Shares of HAL Surges Over 3% as GE to Reportedly Co-Produce Jet Engines in India
08 Jun 2023
08 Jun 2023
Shares of Hindustan Aeronautics Ltd (HAL) surges over 3% on June 7 as General Electric (GE) will reportedly be entering into a pact with HAL to co-produce jet engines in India. At 09:40 am, the defence company’s stock was quoting at INR 3,500.90, up 2.45%. The stock was trading with volumes of 43,733 shares so far on June 7, as compared with its five-day average of 67,071 shares, implying a fall of 35%.
The Biden administration has given permission, for GE to co-produce the engines in India, ahead of PM Modi's visit to the US later this month. The American defence company will be agreeing with India's Hindustan Aeronautics Limited (HAL) to co-produce jet engines in the South Asian nation. The technology will power India's fighter jet program once the Memorandum of Understanding (MoU) is operationalised.
GE and HAL had agreed to manufacture jet engines in 2012, but the deal could not take off as the government wanted higher levels of technology transfer, as per the report. It added that an agreement on higher levels of technology transfer has been agreed upon and no other ally has this kind of an agreement with the US. Modalities of technology transfer, timelines and payment mechanisms are being discussed before the final agreement is inked during the Prime Minister's visit to Washington DC between June 21 and 24, 2023, the report said.
The central government is yet to announce a site for the co-production of GE jet engines in India. However, HAL already has an engine division in Koraput, Odisha and this could be one of the locations under consideration. Sources have also said that 500-600 Indian Micro, Small & Medium Enterprises (MSMEs) could benefit from this agreement.
Discussions on possible collaboration on jet engines took place in February during NSA Ajit Doval's meeting with his counterpart Jake Sullivan. While the deal will need the approval of the US Congress, an agreement has been reached at the highest political level. The deal contours were reviewed by Defence Minister Rajnath Singh and US Secretary for Defence Lloyd Austin, during the latter's visit to India this week.
HAL's Profitability and Order Book
ICICI Securities pointed out that HAL has a healthy order book of around INR 82,000 crore which is 3 times its FY23 revenues, led by large-scale orders in manufacturing aircraft and helicopters. The order book of HAL provides high revenue visibility in the medium to long term while indicating HAL’s strong competitive and strategic positioning. During the year fresh contracts of around INR 26,000 crore were received which includes manufacturing contracts for 70 HTT -40, 6 Do-228 Aircraft and PSL V launch vehicles. The Government of India’s (GoI) increased focus on indigenisation with the Make in India policy and mandatory offset policy for defence procurement by GoI, augur well for the company’s future growth.
HAL, the largest defence PSU in India, is engaged in designing, developing, manufacturing, repairing, overhauling, upgrading and servicing a wide range of products including aircraft, helicopters, aero-engines, avionics, accessories and aerospace structures.
During the March quarter, the company reported an 8.8% YoY decline in its net profit to INR 2,831.18 crore from INR 3,105.17 crore in the same period last year. The company’s revenue from operations surged 8% YoY to INR 12,495 crore as against INR 11,558 crore in the same period last year. The company’s EBITDA (earnings before interest, tax, depreciation and amortisation) surged by 29% in the January to March period of FY24 as against INR 2,495 crore in the same period last year.
The state-owned aerospace and defence firm, whose customers include the Indian Army, Navy and Air Force, and aerospace corporations Airbus and Boeing, said its order book position stood at INR 817.84 billion for the quarter. HAL is engaged in the design, development, manufacture, repair, overhaul, upgrade and servicing of a wide range of products including, aircraft, helicopters, aero-engines, avionics, accessories, aerospace structures and Industrial Marine Gas turbines.
The Indian government currently owns a 71.65% stake in HAL as of March-end, according to exchange data, having sold 3.5% of its holdings in a deal that fetched it INR 28.67 billion in the last fiscal year. Hindustan Aeronautics Limited (HAL) is an Indian public-sector aerospace and defence company, headquartered in Bangalore. Established on 23 December 1940, HAL is one of the oldest and largest aerospace and defence manufacturers in the world. HAL began aircraft manufacturing as early as 1942 with licensed production of Harlow PC-5, Curtiss P-36 Hawk and Vultee A-31 Vengeance for the Indian Air Force.
HAL currently has 11 dedicated Research and development (R&D) centres and 21 manufacturing divisions under 4 production units spread across India. HAL is managed by a board of directors appointed by the President of India through the Ministry of Defence, Government of India. HAL is currently involved in designing and manufacturing of fighter jets, helicopters, jet engines and marine gas turbine engines, avionics, software development, spares supply, overhauling and upgrading of Indian military aircraft. The HAL HF-24 Marut fighter bomber was India’s first indigenous fighter aircraft.
