Memorandum submitted by the British Air
Transport Association
1. INTRODUCTION
1.1 BATA is the trade association representing
UK registered airlines with members from the scheduled, charter
and freight sectors. BATA members produce over 90% of UK airline
output.
1.2 The legislative framework within which
the CAA operates was introduced some 40 years ago and, given the
recent and likely future developments in the industry, we welcome
this timely Inquiry.
2. CAA ADAPTING
TO CHANGING
TIMES
2.1 UK airlines operate in a very international
and highly competitive market, competing with each other and with
airlines registered and regulated in other countries. As the commercial
air travel markets are increasingly deregulated and the industry
moves towards international consolidation we expect the role of
the UK's aviation regulator, the Civil Aviation Authority (CAA),
to adjust to reflect these changes. The advent of the European
Aviation Safety Agency (EASA) is a good example of this trend
toward international structures in aviation.
2.2 For example, in future we would expect
CAA to be the implementer of international safety regulation,
but not the rule maker. This implies a future CAA with a different
balance of skills to the CAA of the past. We would also expect
CAA's economic regulation to continue to focus on the development
and maintenance of open markets with minimum competitive distortion.
Where competition is inadequate, with monopoly suppliers for example,
the CAA should provide robust economic regulation to ensure that
UK aviation operates and grows efficiently.
2.3 The new, more multinational, structures
in aviation also suggest a changing role for Government and, perhaps,
a greater advisory role for CAA. We feel that CAA's current activity
as policy adviser to Government is understated and it will become
even more important in future for the roles and relationships
between Government, CAA and international aviation bodies to be
both constructive and transparent.
2.4 We will comment on the issues raised
by addressing each of the CAA's main areas of responsibility:
— Economic Regulation; and
3. AIRSPACE POLICY
3.1 The Airspace Policy department of the
CAA has an important role in the development both of UK airspace
and the airspace across Europe.
3.2 Developments in UK airspace are necessary
to meet the growth expected in the number of flights including
additional runway capacity at airports and to ensure that best
use is made of technology—on the ground and in the air.
Developments should aim to minimise the environmental impact of
flight routings and we would expect Government to provide CAA
with clear guidelines on the environmental objectives of UK airspace
policy.
3.3 The airlines enjoy good consultation
processes with the Airspace Policy department of CAA. However,
we believe that the current processes for consultation on and
approval of airspace changes are significantly longer than necessary
and there is a risk that they will become a bottleneck constraining
the developments that are needed both to allow growth and to minimise
environmental impact.
3.4 The current structure and use of controlled
airspace across Europe produce significant fuel inefficiencies
for airlines and CAA have a key role in promoting better airspace
structures across Europe as part of the Single European Sky initiative
and to develop and promote civil/military collaboration within
UK airspace and across Europe.
4. CONSUMER PROTECTION
4.1 There is a limited dialogue between
BATA and the Consumer Protection area of CAA. In part, this is
due to the unit's focus on implementing travel industry regulations
rather than those regulating airline operations.
4.2 As the airline industry is international,
competitive and increasingly de-regulated commercially, we would
expect consumer protection regulation to be the minimum necessary
to ensure adequate standards of service. Any such regulation should
be international in scope and applied consistently across states.
We would also expect CAA to ensure that consumer-related legislation
is implemented in a way that does not undermine the competitiveness
of UK airlines.
5. ECONOMIC REGULATION
5.1 The regulation of airlines' commercial
activity has reduced as air travel markets across the world have
become more open. However, the regulation of monopoly suppliers
remains a vital CAA role as far as UK airlines are concerned.
BAA's London Airports and NATS are the two prime examples and
we look to the CAA's Economic Regulator to set price controls
that encourage these monopolies to operate efficiently and to
develop additional capacity in a timely, appropriate and efficient
manner.
5.2 We have regular dialogue with the Economic
Regulation Group (ERG) and we will continue to seek a fair deal
for airline customers of the monopoly suppliers. In particular,
we want to ensure that the development of additional airport capacity
continues to be funded separately at each airport. We support
the view of CAA that cross-subsidy between airports is unnecessary
and if introduced would undermine the highly-competitive airline
market.
