Aviation Newsletter October 2024

In this October 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.

A. Key Updates - India

(a) Air India receives Directorate General of Civil Aviation's ("DGCA") approval for in-house aircraft interior modifications

October 28, 2024 - Air India, owned by the Tata Group, has received Design Organisation Approval ("DOA") from DGCA under Civil Aviation Requirements 21 ("CAR 21"), which authorizes the airline to independently modify the interiors of its aircraft. This makes Air India the first Indian airline to obtain such approval, a significant development in the airline's efforts to enhance its fleet management capabilities.

With the CAR 21 approval in place, Air India is now empowered to implement interior modifications more efficiently, without the need for external contractors. This comes as part of the airline's US$ 400 million refurbishment program aimed at updating 67 older aircraft. The program will initially target 27 narrow-body Airbus A320neo aircraft, followed by 40 wide-body Boeing planes, with upgrades including a modern three-cabin layout, new seating, carpets, curtains.

This move is aligned with Air India's broader strategy of operational self-reliance and efficiency. Additionally, it supports the airline's upcoming merger with Vistara, expected to be completed by the end of 2024, as Air India seeks to position itself as a world-class carrier.

Source: Air India

(b) Adani Airport Holdings Limited ("AAHL") incorporates Celeritas International FZCO in UAE

October 26, 2024- AAHL has incorporated a new entity, Celeritas International FZCO, in the UAE with an authorized capital of AED 100,000. The company will operate within the Jebel Ali Free Zone, though it has not yet begun business activities. AAHL holds a 74% stake in Celeritas, and the formation involves no related party transactions.

In addition, April Moon Retail Private Limited, a joint venture of AAHL, plans to acquire a 74% stake in Cococart Ventures Private Limited for Rs 200 crore. Adani Enterprises is looking to invest approximately Rs 80,000 crore this fiscal year, with Rs 50,000 crore earmarked specifically for airport projects. This strategic move aligns with AAHL's broader vision of expanding its footprint in the aviation and infrastructure sectors.

Source: Economic Times

(c) SpiceJet's significant settlements with aircraft lessors

October 25, 2024- SpiceJet has successfully settled a US$ 23.39 million dispute with Aircastle (Ireland) Designated Activity Company and Wilmington Trust SP Services (Dublin) Limited for a total of US$ 5 million. This settlement includes agreements regarding the treatment of certain aircraft engines. Additionally, the airline has resolved a separate dispute worth US$ 131.85 million with Irish aircraft lessor Babcock & Brown Aircraft Management, achieving an amicable settlement for US$ 22.5 million. These developments follow SpiceJet's recent fundraising of Rs 3,000 crore through a Qualified Institutional Placement ("QIP"). In another notable resolution, SpiceJet settled a longstanding US$ 4.5 million dispute with Shannon Engine Support Limited, agreeing to a reduced amount of US$ 2 million.

Source: Economic Times

(d) Central Board of Indirect Taxes ("CBIC") amends regulations for aircraft operators on passenger data reporting

October 24, 2024 - CBIC has introduced new regulations for aircraft operators that require them to submit passenger data both 24 hours before departure and at the wheels-off time. This change eliminates the previous option for operators to choose between the two reporting times. The move aims to tackle issues related to underpayment of goods and services tax ("GST") on canceled tickets, with economy class tickets subject to a 5% tax and business class tickets at 12%. Directorate General of GST Intelligence ("DGGI") has also found instances where airlines collected GST on last-minute cancellations but failed to pass that tax on to the government.

Source: Economic Times

(e) Abu Dhabi Investment Authority ("ADIA") to invest US$ 750 million in GMR Group

October 23, 2024 - ADIA is set to invest US$ 750 million in the debt of India's GMR Group, aiming to enhance GMR's capacity to support the growth of its airports business. This investment will help GMR reduce its pledged shareholding and refinance external debt.

ADIA's investment will be directed towards structured debt instruments of GMR Enterprises ("GEPL"), the holding company for GMR Group, which holds approximately 25% of GMR Airports. GMR Enterprises' total debt has risen nearly 4% year-on-year to 44.77 billion rupees (US$ 532.5 million). GMR Group Corporate Chairman Kiran Grandhi stated that this investment will facilitate the repayment of external debt, significantly strengthening GMR Airports' growth potential. India's domestic passenger traffic is projected to double to 300 million by 2030, positioning GMR to capitalize on this expanding market.

