Select Committee on Transport Minutes of Evidence

First Supplementary memorandum submitted by the Civil Aviation Authority



1.   In striving for efficiencies, what consideration have you given to the possibility of allowing some CAA services to be provided by competent third parties on a competitive basis?

  The CAA believes that, in order to maintain a coherent safety regulatory system that continues to deliver the high safety standards that are enjoyed in the UK, it is important that core regulatory activities are, in the main, carried out by the CAA. However, the CAA regularly reviews activities which might usefully be outsourced to others. During the last seven to eight years the CAA has outsourced many support activities: IT services, mail services, printing, catering, security, and travel management. Such arrangements are not confined to support activities and the CAA authorises appropriately qualified persons in industry to carry out a number of safety regulatory functions including, for example, pilot flight testing. The CAA will continue to keep this under review in order to provide the most effective service to those we regulate.

  The ATOL scheme provides several examples of how the CAA enables third parties to provide its services. For example, the CAA has reached agreements with one travel trade association and a bank under which they carry out administrative functions relating to ATOL, as well as providing financial protection, for participating ATOL holders. This enables ATOL holders to choose to obtain their ATOLs from the CAA either directly or via either of those bodies. About 200 ATOL holders hold their licences via such third party arrangements, and the CAA is in discussions with other potential providers of this service.

  In providing refunds to the customers of collapsed ATOL holders, the CAA engages the services of claims handling agencies which are equipped to manage high levels of demand, selecting them on the basis of price and their ability to provide a good service to the public. In the last two years, almost 80% of the public's claims were handled by third parties, and there are presently three agencies providing this service.

2.   It has been suggested that the CAA should be given a wider remit in terms of promoting all aspects of aviation, including innovation, exports, and sports, and that you should report to the Department for Trade and Industry as well as Transport. Would you welcome such an extension of your remit?

  The CAA would not welcome such an extension of our remit, as we fear it could detract from the clarity of the objectives currently given to us through legislation and through guidance from Ministers.

  We note that the FAA used to have a mandate to promote the growth of the airline industry. That mandate was repealed in the aftermath of the ValuJet crash in 1996, when questions were raised about possible contradictions between the promotion mandate and the FAA's safety obligations.

  We recognise that the French DGAC has support for the aircraft industry" as one of its objectives. However, that needs to be seen in the context of the DGAC's role in providing launch investment and R&D funding for the French aviation industry. The CAA does not have such functions.


3.   How do you use targets to drive performance on service level and efficiency?

  Challenging objectives and targets are set for each Executive Member of the CAA Board and these are cascaded down throughout the organisation. Each Group Director will add other objectives and targets specific to their respective groups. Targets and performance objectives are developed annually for staff at all levels as part of the employee performance appraisal process. All employees, including the Executive Members have formal six monthly meetings with their line managers to assess progress against objectives. Corrective action or objective updates are then generated, and the remuneration of Executive Members and employees will be affected by achievement or otherwise of their respective targets and objectives.

4.   Why do you not have any performance indicators or targets relating to your environmental objective?

  Following the Civil Aviation Authority (Air Navigation) Directions 2001, the CAA is required to take into account various factors relating to the environmental impact of aviation. The guidance to the CAA on Environmental Objectives relating to the exercise of its Air Navigation Functions (January 2002) provides amplification and clarification of those Directions. In most respects, the Department for Transport is responsible for the environmental regulation of aviation. The CAA has limited ability to require aviation stakeholders to provide environmental data and we have been given no statutory or other obligation to report on the environmental performance of aviation.

5.   Do you publish all of the service level performance data you record? Do you have any plans to increase the publication of performance data as a means of increasing transparency and demonstrating the quality of your service?

  We do not currently publish all the performance data gathered. However, it is our intention to put on the CAA web site all relevant indicators in early 2006.

  In addition, SRG has a Standing Committee called the Safety Regulation Finance Advisory Committee (SRFAC). This joint Industry/CAA Committee meets on average five times a year and is used as the vehicle to consult on SRG's charges, budget plans, actual performance against budget, and to discuss the wide range of performance indicators that SRG produces. The SRFAC also provides a forum within which industry is consulted on SRG efficiency and proposed business initiatives.

6.   Your corporate plan makes reference to a number of papers due for delivery to the Board during the course of 2005 and 2006 in relation to improving efficiency and cost effectiveness. What real benefits have been achieved so far and how are you measuring and validating these?

  The Corporate Plan identifies a number of improvement projects that the CAA initiated during 2005-06. Examples of such projects are set out below:

    —    Review of SRG's Operating Standards Division: The structure and organisation of the Division was reviewed, which will result in an annual reduction in staff costs of £376,000 being realised from April 2006.

    —    Review of location of SRG's Regional Offices: The review of the requirement for, and the location of SRG's 10 regional offices has resulted in three being merged into one site and one office being relocated to SRG's main site at Gatwick. This has resulted in reduced accommodation and employment costs providing an annual saving of £157,000.

    —    SRG's Medical Department: Other organisational rationalisations have been achieved, including the restructuring of the management of the Medical Department, which has reduced annual costs by £133,000.

    —    CAA House, London: The CAA has rationalised its occupancy of its London property, which has enabled an additional floor of CAA House to be sub-let at commercial rents, providing an additional income of £265,000.

    —    Insurance arrangements and VAT: The CAA initiated a review of its insurance arrangements during 2005 and was able to renegotiate its policies, and it is forecast that the premiums will be reduced by £240,000. It is expected that this saving will be maintained over future years. Also during this period, the CAA has renegotiated its VAT recovery methods with HM Customs and Excise and it is forecast that the CAA's VAT charge will be reduced by £700,000. It is expected that this saving will be continued for future years.

  The initiatives outlined above have reduced the CAA's annual costs by £1.87 million. This is part of a continuous process; for example during 2002-03 the CAA initiated a review of its publications methods, which resulted in the CAA making all of its publications available on the internet. This has saved an average of £650,000 per annum.

  Projected cost savings are incorporated in the annual budget setting process, which is overseen by the Board. Any variances from the savings planned would show up in the reporting of budget against actual expenditure, which is reported to the Board monthly.

7.   What progress have you made in developing a CAA programme of efficiency improvements and identifying quantifiable benefits?

  Each update of the CAA's Corporate Plan incorporates a programme of efficiency improvements aimed at delivering the overall efficiency improvement target set by the Board.

  The CAA is currently developing its business plans for 2006-07, which will be used as the basis for the next Corporate Plan. A number of efficiency improvements have been identified, but have yet to be endorsed by the CAA Board. Examples of such improvements, which are currently being planned for 2006-07, are set out below:

    —    SRG's Operating Standards Division rationalisation of regional offices initiated in 2005 will continue with the objective of merging other regional offices in 2008.

    —    The merger of SRG's Airworthiness Maintenance Standards Department with its Design and Production Standards Division will be implemented early in 2006-07 and future efficiency improvements will be identified as a result of the merger.

    —    The Consumer Protection Group will be developing the skills of its staff to enable them to manage a greater variety of further tasks and to be able undertake risk assessments on licence holders.

  The improvements identified in the business plans of the regulatory groups and the corporate centre will be consolidated into the CAA-wide 2006-07 Continuous Improvement Programme. This will include recommendations of the Hampton Review and the Better Regulation Task Force's Less is More" report. The programme will also include quantifiable targets for each of the improvement initiatives. The progress of the activities will be monitored against the plan and reports will be provided to the CAA Board.

8.   Was Phase 1 of the Electronic Records Management programme successfully completed in September 2005 as planned? How is Phase 2 progressing and when do you expect this to be complete?

  Phase 1 of the Electronic Records Management (ERM) Programme is scheduled to be completed at the end of January 2006, four months later than originally stated. The ERM software products which were available initially, failed to meet the acceptance criteria of the CAA following product assessments prior to the start of Phase 1. This situation was largely caused by changes to the requirements of The National Archive (TNA) for those products to gain TNA accreditation, which resulted in some products losing their accreditation (12 products reduced to four). TNA accreditation was one of the CAA's key criteria for acceptance to enable compliance with the Government's ERM2004 directive. A further assessment of products was therefore undertaken, which delayed the start of the ERM Programme by three months.

  Other factors associated with the definition of the requirements and prototyping of the software contributed to the delay, but we have contained these instances within the planned contingency for the Programme.

  The ERM Programme was re-planned to take account of the above situations, with Phase 1 given a revised completion of the end of January 2006. Phase 1 is on target to meet this milestone.

  Phase 2 of the ERM Programme (Proof of Concept) can only follow once the ERM System has been designed and built, and therefore is delayed as a consequence of the delay in Phase 1. Where possible, Phase 2 activities have been brought forward, including some pre-planning work. Phase 2 is still forecast to be completed within budget and duration, but will now complete in July 2006 (originally April 2006).

9.   Is the wider Electronic Document and Records Management System still on course for completion by December 2007 and are costs still in line with those initially planned?

  The whole ERM Programme remains within the budget and overall timescales. Therefore, despite the early stages of the Programme taking four months longer than initially stated, the CAA expects to complete the whole programme by no later than December 2007 as originally planned.

