aviation sector? If not, do general state aid rules apply?

No. However, the central government has given approximately US$1.7 billion in the past four years (before 31 March 2013) to aid Air India. In 2013, Indian Oil Corporation, the nation's biggest refiner, agreed to sell jet fuel to Air India at an 8 per cent discount.

34 What are the main principles of the state aid rules applicable to the aviation sector?

The state has, as a policy, given aid and injected funds to assist Air India's business. It has been recommended that the stated policy 'that the national carrier would be considered before allocation of traffic rights to other eligible applicants' should be discontinued (see the 2012 Report of the Committee Constituted for examination of the recommendations made in the Report on Competitive Framework of Civil Aviation Sector).

35 Are there exemptions from the state aid rules or situations in which they do not apply?

State aid is only given to the national carrier, as it is government-owned; as such there are no applicable exemptions.

36 Must clearance from the competition authorities be obtained before state aid may be granted?

No, since Air India is fully state-owned as the national carrier and no state aid is rendered to other airlines. The Competition authorities do not seem to regard state aid as anti-competitive.

37 If so, what are the main procedural steps to obtain clearance?

Not applicable.

38 If no clearance is obtained, what procedures apply to recover unlawfully granted state aid?

Not applicable.

Miscellaneous

39 Is there any aviation-specific passenger protection legislation?

The Carriage by Air Act, 1972 and the Consumer Protection Act, 1986 are the statutes under which passengers may file an action to redress their grievances or approach civil courts for compensation and damages.

The DGCA has issued CARs under section 3 – Air Transport, series 'M' for 'Passenger Facilitation'. CAR dated 28 February 2014 (revised 17 July 2014), under this series, on 'Carriage by Air of Persons with Disability and/or Persons with Reduced Mobility' lists the rules for the protection of and provision of assistance to disabled persons and persons with reduced mobility travelling by air in order to protect them against any form of discrimination and to ensure that they receive all possible assistance during their travel. Clause 4.5.1 thereof deals with the complaints procedure and provides that if a person with disability or reduced mobility considers that this CAR has been infringed, he or she may bring the matter to the attention of the airlines, airport operator, as the case may be. Another CAR dated 22 May 2008 has been issued on the subject of 'Refund of Airline Tickets to Passengers of Public Transport Undertakings'. The CAR dated 6^th August 2010 (revised on 14^th January 2011) is on the subject of 'Facilities to be provided to passengers by airlines due to denied boarding, cancellation of flights and delays in flights'. This should be read harmoniously with the Interglobe decision cited above in reply to Question No.24. Clause 3.7 covers passenger redressal and provides that when affected by denied boarding, a cancellation or a long delay, the passenger may complain directly to the airline. If the airline has not provided compensation or reasonable facilities as listed in clauses 3.5 and 3.6, or if an airline fails to fulfil its obligations, passengers may complain to the statutory bodies set up under the relevant law.

40 Are there mandatory insurance requirements for the operators of aircraft?

CAR dated 1^st March 1994 (revised on 9^th April 2014) provides in Clause 10.12 that an operator shall maintain a current insurance for an amount adequate to cover its liability towards passengers and their baggage, crew, cargo, hull loss and third party risks in compliance with the requirements of the Carriage by Air Act, 1972, or any other applicable law.

CAR dated 1 June 2010 under section 3 – Air Transport, series 'C' part III, issue II lists the minimum requirements for grant of permit to operate non-scheduled air transport services and Clause 10.10 thereof provides for insurance requirements on similar lines as Clause 10.12 mentioned above. CAR dated 26 August 1997 (revised 21 May 2009) under section 3 – Air Transport, series 'C' part IV lists the minimum requirements for grant of a permit and operation of air transport cargo services. This CAR, in clause 7, provides that the application for an operating permit shall contain information on a current comprehensive insurance policy covering passengers and their baggage, crew, third-party risks, hull loss, and any other conditions that may be specified by the DGCA. Clause 10.12 thereof provides that the operator shall maintain a current insurance for an amount adequate to cover its liability towards passengers and their baggage, crew, cargo, hull loss and third-party risks in compliance with the requirements of the Carriage by Air Act, 1972, or any other applicable law.

41 What legal requirements are there with regard to aviation security?

Section 5A of the Aircraft Act, 1934 provides that the DGCA or any other officer specially empowered by the central government, may issue directions, etc in any case where the DGCA or such other officer is satisfied that in the interests of the security of India or for securing the safety of aircraft operations it is necessary so to do.

The central government has created the Aircraft (Security) Rules, 2011. Part II thereof deals with security measures at aerodromes, part V deals with security measures by aircraft operators and part VII covers security accidents and incidents.

Aviation security comes under the purview of the Bureau of Civil Aviation Security (BCAS), which issues AVSEC (aviation security) orders and circulars. It lays down aviation security standards in accordance with annex 17 to the Chicago Convention of the ICAO for airport operators, airlines operators, and their security agencies responsible for implementing AVSEC measures; the BCAS monitors implementation of security rules and regulations and carries out surveys of security needs; it ensures that persons implementing security controls are appropriately trained and possess all competencies required to perform their duties; it plans and coordinates aviation security matters; and conducts surprise/dummy checks to test professional efficiency and the alertness of security staff as well as mock exercises to test the efficacy of contingency plans and operational preparedness of the various agencies. The BCAS has prepared a national aviation security programme for airport operators, airline operators and their security agencies. The commissioner of security of the BCAS is responsible for the development, implementation and maintenance of the national civil aviation security programme.

42 What serious crimes exist with regard to aviation?

Crimes with regard to aviation (hijacking; committing an act of violence onboard an aircraft in flight; destruction of, or damage to, air navigation facilities; offence at airports, etc) are provided for in the Anti-Hijacking Act, 1982 along with the Anti-Hijacking (Amendment) Act, 1994 and the Suppression of Unlawful Acts against Safety of Civil Aviation Act, 1992 along with the Suppression of Unlawful Acts against Safety of Civil Aviation (Amendment) Act, 1994. Other crimes include human and drug trafficking, inappropriate behaviour onboard an aircraft, carrying of prohibited goods, etc for which the general criminal laws apply. Some provisions to regulate conduct aboard an aircraft also exist in the Aircraft Rules which read with Schedule VI provide for punishments that include imprisonment.

Note, the above information applies as of 1^st August 2014.

UPDATE & TRENDS

The domestic passenger numbers in India have been growing at the rate of about 6.2% (for domestic carriers) and the outlook is strangely very positive in the face of airlines that continue to struggle with mounting losses. Two big new carriers are poised to enter the market i.e. Air Asia and Tata-SIA who must offer game-changing service whilst old players like Jet Airways and Air India will fight to hold on to their market space. Curiously airlines like Indigo have managed to return profits as against other competitors in the same market reflecting that good service reputation pays off. There is little big-ticket litigation in this field at present, but these will arise as consolidations occur and when mergers take place to make this whole market more efficient. Consolidation is inevitable for such a market given the fact that seat capacity is continuing to grow with demand and yet efficiency is a tough target for many of the smaller players and even some of the old well-established ones. Increased regulation will also open up issues and short-cuts that have hitherto been outside the purview of public review. As regulations continue to become more sophisticated, the sky will become safer for more aircraft that pollute less (per seat), and perhaps reach further and further into the lesser frequented though well populated parts of India that really need air connectivity for them to prosper.

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.