Download file as PDF - HFW

hfw.com

Download file as PDF - HFW

• Model aircraft with a maximumtake off mass (MTOM) of 20kg.• Foot-launched flying machines(including powered paraglidersand hang gliders).• Captive balloons.• Kites.• Parachutes.With the exception of passengerlimits (which were already adequate),the specified minimum coveragelevels were increased on 6 April2010 by Regulation (EU) 285/2010 toreflect the International Civil AviationOrganisation’s decision (effective30 December 2009) to increasecarriers’ liability limits establishedunder MC99. Air carriers and aircraftoperators are required to obtain thefollowing cover:• Passenger liability: 250,000Special Drawing Rights (SDRs).MTOM (kg)< 500< 1,000< 2,700< 6,000< 12,000< 25,000< 50,000< 200,000< 500,000≥ 500,000• Baggage: 1,131 SDRs perpassenger in commercialoperations.• Cargo: 19 SDRs/kg forcommercial operations.Member States have the option ofreducing passenger liability cover toa sum in excess of 100,000 SDRsper passenger for aircraft of 2,700kgor less MTOM in non-commercialoperations. The UK, for instance, hasset the minimum level at 100,000SDRs.Passenger, baggage and cargo coverdoes not have to be in place formere “overflights” by operators fromoutside the European Union, wherethey do not take off or land within aMember State.Minimum third-party liability cover inrespect of death, injury or damageon the ground is on a per accidentsliding scale by reference to theMTOM of an aircraft:Minimum third party cover (SDRs)750,0001,500,0003,000,0007,000,00018,000,00080,000,000150,000,000300,000,000500,000,000700,000,000The above limits are mandatory foreach and every aircraft on a peraccident basis. However, if third partywar or terrorism cover is not availableon a per accident basis, insurance onan aggregate basis is permitted bythe Insurance Regulation, providedsuch aggregate is at least equivalentto the relevant amount set out above.Enforcement and penaltiesCompliance with the InsuranceRegulation is enforced by individualMember States - the relevant bodyin the UK is usually the CAA. TheInsurance Regulation states thatfor aircraft operators using aircraftregistered in the EU, depositingevidence of insurance in one MemberState should be sufficient in allMember States. For overflights byaircraft registered outside the EUwhich do not involve take-off orlanding in a Member State (or wheresuch aircraft stop in Member statesonly for non-traffic purposes), therelevant Member State may decidewhether to request evidence that theInsurance Regulation has been met.Infringement of the InsuranceRegulation may result in thewithdrawal of an operating licencefor EU air carriers, or the refusal ofthe right to land on the territory of aMember State for non-EU air carriersor aircraft operators using aircraftregistered outside the community.In the UK, the Civil Aviation(Insurance) Regulations 2005 permitthe CAA to de-register UK registeredaircraft where an aircraft operator failsto provide (when requested) evidenceof adequate insurance, meaning theright to fly will be withdrawn. TheCAA may also prevent the take-off of,and take steps to retain, any aircraftGeneral Aviation Bulletin 03