10.   Why were 27 of your 59 key actions for 2004-05 not met in full and on time? Was it due to poor planning or poor delivery? And is the fact that performance was particularly poor against those actions described as being CAA-wide indicative of problems of coordination?

  The CAA intends that the key actions set out in its Corporate Plan are both challenging and focused on the strategic direction required by the CAA, DfT and Industry. However, as with any business, the CAA recognises that there will always be occasions, because the Plan has been drawn up about six months before the start of the year, when events require activity to be re-prioritised to deal with issues that arise subsequently, and necessarily take priority over those originally put in the Corporate Plan.

  In its 2005-06 Corporate Plan, the CAA reported that out of 59 key actions for 2004-05, 32 had been met in full and on time, and 11 were completed though not on time and 15 that were delayed mainly due to a lack of resources or changes in priorities, and one action was not completed as it was no longer required." The reported delays were not due to poor planning, poor delivery or poor coordination.

  The CAA monitors closely delivery against the key actions identified in the Corporate Plan as the year progresses and regular reports are put to the Board. The criteria for deeming an action to be late were stringently applied, with four of the 11 actions not completed on time" being only delayed by at most four weeks. This marginal delay did not cause any significant problems to the operation of the CAA or its ability to achieve its objectives.

  During 2004-05, the CAA had to react to many EASA related issues which could not have been foreseen and resulted in four projects being postponed because specialist resources were diverted to support EASA crisis activities. As a regulator, the CAA is also subject to the decisions and processes of external agencies such as Eurocontrol, which are outside of its control. Nine of the delays encountered were due to such external causes.

  The Plan included four projects delayed due to requests from industry to increase timescales in order to ensure that all of their issues were adequately addressed. One example was the SRG Costs and Charges Review. The project had been scheduled to last eight months, but due to industry's request for more time to attempt to achieve a consensus on the CAA's charging proposals, the project was extended for a further three months.

  Two of the delayed actions reported in the Corporate Plan were associated with the EDRMS programme. The reason for these delays has been included in our answer to question 8 above.

11.   What actions have you taken to ensure that you achieve greater success with the key actions detailed for 2005-06?

  The CAA continues to monitor progress against all its planned actions and ensure that these actions remain challenging. However, the CAA will continue to give priority to any business critical issues as and when these arise, particularly if they have a safety context, and will manage its resources accordingly.

12.   Do you apply cost-benefit analysis in the setting of safety standards?

  Cost-benefit analyses are carried out routinely as part of the Regulatory Impact Assessment (RIA) process. If a new safety standard is to be mandated, the Cabinet Office guidelines require the CAA to consult using the RIA mechanism, which includes the determination of the cost of a proposal and the impact it would have on industry, and in particular on small businesses. At the completion of the consultative phases of the process, a Final RIA is drafted and accompanies the proposed legislation for approval by the appropriate Minister of State. The Ministerial sign-off" of the RIA includes the following statement: I have read the Regulatory Impact Assessment and am satisfied that the benefits justify the costs".


13.   In 2003, our predecessor Committee criticized the CAA for failing to ensure the development and investment in runways and airport facilities. In your own view, have you improved in this area?

  The Committee's criticisms of the CAA in its 2003 report related, we understand, to the statutory objective in the 1986 Airports Act to encourage investment in new facilities at airports in time to satisfy anticipated demands by users of such airports. This duty applies only to the CAA's role as the economic regulator of airports and, in particular, its function of setting price caps on charges to airlines every five years at the three designated BAA airports in London—Heathrow, Gatwick and Stansted—and Manchester Airport. For the BAA London airports, the CAA set price caps in 2003 which have enabled BAA to undertake investment at those airports expected to total around £5 billion [in 2004-05 prices] over the period of the current price caps (2003-04 to 2007-08). The vast bulk of this investment is at Heathrow with the construction of Terminal 5, following the grant of the necessary planning permissions, which is due to be completed by the end of this period. The CAA included a mechanism in the price caps at Heathrow to provide an incentive to BAA to complete the various stages of the Terminal 5 project on time.

  The scale of airport investment currently being undertaken and the speed with which it followed the Government's decision that Terminal 5 should go ahead after a much delayed planning process suggests that problems have lain somewhere other than in the exercise of the CAA's regulatory responsibilities for airports.

  A similar conclusion might be drawn from the advice the CAA gave the Government on the UK's future airport needs in 1990. That detailed study led to the CAA advising the then Government that a new runway to cater for demand arising in the South East would be needed in the first few years of this century. The CAA considered a number of options for locating this additional runway development, including Heathrow, Gatwick and Stansted as well as at other sites in the South East, mainly from an air traffic control perspective. The Government subsequently set up a working group, on which the CAA was represented which identified in a report published in July 1993 those airports that, from a wider perspective, had scope to provide additional runway capacity to serve the South East. The Government did not pursue the working group's main recommendations.

  The CAA has recently (December 2005) published a consultation paper setting out the issues for the next review of the price caps at the BAA London airports for the five years starting in April 2008. The paper identifies the need for investment in new airport infrastructure, including runways, to cater for future demand from airlines and passengers as a major issue for the review and discusses possible ways to incentivise BAA to bring forward the right investment at the right time.

14.   How are you planning to encourage development at airports over the next decade?

  In its December 2005 consultation on BAA's airport charges from 1 April 2008, the CAA explicitly recognised the need for investment in airport infrastructure, and made a number of proposals consistent with its duty to encourage investment in time to satisfy anticipated demand. In addition to adopting an evolutionary approach to the review, designed to avoid unnecessary change to regulatory policy and to create a stable climate for investment, the CAA has focused on the need to ensure that the legal requirement to set price caps every five years does not impede investment. The CAA has therefore proposed a number of modifications to ensure greater flexibility in revenue recovery over time:

    —    where a major investment is contemplated, or where the future rate of growth in demand is uncertain, allowing BAA greater flexibility in its pricing. This would enable the strength of demand for new capacity to be assessed (better informing the decision on the timing of the investment), and allow prices to follow a path to a level covering the costs of investment. If such an approach led to prices in 2008 to 2013 that were higher than merited by airport costs, there would need to be compensating adjustments in future price control periods; and

    —    where demand is uncertain, revising the regulatory framework from 1 April 2008 so that under-recovery of revenues against allowed revenue (eg as a result of weaker demand than forecast) in a given five year period could be rolled forward and recovered in future periods, and linking allowed returns on investment to actual (rather than forecast) capital investment.

  The CAA is currently consulting on this position in respect of BAA's airports until 20 March 2006. It will firm up its position once it has considered responses to that consultation. (The CAA expects to undertake an equivalent consultation on the issues around Manchester airport in November 2006.)

15.   What has been the effect on airport investment of the Competition Commission's rejection of the single till" model?

  The Competition Commission actually rejected the dual till"2[2] model, and recommended the continuation of the single till" model. In principle, it is impossible to establish the effect of this decision, as the degree of investment that would have occurred had a dual till" approach been adopted can never be known. However, in practice, investment has been very strong under a single till"3[3] approach. This is illustrated in the chart below, which shows investment across BAA's three London airports at unprecedented levels over the period 2003-04 and 2004-05, the first two years of the current price control period.

16.   Does the CAA still favour the dual till" model?

  At the last review, the Competition Commission concluded, and the CAA agreed, that having considered the relative merits of alternative regulatory approaches, airport charges for the current five year control period should be set on the basis of a single till". In the light of its evolutionary approach to the current airports review, the extensive discussion and analysis of this issue at the last review and resulting conclusions, the CAA does not intend to re-open the debate over the introduction of a dual till" for this review. It is therefore proposing that price caps for airport charges in the next five year control period should continue to be set on the basis of a single till".

  The CAA is currently consulting on this, and will therefore not firm up its position until it has considered responses to that consultation.

17.   Why are you proposing to continue to treat the three BAA airports as single entities rather than one overall entity?

  In its February 2003 decision on the price controls for BAA's designated airports, 4[4] the CAA decided to apply price caps on a stand-alone5[5] basis on the grounds that it would:

    —    provide for a level playing field between Stansted and non-BAA airports in the South East;

    —    remove a potential distortion whereby Stansted investments may be undertaken even though Stansted users do not value them sufficiently to pay for the life cycle costs at that stage; and

    —    improve the transparency of regulation for each airport.

  However, the CAA is not at this stage aware of any additional arguments or evidence that was not considered as part of its February 2003 decision that would suggest that the stand-alone approach to price regulation should be reconsidered. Further, the CAA considers that the requirements of UK and European competition law are more likely to be met through a policy of stand-alone regulation.

  The CAA is currently consulting on this position, and will therefore not firm up its position until it has considered responses to that consultation.

18.   How much weight do you attach to the CAA Passenger Survey in the process of determining airport price caps?

  The CAA Passenger Survey provides comprehensive and detailed information about the flow of passengers through the designated airports. It is a vital planning tool for airports, airlines and aviation related stakeholders who meet some 50% of the costs in return for access to the data. Its main use in the regulatory price cap reviews is in assisting with analysis of the market circumstances of each airport as it provides comprehensive information of airport catchment areas. However, the existence of the Survey provides the CAA with the opportunity to seek specific information from passengers and was recently used in this way for the CAA's December 2005 report on the demand for outbound leisure air travel and its key drivers. The CAA will be considering what further use it might make of the scope the Survey gives it for accessing passengers' views in the current airports price review.