People all around the world have long been fascinated by air travel, and the Airbus A380 has been heralded as the future of commercial aviation. The A380 aspired to transform long-haul travel by providing passengers with unrivalled comfort and elegance because of its large size and remarkable capacity. Despite its initial promise, the A380 faced a number of issues that prevented it from becoming a standard in airline fleets.
The Airbus A380's Rise and Fall
Initial Hopes and Lofty Aspirations
There are numerous aircraft that have left an everlasting impression on the world. The Airbus A380 is one such aircraft. It debuted in 2005 as a technological marvel that promised to revolutionize air travel and enthralled both airlines and customers. Despite its early enthusiasm and lofty goals, the A380 never attained the degree of success that Airbus had hoped for. Its popularity has declined further in recent years, with the COVID-19 epidemic exacerbating the situation. Qantas, one of the world's largest airlines, has announced the future of the A380 in its fleet, providing insight into the industry's direction.
Obstacles and Setbacks
Throughout its lifespan, the A380 experienced a number of noteworthy obstacles. One of the major challenges was the limited number of airports that could accommodate such a huge aircraft. The A380's operational flexibility was hampered as a result, making it less enticing to carriers. Furthermore, the global financial crisis of 2008, as well as rising fuel prices, decreased demand for the superjumbo. Airlines began favouring smaller, more fuel-efficient aircraft that provided greater flexibility and cost benefits.
The COVID-19 Pandemic's Impact
Airlines' Response and A380 Storage
The COVID-19 pandemic, which emerged in 2020, had a significant influence on the aviation sector. As travel restrictions were enforced across the world, airlines were obliged to ground a large number of their fleets. The A380 was particularly susceptible due to its high operational expenses and lack of demand. Many airlines stored their A380s for an extended period of time in order to reduce the cost burden and uncertainty posed by the epidemic.
Shifting Market dynamics
The pandemic transformed the aviation scene, with travellers favoring shorter flights and more direct routes. The A380 was further marginalized by this shift in demand since its high capacity was less suited to the shift in market conditions. Airlines began looking into fleet renewal options, seeking smaller, more fuel-efficient aircraft with better operational flexibility. The A380's future became more dubious.
Qantas' CEO Announcement
Vanessa Hudson, Qantas' next CEO, made an important declaration in light of the shifting market landscape and the challenges posed by the A380. Hudson indicated during the International Air Transport Association's Annual General Meeting in Istanbul that Qantas' A380 fleet will be retired over the following decade. This decision represents the airline's strategy shift towards more efficient and environmentally friendly aircraft alternatives. The announcement came during a conversation about intentions to sell 24 widebody aircraft, with Hudson noting, "One thing we are hearing from speaking to manufacturers and other airlines is that there is significant demand for widebodies." Qantas currently has seven A380s in commercial service, according to Australian Aviation: VH-OQB, VH-OQD, VH-OQH, VH-OQK, VH-OQJ, VH-OQG, and VH-OQL. Three of its superjumbos, VH-OQC, VH-OQA, and VH-OQI, are now undergoing cabin upgrades in Abu Dhabi.
The Future of Qantas' A380
The decision by Qantas to retire its A380s marks a new chapter in the airline's fleet plan. The airline plans to replace these superjumbos with next-generation, fuel-efficient aircraft that are more environmentally friendly. This decision follows a wider industry trend in which airlines want smaller, more adaptable aircraft that can react to shifting market needs.
Prospects for the Industry and Future Retirements
The decision by Qantas raises concerns about the A380's future in the airline sector. With other airlines facing comparable issues and considering fleet modernization, the possibility of further A380 retirements grows. While the A380 will continue to service certain routes for the time being, industry analysts believe that its overall presence will gradually shrink as airlines convert to more efficient and economically feasible alternatives.
The Airbus A380, once envisioned as the pinnacle of air travel, has endured multiple challenges during the course of its existence. The COVID-19 outbreak exacerbated its already dwindling popularity, prompting airlines like Qantas to declare their intentions to abandon their A380 fleet. While the A380 will be remembered for its contributions to aviation history, its days as a prominent aircraft are numbered. The industry's emphasis has turned towards smaller, more efficient planes that provide greater flexibility and sustainability.
With Inputs from Australian Aviation
Qatar Airways, known for its world-class service and dedication to creating outstanding travel experiences, is expanding its summer operations by operating its largest aircraft, the Airbus A380, to Paris Charles de Gaulle Airport (CDG). This smart decision intends to accommodate the peak summer season's increased demand while also providing travellers with exceptional comfort and elegance throughout their journey.
Summer Operations at Qatar Airways
Qatar Airways, as a prominent global airline, is always striving to optimize its operations in order to meet the changing travel patterns and preferences of its passengers. The summer season, which is marked by increased vacation travel and holiday locations, experiences a substantial increase in air travel demand. Qatar Airways utilizes many techniques to manage this influx, including the deployment of larger aircraft and the adjustment of flight schedules.
