Aviation Newsletter | September 2024

In this September 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.

Key Updates - India

(a) SpiceJet aims for 100 aircraft by the end of 2026

September 27, 2024 - SpiceJet has successfully raised Rs 3,000 crore through qualified institutional placement ("QIP"). The share sale which involved over 48.70 crore shares price at Rs. 61.60 each, attracted significant investments from major entities such as Societe Generale, Goldman Sachs (Singapore), Nomura Singapore, and Discovery Global Opportunity (Mauritius). Following the fund raise, SpiceJet has cleared all the GST dues along with employees' salary. The airline has also announced plans to expand its fleet to 100 aircraft by 2026. Currently, SpiceJet operates 21 aircraft.

Source: The Economic Times

(b) IndiGo appoints Isidro Porqueras as Chief Operating Officer ("COO")

September 26, 2024 - IndiGo has appointed Isidro Porqueras as its new Chief Operating Officer starting November 01. He will succeed Wolfgang Prock Schauer, the current President and COO of IndiGo. Isidro Porqeras has over 25 years of experience in different sectors of aviation such as operations, commercial, strategy, and finance.

Source: Economic Times

(c) Air India unveils USD 400 million refurbishment programme

September 17, 2024 - Air India has announced a significant USD 400 million refurbishment program to modernize 67 of its older aircraft, with a phased plan to revamp both narrow-body and wide-body jets. The program will commence with the overhaul of 27 narrow-body Airbus A320neo planes, followed by 40 wide-body Boeing aircraft. The first aircraft, VT-EXN, an A320neo, has entered the hangar and is expected to return to service by December 2024. Between three and four aircraft will be retrofitted monthly, aiming for full narrow-body fleet upgrades by mid-2025. Meanwhile, preparations for a complete interior overhaul of 40 legacy Boeing 787 and 777 aircraft are underway, with initial retrofitting slated for early 2025.

Source: Business Standard

(d) DGCA monthly report records drop in SpiceJet's market share

September 13, 2024 - DGCA has released its latest monthly report, revealing that SpiceJet's market share has plummeted to 2.3%, down from 5.6% in January. IndiGo remains the dominant player with 62.4%, followed by Air India at 14.7%.

Source: Economic Times

(e) India hosted second Asia- Pacific Ministerial Conference on civil aviation

September 12, 2024 - The first Ministerial Conference on Civil Aviation in the Asia-Pacific region was held in 2018 in Beijing, China. After being postponed due to the COVID-19 pandemic, the conference finally took place in New Delhi, India, from September 11 to September 12, 2024.

The event was co-hosted by the International Civil Aviation Organization ("ICAO") and the Ministry of Civil Aviation. During the conference, the Union Minister emphasized the importance of creating a conducive business environment in aviation, with policies supporting Maintenance, Repair, and Overhaul ("MRO") services, aircraft leasing, and indigenous manufacturing. Key steps taken by the government toward making India a global aviation hub was highlighted, including new MRO guidelines and permitting 100% foreign direct investment ("FDI") through the automatic route. The Union Minister also noted that by 2035, the Asia-Pacific region is expected to account for over 40% of global air traffic, with nearly 3.5 billion passengers traveling annually.

A significant milestone of the conference was the formal adoption of the Delhi Declaration, a comprehensive framework aimed at enhancing regional cooperation, addressing emerging challenges, and fostering sustainable growth within the civil aviation sector. ICAO's primary focus during the conference included long-term aspirational goals related to CO2 emissions, cybersecurity, crisis preparedness and response, advanced air mobility, new entrants, and implementation support.

Source: Press Information Bureau and ICAO website

(f) DGCA launches safety audit of flying training organizations

September 12, 2024 - DGCA has initiated a special safety audit of all flying training organizations ("FTOs") in India, following a series of recent incidents involving training aircraft. The audit, which aims to ensure compliance with aviation safety standards, will be conducted in three phases from September to November 2024 and will encompass 37 FTOs. The first phase will assess 11 FTOs this month.