19.   To what extent is the Air Transport Users Council (AUC) involved in the creation of regulatory policy in areas other than specifically consumer protection, and do you have other mechanisms for involving consumers in the regulatory processes?

  The AUC's principal focus is on matters that directly affect the interface between airlines/airports and air passengers. In general, these cover aspects that fall outside the CAA's regulatory remit but this does not constrain the AUC from expressing an independent view on any issue that it judges to have a significant and direct operational impact on customers of air services or where its experience in the field of customer/operator relations enables it to make a distinctive contribution on matters subject to regulation, or in response to formal consultations. Consequently, in the area of economic regulation the CAA specifically seeks the views of the AUC on matters that are likely to affect the interests of consumers—such as the pricing and quality of services and facilities provided by airports, route licensing policy, and competition and transparency issues regarding air fares.

  The AUC is free to comment on any issues where, according to its own judgment, it wishes to promote the interests of air passengers. It responds to consultations from the CAA, the Government, or the European Commission; it participates in official working groups or committees where it feels it is able to add value, and it promotes a consumer view proactively (for example, seeking meetings with officials or ministers) as it considers appropriate.

  The level of detail of the AUC's consultation responses, or the scope of its involvement in committee or proactive work, varies according to a number of factors. The main ones are its perception of the degree of consumer interest or possible consumer detriment and its potential ability to influence an outcome. But an important secondary consideration is the degree to which it believes its contribution will add value to the contributions of other interested parties.

20.   It has been alleged that the Air Transport Users Council (AUC) is not adequately resourced. Can you explain how this body is resourced, and how the level of resourcing is determined?

  The AUC receives its funding from the CAA, as an Auxiliary Group within the CAA corporate structure. The level of funding is determined via the CAA's normal business planning process.

  Regulation EC 261/2004 on compensation and assistance for air passengers in the event of delays, cancellations or overbooking came into force on 17 February 2005, resulting in a significant increase in complaints and enquiries to the AUC. The AUC and CAA had expected the Regulation to generate additional complaints and enquiries, but it was impossible to predict the level of increase.

  In the event, the AUC was not able to keep up with the increase in demand for its services arising from Regulation EC 261/2004, with the result that there have indeed been allegations that it is not adequately resourced. It has, however, taken on additional staff, and, as the training of the new staff progresses, is catching up with the backlog. The AUC and CAA have together monitored the impact of the Regulation and both believe that the AUC is currently resourced at an appropriate level.


21.   In your submission to this inquiry which amounts to some 114 paragraphs, you mention General Aviation just twice. Does this reflect how important you think this sector is?

  The fact that we mentioned General Aviation (GA) just twice in our submission does not reflect our view of the importance of General Aviation. Instead, we consider that the extent to which GA was mentioned reflects more the questions which were posed for this inquiry. Those questions stemmed from the statutory framework within which the CAA operates, and from the guidance given to the CAA by Government. Neither the statutory framework nor the guidance from Government make much, if any, explicit mention of GA and, as a result, our submission did not make much explicit mention of GA either.

  None of this detracts from the CAA's view that GA is an important sector of UK aviation. The GA sector and its interests are given attention continuously in the Airspace Policy and Safety Regulation activities of the CAA, and currently there are several major joint initiatives underway with GA:

    —    Light Aviation Airports Study Group—This review, undertaken by the CAA and Industry, is considering the use of non-licensed aerodromes for flying training and some small public transport operations.

    —    General Aviation Regulatory Review—This Industry/CAA review is considering the future shape and extent of UK General Aviation regulation once EASA takes responsibility for Operations and Licensing issues.

    —    General Aviation Strategic Review—This CAA/Industry review is considering the wider benefits of General Aviation to the UK. Included in the review will be the economic benefits of General Aviation to the UK economy and technical and sectoral trends.

    —    Small Air Operator's Certificate (AOC) Holders— Many small General Aviation companies also have an AOC and oscillate between AOC operations, aerial work and private flying. The CAA/Industry Review Group is looking to reduce the regulatory burden and oversight without affecting safety levels; this involves the increased use of Industry bodies to take on a more active interface between the CAA and companies so as to reduce CAA involvement and hence costs.

  The CAA would not be engaging in such reviews if we thought that GA was not important. Please also see answers to questions 22, 23, 26 and 27.

22.   The CAA is currently running two reviews of the General Aviation sector—could you explain what you are reviewing, and what areas of policy will be influenced by the outcomes?

  The Review Teams will be looking at the following:

    —    a description and definition of general aviation in the UK;

    —    the existing UK policy context for general aviation;

    —    GA sectoral trends in the UK during the past 10 years;

    —    UK versus international trends;

    —    other regulatory models used within Europe and elsewhere;

    —    the accident rate for UK general aviation over the past 10 years compared with selected other European National Aviation Authorities and the Federal Aviation Administration. (The Review Teams will consider appropriate safety targets for general aviation.);

    —    benefits (quantified so far as possible) to UK or European aviation industries from general aviation;

    —    implications of general aviation activities for other users, and for the community generally (including, so far as practicable, environmental impacts);

    —    major current developments which are likely to affect UK general aviation: airspace, infrastructure, technology, regulatory, costs, etc;

    —    issues concerning access to airports;

    —    future trends affecting GA;

    —    methods and effectiveness of consultation and dialogue between GA interests and CAA/Government;

    —    key strategic issues for UK general aviation;

    —    possible legal and Regulatory changes;

    —    costs of administration;

    —    costs to industry;

    —    advantages and disadvantages of each proposal; and

    —    cost effectiveness and risk analysis.

  Given the very broad scope of these two reviews and the wide range of activities and issues being examined, and the fact that the CAA is taking part in the reviews with a completely open mind, the CAA does not wish to pre-judge the areas of regulatory or other policy that will be influenced by the outcomes of the reviews.

  It should be noted that all the information concerning the two reviews, ToR's etc, have been published on the CAA web site.

23.   Was there a link between the protests from the General Aviation sector against the proposed new safety regulation charges and the announcement of two reviews of General Aviation (the Strategic Review and the Regulatory Review)?

  The announcement of the two reviews did not stem from the protests of General Aviation (nor, as has been suggested by some, from the CAA anticipating the Transport Select Committee inquiry, which was announced some five months later).

  The strategic review arose from a number of discussions in the CAA Board about the Joint Review Team (JRT) project and its proposals, and from the Board's recognition of a need for the CAA and other parties to have a better understanding of the key strategic issues facing the UK General Aviation sector. We are not aware of any comparable wide-ranging review over the last 10-15 years, and there are currently many developments in progress and planned which have important implications for that sector eg:

    —    the Single European Sky initiative;

    —    the European Aviation Safety Agency;

    —    changes in airspace classification;

    —    changes in technology eg Mode S;

    —    continued rapid growth in commercial air transport; and

    —    possible introduction of unmanned air vehicles.

  Against the above background, CAA and DfT had felt for some time that a strategic review of the GA sector could be useful, but we were concerned that the industry might not welcome it. However, CAA discussions with DfT Ministers showed that there was now an appetite in the industry for a review of this nature.

  The Regulatory review of Large AOC holders was a Business Plan initiative before the start of the Costs and Charges review. The Small Aerodromes working group and the Small AOC working group review stemmed from the JRT analysis, which highlighted the full cost of the regulatory activities being undertaken once cross-subsidy was removed. Both of the latter two work streams were established before any consultation on SRG's revised charges took place.

24.   Should the CAA not have a non-executive Board member from the General Aviation sector in order to ensure proper balance and representation?

  No. Non-executive Members of the CAA Board are appointed by the Secretary of State on merit under the rules of the Office for Public Appointments. They are not appointed in a representative capacity. If Members were to be appointed on a representative basis, all the principal classes of organisation regulated by the CAA would be entitled to representation on grounds of fairness. This would make for a very large Board, which would be at risk of its agenda being distorted by the special interests of those representatives.

  That said, we are interested in having someone with experience of general aviation on the CAA Board, and the advertisement last year for a new Non-Executive Director stated that experience of the GA sector was one of the areas which would be an advantage to applicants, amongst other attributes. In the event, the person appointed to fill that vacancy does not have a general aviation background.

25.   Is it not true to say that your proposed charging scheme for safety regulation is unfair on General Aviation as compared to the airlines who do not pay VAT or fuel taxes under ICAO protocols? 6[6]

  No, this is not a true statement. Please see answers to questions 26 and 27.

26.   What modifications were made by the Board to the proposals put forward by the Joint Review Team on Costs and Charges for the Safety Regulation Group?

  The JRT Report for the Board was completed in April 2005.

  Changes to the JRT Recommendations by the CAA Board at its meeting held on 4 May 2005 were as follows:

    (a)  The proposed implementation date was deferred from 1 October 2005 to 1 January 2006 so as to enable a full 12-week consultation period to provide industry with an appropriate amount of time to coordinate a response to the consultation. The normal charges consultation period adopted by the CAA is five weeks.