which it has reason to believe isintended or likely to be flown withoutadequate insurance.Crucially, in addition to thewithdrawal of the right to fly, criminalpenalties may also be imposed onaircraft operators who fail to provideinsurance details when requested,or are found to have alreadyflown aircraft without adequateinsurance. The maximum penaltyon conviction for failing to provideevidence of adequate insurance isa fine of £1,000. The latter offenceis more serious and, on summaryconviction, can lead to a maximumfine of £5,000, or on conviction onindictment, a fine and/or up to twoyears in prison.However, it is possible for an aircraftto remain on the UK register withoutadequate insurance, provided adeclaration is made in writing tothe CAA that the aircraft will not beflown unless the CAA has first beenprovided with evidence of adequateinsurance.Beyond EuropeIncreasingly, countries beyond theEU are choosing to put in placemandatory insurance criteria forair carriers and aircraft operators.Australia, Dubai, Hong Kong,Indonesia, Thailand, Turkey and theUSA have all introduced minimuminsurance criteria. How the criteria isset in each country varies:1. In Thailand, for example,the requirements set by theDepartment of Civil Aviation donot apply to foreign carriers.2. In some countries, the minimuminsurance requirements aresimilar if not identical tothose established under theInsurance Regulation. Forexample, in Dubai, minimuminsurance requirements foraircraft operators have beenestablished in an InformationBulletin 06/2010, issued bythe UAE General Civil AviationAuthority, which broadly mirrorthose established under the ECRegulation, although the revisedMC99 limits have not beenreflected in the Bulletin.3. The same can be said for Turkey,where a Turkish Regulation oninsurance requirements for aircarriers and airport operators inrespect of passengers, baggage,cargo, war and terrorism wasimplemented on 15 November2006.4. In Hong Kong, the minimumrequirements are set in USDcurrency and are on a slidingscale based on an aircraft’smaximum takeoff mass.5. In the USA, air carriers arerequired to maintain third partyaircraft accident liability coverfor bodily injury to or death ofpersons (other than passengers)and for damage to property.In addition, they are requiredto maintain cover for bodilyinjury to or death of aircraftpassengers. How the limits areset depends on the cover. Forexample, the limits of coverfor liability to third parties areset at a minimum limit any oneperson any one occurrenceup to a maximum amount peraircraft for each occurrence. Forsome aircraft, depending on thenumber of seats or maximumpayload capacity, the minimumcoverage requirements arelower. As would be expected,the minimum insurance coverrequired in respect of bodilyinjury in the USA is higher thanthe limits set under MC99,as is the case also under theInsurance Regulation.6. In Indonesia, minimum levels ofinsurance have been establishedin respect of third party andpassenger cover. However, thelevels, set in Indonesian Rupiah,are much lower than thoseestablished under MC99.In conclusion, the requirement forall aircraft operators to comply withminimum insurance criteria setby individual states is becomingincreasingly prevalent. It isincumbent on aircraft operators,when purchasing their insurancecover, to ensure they are adequatelyprotected for the routes being flown,particularly since the sanctions forfailing to comply can be severe.For more information, please contactEdward Spencer, Partner, on+44 (0)20 7264 8314 oredward.spencer@hfw.com, orVictoria Cooper, Associate, on+44 (0)20 7264 8556 orvictoria.cooper@hfw.com, orKate Seaton, Associate, on +65 63059560 or kate.seaton@hfw.com, oryour usual contact at HFW.04 General Aviation Bulletin


Brazilian air taxi operatorsfight back against illegalcarriage of passengers by airForty air taxi companies, allmembers of ABTAER (Brazilian AirTaxi Association), recently sent adelegation to the Brazilian Senateto complain about the widespreadpractice of illegal carriage by air byprivate owners without the necessarylicences, insurance, training, etc.More than new rules and regulations,the representatives from this sector(which has an estimated annualturnover of R$8.4 billion) asked themembers of the Senate’s temporarysub-committee for civil aviation forstricter checks to be adopted toput an end to these kinds of illegalpractices.The Brazilian civil aviation authority(ANAC), charged with overseeing thesector, has powers to seize aircraftor cancel a pilot’s licence, as well aslevy fines. The criticism made is thatANAC is not doing enough, and morerandom checks and inspections needto be carried out to stamp out thispractice.According to a representative from theSenate’s civil aviation sub-committee,quoted in the local press, the sectordoes need defending, because itinvests heavily in pilot training andretention, aircraft maintenance andadequate insurance, and cannotcompete with private operators whoare exempt from similar restrictions.As an example, whilst an air taxioperator will take as long as ninemonths legally to include an aircraftinto its fleet, so that it is properlylicensed to carry passengers by air,a private operator can start usingits aircraft for illegal carriage by airimmediately after acquiring it. Thisis usually seen by private owners asan easy way of reducing the costs ofmaintaining their aircraft.In another example, an air taxi pilotwho undergoes a four month trainingprogramme (usually paid for by theair taxi company) is subject to thesame rules as a commercial pilot inan airline, whereas the illegal operatorcan operate anytime anywhere withlittle or no control or preparation.Users of air taxi services in Brazilshould watch out and check whetherthe carrier they have chosen is dulyauthorized or not.For more information, please contactFernando Albino, Associate,on +55 (11) 3179 2900 orfernando.albino@hfw.com, or yourusual contact at HFW.Regional focus: ChinaChina is now the second largesteconomy in the world. Over the next 20years, China’s gross domestic productis forecast to grow at an averageannual rate of 7%. There has been aconsequent rapid development in airtravel and much publicity surroundingChina’s development of its owncommercial aircraft manufacturingindustry, including the ARJ21, C919and CJ-1000A programs.Although growth in the Chineseeconomy has slowed in recentmonths, this is not set to hamperan appetite for the General Aviation(GA) sector. Government rhetoric andannouncements from private investorshave made it clear that industrystakeholders see China as a keyplayerin the years to come. This articleanalyses what the future may hold forChina’s ‘fledgling’ GA industry andwhether it will be able to overcome theregulatory, political and infrastructuralchallenges it faces to truly achieve itslong-awaited take-off.The industryGA is not new to China, but it isone of the few sectors that has notexperienced strong growth over thepast three decades. The first postwar GA operations can be tracedback to the 1950s. Growth has,however, been slow since that period.Records from 2010 show that Chinahad 1,010 GA aircraft, including 206rotor-wing aircraft, 781 fixed-wingaircraft, and a number of hot-airballoons and airships. Federal AviationAdministration statistics from the sameperiod show that there were 224,172active GA aircraft in the United States.If the number of aircraft is taken asan indication of the maturity of theindustry, China’s GA has not developedsignificantly.Government plansThe government recognizes that GAin China still falls far short of what isneeded by the economy. In light ofthis, GA was named for the first timeas a strategic industry by China’scabinet in the 12th Five-Year Plan(2011-15). Much of the change inthe government’s attitude has beendown to the work of the Civil AviationAdministration of China (CAAC), whohave worked hard to publicise thewider economic and social benefits ofa developed GA industry. For example,the CAAC has pushed for and set outambitious investment plans, which aimto trigger growth in the industry andhas established a specific GA fund,General Aviation Bulletin 05


