Article 83 bis Leases in India : The Beginning of Foreign Registered Aircraft Operating in India?

CRITERIA FOR LEASING OF AIRCRAFT BY INDIAN OPERATORS

CIVIL AVIATION REQUIREMENT SECTION 3 – AIR TRANSPORT SERIES “C” PART 1 ISSUE IV, 24TH MARCH 2017

The DGCA issued a draft Civil Aviation Requirement (in relation to the criteria for leasing of aircraft by Indian operators, hereinafter “CAR”) in June 2016 inviting comments from all stakeholders to be submitted by the 18th of July 2016. Various parties submitted their comments and after due deliberation, the DGCA has issued the final CAR dated 24th of March 2017. While rather vague, the CAR seeks to lay down regulations / rules pertaining to leasing of aircraft under the Article 83 bis route. This is clear as the CAR speaks about making regulations relating to Operators intending to engage in a leasing arrangement wherein the aircraft is registered in a State different from the State responsible for oversight of the operator’s operations, (the CAR states that the parties must familiarize themselves with the respective responsibilities of the State of Registry as well as those of the State of the Operator). The CAR is discussed briefly below and this note is aimed at giving you a brief overview of its contents.

  • The CAR applies only to operational leases and not to financial and / or capital leases;
  • Responsibilities of the Lessor and Lessee must be explicitly specified in the lease agreement to provide for proper airworthiness and operational oversight and control of the aircraft;
  • The CAR lays down the various responsibilities of the State of Registry vs the State of Operator;
  • All leasing arrangements should be backed by the regulatory bodies of the two parties either in the form of an Agreement under Article 83 bis or any other understanding;
  • Leasing under CAR is permitted only between two scheduled air operators or between two non-scheduled air operators, cross leasing between a scheduled operator to a non-scheduled operator and vice-versa is prohibited.
  • Wet, damp or dry lease into India is only permitted in emergency situations. Emergency situations may include:
    • Unexpected grounding of an aircraft of an existing Operator;
    • In case an aircraft goes under scheduled maintenance of checks;
    • Any other unforeseen circumstances.
  • Article 83 bis leases are not permitted for capacity or route expansion of an air transport (passenger) service, with the exception for cargo operators and in case the lease is executed for Government of India requirements;
  • In cases of a wet or damp lease, aircraft operations must be in compliance with the requirements of the Lessors air operator certificate for the duration of the lease;
  • In case of a Wet lease (out) of an Indian registered aircraft, the Indian AOC holder will be responsible for operational control of the aircraft for the duration of the lease. In a case of a damp lease (out) the qualification and operational control of crew provided by the Lessee should be addressed and aligned with the Lessors operations policies;
  • In case of a Wet lease (in) of n foreign registered aircraft, the Lessor will be responsible for operational control of the aircraft for the duration of the lease. In a case of a damp lease (in) the qualification and operational control of crew provided by the Lessee should be addressed and aligned with the Lessors operations policies;
  • The CAR also speaks of “Intra State Wet Leases” where one Indian operator leases to another Indian operator;
  • The wet and damp leases (in) and (out) cannot be for extended period of times and the CAR lays down the following time limitations:
    • Wet / Damp lease (out) may be for a maximum period of 12 months;
    • Wet / Damp lease (in) may be for a maximum period of 3 months with a one time extension of another 3 months;
    • In case of an Intra State Wet Lease, the maximum lease period may be 12 months with a one time extension for another 12 months.
  • The CAR also deals with Dry leases (in) of a foreign registered aircraft and Dry leases (out) of Indian registered aircraft. Apart from stating the division of responsibilities, the CAR lays down the following time limitations:
    • Dry Lease (in) of a foreign registered aircraft and a Dry Lease (out) of an Indian registered aircraft may be for a maximum of 12 months with a one time extension of another 12 months;
  • The CAR lays down the procedure for leasing:
    • General provisions relating to the lease agreement:
      • Application for approval must be submitted in writing;
      • Must contain details and descriptions of the parties and their respective responsibilities;
      • Depending on the complexities of the lease arrangement, the DGCA may request more information;
      • The CAR lays down the minimum information required (see 7.1.1) for the DGCA to determine whether proper operational control and continuing airworthiness oversight for the aircraft are in place for the duration of the lease. The minimum safety responsibilities of the Lessee and Lessor are given in Table 1 to the CAR.
    • Foreign registered aircraft leased to Indian Operators:
      • The Indian AOP / AOC holder may apply a minimum of 45 days before the proposed commencement of operations to the DGCA.
      • The documents to be submitted to the DGCA include:
        • 3 sets of the Aircraft Leasing Form (LF-1);
        • Copy of the lease agreement; and
        • Consent of the foreign civil aviation authority in writing.
      • Evidence about the leasing operation must be provided by the applicant (note: this is a very vague requirement as no other specifics are given).
      • The crew in cases of Wet and Damp leases must be security cleared by the Ministry of Home Affairs.
