An Overview of Aircraft Leasing in Nepal (2024)

Aircraft Leasing is an Authorized Financial Arrangement recognized by the Civil Aviation Authority of Nepal in which airlines lease or rent aircraft from leasing companies rather than making the upfront purchase of an aircraft. The Civil Aviation Authority is the principal regulatory body in Nepal pertaining to the registration and leasing of aircraft. A lease is an agreement between two parties to utilize an aircraft for a specified period of time. Leasing of aircraft occurs on two fundamental levels.

Airlines typically lease aircraft for a duration of three to twelve years under operating leases. The owner’s rights are not transferred under these leases; the lessor continues to be liable for residual value, insurance, and maintenance.  A finance lease transfers the majority of the advantages and disadvantages associated with aircraft ownership to the lessee. Practically speaking, it constitutes a form of ownership or a purchase.

1. Laws Governing Aircraft Leasing in Nepal

Civil Aviation Rules 2058  governs Aircraft Leasing in Nepal from the drafting of Lease to its completion. The Rule is an extension derived from the Civil Aviation Authority Act which has established Nepal Civil Aviation Authority as the apex body for the Registration and Leasing of Aircrafts in Nepal. The Rules has posited that for the purposes of obtaining Air Permit, the Leased Aircraft must submit an Application to the Director General of the Regulatory Authority with the Prescribed Fees. 

2. Procedure of Leasing an Aircraft in Nepal

The following constitutes the leasing procedure for aircraft in Nepal

2.1 Due Diligence of the Aviation Project

Generally with the assistance of a law firm, the concerned parties must ascertain the viability of leasing an aircraft and familiarize themselves with the legal frameworks and requirements of Nepal for aircraft leasing in Nepal during the initial phase. The Preparation Phase must additionally encompass the aircraft’s model and size selection.

2.2 Structure and Configuration of the Lease

Subsequently, the Concerned Party or Organization must reach a decision regarding the lease structure to be implemented, which may include either a dry lease for the aircraft alone or a wet lease for both the aircraft and the crew.

2.3 Settlement of Lease Agreement

As per the guidelines set forth by the Civil Aviation Authority of Nepal (CAAN), a thorough lease agreement encompassing all pertinent terms and conditions of the lease is mandatory. Hence, the individual with such intentions must compose a Lease Agreement.

2.4 Draft Preparation of Mandatory Documents

In addition to the Lease Agreement, CAAN mandates the submission of an Application Form for Aircraft Leasing, the particulars of which are elaborated upon in the following section. Additionally, a set of documents, as specified by CAAN, must be drafted or properly completed. Their details are provided below.

2.5 Approval by CAAN

The Civil Aviation Authority of Nepal (CAAN) must then grant approval to the concerned. The lease agreement, aircraft specifications, and any other pertinent documents that are considered necessary must be submitted in order to obtain regulatory approval. Upon receipt of approval from the CAAN, the lessee is additionally obligated to fulfil the financial obligations of the lease, including security deposits, lease payments, and any additional charges.

2.6 Completion of Registration of Aircraft

Consequently, registration with the Civil Aviation Authority of Nepal is required for the leased aircraft. Obtain or amend the AOC to include the leased aircraft, if applicable. The essential customs procedure, in addition to other taxation concerns, requires further resolution.

3. Essential Documents for Aircraft Leasing in Nepal

It is important to acknowledge that the documentation necessary for aircraft leasing in Nepal may differ depending on the nature of the lease, the participating parties, and the applicable regulations. Nonetheless, a general summary of documents that might be necessary for the aircraft leasing procedure in Nepal is provided below. The Required Documents for Leasing an Aircraft in Nepal Are:

  1. Lease Agreement that outlines the terms and conditions of the lease and other details
  2. Aircraft Registration Certificate, Certificate of Airworthiness
  3. Certificate of Insurance
  4. Relevant Financial Documents
  5. Air Operator’s Certificate
  6. Compliance Documents to financial, safety, and legal standards.
  7. Relevant Documents if FDI
  8. Compliance and Legal Documents such as Power of Attorney and others.

4. Details to be Mentioned in the Aircraft Leasing Application

The following are the requirements for an application to the Civil Aviation Authority in Nepal for aircraft leasing:

  • Details on Aircraft:
  • Type of Aircraft, Manufacturer, Serial Number, and Production Date
  • Type, Make, Power Rating, and Quantity of Engines
  • Minimum Number of Crew, Maximum Takeoff Weight, Empty Weight, and Maximum Passenger Seats
  • Type of Propeller or Rotor, Manufacture
  • Name of the Constructor, Address, Telephone Number, and Fax
  • Cycles and hours flown since new
  • The Accident Record:
  • Particulars regarding any incidents or accidents, including their nature, extent of damage, and significant repairs.
  • Details Regarding Registration:
  • State Registration Mark, if applicable, and prior registration in Nepal
  • Current Aircraft Position or Operation, Registration Number, and Operational Type
  • Owner Particulars:
  • Nation, Name, and Address of the Owner
  • Leasing Applicant Particulars:
  • Classification of Lease Applicant (e.g., Nepalese citizens, Nepal-registered businesses, non-citizens conducting business or residing in Nepal)
  • Business Classification for Non-Citizen Applicants
  • Premises of business operations or tenure of residency in Nepal for applicants who are not citizens
  • Information on the Operator:
  • Name and Address of the Operator, Nationality, Telephone Number, and Fax
  • Routine Location of an Aircraft
  • Aircraft classification includes designations such as Transport Passenger, Transport Cargo, Special Category, and Aerial Work.
  • Financial Information:
  • Specifics regarding the paid leasing fee (Yes/No/N/A)
  • Information regarding leases and lease-purchases
  • Types of Leases and Certificates:
  • Dry lease, wet lease, or semi-wet lease classification
  • Information regarding certification, such as the Type Certificate of Approval and the Certificate of Airworthiness
  • Leasing Constraints:
  • Specifics of the lease agreement, including whether the Director General received a draft copy.
  • Airworthiness Authority confirmation from a foreign country (if leasing from a foreign operator)
  • Substantiation and Declaration:
  • Attestation that the information provided is accurate
  • Acknowledgment of having studied Nepalese Civil Airworthiness Requirements and pertinent Aviation Rules
  • Signature, Date, Location, and (if applicable), Stamp

5. Conclusion

For the purposes of Leasing an Aircraft in Nepal, a Lease Agreement must be structured and configured in accordance with the parties. Thereafter, a draft preparation of Mandatory Documents must be brought to effect followed by the regulatory approval by Civil Aviation Authority of Nepal. In General, a set of Documents is deemed necessary for Aircraft Leasing such as a Certificate of CAAN Registration, Insurance, Air Operator Certificate, Relevant Documents for FDI and others. 

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