Source: Economic Times

(f) Central Government extends Ude Desh ka Aam Nagrik ("UDAN") scheme for 10 more years

October 21, 2024- Central Government has announced a ten-year extension of the UDAN scheme. It was launched on October 21, 2016, aiming to make air travel more affordable, particularly for underserved regions. The scheme operates on a market-driven model, where airlines assess demand and submit proposals. Key support mechanisms include Viability Gap Funding ("VGF"), waived landing charges, and a capped excise duty of 2% on Aviation Turbine Fuel ("ATF") for the first three years. State governments are also required to reduce VAT on ATF to 1% or less for ten years.

Since its inception, UDAN has operationalized 601 routes and enabled travel for over 1.44 crore passengers. The scheme has also contributed to the increase of operational airports in India from 74 in 2014 to 157 in 2024, with a target to reach 350-400 by 2047.

The extension is expected to stimulate economic growth and improve access to remote areas. The first UDAN flight took off on April 27, 2017, connecting Shimla to Delhi.

Source: Press Information Bureau

(g) India set to become a leader in sustainable aviation fuel ("SAF") production

October 21, 2024 - India is poised to emerge as a significant player in the global SAF market, with projections indicating a production capacity of 8-10 million tonnes annually by FY2040.This ambitious target aims to surpass the domestic demand of 4.5 million tonnes needed for a 15% blending mandate across all flights, positioning India as a leading SAF exporter. To achieve this, an estimated investment of INR 6-7 lakh crore (US$ 70-85 billion) will be required, which is expected to reduce carbon emissions by 20-25 million tonnes annually and create between 1.1 and 1.4 million jobs across the value chain.

Deloitte's analysis highlights that India's surplus of 230 million tonnes of agricultural residue will be a vital resource for SAF production, particularly through the Alcohol-to- Jet technology. Additional feedstocks, including municipal solid waste and used cooking oil, along with alternatives like sweet sorghum and seaweed, are also identified as key contributors.

Source: Deloitte, Green Wings: India's Sustainable Aviation Fuel Revolution in the Making Report

(h) India's aviation sector to require over US$ 170 Billion by 2030 for expansion

October 15, 2024- India's aviation sector will need to invest more than US$ 170 billion by 2030 to support record aircraft orders and enhance airport capacity, according to a report by S&P Global Ratings. As one of the world's fastest-growing aviation markets, domestic passenger traffic is expected to double to 300 million, with international flight traffic projected to more than double as well.

Indian airlines have placed unprecedented orders for 1,700 aircraft from Airbus and Boeing, while authorities aim to double the number of airports to build global aviation hubs that can compete with Singapore, Dubai, and Doha. S&P Global estimates that US$ 150 billion will be required for aircraft orders, and an additional US$ 24 billion for building and expanding airports.

Source: S&P Global

(i) Adani Airport Holdings Limited ("AAHL") to invest Rs 1,300 Crore in Thiruvananthapuram International Airport Expansion

October 11, 2024 - AAHL has announced Rs 1,300 crore investment to expand Thiruvananthapuram International Airport ("TRV") by 2027. The initiative, revealed at the TRV Growth Conclave, is called "Project Anantha" and aims to significantly enhance airport facilities.

The new terminal will increase from 45,000 to 165,000 square meters, allowing TRV to serve nearly 12 million passengers annually. Planned features include a plaza, a hotel, and improved parking, alongside a new Air Traffic Control tower and an international cargo complex. Construction is set to begin this financial year, marking a key development for the airport, which was previously operated by the Airports Authority of India.

Source: Economic Times

(j) Akasa Air and Rolls-Royce announce engine leasing agreement

October 11, 2024 - Akasa Air has entered into a partnership with Rolls-Royce & Partners Finance ("RRPF") Engine Leasing (India) IFSC Pvt Ltd, formalized on September 30, 2024. This agreement involves a long-term sale and leaseback solution for two LEAP-1B engines, set for delivery in October 2024.

