Abroad, airlines face suspension or hefty fines for unpaid dues or flight cancellations
Directorate General of Civil Aviation may have been slow to act against Kingfisher Airlines but the regulator's notice to the airline last week comes as an acknowledgement that financial crisis does have an impact on safe and reliable air transport.
Else where in the world, civil aviation authorities enhance audits and bring airlines under greater scrutiny. There are instances of airlines being fined for not adhering to schedules and Mexican government had suspending permits of three airlines (AeroCalifornia, Avolar and Aviasca) in 2008-09 for unpaid air traffic dues amongst other things. The three airlines never took to skies again.
Last week the U.S. Department of Transportation (DOT) fined Xtra Airways for violating rules protecting passengers when their public charter flights are suddenly canceled, and ordered the carrier to cease and desist from further violations. Xtra Airways was one of several carriers operating flights for Direct Air, a charter operator which ceased operations in March.
In the US the Federal Aviation Administration (FAA) is the safety regulator. The financial regulator is the Department of Transportation.
Whenever an airline is in financial stress the FAA increases the surveillance of that airline. The FAA is seeking USD 162 million in civil penalties from American Airlines which declared bankruptcy earlier this year. The penalties pertain to 36 instances of safety
violations such as failure to perform repairs and mechanics putting aircraft into service with inoperable equipment.
The DGCA has powers of surveillance but has no powers to impose fines on its own. The Aircraft Rules of 1937 lists fines and punishment for unsafe aviation practices. Penalties include imprisonment from three months to two years and fines upto Rs ten lakh.
"DGCA has administrative powers to suspend or cancel licence but does not have power to prosecute. In order to prosecute DGCA will have to file cases in courts but that never happens,'' said a source from DGCA.
A retired DGCA official revealed that the regulator had filed a case seeking penalties against slaughter house which operated nearby an
airport but it took seven years for the case to be come up for hearing and by the time concerned officer had retired.
After this incident DGCA had proposed that the government allow it enforcement powers but the law ministry turned down the demand, he said. "The rules in present form are toothless. Unless penalties are imposed airlines or operators flouting rules will not fall in line,''
the officer said.
Aviation expert Capt Mohan Ranganathan said as Kingfisher had defaulted in payments on various counts and there was enough ground for civil aviation ministry and the DGCA to take action against the airline earlier.
Centre for Asia Pacific Aviation said that DGCA action demanding recovery plan from Kingfisher should have happened much earlier. " The position adopted by the government to date was that as long as the airline was able to operate at least five aircraft safely Kingfisher’s licence would remain valid. But this ignored the fact that the airline was continuing its operations by accumulating bank and vendor debt and not paying its staff. Certain civil aviation authorities require airlines to maintain sufficient cash to cover 3 months of operations with zero revenue or 2 years of operations with realistic assumptions.
Provisions along such criteria could be introduced as a requirement to maintain a licence.,'' CAPA said in its report.
"Governments generally require that airlines are financially fit to be certified to fly and to maintain their certification. This is done to protect consumers. But indeed implementation varies widely and there are also local legal issues to sometimes deal with. Safety violations are a more common cause for groundings or suspensions. But sometimes the two can be inter-related as financial problems can lead to safety concerns as an airline may lack the money to buy parts and provide the maintenance they are required to,'' said a Singapore-based aviation analyst.
How other countries act when airlines go bust
Switzerland - According to Swiss aviation law , the Federal Officeof Civil Aviation (FOCA) can suspend or revoke the operating permit
of a Swiss air carrier if it comes to the conclusion that the financial viability of such air carrier is not assured anymore. Each Swiss air carrier has to submit to FOCA on a regular basis standardized financial information (balance sheet, profit and loss account, cash planning, budget figures). In case of financial distress, additional oversight measures may be initiated.
Singapore - A Singapore Air Operator Certificate (AOC) holder must ensure the safe conduct of its commercial air transport operations. In this regard, it must meet the requirements in the Singapore Air Operator Certificate Requirements (AOCR) pertaining to its
organisation structure, staffing, training, maintenance, procedures/processes and other arrangements, such as contracted work.
Australia - Civil Aviation Safety Authority (CASA) takes into account the financial health of an airline when determining if it is fit to
continue to hold a licence. However, the issues of salaries is an industrial relations matter and there are other regulators in
Australia to deal with that. It is not a matter CASA would be involved in.
CASA looks at the ability of an airline to allocate the appropriate level of financial resources to safety. Minimum criteria is that airline
has to meet the required safety standards set out in the aviation safety legislation and regulations.
US - The Department of Transportation conducts fitness review on U.S. commuter and certificated air carriers every three to five years. Certain concerns related to one area of fitness, such as the financial health of an air carrier, may generate a fitness review; however, it
does not generally necessitate the need for revoking an air carrier’s economic authority.
UK - The UK Civil Aviation Authority requires airlines to provide us with a full annual budget. The authority also monitor monthly management accounts which include detailed profit and loss figures. If there is concern over the financial health of a particular airline the authority increases its monitoring regime.
Source - Information compiled from civil aviation authorities of these countries.
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