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June 2016

Aviation Update: April 2016

Aircrafts have the nationality of the State in which they are registered and this puts onus on the State of Registry to ensure that the aircraft on its civil register follow its laws and regulations even if it is operated outside its territory. CAR Section 3 Series C Part I that was revised in November 2009 stipulates that no Indian operator shall take any aircraft on lease or give any aircraft on lease to a foreign operator without permission from the Director General of Civil Aviation, who may take a decision regarding the need to conclude an agreement between Government of India and the State of Registry or the State of the Operator under Article 83 bis of the Convention. In the article “Leasing the “big bird” – regulatory guidelines”, we are trying to comprehend the legal framework governing aircraft leases in India, the various types of permissible lease options available and the control mechanism DGCA puts in order to meet with the requirements under Chicago Convention and the domestic regulations. Even the requirement of aircraft leasing agreement has been considered, which is generally negotiated between the Registered Operator of the aircraft, the foreign operator intending to operate the aircraft overseas, State of Registry and State of the Operator. Once such an agreement is entered it has to be registered with ICAO. Currently, airlines are increasingly turning to operating leases wherein a leasing company bears the risk of any slump in their second-hand value. Companies do not find merit in spending cash to “own” fleet and instead prefer to take them on rent. This trend in aviation sector is ensuring the profitability but gradually making the business short-term. Though it may also ensure and become the most viable business option in the times to come, and then this model will ensure longevity and credibility not on the basis of ownership of aircraft but on the basis of consistency of service that it can provide.

April, 2016 April, 2016

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