This transaction marks RRPF's inaugural deal through its new entity at Gujarat's GIFT City, reflecting its strategy to enhance its presence in India's aviation finance sector. For Akasa Air, the LEAP-1B engines will improve operational efficiency, aligning with sustainability goals while supporting the airline's growth trajectory as it seeks to expand its market share in the competitive aviation landscape.

Source:100 Knots

(k) Government to invest over Rs 92,000 crore in airport expansion

October 8, 2024 The Indian government is set to invest over Rs 92,000 crore in the construction of new airports and the expansion of existing facilities. Civil Aviation Minister Ram Mohan Naidu announced that India aims to have 200 operational airports by 2025, with an additional 200 planned over the next 20-25 years. This initiative is designed to meet the growing demand for air travel driven by India's large population and increasing economic activity.

During an event organized by the French Aerospace Industries Association ("GIFAS"), Mr. Naidu highlighted plans to develop new airports in underserved regions and enhance infrastructure in major metropolitan areas. Indian airlines are also scaling up operations, adding approximately 9% more capacity in 2024, with total seat availability expected to reach 240 million across domestic and international routes.

Source: Aviation space

(l) DGCA issues safety advisory for Boeing 737 operators

October 7, 2024- DGCA has issued a safety advisory to Indian airlines operating Boeing 737 aircraft, including Air India Express, Akasa Air, and SpiceJet, due to potential risks associated with faulty rudder control systems. This directive follows concerns raised by the U.S. National Transportation Safety Board ("NTSB") regarding Collins Aerospace SVO-730 Rudder Rollout Guidance Actuators. Airlines are required to conduct mandatory safety risk assessments and inform flight crews about the possibility of rudder issues. Additionally, the DGCA has temporarily suspended CAT III B approach and landing operations. These measures aim to enhance safety following the NTSB's identification of a manufacturing flaw that affects over 350 actuators.

Source: DGCA Website

(m) DGCA approves Air India Express-AIX Connect ("AIXC") merger

October 1, 2024- DGCA has granted regulatory approval for the merger of AIX Connect and Air India Express. Following this approval, all aircraft operated by AIXC have been transferred to the Air Operator Certificate ("AOC") of Air India Express. The Tata Group acquired both Air India and Air India Express (the latter being a fully-owned subsidiary of Air India) from the government in early 2022.

This merger sets a benchmark in Indian airline mergers, especially with the upcoming Air India-Vistara merger, which is scheduled to take place on November 12, 2024. The Tata Group will now operate two airlines- a low-cost carrier Air India Express and a full-service carrier Vistara.

Source: The Indian Express

B. Key International Updates

(a) Federal Aviation Administration ("FAA") finalizes rules for air taxi training and certification

October 22, 2024- FAA has finalized training and pilot certification regulations for air taxis, removing a key barrier to the deployment of electric vertical takeoff and landing ("eVTOL") aircraft. The FAA described the rule as essential for the safe introduction of these vehicles, with some companies targeting commercial flights as early as 2025. eVTOLs have generated considerable interest, leading to public offerings by companies like Joby Aviation and Archer Aviation. Following the announcement, Joby shares rose by 7%, and Archer's increased by 3%.

Source: Reuters

(b) International Civil Aviation Organization ("ICAO") announces increased compensation limits for international air travel

October 18, 2024- ICAO has announced significant increases in compensation limits for international flights under the Montreal Convention. These updates will be effective from December 28, 2024, addressing various issues, including death, injury, delays, baggage, and cargo.

The Montreal Convention, formally known as the Convention for the Unification of Certain Rules for International Carriage by Air, has been adjusted for inflation every five years, ensuring that compensation remains relevant. This marks the fourth review since the treaty's inception in 2003.

Key updates to liability limits include:

• Death or Bodily Injury: Increased from 128,821 SDRs to 151,880 SDRs (approximately US$ 202,500).
• Delay in Passenger Transport: Rises from 5,346 SDRs to 6,303 SDRs (about US$ 8,400).
• Destruction, Loss, Damage, or Delay of Baggage: Increased from 1,288 SDRs to 1,519 SDRs (around US$ 2,000).
• Destruction, Loss, Damage, or Delay of Cargo: Rises from 22 SDRs to 26 SDRs per kilogram (about US$ 35).

