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Project Assignment (Aviation Law-II)

“Civil Aviation Policy in India: A Critical Analysis”

By

Samradhya Ishan Dhar

POST GRADUATION DIPLOMA IN AVIATION LAW AND

AIR TRANSPORT MANAGEMENT

(PGDALATM)

NALSAR UNIVERSITY OF LAW

HYDERABAD

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INDEX

Introduction ………………………………….Page 3-4

Overview………………………………………Page 5-6

Analysis……………………………………….Page 7-13

Conclusion……………………………………Page 14

References and Bibliography………………Page 15

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Introduction

Civil aviation is one of two major categories of flying, representing all non-military aviation, both private
and commercial. Most of the countries in the world are members of the International Civil Aviation
Organization (ICAO) and work together to establish common standards and recommended practices for
civil aviation through that agency.

Civil aviation includes two major categories:

Scheduled air transport, including all passenger and cargo flights operating on regularly scheduled routes;
and

General aviation (GA), including all other civil flights, private or commercial

The Civil Aviation Ministry is evolving a draft Civil Aviation Policy that would increase foreign direct
investment ceiling, liberalize bilateral and move towards an `Open Sky,' encourage the promotion of
Regional Airlines, lower fares to make aviation affordable and remove price monopolies in respect of
Aviation Turbine Fuel (ATF).

Mission Of Civil Aviation Policy

The main aim of the Civil Aviation Policy is to maintain a competitive Civil Aviation Environment which
ensures safety and security in accordance with international standards, promotes efficient, cost-effective
and orderly growth of air transport and contributes to social and economic development of the country.

Objectives of Civil Aviation in India:

The objectives of this Civil Aviation Policy are the creation and continued facilitation of a competitive and
service-oriented Civil Aviation Environment in which:

- The interests of the users of civil aviation are the guiding force behind all decisions, systems and
arrangements

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- Safe, efficient, reliable and widespread quality air transport services are provided at reasonable prices

- There exists a well-defined regulatory framework catering to changing needs and circumstances

- all players and stakeholders are assured of a level playing field

- Private participation is encouraged and opportunities created for investors to realize adequate returns on
their investments

Other objectives are:

a) To ensure aviation safety, security

b) Effective regulation of air transport in the country in the liberalized environment

c) Safe, efficient, reliable and widespread quality air transport services are provided at reasonable prices

d) Flexibility to adapt to changing needs and circumstances

e) To provide all players a level-playing field

f) Encourage Private participation

g) Encourage Trade, tourism and overall economic activity and growth

h) Security of civil aviation operations is ensured through appropriate systems, policies, and practices

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Overview

The history of civil aviation in India began in December 1912. This was with the opening of the first
domestic air route between Karachi and Delhi by the Indian state Air services in collaboration with the
imperial Airways, UK, though it was a mere extension of London-Karachi flight of the latter airline. Three
years later, the first Indian airline, Tata Sons Ltd., started a regular airmail service between Karachi and
Madras without any patronage from the government.

At the time of independence, the number of air transport companies, which were operating within and
beyond the frontiers of the company, carrying both air cargo and passengers, was nine. It was reduced to
eight, with Orient Airways shifting to Pakistan. These airlines were: Tata Airlines, Indian National Airways,
Air service of India, Deccan Airways, Ambica Airways, Bharat Airways and Mistry Airways.

In early 1948, a joint sector company, Air India International Ltd., was established by the Government of
India and Air India (earlier Tata Airline) with a capital of Rs. 2 crore and a fleet of three Lockheed
constellation aircraft. Its first flight took off on June 8, 1948 on the Mumbai (Bombay)-London air route. At
the time of its nationalization in 1953, it was operating four weekly services between Mumbai-London and
two weekly services between Mumbai and Nairobi. The joint venture was headed by J.R.D. Tata, a
visionary who had founded the first India airline in 1932 and had himself piloted its inaugural flight.

The boom in the aviation sector has attracted several new entrants. Until 2003 there were three main
scheduled domestic airlines – Jet Airways, Indian Airlines and Air Sahara. Since August 2003, they have
been joined by Air Deccan, Kingfisher Airlines, SpiceJet, Paramount Airways, Go Air and IndiGo.

The industry is now moving towards consolidation with the confirmation of the Air India-Indian merger, Jet
Airways, acquisition of Air Sahara, and the controlling stake taken in Air Deccan by the parent of
Kingfisher Airlines.

In order to meet the expected traffic growth mentioned above, new and incumbent carriers are placing
significant aircraft orders. Indian carriers have approximately 480 aircraft on order for delivery up to 2012,
which compares very impressively with a fleet size of 310 aircraft operating in the country today.

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Almost 150 aircraft have been added in the last two years alone for scheduled services (at a rate of up to
six aircraft a month in the domestic market), with a further growth in excess of 50 aircraft in the general
aviation category.

