DGCA revises licensing norms

Revised rules were issued on Wednesday

The Directorate General of Civil Aviation has revised airline licensing norms, restricting foreign carriers from having management control in domestic airlines. The revised rules regarding minimum requirement for grant of operating permit were issued on Wednesday.

The amended rules also allow airlines to carry out maintenance and repairs and training of pilots and engineers at facilities belonging to other airlines. This change will benefit both Tata Singapore Airlines and AirAsia, which could use their bases in Singapore and Malaysia for training and engineering functions.

Earlier rules stipulated that the chairman and two-third of an airline’s board members are Indian citizens and that effective control and substantial ownership is vested with Indians. The revised rules state domestic airlines shall not enter into an agreement with a foreign airline or a foreign investor, which may give the latter the "right to control the management'' of the domestic airline.

The recent controversy over the issue of Etihad's control over Jet Airways seems to have prompted the DGCA to revise its rule. Last week, the Securities and Exchange Board of India issued a notice to Etihad for alleged violation of takeover code in acquisition of 24 per cent stake in Jet Airways and asked why no open offer should be made to minority share holders.

At present, the two airlines are waiting in the wings to start operations in India. AirAsia is waiting for an operating permit from DGCA, while Tata Singapore Airlines is still to receive a no-objection clearance from the civil aviation ministry.

Bharatiya Janata Party leader Subramanian Swamy has challenged the Foreign Investment Promotion Board’s approval to AirAsia in the Delhi High Court, alleging violation of government rules in clearance. Swamy claims the government rules on FDI in aviation were meant only for existing airlines and not for greenfield airlines. He also alleged that the effective control in AirAsia India would rest with Air Asia Malaysia.

Tata Singapore Airlines and AirAsia did not respond to queries on the revised DGCA norms.

The other modifications in the rules include the need for prior security clearance of the chief executive officer, chief financial officer, and chief operating office of an airline if the post is held by a foreign national. Another clause says: “All foreign nationals likely to be associated as a result of investment by foreign airlines shall be cleared from a security viewpoint before deployment.”