On 7th August 2020, soon after the IX1344 failed to land on its first approach, Air Traffic Control (ATC) cleared the take-off of an Air India aircraft bound for Delhi. This was an indication that the crew in charge of the Boeing 737-800, flying in from Dubai, did not raise an alarm over weather or other conditions at the airport[1].
While the investigation into the unfortunate plane crash in Kozhikode is still underway, many question the corruption in the aviation industry and the possible role it played in the crash, indicating that the truth may never come to light.
The industry appears to be particularly prone to corruption, typically characteristic of any industry with such extensive government control of assets, like airports, and subject to multiple layers of regulation. This is especially true in India where bureaucracy and red tape is widely encountered by the consumer.
India
Back in 2012, The Business Standard reported based on a preliminary investigation carried out in consultation with the Directorate General of Civil Aviation (DGCA) that the Central Vigilance Commission (CVC) has recommended action against twelve Civil Aviation Ministry officials for extending favours to certain private airlines for securing jobs for their relatives.
In addition to this, IBN Live reported that the New Delhi District Consumer Disputes Redressal Forum had ordered Air India to pay compensation to a woman concerning a bribe sought from her son by a member of its airport staff, to allow him to carry extra luggage on an airplane bound to Singapore.
The New York Times had also dug deep on the practice of pilots falsifying records and paying bribes to testing officials about professional examinations and qualifications.
Licenses
The government is also under fire for its system of issuing licenses, as most of the world issues ones that are valid for life- with provisions to keep pilots in check, while the DGCA continues to issue licenses that expire every five to ten years, ensuring laborious administrative work for themselves, and a gateway for corrupt practices.
The issue of the Flight Radio Telephone Operators License (which every pilot must have) is another proof of the matter. The usage of radiotelephones is well established in many countries, including the US, where there is no separate license one needs to have to use it. The pilots receive training on using them during the regular course.
In India however, The Ministry of Telecommunication conducts a monthly exam for the pilots to acquire this, apparently, basic license. This is again a cumbersome task for everyone involved.
The DGCA while seems to be increasing the standards of regulation using these methods, in reality, its only increasing room for corruption to seep into the industry at multiple levels of control.
With this proof, it indeed looks like India is not flying so high on the corruption front in the aviation sector.
Beyond the Borders
The industry in the rest of the world, however, remains relatively sound, with the establishment of strict protocols and organizations that have been set up to keep corruption at bay.
In late January 2020, Airbus agreed to pay nearly $4 billion and to take several remedial measures to resolve alleged corruption violations with the French National Financial Prosecutor's Office (PNF), the United Kingdom's Serious Fraud Office (SFO), as well as the US Department of Justice (DOJ) and US Department of State.
This represents the largest combined anti-corruption settlement to date, and the alleged corrupt conduct involves a number of airline and government customers. This serves as an example for aviation companies to help identify external and internal red flags of corruption, and strengthen their compliance programs.
Airbus and Corruption
On paper, it appeared that Airbus had robust anti-corruption compliance procedures. For example, Airbus had created a Special Marketing Organization (SMO) responsible for selecting and monitoring consultants and ensuring that commercial intermediaries were independent of Airbus customers. The SMO had its compliance officer and general counsel along with a selection committee at the group level for approving consulting contracts, as reported by Holland&Knight.
This seemingly comprehensive system was, however, flawed, and in numerous instances, approved consulting arrangements and payment schemes had clear violations. In some cases, approval was granted notwithstanding concerns raised by the compliance department. Moreover, the DOJ alleges intentional acts by Airbus employees to disguise payments.
While there are many more instances of corruption and bribery that were uncovered, the crux of the issue and real points of focus are as follows-
Consultants, brokers and agents remain the weakest link in preventing corruption
Many charges against Airbus related to "commissions" were paid to third parties as a broker, consultant or agent, who were linked directly or indirectly to executives of Airbus customers or their family members. This shows that company compliance programs must have clear procedures for vetting third parties and approving agreements and commissions with such parties.
Financial institutions and other counter-parties are heavily scrutinizing deals to avoid corruption
It appears that the original notification i.e. voluntary disclosure by Airbus to the SFO was prompted by concerns raised by an export credit agency during diligence of a sale-leaseback transaction of aircraft ordered by a Sri Lankan airline from Airbus (involving an unnamed leasing company), as reported by Holland&Knight. This highlights the fact that banks, lessors, investors and other financiers are now asking about brokers and consultants in major aircraft transactions.
Sponsorships and other marketing-related payments may constitute "Bribery"
The enforcement authorities flagged several payment mechanisms used by Airbus employees to engage in corrupt conduct. While it is certainly legitimate for aviation companies to sponsor sports teams as a legitimate means of marketing and market penetration, companies need to properly diligence the team and its owners to identify any potential corruption or ethical issues.
The Airbus story highlights, with proof, the areas in which corruption in the industry is prevalent and standards of procedure that allowed for these underhand practices to be unearthed, giving us Indians something to learn from.
The necessity for internal reviews by companies and inspections by third-party bodies to uncover the deep-rooted corruption in the Indian aviation industry is the need of the hour. Else, it could directly or indirectly be the cause of another unfortunate event like the plane crash in Kozhikode, where the 18 lives lost could have been saved.
Article by-
Anupama Nhavalore,
PES MUN Society
Excellent article covering all the corners of corruption prevailing in the Indian aviation industry.