The Standard Ground Handling Agreement (SGHA) has been adopted for a substantial number of ground handling agreements between airlines and ground handling companies. Article 8.1 of the SGHA is typically used to exempt ground handling companies from liability for damages caused by them. A Shanghai High Court judgment has clarified significant issues relating to the interpretation of this article.
Border entry and exit permissions are an important aspect of international air transport. A case before the Jingan District People's Court has confirmed that since the regulation of immigration is a government function, the passenger will bear the consequences if air travel is interrupted due to visa issues.
When Austrian Airlines found the luggage of one of its passengers several months after it had gone missing, the passenger was notified to reclaim it. The passenger checked the luggage and found that all of the previously declared contents were intact. However, he then unexpectedly claimed that valuables worth Rmb200,000 were missing. The court considered the extent of the airline's liability in the subsequent compensation claim.
The courts recently found in favour of Air China in a dispute arising from the re-issuing of the return portion of a ticket. They held that it was legal for both parties to agree to re-issue the ticket and extend its validity period, and therefore both parties should have acted according to the amended contract. As the passenger did not take the re-issued flight as agreed, he was responsible for the consequences.
A recent decision by a Chinese low-cost carrier to blacklist passengers who demanded and obtained compensation for an extended flight delay has been the subject of much public debate. The airline has confirmed that it has blacklisted the passengers for their unruly behaviour. But questions have arisen as to whether airlines have the right to create blacklists or otherwise refuse to admit passengers.
A controversial civil aviation development charge is being imposed on every air passenger in China and every Chinese airline. Many commentators have questioned the need for, and the legitimacy of, such a charge, arguing that with tax revenues of Rmb1 trillion in 2011, the government does not lack capital for large-scale aviation infrastructure.
China signed the Cape Town Convention and protocols in 2001, but it was not until 2009 that the Civil Aviation Administration of China issued rules for the recordation of irrevocable deregistration and export request authorisations (IDERAs) and the deregistration of aircraft by IDERA holders. Chinese airlines and their foreign creditors should be aware of the application process and the documents required.
Along with planned aircraft standards for use in general aviation, the joint opinions on the administration of low-altitude airspace, which were issued by the State Council and the Central Military Commission of China, are encouraging signs for the Chinese general aviation industry.
The Ministry of Finance and the State Administration of Taxation have released a circular which exempts Taiwanese airlines engaged in flights across the Taiwan Strait from business and corporate income tax on income derived from China. The exemption applies retrospectively to taxes paid by Taiwanese airlines on such income since June 2009.
The failure of East Star Airlines' restructuring application marked China's first domestic airline bankruptcy and highlighted some of the policy constraints and other challenges facing China's private airlines. One year on, foreign airlines seeking to enter the market must consider not only these policy concerns, but also the liability risks inherent in potential targets.
A new circular from the State Administration of Customs leaves little room for separating the dutiable rentals from certain maintenance expenses that the lessee bears under the aircraft lease so as to save the cost of import duties from the lessee's perspective. The circular may trigger renegotiations by Chinese lessees of the expenses and costs that they bear under aircraft leases.
As cooperative schemes within airline alliances, such as code sharing, can result in significant reductions in ticket prices or other forms of competitive restriction, such cooperation between members of an alliance is likely to be treated as monopolistic conduct under China's Anti-monopoly Law. However, the aviation industry lacks practical guidelines in this area of law.
Foreign entities can invest in airports in China pursuant to the Regulations on Foreign Investment in Civil Aviation. However, the regulations effectively cap a foreign entity's holding at 49% of the equity and limit the lifespan of a joint venture involving a foreign party to 30 years.
A man who sued his former employer, Xiamen Airlines, for being blacklisted and denied travel on its aircraft has lost his case before a district court in Beijing. The court supported the practice of barring people who are potentially dangerous from boarding a flight, but stressed that sufficient justification for blacklisting on safety grounds must be adduced on a case-by-case basis.
The Cape Town Convention is effective in China, making the International Registry an additional registry for registering various interests in aircraft equipment in China. The Civil Aviation Administration of China has identified the registrable interests and has announced the steps that it has taken to implement the new registration system.
Industry Developments; Legal Developments; Outlook.
Once the Cape Town Convention comes into force in China, the International Registry will become an additional registry for various interests in aircraft. The Civil Aviation Administration of China has been designated as an entry point to collect and transmit registration information. It is likely to adopt the authorizing entry point model, as applied in the United States.
A recent statement by the Civil Aviation Administration raises concerns for the aviation industry, particularly in its recommendation that Chinese airlines cancel orders for new aircraft or postpone their delivery. Although the measures are arguably not official rules, many stakeholders expect them to affect aircraft orders and lease agreements; they may also benefit the industry's long-term development.
The National People’s Congress has ratified the Cape Town Convention. The ratification will provide owners and mortgagees of aircraft equipment with better protection for their interests in terms of perfection and priority of such interests by way of registration. As such, it is likely to be welcomed by existing and potential financiers, leasing companies and other market participants.