This comprehensive evaluation will focus on various aspects, including safety standards, operational procedures, aircraft maintenance, and training curricula. The DGCA emphasized that maintaining high safety standards is crucial, stating that any lack of commitment to safety protocols will not be tolerated. This marks the first special audit since 2022, highlighting the regulator's ongoing efforts to enhance aviation safety in the country.

Source: Hindustan Times

(g) DGCA approves operating license for Rewa Airport

September 10, 2024 - Madhya Pradesh's Vindhya region is set to enhance its economic and regional connectivity with the DGCA granting an operating license to Rewa Airport. This new addition will bring the total number of operational airports in the state to six, including those in Bhopal, Indore, Jabalpur, Gwalior, and Khajuraho. The license allows for both passenger and cargo flights, promising to improve access to cultural and historical sites while boosting trade, employment, and tourism in the area.

Source: Economic Times

(h) Goods and Services Tax ("GST") council eases burden on foreign airlines by exempting import services from tax amid Rs.10,000 Crore notices

September 9, 2024 - During the 54th meeting of the GST Council, a significant exemption was announced for the import of services by foreign airline companies from related persons or their establishments outside India, provided these services are made without consideration. This decision is expected to boost global confidence in India's aviation sector.

The exemption offers major relief to overseas carriers, including British Airways, Lufthansa, Oman Air, Emirates, and Singapore Airlines, which had received notices from the Directorate General of Goods and Services Tax Intelligence ("DGGI") for alleged non-payment of taxes totalling Rs.10,000 crore. Revenue Secretary Sanjay Malhotra highlighted that this move aligns with the tax benefits Indian airlines receive abroad, easing compliance burdens for foreign carriers operating in India.

Source- Press Bureau of India

(i) Government will continue Udega Desh Ka Aam Nagrik ("UDAAN") scheme for 10 more years

September 9, 2024 - Ram Mohan Naidu, Civil Aviation Minister, announced that the government will extend its flagship regional air connectivity program, UDAAN, for an additional 10 years. He highlighted that the scheme has benefited over 1.4 crore passengers and facilitated 2.8 lakh flights, operating 583 routes across 157 airports nationwide. it was further emphasized that the goal is to develop 350-400 airports over the next 20-25 years.

Source: Deccan Herald

(j) Digi Yatra facility inaugurated at 9 more Airports

September 6, 2024 - The Digi Yatra Facility is a transformative digital initiative aimed at enhancing seamless, contactless, and paperless boarding at airports using Facial Recognition Technology ("FRT"). It was first launched at three airports, New Delhi, Varanasi, and Bengaluru. Since then, the total number of airports with this facility has increased to 24, including the recent addition of nine airports: Bhubaneswar, Coimbatore, Dabolim (Goa), Indore, Bagdogra, Ranchi, Patna, Raipur, and Visakhapatnam.

Source: Press Information Bureau

(k) DGCA invites comments on draft amendment for wet/damp leasing of aircraft

September 6, 2024 - DGCA has proposed stricter norms for wet-leased aircraft. Comments are invited by October 6, 2024, on the draft amendment to CAR Section 3 (Air Transport) Series C Part I Issue V, which specifies criteria for wet/damp leasing of aircraft by Indian operators. In a press release, the DGCA stated that the enhanced regulatory framework includes restricting wet/damp leases to countries with reliable safety oversight systems and standardizing DGCA surveillance of such operations.

Among the proposed changes, aircraft can only be wet-leased from ICAO contracting states that have an average effective implementation score of 80% or above, with a minimum of 70% in each area, covering personnel licensing, airworthiness, and operations.

Source: DGCA Website

(l) DGCA Issues guidelines for Vertiports to support electric Vertical Take Off and Landing ("eVTOL") Operations

September 5, 2024 - DGCA has issued guidelines for the development and operation of vertiports, designed for eVTOL aircraft. The guidelines cover essential infrastructure, visual aids for landings, battery charging requirements, and emergency preparedness measures. This move aims to enhance air mobility solutions in India and will facilitate the granting of site clearance and authorization for vertiport construction.

