Expert Opinion: Saudi Arabia’s new safety rules

CJI Expert
By CJI Expert August 17, 2016 15:26

Expert Opinion: Saudi Arabia’s new safety rules

With new safety rules coming into effect in Saudi Arabia on September 1, Clyde & Co partner Oliver Tebbit takes us through how the new rules will affect business aviation operations in the country, and how to ensure that you are complying with them


Background

On the 1st of March this year the General Authority of Civil Aviation in Saudi Arabia, (GACA), published a new code of safety regulations, GACAR, compliance with which will become compulsory on the 1st of September 2016. The new rules will have far-reaching implications for owners and operators of aircraft in Saudi Arabia, both air carrier operated airline aircraft and privately operated corporate jets.

The rules require that aircraft which are registered in Saudi Arabia should be operated under a GACA approved air operator’s certificate (AOC) in respect of commercially operated aircraft, or an operator’s certificate (OC) in respect of privately operated aircraft. A six month grace period before implementation has been running from the 1st March publication date, allowing affected parties to get organised and speak to GACA before the GACAR implementation deadline, in order to understand how the new rules will impact their operations and enable arrangements to be made to ensure compliance.

An element of uncertainty still surrounds certain aspects of the regulations, particularly with regard to the manner in which the regulations will be applied in relation to foreign non-commercial operators of foreign (non-Saudi) registered private aircraft which are based in, or regularly visiting Saudi Arabia. Aircraft which are registered outside Saudi Arabia, but leased to, or, in some cases, ultimately owned by, individuals or entities which are resident in Saudi Arabia are therefore potentially affected.

This article focuses on the application of GACAR in relation to corporate jets, whether operated for hire and reward, or on a private use basis.

The Private Aircraft Fleet in Saudi Arabia and the need for GACAR

While accurate statistics are difficult to come by, the corporate jet fleet based in Saudi Arabia, or ultimately owned or chartered to individuals or entities in Saudi Arabia, is generally considered to be between 150 and 200 aircraft, of which only about 30% are actually registered at GACA, the rest being registered in offshore or overseas jurisdictions. The Saudi fleet represents around a third of the corporate jet aircraft currently ‘based’ in the Middle East.

GACA, and the broader corporate jet market in Saudi Arabia, have been working hard in recent years to shed a reputation for failing to clamp down on illegal charter activity in the private jet market, by not acting effectively against the charter hire of aircraft which are licensed for private operations only, often called ‘grey charter’ activity. Given that lower regulatory and oversight standards are applied to private, non-commercially operated aircraft, there is a risk to the public that safety and security standards could be compromised by the illegal charter market. Further, given the cost of establishing and maintaining a commercial AOC, licensed operators of commercial charter aircraft also view the illegal charter market as creating unfair competition in an already competitive charter market, dis-incentivising operators from investing resources to establish commercial operations in Saudi Arabia and dis-incentivising owners from paying for professional aircraft management when they want to generate charter revenue from an aircraft. Therefore, the GACAR initiative should encourage higher safety and security standards being applied where commercial charter activities are carried out, as well as help to stimulate revenue for licensed charter operators.

GACAR – the New Code

Rules for ‘HZ’ or ICAO 83 bis Aircraft

Privately operated, non-charter aircraft registered in Saudi Arabia (HZ) must be operated in accordance with GACA’s Part 125 Rules which requires operators to obtain an OC. Private aircraft which are registered in Saudi Arabia and operated for compensation or hire will (upon implementation of the new rules) need to be licensed and operated in accordance with Part 121 Special Unscheduled Rules under an AOC.

Where an aircraft which is operated by a Saudi operator is registered in a state which has an ICAO 83 bis agreement in place between it and Saudi Arabia (such as the Cayman Islands or Aruba), the operation of such aircraft will also now fall within the ambit of GACAR. If the relevant operator of a charter aircraft already holds a GACA AOC, a process of re-validation in accordance with GACAR will be necessary. For private non-charter aircraft, a new requirement has been introduced which requires that the operator obtains a private OC from GACA. The process of re-validation and validation by GACA has been taking place since March so that operations should be relatively unaffected when the September implementation deadline is passed.

Rules for Non-commercial Foreign Operators

GACAR Part 127 rules govern the non-commercial operation of aircraft by foreign operators with an operating base located in Saudi Arabia and require that operators of such aircraft should obtain appropriate authorisations from GACA. GACAR define an operating base as the ‘location from which operational control is exercised’, further explaining that ‘an operating base is normally the location where personnel involved in the operation of the aircraft work and the records associated with the operation are located. An operating base has a degree of permanency beyond that of a regular point of call’ (GACAR, Part 1, Version 6.0).

Accordingly, where crew are employed and living outside Saudi Arabia, and maintenance support is provided from outside Saudi Arabia, it may, notwithstanding that an aircraft may be chartered or leased on an exclusive, private, basis to a Saudi principal or company, be possible to claim relief from the requirement to obtain a GACAR Part 127 private OC.

Successfully representing to GACA that an aircraft is not based in Saudi Arabia, thereby being excused of the obligation to comply with GACAR, may create obstacles to obtaining an annual permit from GACA which allows an aircraft to visit Saudi Arabia without having to obtain specific flight approvals. Historically it has been reasonably straightforward for owners of privately operated aircraft with a connection to Saudi Arabia (perhaps via a lease or operating agreement), to obtain from GACA an annual permit allowing visits to Saudi Arabia. Access to such permits for aircraft which are not registered in Saudi Arabia, or operated by an operator which is not licensed by GACA, is becoming increasingly restricted as GACA seeks to exercise a greater degree of oversight in relation to the operation of aircraft which it believes may be considered to be based in Saudi Arabia and should therefore be subject to the closer review by GACA.

In addition, a privately operated, non-commercial aircraft operated by a foreign operator which does not have an operating base in Saudi Arabia, and therefore does not need to obtain a GACA license, may face challenges in respect of obtaining permits for internal flights within Saudi Arabia. Unlike other aspects of GACAR, where comprehensive guidance notes have been published, the guidance notes in relation to ‘foreign non-commercial operators operating large aircraft in the KSA’ have not yet been published by GACA, leaving an element of uncertainty for those potentially affected.

Sanctions

A wide range of sanctions is available to GACA in the event that an aircraft is found to be operated in violation of GACAR. Aircraft can be grounded and fines can be imposed, potentially enabling the confiscation of aircraft. In the event that fines were to remain unpaid, GACA would eventually have a right to sell an aircraft operated in breach of GACAR.

Comment

Complying with GACAR will require a number of aircraft owners to re-structure their aircraft ownership and operating arrangements, a process which could become complex depending upon the existing ownership and financing arrangements which are in place.

Further, foreign operators of aircraft which are based in Saudi Arabia will need either to demonstrate that they do not maintain an operating base in Saudi Arabia, or, if they do, obtain a Part 127 approval. If an aircraft is going to be based in Saudi Arabia and chartered, a local presence will need to be established in Saudi Arabia with operations in accordance with the Part 121 rules.

GACA’s initiative is an admirable one insofar as its objective is to improve operational safety and security levels for the corporate jet fleet which is based in Saudi Arabia. While safety levels for the operation of the corporate jet aircraft are high, accident rates are marginally higher than those achieved by commercially operated airline aircraft, so there is clear scope for improvement. Further, encouraging the growth and development of the private jet charter market in a safe and regulated environment can only, in the longer term, work to the benefit of the wider business aviation industry.

CJI Expert
By CJI Expert August 17, 2016 15:26

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