The Airbus A380: Qatar Airways' Flagship Aircraft
As Qatar Airways' flagship aircraft, the Airbus A380 holds a unique position in its fleet. The A380 establishes new norms in aviation excellence with its tremendous capacity and exceptional passenger experience. Qatar Airways takes pride in providing its clients with the highest level of comfort, sophistication, and technological innovation, and the A380 perfectly represents these principles.
Qatar Airways' Decision to Operate the A380 to Paris CDG
Paris CDG, one of Europe's busiest airports, acts as a gateway to France and connects travellers to destinations all over the world. The decision by Qatar Airways to operate A380 flights to Paris CDG arises from the airport's importance as a major travel hub. The airline's goal is to provide customers with a pleasant and seamless flight while capitalizing on the high demand for travel to and from Paris. The A380 has a seating capacity of 517 passengers, including First, Business, and Economy classes, allowing Qatar Airways to dramatically expand the number of available seats, allowing more customers to enjoy the airline's outstanding service and seamless travel experience.
Flight Schedule and Frequency
Qatar Airways will begin operating the Airbus A380 on Monday, Friday, Saturday, and Sunday flights between Doha and Paris CDG starting July 1st. This enhanced schedule offers customers additional alternatives for comfortably planning their vacations and coincides with Qatar Airways' commitment to flexibility and customer satisfaction. Travellers may now select from a broader choice of departure dates while still maintaining seamless connectivity to their final destinations.
Improved Passenger Experience
Passengers flying on Qatar Airways' Airbus A380 to Paris CDG can enjoy unrivalled comfort and elegance. The A380 features cabins, captivating décor, and cutting-edge services, all of which contribute to a genuinely unique flying experience. Every traveller may experience a voyage adapted to their tastes and needs, from sumptuous First-Class suites to comfortable lie-flat Business Class seats and smartly constructed Economy Class cabins.
Advantages of Flying on an Airbus A380
Flying aboard the Airbus A380 has various benefits that enhance the trip experience. The innovative air circulation systems on board guarantee a pleasant and healthy cabin atmosphere, reducing travel fatigue. Furthermore, the A380's quiet engines and cutting-edge technologies greatly minimize noise and vibrations, giving passengers a pleasant and peaceful journey.
Qatar Airways' choice to use the Airbus A380 on flights between Doha and Paris CDG during the busy summer season demonstrates the airline's dedication to satisfying customer demand and offering an extraordinary travel experience. Passengers may look forward to the A380's comfort, luxury, and cutting-edge technology, as well as the enhanced flight schedule and greater seat capacity. Qatar Airways' A380 flights to Paris CDG, whether for business or pleasure, offer an amazing voyage.
The drone sector in India is rapidly expanding, with applications in agriculture, infrastructure, surveillance, and delivery services. As the demand for drone services grows, the necessity for well-trained drone pilots becomes critical. Recognizing this requirement, Airbus developed a thorough training programme to help aspiring drone pilots improve their skills and capabilities.
Overview of the Training Course
The drone industry in India is quickly growing, creating new opportunities in a variety of industries. With the growing need for competent drone pilots, Airbus, a well-known aerospace corporation, has taken an important step towards satisfying those demands. Airbus will provide a five-day drone pilot training course at their Bengaluru Training Centre beginning June 26, 2023. Airbus' drone pilot training course will span five days and be held at the Airbus Training Centre in Bengaluru. The course has been approved by the Directorate General of Civil Aviation (DGCA), guaranteeing that it complies with aviation regulations and safety requirements.
"Building on Airbus' growing presence in delivering high-quality state-of-the-art pilot and maintenance training in India, a broadening of the scope into drone training is a demonstration of our commitment to supporting the upskilling of India's aviation infrastructure development," Laurie Alder, Head of Customer Services, Airbus India, and South Asia, said of the launch. We think that this training will equip aspiring drone pilots in the country with industry-specific skills and knowledge of safe drone operations, allowing them to advance their careers in this quickly increasing sector."
The training course includes both theoretical and practical courses. Theoretical training will be provided by DGCA-approved Airbus instructors on topics such as drone rules, basic concepts of flight, ATC protocols, maintenance, operations, and aerodynamics. These training sessions provide students with the solid foundation of knowledge required to operate drones safely and efficiently. The training includes flight sessions where participants acquire hands-on experience with drone operation in addition to the theoretical component. They study different flight manoeuvres, precision landing, obstacle avoidance, simulator training, and practical flying lessons under the supervision of professional instructors at an Airbus-approved facility in Bengaluru, where drones will be provided by Airbus. On successful completion of the course, students will receive an Airbus certificate. Candidates who completed Class 10 and are between the ages of 18 and 65 are eligible to apply for the programme. They must also possess a valid Indian passport and a medical certificate of fitness for them to undergo training and operate the drones.