in conjunction with the Ministry ofFinance, to subsidise GA operations,pilot training, and infrastructure andfacility refurbishment. Both Stateownedand private enterprisesregistered in China and holding GAoperating licenses should be eligible toapply for the subsidy.Local governments are also startingto gear up in anticipation of growthin the sector. Eight cities, includingChonquing, Xi’an and Zhuhai havealready established State or provincialindustrial parks, specially designed toattract interest from the GA industry,and should provide suitable bases forMROs and OEMs looking to establishthemselves in the country. Suchprojects by local government shouldencourage growth in the supportfunctions that are vital if the GAindustry is to develop.In addition to investment, the CAAC‘plans’ to overhaul what many see inthe industry as outdated and restrictiveflying regulations. Opening up of thecountry’s low altitude airspace is due tostart in 2013. Recent statements fromthe National Air Traffic ManagementCommittee have intimated that trafficguidance and air surveillance facilitieswill be promoted nationally fromnext year. A government circular, the“Opinion on Intensifying Reform ofthe Administration of Low-AltitudeAirspace in China”, states that airspacewill be opened up below 1,000 metresfor the use of GA in trial locationscovering parts of Beijing, Changchun,Chengdu, Guangzhou, Lanzhou, Jinan,and Nanjing.Potential for growthChina’s GA industry clearly hashuge potential for growth. In termsof private jets, the Hurun ChineseLuxury Consumer White Paper 2012disclosed that 63,500 Chinese haveminimum assets of 100 million yuan (c.US$16 million) and 13% plan to buy abusiness jet.The CAAC expects GA flying willincrease at an average rate of 15%p/a over the next ten years, whichwould require somewhere in the rangeof 10,000 to 12,000 GA aircraft toaccommodate that level of activity,including 400 business jets!The country is also in desperateneed of helicopters to service ruralcommunities for air ambulance andaccident and emergency purposes.In addition, as more people move tourban areas, there will be a greaterneed for helicopters to provide trafficand policing support. The current fleetis clearly not sufficient to service apopulation of over one billion.Investment is neededPrivate investment from both Chineseand overseas companies in GA isset to be significant and needed.Investment has already started tocome from overseas companies,with several major aviation playerssigning joint ventures with Chinesebased companies and the Chinesegovernment. China’s GA influenceoverseas also seems to be expanding,with the state backed purchase of theUS helicopter manufacturer, EnstromHelicopter Corporation, at the endof last year. Privately owned Chineseinterests also came close to finalisinga significant deal to purchase the GAarm of Hawker Beechcraft, but thedeal broke down due to a disputeover pensions. Although only smallsteps into a huge market, it shows thatChinese GA ambitions are not confinedby geographical boundaries.Government plans versus realityThis is not the first time there havebeen ambitious plans for ChineseGA. In 1996 the CAAC published“The Decision by the CAAC onIssues Regarding the Developmentof General Aviation.” This decisionemphasised the need for coordinateddevelopment of the national economy,society and civil aviation; recognizedthe importance of GA; and outlinedspecific policies and measures topromote GA Growth in the industry,which has been modest since 1996.Even the current plans to open lowaltitude air space – seen by many asthe biggest regulatory challenge togrowth – are some way off, with reformof the regulations and implementationof the trial locations not expected tostart until 2015, with the final aim ofcompleting the project by 2020.China does have a significant bodyof law relating to GA. There are morethan 30 regulations containing rulesrelating to civil and GA, which focus oneconomic management, certification,security and operating standards.Amongst the most important are the“General Operating Flight Rules”,“Regulations on General AviationBusiness”, “Approval Process forGeneral Aviation”, “General AviationBusiness License Regulations” and the“General Aviation Regulations on NonoperatingRegistration”. These rules arehowever, difficult to navigate and thecurrent procedures for approval andregistration are time consuming, anddo not allow enough flexibility to meetthe numerous functions of GA.Whilst the CAAC clearly aim to achievegrowth and development in theindustry the development of GA is notup to the CAAC alone and this mayhave been part of the problem over06 General Aviation Bulletin