6. SAFETY REGULATION
6.1 The maintenance of high standards of
safety is a priority for the industry and we strongly support
the development of international aviation safety regulations,
applied consistently across all states. We see the European Aviation
Safety Agency (EASA) as an opportunity to meet this objective
across Europe and at the same time provide an aviation safety
regulator able to work with the US Federal Aviation Administration
(FAA) to ensure consistent international regulations.
6.2 We believe that the introduction of
safety management systems in UK airlines over the last 20 years
has made a significant contribution to the industry's safety record.
The CAA encouraged these moves to embed the safety culture into
airline management and operations and the new structures should
enable more efficient safety auditing by SRG. We look forward
to these changes reflected in the number and style of oversight
inspections undertaken by CAA.
6.3 The CAA's Safety Regulation Group (SRG)
is starting a period of transition as EASA takes on some of the
responsibilities previously undertaken by National Aviation Authorities
(NAAs) across Europe. Whilst this transition is not without its
difficulties the process is necessary and all those involved—EASA,
NAAs and industry—should work to minimise administrative
burdens and achieve the objective of robust and effective regulations
applied consistently across all states. Further phases of implementation
will follow over the next two to three years until most aviation
safety regulation for Europe originates in EASA.
6.4 We feel it is important for CAA to engage
positively with EASA in order to ensure UK's experience is brought
to bear in the delivery of high quality safety standards.
6.5 Standards of safety should not be limited
by cost considerations. However, the industry expects its regulation
to be delivered as efficiently and cost-effectively as possible.
The costs of regulation affect the industry through the direct
cost of implementing the regulations and also through the cost
of the regulator itself. In the UK, the CAA's costs, together
with a 6% rate of return, are paid for by the aviation industry
through a variety of charging schemes. The predominant activity
and cost within CAA is the SRG whose costs are recovered through
charges paid by the UK aviation companies regulated by the SRG
and, in the case of airline regulation, the UK-registered airlines.
Foreign registered airlines do not contribute to the costs of
SRG. In fact, in many other European countries the cost of the
aviation safety regulator is funded, either in part or in whole,
by the state.
6.6 UK airlines have been contributing charges
well in excess of the costs of regulating them for a number of
years. BATA called for and fully participated in, the Joint CAA/Industry
Review Team of SRG costs and charges which reported earlier this
year. We welcomed this review and its clarification of charging
principles.
6.7 CAA has since consulted on and implemented
a number of changes to the SRG charges schemes which will, over
a period of some five years, bring charges for regulatory activity
in line with the cost of that activity. This change to a more
open and transparent approach to consultation and the setting
of charges needs to continue as SRG seeks increased efficiency
and adjusts its role in line with the enlarged responsibility
of EASA.
6.8 There remain a number of areas where
SRG requirements exceed those in any other state and we would
consider several of these requirements as adding cost without
improving safety.
6.9 There are also differences between states
when it comes to deciding who pays for the regulator's costs.
Some states pay for some or all of its aviation regulator and
others expect industry to cover all costs.
6.10 One BATA member has investigated the
regulatory charges that would apply if it was registered in either
Ireland or Germany instead of the UK. They found that in 2003,
CAA SRG charges were three times the comparable charge in Ireland—whose
regulator's costs are also fully paid by industry—and over
10 times the charge in Germany where the Government funds part
of the regulator's activity. Even after the changes to SRG charges
following the recent review, the direct regulatory costs for this
airline being registered in the UK will still be 50% more than
being on the Irish register and over five times that of being
on the German register.
6.11 There are clearly many differences
between aviation regulators across Europe. As EASA becomes the
single rule-maker, UK airlines will look to CAA to redefine its
role and in doing so to recognise that the most efficient way
to oversee the regulations in the UK may be learnt from other
NAAs.
6.12 The move toward central EU rulemaking
also presents a challenge to the UK. If Government wishes to duplicate
by retaining research and other policy development skills in this
country it should not pass the cost of this duplication to UK
industry.
6.13 There are two elements of the CAA's
overhead cost that we will continue to challenge. The need to
make a 6% rate of return seems to be excessive when risk-free
rates are so much lower and the anomalous position of CAA with
regard to VAT means that industry has an additional and unnecessary
financial burden.
21 November 2005
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