Advantages of the Training Course
The Airbus drone pilot training course has a number of advantages for both prospective drone pilots and the industry as a whole. The training provides participants with the competence needed to operate drones successfully and ethically by improving their abilities. This skill adds to the overall safety and efficiency of drone operations in India. Furthermore, the availability of skilled drone pilots answers the expanding drone sector's talent demands. As more businesses adopt drone technology, the demand for competent pilots grows. The Airbus training course is critical to closing the skill gap and guaranteeing a consistent supply of qualified workers in the drone sector.
India's Drone Industry Expands
In recent years, India's drone business has grown significantly. The government has implemented progressive legislation and regulations to encourage the use of drones in a variety of industries. Drones are revolutionizing old practices and throwing up new opportunities in everything from agriculture and logistics to surveillance and filmmaking.
The Importance of Drone Training in the Micro and Small Category
The Airbus training course focuses on commercial drones in the micro and small categories. These drones are often lightweight, adaptable, and simple to control, making them appropriate for a variety of businesses. Airbus meets the particular needs and aspirations of the Indian market by providing specialized training for micro and small category drones.
The Airbus drone pilot training course in India is a crucial step towards satisfying the country's burgeoning drone sector's talent demands. Airbus helps prospective drone pilots with the skills and knowledge needed to flourish in their jobs by delivering thorough theoretical and practical training. As India adopts drone technology, the training course is critical to ensuring safe and effective drone operations in a variety of businesses.
With Inputs from Airbus
Japan Airlines (JAL) made a phenomenal announcement in November 2022 that sent ripples throughout the aviation industry. Starting in April 2024, the renowned airline desires to launch Airbus A321 Passenger to Freighter (P2F) cargo flights. This development marked a big step forward in JAL's ongoing efforts to optimize and grow its cargo operations. As a result of their dedication, the first aircraft planned for JAL has begun its conversion process in Singapore.
Japan Airlines (JAL): Background
Before we delve into the recent announcement, let us take a minute to appreciate Japan Airlines' (JAL) heritage and prominence. JAL, founded in 1951, has developed into one of the world's premier airlines, renowned for its dedication to excellence and client satisfaction. JAL has prioritized passenger services throughout the years but has also recognized the need for a robust freight network to meet the shifting needs of industries across the globe.
Airbus A321 P2F Cargo Flights Announced
In 2015, Airbus announced the P2F conversion programme for the A320 and A321 in collaboration with ST Engineering and Elbe Flugzeugwerke (EFW). The first modified A321P2F flight took place in January 2020, and the aircraft was afterwards handed over to Qantas (QF). The vessel can transport 14 full-size cargo containers on its main deck and up to 10 on its lower deck. It can carry a payload of up to 27 tons. JAL announced the introduction of Airbus A321 P2F cargo flights to further enhance their cargo capabilities. This strategic decision corresponds with the increasing need for efficient and environmentally friendly freight transportation options. JAL intends to extend its cargo network and provide bespoke services to satisfy the increasing needs of diverse sectors by using the adaptability of the Airbus A321 aircraft.
Commencement of Conversion Work in Singapore
The first aircraft earmarked for JAL's Airbus A321 P2F cargo fleet has begun its conversion process in Singapore, making their ambition a reality. Singapore, known for its expertise in aircraft modifications, is an appropriate location for this huge operation. Skilled engineers and technicians are methodically converting the passenger aircraft into cutting-edge cargo, ensuring that it meets severe safety and operational criteria. The work is being done in collaboration with Airbus by ST Engineering Aerospace. The aircraft (MSN4173) is the first of three ordered for the modification. Qatar Airways (QR) formerly operated it. Before the November announcement, two aircraft had already been delivered, and the third came in February.
The flights will be operated by JAL in collaboration with Yamato Holdings, a Japanese logistics company. The airline will operate four domestic flights from Tokyo (NRT/HND) to Kitakyushu (KKJ), Sapporo (CTS), and Okinawa (OKA), as well as a link between OKA and KKJ. Each day, there will be 21 flights. The aircraft have been scheduled to operate in Yamato Transport colors. It is the company's first foray into air freight delivery since it presently relies on road, rail, and ferry transit. The IAE V25000-powered jets' conversion work is planned to be finished by the middle of September, with crew training beginning in November.
Benefits of Conversion
Japan Airlines (JAL) will benefit substantially from the conversion of Airbus A321 aircraft into freighters. For starters, this conversion enables JAL to maximize asset utilization by reusing passenger jets that may have reached the end of their commercial service life. JAL extends the life of these aircraft by transforming them into freighters, allowing them to carry more cargo. Second, the P2F conversion of the Airbus A321 provides greater operational freedom. These cargo aircraft can land at airports with shorter runways, allowing JAL to expand its worldwide reach. Furthermore, the A321 P2F modification allows JAL to move cargo more efficiently because the aircraft is built to accommodate both bulk and containerized cargo, offering versatility and agility to fulfil various client requests.
