Finance - Going Unnoticed

The BAOA is trying valiantly to change the attitude of the establishment towards civil aviation in general and business aviation in particular. However, it has a long way to go in convincing the government that civil aviation can contribute substantially to the economic prosperity of the nation.

There is general mystification about the expression general aviation with formal iterations and personal perceptions about its constituents varying. The Federal Aviation Administration (FAA) defines general aviation as “flights not conducted by the military or the scheduled airlines”. The International Civil Aviation Organisation (ICAO) does not relate to military aviation, but within the domain of civil aviation, its wisdom is universally acceptable. Beginning 1969, Annexes to the Convention on International Civil Aviation began making distinction between general aviation operations and those for commercial air transport. This trend was started by the Assembly for Annex 6, International Aeroplane Operations, clearly defining general aviation and commercial air transport. Numerous other ICAO documents have recorded similar distinctions designed to separate these two very different types of operation as follows: commercial air transport operation is an aircraft operation involving the transport of passengers, cargo or mail for remuneration or hire while general aviation operation is an aircraft operation other than a commercial air transport operation or an aerial work operation. International Aircraft Owners and Pilots Association (IAOPA) follow this framework. Incidentally, the European Joint Aviation Authority (JAA) does not include aerial work in the definition of general aviation.

In the Indian context, Civil Aviation Requirement (CAR) Sec 8, Series ‘O’, Part III, issued by the Directorate General of Civil Aviation (DGCA), defines general aviation operation as, “An aircraft operation other than a commercial air transport operation or an aerial work operation.” This definition is a replica of the one by the ICAO and excludes non-scheduled operations from the ambit of general aviation. While on definitional aspects, business aviation is the use of any general aviation aircraft for business purpose. As such, business aviation is a part of general aviation that focuses on the use of airplanes and helicopters for business-related travel. However, in the Indian context, the distinction between business use and non-scheduled operations has become diffused over time. This is due to the tax structure which is weighed heavily against private use of aircraft. Consequently, many business houses have obtained non-scheduled operator permit (NSOP) to avoid paying much higher rates of duty for import of aircraft for private or business use. Moreover, while the DGCA definition excludes non-scheduled operations from general aviation, many other organisations including airport operators, regard them as part of general aviation. Take the case of ‘general aviation terminals’ whose major use is by nonscheduled operators at the airports. In usage thus, non-scheduled operations tend to get included within general aviation, while at times business aviation is portrayed as being outside general aviation. There is further confusion inasmuch as most of the members of the Business Aircraft Operators’ Association (BAOA) are actually non-scheduled operators. For the purposes of this article, general aviation includes business aviation as well as non-scheduled operations.

Regulatory Framework

To begin with, the regulatory framework for general aviation in India is in need of a fresh look. In a report prepared by CAPA last year, Kapil Kaul, CEO India and Middle East, stated, “After almost eight years of continuous monitoring of the Indian aviation sector, it became apparent that despite the fact that the general aviation fleet is already significant in size, with 680 aircraft, little is known about it. Our initial enquiries found that fleet and traffic data was limited and unreliable. Only a handful of operators reported financials and grey areas abounded. The fact that the sector is highly fragmented, unstructured and under-funded, means that it has remained under the radar.”

A majority of the regulations in place are modifications of regulations originally designed for scheduled operations. Moreover, many of these are bureaucratic to the point of becoming obstructive in nature. There is no civil aircraft worth the name being produced in India and hence general aviation aircraft need to be imported. The importer’s travails commence with his application for import which is made, in the first instance, to the Aircraft Acquisition Committee (AAC) of the Ministry of Civil Aviation (MoCA). That committee is scheduled to meet once a month and so, if one misses one meeting, a month's wait lies ahead of one before one's application is considered by the committee. Occasionally, meetings get postponed/cancelled with resultant delays in import permissions. As an illustration, the committee has met only twice in the last four months (no meetings could take place in January and March). Applications for import are therefore not taken up for expeditious clearance usually taking up to nine months for the initial paperwork to be completed.

There is also the regulatory insistence that aircraft ownership and management/operational aspects are linked. This is one of the major reasons why fractional ownership did not take off in India. Aircraft operations involve huge costs and the numbers owned by individual entities are small. As per the DGCA website, a total of 136 non-scheduled operators have 400 aircraft while 244 aircraft are privately owned by 174 companies/individuals. In all, 310 owners operate a total of 644 aircraft, the average working out to two per company/individual. It would make economic sense to pool resources where possible so as to maximise utilisation and ensure long-term financial viability. However, each owner, including a single aircraft owner, is required to establish an independent full-fledged operations department to meet regulatory requirements. The situation is impossible, everybody recognises the danger therein, and circumventions rule the roost. Aircraft management companies exist all over the world and are acceptable to most national aviation regulators. BAOA has taken up a case with MoCA urging it to allow import of aircraft by companies/individuals in their own name and then leasing it to a nonscheduled operator who is much better equipped, manned and professionally competent to safely operate that aircraft.