    (b)  The proposals would be restricted to initial changes over a 15-month period concluding on 31 March 2007. This 15-month period will also permit greater clarity to be obtained around the impact of work transferring from SRG to EASA and how EASA will work with SRG. The original proposals were to be implemented in full over a five year period.

    (c)  To lessen the impact on the GA community:

    —  to limit the increase on AOC holder charges to 25% of the combined annual and variable AOC charges levied for the year ended 31 March one year prior to the charging year. The JRT's recommendation was for a limit of 40% applicable.

    —  to limit the increases proposed within the General Aviation and the Aerial Application Certificates Schemes of Charges to 8.4%. The average price increases as per the JRT Report were 11.1%.

  These limitations were expressly acknowledging that while charges had to increase to reduce cross-subsidisation, caution should be exercised because of the impact on the GA community. However, given the gap between the cost of providing the regulatory activity and the income being generated by the current charges, the Board considered that taking a limited step forward would not compromise the GA community.

  Following receipt of industry comments resulting from the charges consultation process that closed on 5 September 2005 and the Adjournment Debate held in the House of Commons on 11 October 2005, the CAA Board made three further amendments to assist the GA community as follows:

    (a)  Charges for Permits to Fly within the Airworthiness Scheme would increase by 10% (previously 23.1%).

    (b)  Charges for the General Aviation Scheme would increase by 3% (previously 8.4%) with the exception of parachuting whose charges would remain at the previous years' level.

    (c)  Aerial Application Certificates Scheme charges would increase by 3% (previously 8.4%).

27.   What assessment did you make of the regulatory impact on different parts of the aviation industry from your proposed reform of safety charges?

  As part of the development of the Charging proposals, the CAA was always cognisant of the impact the proposals would have on the aviation industry. Consequently, it undertook impact analyses for the proposed charges covering the operators and organisations of the following regulatory areas all of which have elements of GA included as they cover large as well as very small operators:

    —    Air Operator Certification.

    —    Aerodrome Licensing.

    —    Maintenance organisations approvals.

  The analyses were compiled with an emphasis on identifying the impact on the smaller organisations. The analyses compared the current and proposed regulatory charges as a percentage of the organisations total operating costs.

  The analyses concluded that on average for those AOC holders that operated aircraft below 15 tonnes the current charges represented 0.28% of their total operating costs and that this would increase to 0.35% when the AOC proposals were implemented. The range of operators within this group is extensive and turnover figures range from £130 million (Helicopter operators) to the smaller AOC holder whose turnover does not exceed £1 million.

  These percentages were also broadly consistent for those AOC holders that operated aircraft above 15 tonnes.

  The analyses concluded that on average for the eight smallest aerodromes with turnover below £2 million the current charges represented between 0.08% to 0.20 % of the organisations turnover. This would increase between 0.25% to 1.46% if the charging proposals were implemented.

  The analyses concluded that on average for a Part 145 maintenance approval with turnover below £1.6 million, the current charges represented between 0.35% of the organisations turnover. This would increase to 0.45% if the Charging proposals were implemented.

  The conclusion from each of these analyses is the same in that the proposed charge increases represent a very small proportion of the turnover of the companies sampled. If the charge proposals did cause organisations to question their viability, then that would be for a reason or reasons other than CAA charges.

  All members of the JRT were given full disclosure of the work carried out on the small operators. The results of which developed the transitional arrangements and determined the period of implementation.

  The CAA's policy is to undertake RIAs wherever appropriate. In this case, the CAA did not undertake a formal RIA because:

    —    there is no proposed change in regulatory policy; the change is in cost recovery methodology;

    —    the process of change had been initiated over a number of years via the Safety Regulation Finance Advisory Committee (SRFAC). With significant amendments being made to the Charges Schemes over many years, although more so in the last two years;

    —    the proposals were principally as a consequence of JRT. The work of the JRT ran for a 15 month period and the JRT was comprised of representatives that covered all sectors of the aviation industry. In addition, the CAA approached the JRT process in an open and transparent manner and during the 15 month period the CAA finances and efficiencies were subject to close scrutiny by all sectors of the aviation industry;

    —    based upon the work undertaken in SRFAC and more recently in the JRT, the CAA firmly believes that it has complied with the principle that supports the RIA process, namely that of evidence-based policy making; and

    —    the Better Regulation Task Force's publication on Independent Regulators (2003) mentions that in line with the principle of `comply or explain', independent regulators should explain why particular aspects of the RIA process do not apply to them." The publication recommends to the independent regulators the Cabinet Office guide to better policy making as a useful starting point. In establishing the Cost & Charges Joint Review Team, and by providing a 12 week consultation period for industry comment the CAA believes that it has explained the changes to the cost recovery process in sufficient detail so as not to require the compilation of an RIA.

  For the past seven years SRG has fully conformed with Cabinet Office Guidelines for best practice in this area and Regulatory Impact Assessments are routinely carried out for all new regulations.

28.   What role do you think self regulation should play in the regulation of General Aviation?

  Various regulatory models are used by the CAA in its oversight of General Aviation (GA) activities. These range from self-regulation, through devolved" regulation to full" regulation depending upon the activity and the risks involved; the activities are therefore regulated proportionately. However, devolving regulation does not absolve the CAA of its legal responsibilities and an appropriate level of oversight of such activities must be maintained.

  Self-regulation plays a significant part in GA activities. For example, foot-launched aircraft and conventional gliders are self-regulated activities but EASA's remit now encompasses certain airworthiness aspects of glider operations which, hitherto, had been unregulated by the CAA. A CAA led/Industry Group is currently considering what future regulation should comprise for this sector of the aviation industry. It is, however, complex as GA encompasses everything from foot-launched hang gliders through unmanned aerial vehicles to Boeing business jets. Therefore, one size will definitely not fit all" and proportionality to risk is dominant in the CAA's thinking on this issue.

  The Group is considering what future regulatory models will be required or available once EASA takes over responsibility for Operations and Licensing for some elements of GA. The Group is due to report to the CAA Board in June 2006. Undoubtedly, self-regulation will continue to play a significant role in the non-EASA (ie so called Annex 2 aircraft) sector of UK GA. In addition, again for non-EASA aircraft, the CAA would wish, subject to Industry competence being available, greater devolution to take place.


29.   Would you agree with the Campaign to Protect Rural England that the CAA should be given a new statutory duty to promote environmentally sustainable development?

  The CAA is already required by the 2001 Air Navigation Directions and the Environmental Guidance to have regard for the Government's policies on sustainable development and to take into account the need to reduce, control and mitigate, as far as possible, the environmental impacts of civil aircraft operation. Consequently, the CAA is broadly content with the balance between its obligations in respect to the environment and those regarding the safe and efficient use of airspace and does not see the need for further statutory duties.

  In August 2005 the Campaign to Protect Rural England wrote to the CAA concerning our assessment of tranquillity in considering airspace change proposals. The CAA responded in some detail and offered to meet the Campaign's representatives. Despite a number of subsequent offers to meet, the CAA has not, thus far, received a response.

30.   We have been told that the height and location of flight paths are changed on a piecemeal basis preventing adequate assessments of the cumulative environmental impact. Is that an accurate description?

  Controlled airspace is established for the safe containment of civil air transport aircraft. Air traffic controllers are able to use the full lateral and vertical extent of controlled airspace for the purpose of achieving the most efficient and expeditious flow of traffic. Such use will vary according to the operational circumstances such as weather, volume of traffic and landing and take-off direction at local airports. Safety remains the overriding consideration. Therefore, notwithstanding the establishment of routes, which are published as a template for flight planning purposes, the precise position and altitude of aircraft within controlled airspace will depend on the prevailing operational circumstances and fluctuations in demand.


31.   In your regulation of the National Air Traffic Service (NATS), you have now imposed financial incentives to avoid delays in the morning peak. Is this not likely to encourage NATS to take risks with safety standards in order to avoid penalty payments?

  No. A scheme of financial incentives has been in operation since PPP in 2001 and the CAA's decision to further enhance it from 1 January 2006 was against the background of its safe and effective operation to date. The enhanced service quality term is specifically designed to influence NATS' planning and resourcing decisions and not the daily activities of ATCOs and their managers. It is intended to encourage NATS to ensure that it has in place the correct infrastructure and resource to cope with traffic demand at all times of the day including the morning rush". In particular, it is aimed at providing an incentive for NATS to have in place sufficient resource, primarily controllers, to be able to staff fully the operational positions needed at that time of the day and, thus, should have the effect of enhancing safety rather than degrading it.

  The operational safety culture of the NATS operational managers, such as flow managers, watch managers and operational supervisors, is such that they will always ensure that safety is the first priority in any decision making process and will, within the criteria imposed by that priority, attempt to make the air traffic system run as smoothly, efficiently and effectively as is possible. These managers do not allow financial pressures to impinge on their sound judgement on matters of safety and, in practice, have been dealing effectively with such pressures, in running a most efficient, high capacity operation, for many years. The CAA believes that the new delay term does not create any extra pressure in this respect.