Source- DGCA Website

(m) Civil Aviation Minister K.R. Naidu indicates plans for indigenous aircraft manufacturing

September 4, 2024 - The government plans to establish a special purpose vehicle ("SPV") to advance aircraft manufacturing in India, with Hindustan Aeronautics Limited ("HAL") as a major player in the initiative. HAL has already manufactured a 119-seater aircraft. This SPV will include industry experts, technicians, and government representatives and will be responsible for the entire process of building indigenous planes while addressing existing gaps and challenges within India's current infrastructure.

Source: Economic Times

B. Key International Updates

(a) International Association of Machinists and Aerospace Workers ("IAM") members reject Boeing's contract offer amid ongoing strike

September 24, 2024 - More than 30,000 members of the IAM, who produce Boeing's top-selling 737 MAX and other jets in the Seattle and Portland areas, have overwhelmingly rejected a proposed contract. With 94.6% voting against the initial offer of a 25% pay increase and 96% approving a work stoppage, the strike reflects the workers' demand for a 40% raise, the first pay increase in a decade.

In a recent development, IAM leaders have also rejected Boeing's "best and final offer," which proposed a total pay increase of 30% over four years. Although this represents an improvement from the initial proposal, it still falls short of the union's demands and does not include the restoration of a traditional pension plan. Boeing set a deadline for acceptance, but union leaders announced they would not present the offer to their members for a vote after negotiations with federal mediators failed to yield an agreement. This rejection underscores ongoing tensions as the IAM's strike continues, significantly impacting Boeing's production capabilities and financial outlook. Aerospace analyst Cai Von Rumohr estimates that a prolonged strike could cost Boeing up to USD 3.5 billion in cash flow, drawing parallels to an eight-week strike in 2008 that resulted in USD 100 million in daily deferred revenue.

Source: Business Standard

(b) China Development Bank acquires 80 Airbus A320neo Aircraft

September 13, 2024 - China Development Bank Financial Leasing has announced the purchase of 80 Airbus A320neo planes, set for delivery between 2030 and 2032. This move aims to enhance fleet efficiency and align with sustainability goals, as the A320neo is known for its fuel efficiency and lower emissions. The aviation industry is currently facing supply chain challenges, impacting production and delivery timelines for new aircraft. This acquisition underscores a broader trend toward prioritizing fuel-efficient technologies in the sector.

Source: 100 Knots

(c) Alaska and Hawaiian airlines merger faces key regulatory review

September 7, 2024 - The U.S. Department of Justice ("DoJ") has completed its investigation into the proposed USD 1.9 billion merger between Alaska Airlines and Hawaiian Airlines without objections, marking a significant milestone for the airlines. The focus now shifts to the Department of Transportation ("DOT"), which will assess whether the merger is in the public interest, particularly regarding the transfer of international route authorities. Opposition from United Airlines complicates matters, raising concerns about potential job losses and fare increases, alongside a lawsuit filed against the merger.

Despite these challenges, the merger has garnered support from Hawaii's leadership, including Governor Josh Green, who highlights commitments to job protection and service expansion. The outcome of the DOT's review will be crucial in determining the future of this merger, as it could reshape the competitive landscape of the U.S. airline industry.

Source: 100 Knots

C. Significant developments

(a) Kalpataru Projects International ("KPIL") secures Rs. 2,774 crore in new orders

September 12, 2024 - KPIL and its subsidiaries have announced new orders worth Rs. 2,774 crore. This includes projects in Transmission & Distribution ("T&D") overseas, an EPC project for airport extension from the Airports Authority of India ("AAI"), and a Design & Build initiative for residential buildings in India. Manish Mohnot, MD & CEO of KPIL, highlighted that these orders strengthen the company's market position and enhance its order book.

With these recent wins, KPIL's year-to-date order intake has reached around Rs.9,800 crore, improving business visibility. As one of India's largest specialized EPC companies, KPIL works across various sectors, including power transmission, water supply, and urban mobility projects. The company currently operates in over 30 countries, maintaining a global presence in more than 70 nations.