Increased Flexibility and Efficiency
One of the most noticeable benefits of the Airbus A321 P2F conversion is the increased efficiency and flexibility it provides to JAL's cargo operations. The ideal size of the A321 enables cost-effective operations on routes with modest cargo demand. Furthermore, the aircraft's fuel economy contributes to a more environmentally friendly approach to freight transportation, which is consistent with JAL's commitment to sustainability. JAL can cater to a variety of cargo categories because of the flexibility provided by the A321 P2F conversion, including perishable items, e-commerce cargoes, and specialized equipment. JAL's versatility makes it a favored cargo carrier for a wide range of businesses, guaranteeing that their cargo requirements are addressed with the highest care and efficiency.
Potential Obstacles and Considerations
While the Airbus A321 P2F conversion offers various benefits, it is critical to recognize potential obstacles and concerns. Maintenance expenses, regulatory compliance, and market changes must all be carefully controlled to maintain JAL's cargo business' long-term viability. JAL can address these difficulties proactively by regularly monitoring and adjusting to industry developments and client expectations, allowing them to preserve their competitive advantage in the cargo market.
Japan Airlines' debut with Airbus A321 P2F freight flights ushers in a new chapter in the company's history. JAL displays its commitment to innovation and answering the increasing demands of the cargo market with the start of conversion work in Singapore. The addition of modified A321 freighters not only enhances JAL's cargo network but also positions the airline as a dependable and long-term partner for enterprises throughout the world. JAL's transformational project aims to develop a more efficient, flexible, and customer-centric cargo operation that contributes to the growth and success of industries globally.
With Inputs from AirwaysMag
As per sub-rule (3) of Rule 134 of the Aircraft Rules, 1937, no air transport service, other than a scheduled air transport service or an air transport service to which the provisions of sub rule (1) or (2) of rule 134 apply, shall be operated except with the special permission of the Central Government and subject to such conditions as it may think fit to impose. Further, Rule 134A, stipulates that no air transport service, other than a scheduled air transport service, shall be operated by an Indian air transport undertaking unless it holds a Non-Scheduled Operator’s Permit (NSOP) granted by the Central Government. The power to issue the NSOP is delegated to the Director General of Civil Aviation (DGCA) and to the Joint Director General of Civil Aviation.
Non-Scheduled air transport service means an air transport service, other than a scheduled air transport service, being operated for carriage of passengers, mail and goods, and includes charter operations.
Non-scheduled air transport service in India is divided into non-Scheduled Commercial and non-Commercial Categories. The carriage of passengers by a non-scheduled commercial 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. Non-commercial operators are restricted to use aircraft for the individual owners’ requirements.
Requirements for NSOP Applicant
The procedure and guidelines for issue of a Non-Scheduled Operator’s Permit are listed in applicable Air Operator Certification Manual (CAP3300 (for aeroplanes)/ CAP 3400 (for helicopters)). The guidelines and requirements under CAP 3400 are similar, if not the same as CAP 3300.
Some of the key eligibility and procedural requirements for an NSOP applicant are as follows:
(a) The applicant should be a citizen of India or a company or a body corporate with:
i. Its registered office and principal place of business within India:
ii. its chairman and at least two-thirds of its directors are citizens of India;
iii. its substantial ownership and effective control is vested in Indian nationals.
Note: Foreign Direct Investment for obtaining a Non-Scheduled Operations Permit with FDI up to 74% and investment by Non-resident Indians (NRI) up to 100% is allowed through automatic route and for Helicopter services/seaplane services, wherein FDI up to 100% is allowed through automatic route subject to satisfaction of conditions of Board of Directors and the substantial ownership and effective control of the management
(b) The applicant shall be in possession of at least one aircraft, either by outright purchase or on lease (without crew), which shall be registered in India and shall have a valid Certificate of Airworthiness in Normal Passenger Category.
(c) The Applicant shall have a minimum paid-up capital as given below:
Minimum Paid Up Capital (Rs. in Crores)
|Upto 2 aeroplanes/helicopters||2.00|
|Between 3 and 5 aeroplanes/helicopters||5.00|
|Between 6 and 10 aeroplanes/ helicopters||10.00|
|Above 10 aeroplanes/helicopters||15.00|
(d) The imported aeroplane/helicopter for non-scheduled operations shall not be more than 15 years in age or shall not have completed 75 percent of its design economic life or 45,000 pressurisation cycles whichever is earlier. However, this requirement will not be applicable for Indian registered aircraft maintained in accordance with DGCA requirements.