  Moreover, the measurement of delay performance takes place at one remove from the NATS operations itself, in both time and position. It will be measured a matter of days later at the EUROCONTROL CFMU, in Brussels, and therefore cannot act as a real time performance monitor in the operational environment (which the CAA acknowledges could directly influence the decision making of the local flow managers, watch managers and operational supervisors).

  The CAA approves the NATS operation, under the UK Air Navigation Order, on the basis of its mature and effective Safety Management System (SMS). That SMS requires NATS' managers to assess all operational risks to the safety of day-to-day operations and take immediate action to ameliorate any risks so identified. The enhanced delay term does not change that and it remains NATS' responsibility to ensure its operation is, and can be shown to be, safe.

  The CAA's Economic Regulation Group and Safety Regulation Group worked closely together on the specification of the delay term from the very early stages of its development and were at pains to remove any element that could directly affect safety such as penalty criteria that might encourage inappropriate operation in deteriorating weather conditions.

32.   We have had industry representations that your approach to safety regulation is becoming outmoded and overly cumbersome, encouraging box-ticking and perhaps tempting some in the industry to withhold information. Is there a risk that your model of safety regulation could become self-defeating through overload and fatigue, especially in the General Aviation sector?

  The CAA audit philosophy for the oversight of AOC holders and maintenance organisations has been developed over the past 20 years. It is a proportionate system based on giving credit to high performance companies and increased oversight to those companies that are either changing their business or experiencing safety related problems. On an annual basis a review takes place between the Accountable Manager, nominated post-holders and company Quality Manager with CAA staff to ascertain the company's safety performance. Based on this information, together with future company plans and the CAA's own audit experiences throughout the year, a future CAA audit programme for the following year is formulated.

  There are, however, recent EASA requirements which are legally binding and therefore have to be met, and these involve Part M and Part 145 activities.

  Where European law does not prevail, then the CAA's previous pragmatic approach to oversight is retained. As mentioned in the answer to other questions, there are a number of ongoing initiatives which may, particularly in the field of General Aviation (see question 21 for details) reduce regulatory oversight and make CAA regulations more proportionate. These include:

    —    Light Aviation Airports Study Group.

    —    General Aviation Regulatory.

    —    General Aviation Strategic.

    —    Small Air Operator's Certificate (AOC) Holders.

    —    Large Air Operator's Certificate Holders—A Review Group is examining whether oversight of the larger AOC operators can be reduced without detriment to safety. This would involve giving credit for Safety Management Systems, improved Quality Assurance programmes etc.

  In summary, there is a measure of compliance finding due to EASA's requirements but this is complemented by the CAA's performance monitoring which is, by nature, more investigative and searching than pure compliance finding. The CAA is continuing to improve its oversight methodology to be less intrusive into a company's operations whilst maintaining an acceptable level of oversight commensurate with the safety risk. The CAA is just seeking assurance that the company is meeting its regulatory obligations and we do not believe our model of safety regulation will become self-defeating through overload and fatigue. Furthermore, the CAA has seen no evidence, neither to our knowledge has evidence been produced, that this is the case. There are, however, some concerns to be addressed by EASA regarding proportionality for maintenance operations affecting General Aviation aircraft; the CAA is assisting EASA in those deliberations.

33.   We have received a representation that the CAA has been insufficiently bold in challenging the unrealistic policies of other jurisdictions in terms of security. Are you satisfied that the present aviation security regime is fully satisfactory? If not, please write to us under separate cover, and in confidence with your concerns.

  There is often a tension between safety and security matters and the CAA works closely with Transec (which has responsibility for aviation security). The CAA advises Transec on issues affecting flight and cabin crew performance with respect to safety interfaces.

  Post September 11, the CAA was instrumental in seeking some limited alleviation to Transec policies for flight crew in particular. However, these did not meet all of BALPA's aspirations. The CAA is not convinced that further alleviations, sought by BALPA, have safety implications and therefore are outside of the safety domain on which the CAA advises and must be viewed as social matters.

  The CAA is satisfied that the current security rules represent the correct balance between safety and security.


34.   The Civil Aviation Bill will require the CAA to start recovering the cost of running the Aviation Health Unit from the aviation industry. What direct benefit will the industry get for its money?

  The Aviation Health Unit will remain a source of information and advice about health matters in relation to aviation for flight crew and airline passengers. It will identify the need for, and support appropriate research on aviation health concerns. For example Head of AHU will be the Chair of the Steering Group of the Ideal Cabin Environment (ICE) project (sponsored by Industry and the European Commission) and in collaboration with the other consortium members which include universities, research institutes and industry (including Airbus) will seek to identify the best possible internal cabin environment. This should inter-alia provide European industry with a commercial advantage.


35.   Are you aware of any inefficiencies or duplication of effort caused by the transfer of responsibilities to EASA? What action are you taking to minimise these?

  We are aware of many inefficiencies caused by the transfer of responsibilities to EASA.

  There is limited duplication of effort, but we are now denied the previous flexibility we had prior to the EASA contractual arrangements. This may mean that we have to revisit an applicant a second time if they wish to raise a matter with us that is not covered by the existing contract. We are providing continuing feedback and advice to EASA and the Commission to highlight inefficiencies as we uncover them, and to seek possible solutions.

36.   What steps are you taking to ensure that there is transparency in the process of transferring responsibilities to EASA? Are you able to demonstrate to industry that you are reducing your costs in proportion to the degree of work EASA takes over?

  EASA's current responsibilities were transferred to it by the implementation of Regulation (EC) 1592/2002 on 28 September 2003. To ensure that there is transparency in the transfer of tasks, the DfT and SRG hold regular meetings with UK industry to brief them on transition progress. The Joint Review Team initiative and consultation on UK fees and charges covered in detail the impact of EASA on SRG costs. The Safety Regulation Finance Advisory Committee (SRFAC) is briefed fully on the steps being taken to reduce the CAA's costs as work is transferred to EASA. However, the CAA and the DfT can only brief industry on EASA and on our own plans based on what is known. Industry has understandably found it difficult to understand a transition in which much of the work, to implement functions EASA took over from the National Aviation Authorities, has been sub-contracted back to those NAAs because of EASA's lack of resources. Due to the difficulties EASA is having with poor management, poor planning, lack of finance etc, it has been very difficult for the CAA to keep industry well informed about the transition, and to ensure that transition is managed in the most effective way possible.

37.   How long would it take to get EASA turned round to a fully functional state where it is able to fulfil all its duties satisfactorily?

  There are many factors that will determine how long it will take for EASA to reach a fully functional state where it is able to fulfil all its duties satisfactorily. These include EASA's management capability and governance arrangements, its ability to recruit the required numbers of sufficiently experienced staff, and resolution of the current funding problems. It is difficult to predict how long it will take to resolve all the issues but, based on experience with other organisations in difficulty, it should be possible to make EASA fully functional within about two years from the start of a comprehensive turn around programme. The CAA and DfT are pressing for urgent action through the EASA Management Board and the European Commission. It is the action taken by those bodies, and EASA's own management capability, which will largely determine the outcome.

38.   What arrangements have you put in place for redeploying and transferring employees affected by EASA?

  The CAA's primary aim in relation to staff affected by EASA's establishment has been to encourage and assist staff in obtaining jobs with EASA. Thereafter, the CAA's priority has been to ensure adequate staffing to cope with current and projected CAA regulatory work, whilst seeking to minimise the risk of redundancies as a consequence of EASA. A number of measures have been put in place to this end and these are summarised as follows:

    —    Pursuing Jobs With EASA—Wherever practical and appropriate we have put measures in place to encourage employees to follow-up job opportunities with EASA. The measures put in place include practical assistance such as the provision of intensive language training, familiarisation visits to Cologne and open days in the CAA attended by representatives of EASA and by Cologne City Officials.

    —    Redeployment—We have focused on encouraging employees to consider their options at EASA or within the CAA. Arrangements have been put in place to ensure that all CAA vacancies are first publicised amongst those areas impacted by EASA, before wider publication elsewhere in the CAA. Managers considering these employees for vacancies are required to take a creative approach to considering their suitability and expect that an element of training and retraining will be required.

    —    Voluntary Early Retirement—Arrangements are in place for considering requests from individuals to retire early with immediate payment of pension, where that retirement would result in a net reduction in staff numbers. Subject to appropriate business benefits being derived (and an overall financial limit), employees may leave under this scheme.

    —    Flexible Retirement—In 2005, the CAA introduced Flexible Retirement arrangements and these have enabled the extension of employment in several cases where a job currently exists but is expected to disappear in due course as a result of EASA. This has enabled SRG to provide continuity of cover for jobs of recognised limited duration. The individual employees concerned will simply retire later than they would otherwise have done.

  The CAA has pursued all the above avenues but with limited success in terms of staff moving to EASA. This is due to a number of factors, the main ones being EASA's HQ being sited in Cologne, the lack of employment opportunities for partners moving to Cologne, CAA staff concerns about the effectiveness of EASA's recruitment process, and the poor reputation EASA currently has. These factors make EASA less attractive as a career move for our staff.

39.   It has been suggested to us that staff immobility may inhibit your ability to downsize as appropriate in response to EASA. Do you expect to be able to reduce the workforce without the need for redundancies? If not, how have you budgeted for this?