the preceding decades. Developmentinvolves fiscal and tax policies (e.g.taxation on small and mid-sizedhelicopters is very high), and needscoordination and support from themilitary and the wider Communistparty. Getting all interested partiesreading from the same song book maybe the hardest challenge GA growthfaces.The challengesSome 502,700 flight hours wererecorded in China’s GA market in 2011.It is expected that this number will riseto over two million hours by 2020, ifplanned reforms and the opening up ofthe industry continue and materialiseas outlined above. There is little doubtthat China has the buying power topurchase aircraft though state-ownedinitiatives, corporate investment andthe growing wealth of the Chinese‘super-rich’, but the real problemsfacing growth are likely to come fromthe lack of suitable infrastructure andtrained personnel.A recent CAAC report states that therewere 70 airports and 216 landingpoints for GA in China. Industrycommentators anticipate that as manyas 3000 may be needed. Although thegovernment is embarking on expansiveairport investment plans to build 70new airports and rebuild or expand101 others over the next five years, it isunclear how many of these airports willbe suitable for GA. In addition, MROfacilities for GA are currently lackingin Mainland China, with the country’sfirst “4S” (sale, spare parts, service,and survey) facility for GA aircraft onlyopening in June 2007. Most workon GA aircraft - especially work onengines - is currently being performedin Hong Kong or overseas. Fixed BaseOperators (FBOs) which provide fuel,hangar space, and airtaxi and flighttraining services for GA are also fewand far between; in comparison theUS has over 5000 . Until significantinvestment in the infrastructure neededto operate GA aircraft is realised itwill be impractical to own or operatea private aircraft in China withoutincurring significant costs.China also suffers from a lack of GApilots. Part of the reason for this is therelative lack of financial rewards andpoorer working conditions comparedto the commercial airlines. In addition,pilot training costs in China are actuallyhigher than in the US, with most GApilots being military veterans, thusmaking the transfer process timeconsuming and costly.Other issues surrounding investmentand development also exist, becauseof the difficulty surrounding foreignowned companies investing in China.Unless a foreign owned company isable to find a suitable joint venturepartner it can often make the processof establishing a business very difficult.Until the laws surrounding foreigninvestment in China are relaxed,there may be some reluctance forforeign companies to invest significantamounts of money. There are alsowell publicised issues with intellectualproperty and trade secrecy, with thelaws in these areas needing significantreform. China needs to make investingin its GA project attractive for foreigninvestors or they risk losing out onthe capital and industry expertise thatcould be the catalyst for growthA significant cause for tension inChina will be GA’s relationship with thePeople’s Liberation Army Air Force.Much of Chinese airspace is tightlycontrolled by the military; 42% ofaerospace in eastern China is reservedfor the air force, according to a recentmilitary study. This significantly restrictsareas in which GA aircraft can operateand until loosened will continue tohamper development. GA flightsare given low priority and obtainingclearance to operate a specific flightmight take days; this removes asignificant amount of the attractivenessand convenience that GA operationsoften bring.The futureThe CAAC’s plans are ambitious. GAspans aircraft manufacturing, flyingoperations, airport management,airspace usage, finance, insurance andthird-party services, and significantinvestment from within China andoverseas will be needed in all theseareas. The purchase of GA aircraftalone will not be enough to triggergrowth and the realisation of the CAACplans, unless the relevant infrastructureis also improved. There are clearlysignificant challenges facing the GAindustry in China; however, real reformdoes appear to be on the horizon.For more information, please contactJames Jordan, Associate, on +8523983 7758 or james.jordan@hfw.com,or your usual contact at HFW.“China also suffersfrom a lack of GApilots.”General Aviation Bulletin 07

More magazines by this user
Similar magazines