(e) The following manuals in English (2 copies each) must accompany the application:
i. Operations Manual (individual manuals and items listed below form part of the operations manual)
ii. Safety Management Systems Manual
iii. Training Manual
iv. Security Manual
v. Route Manual
vi. Dangerous Goods Manual
vii. Aircraft Flight Manual
viii. Master Minimum Equipment List and MEL
ix. Maintenance Control Manual
x. Maintenance Schedule in respect of each Aircraft
xi. Weight and Balance Manual
xii. Safety and Emergency Procedures Manual
xiii. Flight Safety Manual
xiv. Ground Handling Manual
xv. Any other Manual produced by the Manufacturer in respect of each Aircraft
xvi. Normal and emergency checklist
xvii. Passenger briefing card
xviii. Runway analysis data
xix. EDTO Manual (if required)
xx. CAT II/ CAT III Manual (if required)
(f) The applicant shall provide details/CVs of the following proposed post-holders:
i. Accountable Manager
ii. Director Flight Operations
iii. Director Engineering & Maintenance
iv. Director Quality Assurance
v. Director Safety Management System
vi. Director Flight Safety
vii. Director Training
viii. Director Security
ix. Director Cabin Safety – if applicable
x. Director of ground Operations
xi. Chief pilot of each fleet
NOTE: The above requirements are similar to that of scheduled carriers. Some concession has been given to operators having 3 or less aircraft where some limited positions may be combined. However, the Director Flight Safety shall be an independent functionary reporting directly to the Accountable Manager only.
(g) The applicant shall have sufficient number of pilots and cabin crew (if required) under its own employment. In case of foreign pilots, the applicant shall apply for their Security Clearance in the prescribed format. The pilots holding licences issued by other contracting States shall be permitted to fly only after obtaining Foreign Aircrew Temporary Authorisation (FATA) from DGCA.
The certification process involves five distinct phases as stated below:
(a) Pre-application - During this phase, the applicant conducts initial studies, prepares plans, makes inquiries from the DGCA in regard to the opportunities available under the existing air services agreements and seeks advice as to the validity of different proposals. The prospective applicant at this stage is required to submit a statement of intent to the DGCA outlining the proposal and apply to Ministry of Civil Aviation (MoCA) for issuance of NOC (assessment concerning the financial, economic and legal aspects). On the issuance of NOC and the request of proposed operator thereafter, the DGCA arranges for a pre-application meeting.
(b) Formal application - On completion of pre-application phase if the applicant desires to proceed further then the applicant is required to submit the complete application as per the applicable Air Operator Certification Manual to the DGCA together with the fees and relevant documents to support the intended operation and this will constitute initiation of the formal application phase. The DGCA will then make a formal assessment of the completeness of the applicant’s proposal and invite the applicant for a Formal Application meeting where the details relating to the certification process would be formally discussed. Security clearance from MoCA/Ministry of Home Affairs (MHA) is a pre-requisite for issuance as well as continuation of NSOP and the NSOP would be issued only after the receipt of security clearance from MoCA/MHA. Denial/Revocation of security clearance by MoCA/MHA at any stage would result in closure of the process for issuance of NSOP.
(c) Document evaluation - During this phase, the DGCA will undertake a detailed scrutiny of the applicant’s manuals and other documents, which accompanied the formal application. The documentation must be complete, accurate and current to satisfy the DGCA’s requirements. Qualifications and experience of the nominees for Designated Post holders will be evaluated and the designated post holders will be interviewed. Approval/Acceptance for the same will be granted. There will be series of discussions between the DGCA and the approved/accepted post holders of the applicant at this stage in regard to establishing the validity/ acceptability of the applicant’s proposals. It should be noted that the documents shall reflect precisely the mode and manner in which the applicant intends conducting the proposed operations and once approved, they shall form a part of the understanding between the DGCA and the operator in regard to future functioning of the operator.
(d) Demonstration and Inspection prior to certification - During this phase, the applicant needs to demonstrate to the DGCA that the applicant is in a position to conduct the proposed operations in accordance with the procedures detailed in the documents/ manuals reviewed during the previous phase utilizing the personnel/ facilities/ equipment identified in the formal application. Aircraft, maintenance facilities and arrangements will be inspected. Training facilities, programmes and training personnel will be evaluated. Company’s organizational structure, channels of communication, delegation of powers, financial strength and sources of funding will be subjected to detailed scrutiny to ensure that the company has sufficient resources, effective arrangement and control to satisfy its obligations. Facilities for flight operations, ground handling, facilities and services for passenger, baggage and cargo handling including dangerous goods and security arrangements would be evaluated. Flight, cabin and technical crew, operations and maintenance staff, flight operations officers, examiners/ flight engineers and load/ trim personnel, as applicable, will also be assessed. If the DGCA is satisfied with the above arrangements, proving flight(s) will be conducted to one or more destinations of intended operations, as determined by the DGCA. This phase may reveal the need for some operational changes, which in turn may require the applicant to make amendments to the documents originally submitted. All elements must be satisfactorily completed before proceeding to the certification phase. During this phase, administrative action to formally approve the, the Aircraft, facilities and procedures specified in the Operations Manual, CAME, Training & Checking organization will also be undertaken.