  The measures put in place and referred to in response to question 38, together with staff leaving the CAA, mean that the CAA is on track to achieve the necessary workforce reductions, on the basis of EASA's current responsibilities, without the need to resort to compulsory redundancies. Indeed, by the end of 2005, more staff had been successfully redeployed, or had left, than was expected in our early plans. These arrangements are reviewed on a regular basis to ensure that that remains the case.

  In summary, through careful monitoring and updating of the measures in place as required, we do not currently expect to resort to compulsory redundancies as a result of EASA and its current responsibilities. We do not recognise staff immobility" as a major issue for the CAA as it downsizes in response to EASA.

40.   What has the staff reaction been to the transfer arrangements? In particular, how has morale been affected by the uncertainty of timings in relation to EASA?

  Morale has been difficult to maintain in areas where we have had to encourage employees to pursue alternative jobs outside the area in which they are currently employed. EASA has not been an attractive alternative for many of these staff, for the reasons described above. A further impact on morale is, of course, the ever-reducing possibilities for a career with the CAA.

  We have sought to maintain morale through sensitive change management, open and frequent communication and a supportive approach. This has been balanced with the need to challenge any idea amongst CAA employees that EASA might fail to get fully established. An external assessment of SRG carried out in August 2005, as part of its IIP assessment, found that employees most directly impacted felt that there was sensitive and pro-active handling of the changes required as a result of EASA and that employees felt appropriately informed and assisted in the transfer of work to EASA. Not surprisingly, the results of our Staff Survey, published early in 2005, show that those employees most impacted by EASA are less optimistic about their own and the CAA's futures than staff in other areas of SRG and the CAA generally.

41.   Have you experienced staff leaving the CAA in anticipation of a reduction of scope who has not subsequently been recruited by EASA? What actions are you taking to prevent this loss of regulatory skill and experience?

  Yes. Of those who have left the CAA due to a reduction in scope, 28% have taken up roles with EASA, 33% have been redeployed to roles elsewhere in the CAA, 29% have retired and 10% have resigned. Accordingly, 72% of the staff lost in anticipation of a reduction in scope have not joined EASA.

  Whilst it is inevitable that valuable employees have been lost from the CAA, we are seeking to maintain regulatory skills and experience through being clear with staff precisely what opportunities continue to exist, in order that the CAA can retain adequate skills and experience to meet ongoing requirements. We have backed this up with enhancements to our staff development arrangements to meet the challenges of the future. Inevitably the CAA's capability in a range of specialist areas of aviation engineering will reduce. However, we plan to retain sufficient specialist expertise to continue to deliver successfully our statutory and advisory roles.


42.   One of the Airspace Policy Group's key objectives7[7] is to provide advice to the Government on national issues such as financial protection as well as international issues like the development of EASA and the Single European Sky. To what extent do you think your advice is listened and adhered to?

  The CAA provides advice to Government across a very wide range of aviation policy issues, including Airspace Policy. We work closely with the DfT on such issues, and the CAA's views are generally well received and Government's subsequent actions are usually consistent with our advice.

  There are occasional differences of view—a recent instance was the CAA advice on Financial Protection for Air Travellers, where the Government rejected our proposal for a £1 levy. However, such instances are rare and, in the vast majority of cases, there is a close alignment on policy positions—especially in the many international fora in which we are engaged.

43.   What role did you play in the work culminating in the 2003 Aviation White Paper?

  The CAA Chairman was a member of the White Paper Steering Group (WPSG), which oversaw preparation of the White Paper, and he is now a member of the White Paper Implementation Programme Board.

  In its response to the DfT's consultation, the CAA articulated the need for a careful and well-balanced analysis of all of the options under consideration to ensure that safety, economic, airspace and environmental issues were given due regard. The CAA's response drew on the expertise of each of the various strands of CAA activity, including:

    —    the ability of the UK to meet its obligations in terms of European legislation on nitrous oxide emissions in the vicinity of certain airports;

    —    safety aspects of various infrastructure, project and logistical matters;

    —    detailed technical advice on specific aerodrome development issues, including the proposed development of new airports at Cliffe and Severnside;

    —    advice on the Future Development of Air Transport in the UK: South East (SERAS); and

    —    extensive airspace and noise modelling of the various options under consideration.

  Much of the CAA's detailed technical advice was instrumental in shaping the outcome of the White Paper.

Notes promised to the Transport Select Committee during the oral evidence session on Wednesday 11 January 2006


  The CAA has no financial relationship with Parliament and is not to be regarded as acting on behalf of the Crown. This distinguishes it from most other regulators and bodies to which the NAO already has access, which are either non-ministerial government departments or are mainly funded by public money. Where direct public expenditure is involved, the NAO has a clear role to play, but this does not apply in the case of the CAA.

  The CAA is a public corporation, which is financed from charges on the industry it regulates. The National Audit Act 1983 explicitly excludes it from those bodies of which the Comptroller and Auditor General may carry out an examination. The Civil Aviation Act 1982 was amended in 1984 to remove the role of the Comptroller and Auditor General in relation to the CAA's accounts. The CAA is now subject to independent external audit by auditors appointed by the Secretary of State.

  The Secretary of State, in consultation with the Treasury, determines the remuneration of Board members, including the performance related pay scheme which applies to the CAA's executive directors. This scheme includes finance and efficiency and cost-control targets. Furthermore, in giving the CAA Chairman guidance about the aims and strategic direction which the Government wishes him to pursue, the Secretary of State has said that he expects the Chairman, as a matter of course, to keep the Authority's costs under constant review and to devise formal cost reduction programmes where appropriate. The CAA's record, at least in the period since 2001, shows that the CAA takes very seriously the need for cost effectiveness and is delivering good results in that area.

  In determining and setting its charges, all parts of the CAA carry out detailed annual consultation with those it regulates on future plans and associated charges. The recent extensive consultation with industry on the proposals for revisions to SRG's charges to come into effect in 2006 is a good example of the effectiveness of the process.

  The CAA is subject to regular technical audit by the International Civil Aviation Organisation (ICAO)—and will, in due course, be subject to similar oversight by the European Aviation Safety Agency (EASA). Such audits influence the CAA's use of resources and the way in which it operates.


  Within the heading Employment Costs" covered in the Corporate Plan there are 26 individual cost code types, covering National Insurance, London Weighting, pension costs, luncheon vouchers, market related supplements, redundancy costs etc. The cost code which relates to basic salaries, rises by just below or at 3% pa across the plan period. The market related supplements paid to certain sections of CAA staff rise by more than inflation across the plan period. This planned increase has been included to ensure that the CAA avoids getting behind again in areas such as pilot and Air Traffic Controller pay. At the recent Committee evidence session, Sir Roy McNulty told the Committee that the new Corporate Plan, which will be discussed at the CAA Board in March 2006, is likely to have lower staff numbers than previously reported, as EASA takes over responsibilities from the CAA.


  The CAA is required to grant an AOC provided that the Authority is satisfied that the applicant is competent to secure the safe operation of the relevant aircraft. In addition to the flight operational aspects, the AOC is also dependent upon a number of other factors, particularly maintenance management and the performance of maintenance either in-house or contracted to third party organisations (otherwise known as Part M and Part 145 approvals).

  When an AOC is suspended, either by the CAA or at the request of the AOC holder, the CAA allows an AOC to remain suspended while it is kept informed about progress towards a resumption of operations. Once it becomes clear that there is no such prospect, revocation action is commenced. Revocation may be immediate if there are extreme reasons for doing do so or if there are urgent safety concerns, but revocation normally follows a period of suspension and investigation.

AOC suspensions 2001-05 inclusive

  There were 59 AOC suspensions in the period.

Part M and Part 145 (Maintenance Approvals) suspension 2001-05 inclusive

  There were 35 Part M and Part 145 suspensions in the period.

AOC revocations 2001-05 inclusive

  There were 72 AOC revocations in the period. Many of these revocations follow on from a period of suspension.

Part M and Part 145 refusals

  There were 20 refusals for approval of Part M and Part 145 companies in the period 2001-05.


  The CAA has powers to suspend or revoke AOCs, and Part M & Part 145 approvals when it is no longer satisfied that an operator or company is competent to secure the safe operation of its aircraft. However, these powers are relatively infrequently used because:

    —    The CAA controls the initial entry standard into the system—therefore only organisations that have already demonstrated their competence are permitted to operate.

    —    The operating Industry in the UK is long-established and has developed a culture not only of compliance with minimum safety requirements, but of operating as safely as is reasonable possible.

    —    The CAA takes a collaborative, rather than punitive, approach to regulation that encourages Industry to recognise when standards are declining and when remedial or preventative action, including suspension, needs to be taken. The CAA will, however, act immediately when circumstances require.


  The CAA has completed 59 RIAs since 2002, broken down as follows:

  The CAA publishes its RIAs on its web site and copies of two examples are included with this document. In preparing RIAs, the CAA follows the BRTF's five principles of good regulation when considering regulatory changes. The CAA has also fully embraced the Cabinet Office guidelines on the completion of RIAs and pays particular attention to the likely costs and benefits of proposed regulatory changes and the impact of such changes on small businesses.