      • The aircraft must conform with the Aircraft Eligibility Requirements:
        • Aircraft must be in the DGCA type acceptance list;
        • Registered in the foreign state;
        • Have a valid certificate of airworthiness;
        • Shall not be made the subject of another lease during the term of the lease authorised by the DGCA for that aircraft;
        • Must be less than 18 years of age for passenger services and less than 25 years of age for cargo operations;
        • Must be free from accident;
        • Must have its maintenance program approved by the foreign regulatory authority.
      • Must comply with the long term airworthiness requirements.
    • Indian registered aircraft leased to foreign operators:
      • The Owner / Operator may apply a minimum of 45 days before the proposed commencement of operations to the DGCA.
      • The documents to be submitted to the DGCA include:
        • 3 sets of the Aircraft Leasing Form (LF-2);
        • Copy of the lease agreement; and
        • Consent of the foreign civil aviation authority in writing.
      • Evidence about the leasing operation must be provided by the applicant (note: this is a very vague requirement as no other specifics are given).
      • The airworthiness eligibility requirements must be complied with:
        • Where the aircraft is being maintained by or under the authority of the foreign air operator, the organization performing and certifying the maintenance work must have a valid maintenance approval or equivalent documents for the aircraft type issued by the airworthiness authority of the country of the Lessee.
      • Must also comply with the long terms airworthiness requirements.
    • Leasing of aircraft between one Indian operator to another Indian operator:
      • The Indian registered owner may apply a minimum of 45 days before the proposed commencement of operations to the DGCA.
      • The documents to be submitted to the DGCA include:
        • 3 sets of the Aircraft Leasing Form (LF-3);
        • Copy of the lease agreement.
      • Evidence about the leasing operation must be provided by the applicant (note: this is a very vague requirement as no other specifics are given).
    • The CAR lays down that the 45 day application period may be waived / dispensed with in certain circumstances:
      • Where an aircraft originally intended to operate a scheduled flight is grounded for technical reasons such as maintenance, inspection, mandatory checks or for any other reason beyond the control of the operator;
      • Operation with leased aircraft is necessary due to the fact that an existing financing lease agreement has expired and a new financial lease agreement is yet to be concluded; or
      • Where the aircraft has been leased or chartered to meet an emergency such as a natural calamity, industrial under or any other similar situation.
    • The CAR also lays down the procedure, for grant of permission, to be followed after the application has been made:
      • Once the detailed information is received (for the DGCA to determine whether proper operational control and continuing airworthiness oversight for the aircraft are in place for the duration of the lease), the DGCA may convene a meeting with the Indian operator with the main aim to finalize the arrangements and modalities for operation of the leased aircraft during the period of the lease, representatives of the foreign operator and foreign regulatory authority may also be allowed to participate;
      • On the basis of the above deliberations, the DGCA shall decide whether it is desirable to conclude an agreement under Article 83 bis with the foreign State of Registry or State of Operator (as the case may be);
    • On the grant of permission:
      • The DGCA may impose such conditions as it may deem fit;
      • The Parties may conclude a formal lease agreement wherein it is ensured that the terms of the agreement (if any) concluded between the State of Registry and State of Operator as well as the condition stipulated in the permission letter are incorporated into the lease agreement;
      • A signed copy of the formal concluded lease agreement must be submitted to the DGCA within 7 days of the permission being issued;
      • The leased aircraft must be entered into or deleted from the AOP / AOC of the Indian operator.
    • The DGCA may withdraw permission for operation of an aircraft if it is found that airworthiness and safety of the aircraft operations is in doubt or the requirements in the CAR and / or any other safety rules are not being complied with.

One comment

  1. Hi Nitin, Thanks for sharing the interesting news regarding the Civil Aviation Requirement (CAR) for aircraft leases under art. 83bis in India. While the CAR still needs ample review, hopefully it will solve the issues that arise in India. However, as far as the best ‘State of Registry’ is concerned, ample research has already been done. The Pilsbury World Aircraft Repossession Index reviews 57 jurisdictions worldwide. The Summary of Scores summarizes the overall scores for each of the countries and it breaks down the composing scores. It concludes that Aruba is the highest scoring jurisdiction worldwide and the only one having an overall 100 % score. The competing aviation jurisdictions ‘of choice’ merely scored 58 to 91 %. The same is valid for the Caribbean parts of the Netherlands. Thus Aruba and Caribbean Netherlands provide for the best repossession scenarios under an art. 83bis agreement. It is important that the governments of India and Aruba or the Netherlands start negotiating this agreement immediately!

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