(e) Certification - When all the previous phases have been satisfactorily completed, the DGCA will issue the Air Operator’s Certificate/Permit and the associated Operations Specifications.
Reasons for slow growth of non-scheduled air transport service in India
Following are the reasons that can be attributed to the slow growth of non-scheduled air transport in India:
(a) Cost Implications – as the certification standards are similar to those required by scheduled operators, each non-scheduled operator has to employ individual manpower, recruit individual post holders and have exclusive infrastructure to meet the certification standards. This has serious cost implications, especially for small operators.
(b) Documentation - DGCA approved documentation (which includes twenty manuals) forms a large part of the certification process and every operator has to do this individually which is very time and cost consuming.
(c) Individual contracts - Each operator has to have individual contracts with the vendors (for fuel, training spares etc.) which restricts volume based discounts and drives up the costs.
(d) Engineering and Maintenance - Airworthiness compliance rules necessitate approved individual documentation, manpower, infrastructure, inventory control and various other requirements for each operator, again driving up the cost of operations.
(e) Pressure on Regulatory Authorities - From initial certification to continuing airworthiness, operational and security compliance, regulatory agencies like the DGCA, MHA, MOF etc are busy dealing with operators who have nearly identical regulatory requirements to follow. However, as it is a regulatory requirement, the application of each applicant has to be approved by various agencies which results in ineffective use of valuable government resources.
Aircraft management services and fractional ownership of aircraft
(a) Aircraft Management Services
In the most general terms, aircraft management refers to services related to managing and maintaining a business aircraft. Aircraft management as a concept simply means that the owner hands over his aircraft to an organisation, normally called an Aircraft Management Company, to handle all important functions required keeping the aircraft flying while adhering to all rules/regulations of the state. An aircraft management company usually provides the following services to the aircraft owner for a fee:
a. Aircraft Acquisition
b. Aircraft Certification and regulatory compliance
c. Flight schedule management
d. Ground handling
e. Aircraft Maintenance and spare procurement
f. Crew support and management
g. Charter Management
i. Finance, Revenue and Accounts
j. Insurance of aircraft and crew
Hence, the aircraft management company provides a single umbrella to the owner for the operation of his aircraft without the need to set up his own manpower and infrastructure incurring heavy costs. The aircraft management fee charged by the companies is much lower than the owner’s costs of having an individual set up. Aircraft management companies are widely prevalent in the US, Europe and other countries worldwide.
FAA allows aircraft management companies to enter into contracts with owners to manage their aircraft for a fee. For non-commercial operations, the rules are framed under FAR 91 and for commercial under FAR 135. FAR 91 is more liberal as far as regulatory compliance is concerned and the operational control largely remains with the owner. FAR 135 for commercial operations is stricter where the Aircraft Management Company is accountable to the FAA for regulatory compliance. The FAA oversight is far more restrictive and detailed under FAR 135. FAA also allows the aircraft to be simultaneously operated under FAR 91 and 135, depending upon the nature of a particular flight, whether commercial or non-commercial.
In India, presently there is no provision for a different owner operator and an owner cannot import an aircraft and hand it over to an aircraft management company directly. He has to import it under either a commercial or non-commercial category, complete the certification process, obtain an AOP and then sell it or lease it to the aircraft management company for them to manage the aircraft. Needless to say, in absence of any guidelines, the aircraft management company also has to have its own Air Operators Permit to be able to induct other aircraft and operate them. This whole process imposes huge costs on the owner, the primary reason why very few business aircraft are being imported into India.
(b) Fractional ownership of aircraft
Fractional Ownership of aircraft is an arrangement in which multiple owners share the use and costs of purchasing and operating an aircraft. Several management companies provide fractional ownership programs for aircraft, including NetJets, Flexjet, PlaneSense and AirSprint. Alternatively, owners can join together to purchase their own aircraft, independently of a larger management company.
With fractional aircraft, owners buy a share of an aircraft, rather than an entire aircraft. The price is pro-rated from the market price of a full aircraft. Owners then have guaranteed limited access to that plane or a similar one in the operator's fleet proportional to the size of the share. Fractional owners pay a monthly maintenance fee and an occupied hourly operating fee.
As defined in Title 14 of the Code of Federal Regulations (14 CFR) part 91 subpart K (part 91K) published by FAA, a fractional ownership program must contain all of the following elements:
- Single program manager who provides aviation expertise and management services,
For shared aircraft that are part of a large management company fleet, owners have access to the full fleet of planes and may upgrade or downgrade for specific flights.