Source: Economic Times

(b) GMR Airports acquires Fraport's 10% stake in Delhi Airport for USD 126 Million

September 09, 2024 - GMR Airports has acquired Fraport AG's 10% stake in Delhi International Airport Limited ("DIAL") for USD126 million, increasing its ownership to 74%. This move aligns with GMR's strategy to consolidate its core assets, as Fraport sought to divest due to limited control and valuation differences. Fraport, which has contributed significantly to the development of Delhi Airport over the past 18 years, will continue to support operations under an existing Airport Operator Agreement. The transaction is expected to conclude in the first quarter of 2025, pending approval from the Airports Authority of India and GMR shareholders.

Source: Fraport Website

(c) Air India Group has begun constructing a Major maintenance, repair, overhaul ("MRO") facility at Kempe Gowda International Airport

September 4, 2024 - Air India has announced the commencement of an MRO facility at Kempegowda International Airport in Bengaluru. This facility, spanning 35 acres, aims to enhance self-reliance in fleet maintenance and is expected to create over 1,200 job opportunities for skilled engineers. MRO will feature advanced maintenance technology and will include a Basic Maintenance Training Organisation to ensure a continuous supply of trained personnel for aircraft maintenance.

Source- Air India, Press release

(d) Rajiv Gandhi International Airport launches general aviation terminal for private aircraft users

September 2, 2024 - Rajiv Gandhi International Airport in Hyderabad has officially launched a state-of-the-art General Aviation Terminal specifically designed for private aircraft users. This facility aims to streamline operations for chartered flights, catering to the needs of business and personal travellers. The new terminal, covering 11,234 square feet, features a private entrance, dedicated parking, and comprehensive services including customs checks, security clearance, and bespoke lounges.

Source: HYD GMR Aero Enterprise Website

D. Key Judicial Precedents

(a) National Company Law Tribunate ("NCLT") issues notice to SpiceJet amid ongoing insolvency proceedings

September 24, 2024 - NCLT has issued a notice to SpiceJet in response to a plea from Techjockey Infotech, which claims a default of Rs. 1.2 crore for software services. The NCLT has directed SpiceJet to submit a reply, with the next hearing scheduled for November 14.

SpiceJet is currently facing several insolvency petitions from creditors, including Engine Lease Finance, which is claiming over USD 12 million (approximately Rs. 100 crore). Previously, the NCLT had rejected claims from Willis Lease Finance and Wilmington Trust, while SpiceJet settled with Celestial Aviation. The petitions from Aircastle and Alterna Aircraft remain pending, and both Wilmington Trust and Willis Lease Finance have appealed to the National Company Law Appellate Tribunal ("NCLAT") following their petition dismissals.

In a positive development, SpiceJet raised Rs. 3,000 crore through a share sale to qualified institutional buyers, intended to address its liabilities, including statutory dues totaling Rs. 601.5 crore as of September 15.

Source: The Economic Times

(b) NCLT Orders Go First's suspended Board to respond to Liquidation Notice

September 06, 2024 - The NCLT has mandated Go First's suspended board to file a response regarding the airline's impending liquidation within three weeks. This directive follows an application from Go First's Resolution Professional under Section 33(1) of the Insolvency and Bankruptcy Code ("IBC"), citing the absence of a viable buyer for the debt-ridden airline.

Go First's Committee of Creditors ("CoC") has already voted in favor of liquidation, reflecting the creditors' belief that further attempts at corporate insolvency resolution are no longer feasible. The airline has faced multiple insolvency petitions, with creditors such as Aircraft Finance and Engine Manufacturers involved. The next hearing is scheduled for the first week of October 2024, making this a critical moment for Go First and its stakeholders.

Source: 100 Knots

Contributors to the Newsletter:

• Sanjay Gupta, Partner
• Namita Das, Partner
• Abhay Goyal, Senior Associate
• Roshi Surele, Associate

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