Select Committee on Transport Minutes of Evidence

Memorandum submitted by the British Air Transport Association


  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.


  2.1  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:

    —    Airspace Policy;

    —    Consumer Protection;

    —    Economic Regulation; and

    —    Safety Regulation.


  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.


  4.1  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.


  5.1  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.


  6.1  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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