The depreciation benefit of single asset (aircraft) are spread across multiple companies or owners. This way, all Buyers/Owners can potentially write off their investment (fractional investments) in aircraft within 5 to 6 years, making it attractive for Buyers/Owners. Availing of depreciation by fractional owners is allowed in USA and Europe, which has resulted in growth of huge fleets and thousands of jobs in the industry.
Globally, the largest non-scheduled aircraft operators follow the models of aircraft management and fractional ownership services. These two are the most popular and high growth models. Notable examples of such operators are – NetJets- 600+ aircraft, Lux Aviation- 225+ and Tag Aviation- 80+ that are spread across several State registries.
In USA, Regulation of Fractional Aircraft Ownership Programs and On-Demand Operations, 2003 defines fractional ownership programs and their various participants, allocates responsibility and authority for safety of flight operations for purposes of compliance with the regulations, and ensures that fractional ownership program aircraft operations maintain a high level of safety.
(c) Need for aircraft management services and fractional ownership in India
The Civil Aviation Minister during the Heli India Summit held in October 2022 had announced that civil aviation ministry will issue guidelines on fractional ownership model to promote charter flights as fractional ownership will lower the barrier on the cost of acquisition of helicopters and aeroplanes through pooled capital by multiple owners. The guidelines are yet to be made public and given the need to promote non-scheduled operators which have not grown much compared to the scheduled operations in India, there is an urgent need to lay down clear guidelines and rules for aircraft management companies and fractional ownership in India.
The benefits would be considerable as follows:
Lower cost of Aircraft and Operations: Much smaller upfront capital deployment and the owner(s) would not have to have his own expensive manpower and infrastructure to meet the current regulatory requirements. The aircraft management company can have multiple number and type of aircraft with common manpower and infrastructure, lowering operating costs.
Pooling of Resources: The aircraft management company would have a pool of manpower, including flying crew and Engineers, which it can use across the fleet, increasing efficiency, despatch reliability and safety. The company would have a single, cohesive organisational structure ensuring better safety oversight, coordination, communication and overall regulatory compliance.
Reduction in the Number of Operators: Aircraft management companies would significantly reduce the number of operators. This would limit the touch points for regulatory inspectors, reducing their work pressure and releasing them for better supervision and safety oversight.
Increase in Revenue: Aircraft management companies and fractional ownership would give a boost to aircraft purchase and import activity. This would serve to increase the tax revenue to the government significantly through much higher percentage of use by pooling and joint ownership of aircraft and from taxation revenues from allied services - airport usage charges, fuel offtake, MRO work etc.
(d) Changes required for aircraft management services and fractional ownership to be successful in India
A positive policy statement from MoCA is needed to encourage these business models to take root in India. And policy must be followed up downstream by adjusting regulatory frameworks in every government department that impacts functioning, be it MoF, customs, GST, DGCA, etc. Such action will also send a positive signal to foreign investors, lenders, finance/leasing companies, and international aviation services companies to enter India. Some of the regulatory changes that may be required are as follows:
Different owner operator concept to be recognised and issue guidelines in respect of fractional ownership – the concept of different owner and operator concept is required to be recognised and Air Operators Permit should only be required by the operator of the aircraft. Also, the guidelines for qualifying as a fractional ownership program, operational control responsibilities of fractional owners and Aircraft Management companies and regulatory safety standards for operations under fractional ownership programs, including management operations, maintenance, training, crewmember flight and duty requirements, and others should be issued.
Polling of resources - cross utilisation of the crew and resources of one operator by another operator to be allowed.
Paid up capital requirements to be reduced – capital requirements to be reduced to allow larger participation and ownership base.
No restriction on change in shareholding pattern – currently the DGCA requires that any change in the shareholding pattern of the Company of 10% or more than 10% shall not be effected, unless the security clearance is obtained from Ministry of Home Affairs through Ministry of Civil Aviation. This requirement should be deleted in order to allow open sale and purchase of fractional ownership.
GST on import - The GST of 28% on import of aircraft under non-commercial (private) category should be rationalised and made comparable with aircraft other than for personal use (currently attracting GST of 5%).
GST on purchase - Purchase of an aircraft within the country, i.e. and Indian registered aircraft being sold to an Indian buyer within the country attracts a GST of 5% if the end use is for commercial operations, however the GST is still 28 % in case the aircraft is purchased for private operations. This again is required to be rationalised and made comparable.
III. Income tax
Depreciation – amendment required in Section 32 of the Income Tax Act, 1961 to allow for shared depreciation of a single asset owned by multiple companies.
Minimum or no tax on sale of fraction shares – minimum or zero tax should be imposed on sale of fraction shares in the company owning the aircraft.