Some of the aircraft on order will be used for replacement rather than expansion. However, India’s fleet
will reach approximately 500 to 550 by the end of 2010 and the general aviation fleet will be 300 plus by
2010 compared with 177 today.

According to industry sources, the combined airlines of India are expected to have posted a loss of
approximately $500 million the financial year ended 31 March, 2007. However, the industry has the
prospect of returning to profitability in 2008-09.

Domestic airlines meeting certain qualifications (five years of operation and fleet size of at least 20
aircraft) have now been granted permission to operate to international destinations.

Government policy in the area of bilateral air services agreement has evolved to one which sees air
connectivity as being essential for trade and tourism. As a result, the government has granted
increasingly liberal access to foreign carriers to operate services to India. Existing carriers have been
increasing services and a number of airlines have entered the market for the first time in the last couple of
years.

Air transport is the most modern, the quickest and the latest addition to the modes of transport. Because
of speed with which aero planes can fly, travel by air is becoming increasingly popular. As far as the world
trade is concerned it is still dominated by sea transport because air transport is very expensive and is also
unsuitable for carrying heavy, bulky goods. However, transportation of high value light goods and
perishable goods is increasingly being done by air transport.

Director General of Civil Aviation collects data pertaining to Civil Aviation from various sources viz Air
India, Air India Express, Alliance, Air, Indian Airlines, Private Operators (Scheduled and Non-scheduled),
Foreign Airlines and the airports.

Geographical Coverage: The traffic and operating statistics of Indian Scheduled Domestic/International
Operations and of foreign Airlines (To and From India).

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Analysis

The Indian Civil Aviation sector has showed impressive profits in the pre-liberalization era, has been
adversely affected since the onset of the government’s open-sky policy in the late 1980s. Attempts to
modernize and streamline the airlines’ functioning remain stymied due to technological obsolescence,
successive changes in government in the mid 1990s; lack of coherent policy on private participation as
well as recalcitrance on the part of politically affiliated unions of pilots and controllers. However, as borne
out by several expert recommendations, a reverse in the fortunes of India’s beleaguered airlines can only
occur with the dawn of professional management.

Private Sector Participation and the Civil Aviation Policy

- Private sector participation will be a major thrust area in the civil aviation sector for promoting
investment, improving quality and efficiency and increasing competition.

- Competitive regulatory framework with minimal controls encourages entry and operation of private
airlines/ airports.

- Encouragement of private sector investment in the construction, upgradation and operation of new and
existing airports including cargo related infrastructure.

- Rationalization of various charges and price of ATF/AVGas will be undertaken to render operation of
smaller aircraft viable so as to encourage major investment in feeder and regional air services by the
private sector.

- Training Institutes for pilots, flight engineers, maintenance personnel, air-traffic controller, and security
will be encouraged in private sector.

- Private sector investment in non-aeronautical activities like shopping complex, golf course,
Entertainment Park, aero-sports etc. near airports will be encouraged to increase revenue, improve
viability of airports and to promote tourism. CAA will ensure that this is not at the cost of primary
aeronautical functions, and is consistent with the security requirements.

- Government will gradually reduce its equity in PSUs in the sector.

- Government will encourage employee participation through issue of shares and ESOP

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Strict national civil aviation security programme to safeguard civil aviation operations against acts of
unlawful interference have to be established through regulations, practices and procedures, which take
account of the safety, regularity and efficiency of flights. A good safety record is a judgment of past
performance but does not guarantee the future, although it is a useful indicator. While pilot error is said to
be on the decline, factors of fatigue, weather, congestion and automated systems have complicated
safety. Airline operators, pilots, mechanics, flight attendants, government regulators and makers all have
a stake in making aviation as safe as possible. The International Air Transport Association (IATA), the
International Civil Aviation Organization (ICAO), manufacturers and others bodies cooperate in this aim.
As world air traffic is expected to double or more by 2020, the accident rate must be reduced in order to
avoid major accidents occurring more frequently around the globe.

Private sector participation is encouraged in existing maintenance infrastructure of Indian Airlines and Air
India like Jet Engine Overhaul Complex (JEOC) and new maintenance facilities including engine overhaul
and repairs with up to 100 % foreign equity.

Indian Airlines has major maintenance facilities for all the types of aircraft in IAL fleet i.e. Airbus-300,
Airbus-320, Boeing-737 and Dornier-228. The Engineering Department is responsible for maintenance of
aircraft and is answerable to Director General of Civil Aviation (DGCA) in maintaining the Quality Control.
The Maintenance of the aircraft is carried out at four major bases located at Delhi, Mumbai, Calcutta and
Hyderabad.

Sahara also has its own NDT Shops, wheels and brake assembly shop, battery charging shop, avionics
shop and seat repair shop. It is the only private domestic airline to have its own hangar for aircraft
maintenance. It is also the only private domestic airline to have self maintenance capability.