ICAO Secretary General Juan Carlos Salazar highlighted the importance of the Convention in safeguarding consumer interests and modernizing air travel practices, including the adoption of electronic tickets. ICAO has urged member states to implement the revised limits by December 28, 2024.

Source: ICAO Press Release

C. Significant developments

(a) IndiGo and Malaysia airlines announce codeshare partnership

October 16, 2024 - IndiGo and Malaysia Airlines have launched a codeshare partnership following MoU signed in April 2024. This agreement aims to enhance connectivity between India and Malaysia.

Malaysia Airlines will add seven new destinations in India, including Kolkata, Varanasi, and Patna, expanding its network to complement existing flights to ten major cities. Meanwhile, IndiGo will place its flight code "6E" on Malaysia Airlines' domestic routes from Kuala Lumpur, facilitating access to popular destinations like Penang and Langkawi.

Source: IndiGo website

(b) PDRL partners with Stratus LLC for drone technology

October 29, 2024 - PDRL has signed a memorandum of understanding ("MoU") with Russia's Stratus LLC to enhance drone technology solutions in India and Russia. The partnership will integrate PDRL's AeroGCS software with Stratus' UAV Prof Drone Simulator. This collaboration aims to bolster drone operations, particularly in India's agricultural sector, where PDRL holds a 70% market share. The alliance also opens doors for PDRL in the Russian UAV market, while Stratus benefits from advancements in India's drone sector.

Source: Economic times

D. Key Judicial Precedents

(a) Bombay High Court quashes data theft case against Ex-Go First Managing Director

October 29, 2024 - The Bombay High Court has quashed a data theft case against Wolfgang Prock-Schauer, the former managing director of Go First, stating that no offense was established. The court ruled that continuing proceedings would be unnecessary procedural formalities.

Prock-Schauer had sought to quash an FIR registered in February 2018 based on a complaint from Go Airlines India Ltd. The complaint alleged that he has sent confidential information to his personal email and formatted data on his iPad. The court noted that the accusations did not support a violation of the Information Technology Act, 2000 and emphasized that pursuing the case further would be unwarranted.

Source: Economic Times

(b) Supreme Court upholds Airports Economic Regulatory Authority ("AERA")'s appeals

October 18, 2024 - The Supreme Court has upheld the maintainability of appeals filed by the AERA challenging orders from the TDSAT regarding tariff imposition on Ground Handling Services ("GHS") and Cargo Handling Services ("CHS"). The bench, led by Chief Justice DY Chandrachud, ruled that the appeals are maintainable and instructed the registry to list them for hearing. AERA's challenge arose after TDSAT determined that AERA lacked the authority to impose tariffs on these services, classifying them as 'Non-Aeronautical Services' under the AERA Act 2008, which limits its regulatory powers.

Source: Live Law

(c) Supreme Court reserves judgment on Jet Airways Ownership Plea

October 16, 2024 - The Supreme Court has reserved its decision on the challenge by lenders of the cash-strapped Jet Airways against the NCLAT order that permitted the transfer of the airline's ownership to the Successful Resolution Applicant ("SRA"). The bench, comprising Chief Justice DY Chandrachud and Justices JB Pardiwala and Manoj Misra, heard the arguments from both sides.

The primary issue was the NCLAT's decision allowing the ownership transfer without the SRA paying the complete Rs 350 crores as stipulated in the approved Resolution Plan. The SRA was to pay a total of Rs 4,783 crores, with Rs 350 crores as the initial payment. The Supreme Court had previously set aside the NCLAT's August 8, 2023 decision that allowed the SRA to use a Performance Bank Guarantee ("PBG") as a substitute for the first tranche payment. The SRA was required to deposit Rs 150 crores into an SBI escrow account by January 31, 2023, or risk non-compliance with the resolution plan. The lenders argued for liquidation, stating that JKC failed to meet financial obligations, while the SRA's counsel raised concerns over the implications of potential liquidation and prior investments made.

Source: Live Law

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