  Over the last 10 years, the CAA has invested an average of £2 million per annum in aviation safety research, although more recently this figure has reduced in areas where regulatory accountability has passed to EASA, since it would not be appropriate to invest funds in areas where the CAA alone would be unable to deliver the outcome of the research. However, to ensure that previous research is utilized to Industry's benefit, the CAA has been presenting selected information to EASA for consideration, concentrating on safety issues that were `CAA work in progress' when EASA was formed.

  The following table summarises the CAA's actual and planned safety research expenditure over the period 2002-03 to 2010-11. A detailed analysis of the main safety research projects over the period 2002-03 to date is shown at Appendix 1.
Financial Year£000

  The CAA continues to support research in areas where it retains lead competence:

    —    In Aircraft Operations, we have created the Flight Operations Research Centre of Excellence (FORCE). Managed by an operational transport aircraft captain, FORCE is undertaking research in areas such as Type Rating training and Cockpit Risk Management.

    —    In General Aviation, the CAA has recently completed research into Carburettor Icing and will report the results soon.

    —    In the field of Large Public Transport Helicopters, the CAA has contracts in place to test new helideck lighting schemes that are expected to significantly improve the safety of night operations to the UK's offshore oil and gas installations.

  Where external research is required to help better understand a risk, or to help identify potential solutions, the CAA is committed, whenever possible, to gearing" its own contribution to projects principally funded by industry, other NAAs and other interested organisations. This should avoid duplication and provide better value for money for all involved.

  Examples of this approach to CAA research funding are the matching of contributions from elsewhere, including the European Commission, Health & Safety Executive, industry bodies (notably the UK Offshore Operators Association and Shell Aviation), professional bodies (such as the Guild of Air Pilots and Air Navigators) and other national regulators (such as Norway, USA and Canada). Academic funding (such as the Engineering and Physical Sciences Research Council (EPSRC)) has also been utilised where appropriate.

  The CAA details the research being conducted in its annual Safety Plan. This document is published on the CAA website and the 2006 edition will be published in the next few weeks. This is part of the CAA's programme to enhance consultation with industry on topics such as where the CAA's scarce resources should best be allocated.

  With regard to the CAA's research into side-floating helicopters", the CAA withdrew from the final helicopter type-specific design study, as a cost benefit could not be established. The CAA was prepared to support partial funding if this could be matched by adequate external funding. Funding partners were lobbied via the Helicopter Safety Research Management Committee (HSRMC) to provide assistance but the response was insufficient.

  A report summarising all of the ditching and water impact research has been completed and is published as CAA Paper 2005-06 on CAA's website.

Additional information which, although not requested, the CAA would like to offer to the Committee


  In accordance with Regulation (EC) 1592/2002, the European Aviation Safety Agency (EASA) from the date of its inception was obliged to set the airworthiness standards for most aircraft operated by EU persons or organisations. Under the terms of the implementing Regulation (EC) 1702/2003 the certification standards for aircraft already in operation in the EU at 28 September 2003 were set at a datum level equivalent to that of the State in which the aircraft type was designed. In the UK, the CAA has a long history of setting and enforcing its own airworthiness requirements and for many aircraft types had previously adopted a certification standard above that of the State of Design.

  Differences in the UK standard often took the form of design changes to be incorporated into new aircraft at manufacture, or embodied retrospectively into used aircraft on import into the UK. Such changes are called Additional Requirements for Import (ARI). Other changes affected the way that aircraft were operated or maintained and required, for example, additional inspections, time limitations or component replacements. Such changes are called Additional Airworthiness Directives (AAD). Given EASA adoption of the State of Design's certification standard as the EU standard, it followed that no CAA ARI or AAD would be legally valid any longer. Effectively, all ARIs and AADs would be deleted on 28 September 2003.

  Over the 30 years that the CAA has been in existence, a substantial number of ARIs and AADs have been generated. However, during the last 20 years, SRG has carried out two major initiatives with industry to reduce this number substantially. The number of ARIs and AADs remaining at the inception of EASA in 2003 was 3500.

  To eliminate all but 150 of these measures SRG revisited and reviewed the risk analysis which had generated them. The two main criteria that were applied to the risk analysis and which enabled SRG to remove the requirements were:

    —    whether the State of Design of the aircraft type had taken the opportunity to publish a Service Bulletin or Service Letter, which took account of the UK's measures raised in the AAD; or

    —    if the ARI related to an aircraft that was over 10 years old, and on further investigation of the world statistics for that aircraft in service, the SRG specialist could down-grade the risk based on that service record and therefore remove the ARI.

  Regulation (EC) 1592/2002 contains a flexibility provision under Article 10(1) that allows a EU Member State to act unilaterally in the event that it identifies a safety problem involving an aircraft subject to the provisions of the Regulation. The CAA utilised this regulation as can be seen from the numbers below. The approach taken was to use a targeted safety and business risk based analysis in which consideration was given to the safety and business risk associated with deleting an item after taking into account the origins of the ARI or AAD, the immediacy of its safety impact, or the position of the State of Design on the item. The overall intent was to identify those measures without which an unsafe condition may develop as defined by the new Regulations.

  Based on this approach, 150 ARIs were proposed to EASA in accordance with article 10(1), of which EASA has accepted 94. The remaining 56 have been dealt with as follows:

    —    Eight items, EASA ruled that the particular measure was outside its legal remit to adopt. In those eight cases the CAA will maintain the measure as a national requirement in accordance with its Competent Authority responsibilities.

    —    36 items, EASA showed that alternative measures were already in place that would achieve the same safety intent as the UK Article 10(1) item.

    —    12 items, the CAA was persuaded to the EASA viewpoint that an acceptable level of safety could be achieved without a particular measure in place.


  The CAA is always ready to embrace new technology but does so taking safety considerations fully into account.

  The CAA does not approve or licence individual products that are used within an aeronautical ground lighting (AGL) system. However, the functional performance and suitability of the system as a whole must be assessed and accepted by the CAA both prior to its operational use and upon further modification, including the introduction of new technology, such as LEDs.

  In December 2002, the CAA notified Aerodrome Licensees that, at the request of the CAA, the Airport Operators Association (AOA) had formed a working group to explore the potential uses of LEDs in AGL applications on an aerodrome and, through co-ordinated research and trials, provide input to the development of UK policy and requirements for their operational use. By necessity, most of the research and trials were conducted using LEDs in an actual operational aerodrome environment.

  The AOA working group had, by the summer of 2005, completed the initial research and trials and reported its findings to the CAA. The CAA's view was that no application should be excluded provided the operational performance of the LED light source could be demonstrated to match that required of a conventional lamp, and that the safety of the system was not comprised as a result of an integration of different technologies.

  In August 2005 the AOA requested that the CAA re-issue a notification of the policy and requirements for AGL applications, which excluded the use of LEDs in specified AGL applications. It subsequently became known that LED lights in some of the excluded applications were able to meet the required performance and safety assurances and had already been installed at some aerodromes. In further consultation with the AOA working group, in December 2005, the CAA revised the policy to only exclude applications of LEDs which were definitely unable, and unlikely for some time, to be able to meet the required performance.


  The CAA is no different to other medium to large organisations in that, at any given date, it has a number of vacancies as part of ordinary organisational churn". As at 31 December 2005, SRG had a total of 64 (9.9%) unfilled posts. This is an unusually high percentage for the CAA and should be viewed in the context of the transition of some safety regulatory activities to EASA. In the Design and Production Standards Division, there were 25.6 unfilled posts, which relate to activities that are now part of EASA's remit. There were only eight vacancies in the Air Traffic Standards Department and the remainder were spread across SRG, both in Aviation House Gatwick and across the Regional Offices.

  We should also point out that, in common with other commercial organisations, the CAA recognises this phenomenon" in its budgeting process, by not funding 100% of its posts 100% of the time. If the CAA were to fund all posts all of the time, this would result in higher charges to industry than necessary.


  Over a numbers of years SRG has transitioned, in some areas, from a regulatory regime of significant numbers of inspections to a method of audit, and oversight and compliance testing of company Safety Management Systems. This approach, in partnership with Industry, is much more likely to capture systemic failure in company safety performance, than just relying on inspections alone. The UK safety record is testament to this approach being successful. The CAA believes that this approach should be seen as proportionate regulation rather then Light touch".

  One of the strengths of the relationship between the UK aviation industry and its CAA safety regulator is that there is absolute clarity about their respective responsibilities—the industry manages safety through identification and mitigation of the risks associated with its activities, and the regulator provides the regulatory framework and requirements against which to measure the compliance and practice of the industry.

  The variation in the level of risk and the complexity of the organisations across the sectors are readily recognised. The CAA, in order to properly focus its resources, must provide a proportionate level of regulatory oversight on the basis of these conditions. In those areas where there is the highest risk and complexity, there is a corresponding need for companies to exercise a higher level of systematic control over their activities, while the regulator needs to provide a high level of oversight that not only tests compliance but also makes a judgement on how capable and effective the organisation is in managing its risks.