Air Deccan, Bangalore-based airline, has decided to set up its engineering and maintenance facility for
Airbus-320 operations, basing two of a fleet of 11 Airbus jets here. They have also sought land from the
Airports Authority of India to build an exclusive hangar to carry out 300 and 500-hour checks, apart from
C-Checks and line maintenance.

If there’s an opportunity to do something, everyone rushes to get into it without even realizing if there are
any problems or difficulties associated with it or whether everyone would be really as successful as the
others in getting into that particular field. No one thinks about all this. At one time, phones were a luxury
and the rates across the nation were really expensive. But then there was a plethora of mobile networks
which started their operations and mobile communication rates reached the lowest in the world in India.
But everyone started encountering the message “All the lines of this route are blocked” because the
networks were never built to encounter such a huge base of users. The same thing happens with roads,

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railways, and infrastructure everything in our country. And as we will see, the same happened in the
Indian aviation industry.

Jet Airways and Sahara Airlines were the first private airlines to begin their services after the Govt opened
the skies to private players. And lo and behold! Change became the order of the day.

People were treated to a much better and organized service with well groomed crews, better seats, easy
options of ticketing and a good overall feel of being in an aircraft. People started flocking to these airlines
like never before.

FACTOR INPUTS:

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Airfares in India are among the highest in the world. For instance, a typical Delhi-Bangalore round trip
costs Rs. 18,000 - the same as it would from Delhi to Singapore.

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Operating Costs

The regulatory system affects where, how and when airlines can fly. Thus it affects airlines’ ability to
operate efficient networks and their revenue. To the extent that airlines cannot use the least cost
combinations of aircraft types to carry passengers and freight, the costs of operating existing networks
are higher than they otherwise might be (technical inefficiency). Further, they may be prevented from
flying the optimum sized and configured network (allocative inefficiency). Thus, costs may be reduced as
airlines are able to operate the right aircraft at the right frequencies on an existing route.

Airlines, by changing the design of a network and increasing its size, may also be able to decrease costs
through economies of scale and scope.

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Development of Civil Aviation

The repeal of the Air Corporation Act from 1 March 1994 enabled private operators to provide air transport
services.

Six operators were given the status of scheduled operators on 1 February 1995.

Currently there are five international airports and 87 domestic airports in the country with 28 civilian
enclaves for defense purposes.

The Airport Authority of India plans to invest Rs 35,000 million for the construction and up gradation of
airports.

Budgetary support of Rs 485.50 million was allocated to AAI in 1996-97.

In august 1996, in a major policy decision, the government allowed the private sector to set up air cargo
complexes in a bid to ensure smooth movement of export cargo.

Domestic and foreign investors including NRIs have been invited to participate in the development of
infrastructure support at select airports.
With a market share of 43% Indian airlines is the biggest player in aviation.
Rs 24,710 million have been marked for development of the civil aviation sector in the annual plan for
1997-98.

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CIVIL AVIATION REQUIREMENTS:

The requirements of Civil Aviation are as follows:

SECTION 1: General

SECTION 2 – Airworthiness

SECTION 3 – Air Transport

SECTION 4 – Aerodrome Standards and Licensing

SECTION 5 – Air Safety

SECTION 6 – Design Standards and Type Certification

SECTION 7 – Flight Crew Standards, Training and Licensing

SECTION 8 – Aircraft Operations

SECTION 9 – Air Space and Air Traffic Management

SECTION 10 – Aviation Environment Protection

SECTION 11 – Safe Transport of Dangerous Goods by Air

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Conclusion

In the past, the growth of civil aviation was more or less certain, so decisions about investment is physical
infrastructure for accommodating this demand were relatively easy. Global demand for air transport was
growing steadily and so was demand at individual airport. But, the world is changing. Although most
people still expect global demand for air transport to grow. The growth of demand at individual airports is
far less certain. This poses a problem for policymakers who have to decide if infrastructure investment
should be made at individual airports and, if so, how much capacity the airport should have.

Civil Aviation agreements have vastly expanded international passenger and cargo flights to and from
India, promoting increased travel and trade, enhancing productivity, and spurring high-quality job
opportunities and economic growth. Civil Aviation agreements do this by eliminating government
interference in the commercial decisions of air carriers about routes, capacity, and pricing, freeing carriers
to provide more affordable, convenient, and efficient air service for consumers.

India Civil Aviation policy must go hand-in-hand with airline globalization. By allowing air carriers
unlimited market access to their partners' markets and the right to fly to all intermediate and beyond
points, Civil Aviation agreements must provide maximum operational flexibility for airline alliances.

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References and Bibliography

http://www.tcil.com/ca.asp

http://www.inrnews.com/realestateproperty/india/infrastructure/civil_aviation_in_india_an_ove.html

http://www.jstor.org/stable/4410608

http://www.foolonahill.com/mbaaviation.html#_Toc83227608

Study of the Indian Aviation Industry - Ashish Dhawan, Nidhi Mishra, Nithya R, Payal Yadav, Rajesh B,
Siddharth Dahiya, Siddhartha Butalia

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