  The formal establishment of a safety management system (SMS) makes the task easier" for both the industry and the regulator. SMS is not a form of self-regulation". SMS is a tool and the regulatory oversight function is still undertaken, albeit that it has a greater emphasis on audit against the company safety and quality management systems and their associated procedures.

  To aid our proportionate approach to the diversity of players in aviation, there are a number of regulatory approaches employed which include elements of prescriptive inspection, audits of formal risk management systems, alternative means of compliance, codes of practice and, indeed, a measure of devolved/self regulation as, for example, in the case of the Popular Flying Association (PFA). However, under the latter arrangement, the CAA (rightly) retains its statutory accountability for the safe conduct of PFA activities.

  In the UK we have a mature and highly professional industry in which there exists a very strong safety culture that is underpinned by very sound regulatory principles and behaviours. The CAA will not step back from its statutory responsibility to the Secretary of State and we remain committed to sustaining aviation safety and seeking continuous improvement in the face of continued growth. Proportionate regulatory oversight, using a diversity of approaches, will be at the heart of our approach.


  The recent adverse press reports and speculation about British Airways' (BA) maintenance standards have to be viewed in context. BA flew 867,108 hours (33% of UK total) in 2004 whilst the rest of the UK fleet flew 1,782,364 hours. Proportionally one can therefore expect more incidents with BA being reported than any other individual operator. It is important to bear in mind that the three BA incidents recently featured in the AAIB reports all occurred between 18 and 30 months ago. Much has been done since then by the airline and its engineering organisation to address the issues, which led to the incidents, whilst being actively overseen by Safety Regulation Group's (SRG) Aircraft Maintenance Standards Department (AMSD).

  Without doubt, BA had difficulty for a time in instilling a culture of procedural compliance amongst some of its maintenance workforce. The precise reasons for this are difficult to determine but organisational changes, business re-engineering, transfer of work allocation between engineering facilities and less than congenial staff/management relations may have been contributory factors. These changes have been monitored by the AMSD and, with constant pressure to do so applied through the AMSD regulatory oversight; BA has taken positive action to address any concerns that have arisen. Some examples of how AMSD have effected change within BA are shown below:

  1.  AMSD have highlighted instances of procedural deviation at BA's two monthly Quality Review" meetings with Quality Department staff and management and pressing for effective corrective action and improved management controls in respect of each of these instances.

  2.  AMSD have targeted and are continuing to target routine and unannounced audits of facilities, processes and aircraft surveys.

  3.  AMSD have required BA's own Quality Department to conduct special audits.

  4.  AMSD have required BA's maintenance certifier continuation training sessions to focus on the potential perils of procedural deviation.

  In addition to the above, BA action encompasses education, focused continuation training, enforced attendance at safety seminars, the distribution of a range of safety related publications, the application of an industry respected maintenance error investigation system and in the extreme cases, by decisive disciplinary action. BA also intends to reintroduce a specific supervisory role for the oversight of maintenance. Much of this activity both by AMSD and BA, despite the impression given by the AAIB report, was initiated prior to mid-2003 but had not been completed.

  In 2003 there were two BA incidents involving serious maintenance errors and one in 2004. During the past 18 months there have been no such incidents due to maintenance malpractice by BA staff.

  There has been a 57% fall in the number of BA reported Mandatory Occurrence Reports (MORs) involving maintenance error when comparing the average for 1996-2000 with the average for the last five years (2001-05). All the current signs, including feedback from specifically targeted AMSD audits, suggest that BA's response and actions are taking effect. The CAA is satisfied that the safety threat from maintenance errors has been fully accepted by BA engineering management.


  The CAA currently employs 65 ex-military employees. This amounts to around 6% of our workforce. Of those, 29% have an Air Traffic background, 8% an engineering background and 62% a flying background. Also, of the 6%, 68% are employed in SRG, 25% in DAP, 5% in Corporate and Ancillary Groups and the remaining 2% in ASSI.

  In the last five years, around 95% of our new recruits have joined from the private sector.


  Since EASA became operational on 28 September 2003, the CAA's airworthiness responsibilities consist of those required for competent authorities" under the EASA regime dictated by the Basic Regulation (EC) 1592/2002 and the Implementing Rules 1702/2003 and 2042/2003, together with those relating to aircraft that are excluded from EASA's scope. The tasks include:

    (a)  Issue of Certificates of Airworthiness for UK registered aircraft.

    (b)  Issue of Noise Certificates.

    (c)  Issue and surveillance of the following organisation approvals with place of business in the UK:

    (i)  Production Organisations;

    (ii)  Maintenance Organisations (eg Part 145);

    (iii)  Maintenance Training Organisations (Part 147);

    (iv)  Continued Airworthiness Management Organisations;

    (d)  Full responsibilities for aircraft set out in Annex II of the Basic Regulation eg homebuilds, ex-military aircraft and microlights.

    (e)  State aircraft eg Police helicopters.

  The responsibilities transferred to EASA include the issue of Type Certificates and continuing airworthiness (design) for aircraft not included in Annex II of the Basic Regulation, and approval of design organisations.

  The CAA's safety regulatory functions are not affected in relation to Regulation of AOCs, Flying Training Organisations, Air Traffic Services providers, Aerodromes, flight crew licensing etc. Similarly, the CAA's Economic Regulation, Consumer Protection and Airspace Policy activities are not affected.

Research Projects by Year 2002-06 2002-032003-04 2004-052005-06* Total
Project title ££ ££ £
Aircrew Fatigue Model 50,000325,000 55,00025,500 455,500
Flight Operations centre excellence 049,144 190,50399,251 338,897
Helideck Marking & Lighting 131,06888,726 89,9686,533 316,296
Hazard Analysis of GPS/GNSS Approaches 69,642102,000 53,79836,500 261,940
Investigation of large water droplets break up on impact 75,500119,500 48,1000 243,100
Lighting and Colour vision on the flight deck 55,94975,686 52,05340,300 223,989
Helideck Environmental Issues 36,09065,200 100,40013,750 215,440
Differential GPS Guidence for Off-Shore Approaches 70,38462,000 53,4298,547 194,360
Helicopter ship operations 27,10042,500 116,1400 185,740
Hums Research (Helicopters) 00 135,66830,003 165,671
Pilot View and Visual Clues 16,63627,962 7,6060 52,204
Mortality and Cancer incidence in Commrcial Pilots 56,10466,373 41,058 163,536
GNSS Monitoring and Advice 35,00035,000 35,00027,000 132,000
Objective risk based management of ATM 48,91566,742 013,530 129,187
Balloon Research30,000 38,00056,662 0124,662
Validation of the Fatigue Model 104,84019,668 00 124,508
CAA Chair in ATM & the Environment 40,00040,396 40,0000 120,396
Operation Flight Data Monitoring—Helicopters 95,0008,379 7,7300 111,109
Operational Flight Data Monitoring—OFDM 33,95238,270 38,6031 110,826
Human Hazard Analysis of Complex Aircraft System 72,1500 33,4830 105,633
Damage tolerance, fatigue and fracture 40,00040,000 20,0000 100,000
Computer Modelling of Evacuations 36,94935,868 00 72,817
Vigilance and Wakefulness Assurance 69,7880 00 69,788
Reliability of composition of composite structures 00 036,280 36,280
Gyroplane structures 00 016,000 16,000
Auditory Interface Design for A/C Systems 21,00021,500 12,00012,000 66,500
Airspace Infringement 50,22014,324 00 64,544
Improved Bird Strike Reporting 020,000 41,75061,750
Carbon Monoxide detection 00 40,00020,000 60,000
Assessment of Operaing Systems for Safety Related Systems 23,75034,885 00 58,635
Large Bird Strike Database 24,9050 32,75057,655
Carb Ice0 015,000 39,28154,281
Research on Cabin air Quality 48,9053,700 -4841,784 53,905
Performance Monitoring of Operational GPS/GNSS 43,00010,393 -7040 52,689
Aerodynamics of Gyroplanes 6,4610 44,7581,316 52,536
Investigation into key Parameters of Damage Tolerance Design 17,00012,500 22,5000 52,000
Total of larger items 1,430,3081,463,717 1,382,773427,576 4,704,373
Other251,512 172,98698,184 65,473588,156
*Nine months only
Total1,681,820 1,636,7031,480,957 493,0495,292,529
Budget1,700,000 1,600,0001,500,000 1,165,0005,965,000

2   2 Under which airport charges would be calculated with reference to the costs and revenues associated with providing aeronautical activities alone, removing the scope for commercial revenues to reduce airport charges below the costs associated with the provision of these activities. Back

3   3 Under which the revenues from all aeronautical and commercial activities, undertaken by the airport company, are set against operating costs and capital charges for the purposes of calculating the revenue required to be raised through regulated airport charges. Back

4   4 Economic regulation of BAA London Airports (Heathrow, Gatwick, Stansted), 2003-08, CAA Decision, February 2003. Back

5   5 A stand-alone approach sets price caps by reference to the costs, assets and market conditions of each airport individually, but does not imply treating each airport as a separate company in its own right. Back

6   6 CAA 31 British Gliding Association, para 1. Back

7   7 CAA 56 Civil Aviation Authority, Annex 1 para 7. Back

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