Select Committee on Transport Minutes of Evidence


Memorandum submitted by the British Business and General Aviation Association Ltd

INTRODUCTION

  BBGA is the British Business and General Aviation Association Ltd. The Association is the Trade Body representing companies operating and trading in the Business and General Aviation industry, including manufacturers, operators, maintenance organisations, repair and overhaul organisations, training organisations, aircraft and helicopter sales organisations, spares stockists and other supporting organisations including finance, insurance and publications companies.

  BBGA is active in monitoring and participating in the development a harmonised suite of regulations to govern Business and General Aviation throughout Europe. Through its leading role within European bodies such as the European Business Aircraft Association (EBAA) and European Council of General Aviation Support (ECOGAS), BBGA is represented on all Joint Aviation Authorities (JAA) and European Aviation Safety Agency (EASA) Working Groups, Committees and Boards relevant to Business and General Aviation. BBGA acts as the coordinating office for ECOGAS.

THE REMIT, STRUCTURE AND POWERS OF THE CAA

  BBGA recognises the need for national aviation issues to have a central focus. We therefore support the existence of a national aviation authority (NAA) able to ensure that properly considered legislation in the aviation field is being correctly adhered to.

  The CAA was a reasonable construct at the time of its creation, when the UK was solely responsible for aviation policy, regulation and its implementation, within the bounds of an ICAO framework. Over the last 30 years the aviation world has changed out of recognition. The CAA has attempted to change, this we recognise, but the change in scope" of the CAA does not seem to have matched the changes in the outside world. For years the CAA spent a sizeable minority of its time working with the Joint Airworthiness Authorities (JAA) to provide harmonised requirements with other European states (albeit on a non legal implementation basis). The CAA also kept its own fully stocked cabinet of regulations, the BCAR's. Recently the development of the European Aviation Safety Agency (EASA) has had a profound impact on the CAA.

  BBGA therefore feels that the inquiry by the Transport Committee is timely, not least in ensuring that the CAA, as constituted, is the best type of NAA for the future.

  The Civil Aviation Act 1982, which gives the CAA its primary objectives and functions, focuses overwhelmingly on air transport services". This was important in 1982 and remains so now. But in 1982, the world's air services were dominated by national flag carriers", often themselves mere extensions of governments. The Act has set the tone of the CAA ever since, that of looking after large industry. In terms of large air transport providers, the CAA can be seen to have succeeded, with the major UK carriers frequently leading the world. Elsewhere this approach has been disastrous.

  There is no longer any large transport aircraft built in the UK, and the number of new, certificated, British built aircraft is now a handful a year. Some of this is due to successive governments' policies with regard to manufacturing, but at the smaller end of Aviation, the cost and difficulty of designing and building aircraft under CAA regulations in the UK has seen several initial UK designs move overseas.

  The CAA's handling of Flight Training has been a significant factor in the huge transfer of training to overseas providers. The cost to train a pilot to commercial level has risen by around 80% in the last five years, with costs to training schools rising at an even faster rate. Turning to smaller air transport providers, the CAA's approach has led to the majority of operators of non commercial turbine powered aircraft registering their aircraft outside the UK. A major reason for this was the CAA's insistence on imposing their own specific rules on the design of aircraft not of UK origin (and as mentioned above, almost all aircraft are now of non UK origin). For years the CAA claimed that these Additional Requirements for Import were safety related, yet over 3,000 were scrapped the moment EASA came into being. Given that the CAA still has responsibility for the safety of UK aviation, one cannot imagine they have let over 3,000 safety critical regulations lapse. So it would appear that despite the CAA claiming to industry that these 3,000+ regulations were non-negotiable, the moment they were forced to justify this to another independent body the requirements were cast aside. It is important to note that the CAA did retain around 300 similar regulations, arguing to EASA of the importance of these being retained.

  What seems clear is that the present remit and structure of the CAA is clearly aimed at the benefit of major air transport providers, not the businesses represented by BBGA.

  BBGA have therefore welcomed the initiative of the CAA to hold a strategic and regulatory review with regards to General Aviation. BBGA would hope the thoughts of members of these reviews will be taken on by Government to develop a proper Policy for Business and General Aviation. Only with specific recognition of the different requirements of Business and General Aviation will this important sector be able to recover and prosper.

  BBGA does not contend that the CAA is not without its positives, far from it, a number of personnel are excellent and the leadership, as shown by the aforementioned General Aviation review, recognises many of the problems it faces. CAA generally seeks to involve interested parties and when that happens the results are often encouraging. However, when difficulties occur it is very hard for the regulated to seek redress. Whether it relates to inconsistencies amongst individual surveyors or issues such as the Additional Requirements for Import noted above, the lack of a sensible arbitration scheme is a major deficiency in the CAA structure.

  In general BBGA believes the CAA has sufficient powers to perform its duties. Indeed given the lack of independent arbitration, those powers could be deemed too great in some areas. In others, such as ramp checks of non UK registered aircraft, BBGA feels CAA is reluctant to use its powers. BBGA fears this may be due to cost issues in that this work is not recovered from the regulated as is the case for the majority of CAA activities.

  BBGA feel the biggest single problem that our members face with the CAA is to do with costs. Some of these costs are dealt with below; they involve additional costs a company has to bear such as extra staff. The CAA remains the only Aviation Safety Regulator that is required to fully recover all its costs from those it regulates AND to make a return on capital employed. For years that has placed UK Industry at a competitive disadvantage when compared to its international partners. With a large amount of regulatory activity undertaken by the CAA, all charge payers had to fund the development of regulation that was frequently of little direct interest to them. BBGA believes the requirement to recover all costs is completely unjust and must be amended. This should be addressed in three steps. Firstly the Government should reduce the rate the CAA is required to make as a return on capital employed from 6% to 3.5% in accordance with Treasury instructions relating to Self-Financed Public Corporations, set in September 2003. Secondly the Government should seek to either bear the cost of any remaining regulatory or policy activity (estimated at up to 30% of the Safety Regulation Group (SRG) budget pre EASA) or to ensure CAA costs in this area reduce by the equivalent amount once transfer of activity to EASA takes place.

  Finally the entire funding rational of the CAA must be re-examined. BBGA attempted to raise this within a Joint Review Team" that examined the CAA SRG budget during 2004-05. We felt there was sympathy for such a review from some within the CAA, but the concept was blocked at the insistence of the large airlines. BBGA feels the CAA Charging schemes have become so complex that a significant cost is being borne simply to keep the schemes running. BBGA recognises some of the complexity is due to the need to try to adopt schemes across such a wide range of business types and indeed reflects attempts by all sectors to ease the burden of CAA costs on their sector: basically we are all culpable. Thus we believe all are in danger of not seeing the wood for the trees with regard to the funding of the CAA. BBGA would urge the inquiry to consider why the CAA is there?" For whose benefit does the CAA exist? BBGA believes the answer is that CAA is there to ensure safety of operation of aircraft on behalf of the general public. All the regulations on manufacturers, engineers, aerodromes etc. are simply tailored at the ultimate beneficiary, those who fly.

  If the general public does not benefit from the CAA then one must ask why they are there, because those enjoying aviation as a leisure pursuit would certainly not need an organisation like the CAA to look after their interests. A logical extension of this thought is that the general public should fund at least a significant proportion of the CAA. One could argue that those who choose to fly are actually gaining a disproportionate benefit so a passenger levy may be the best way to provide funding. BBGA recognises the difficulty in hypothecation of taxes but would also contend that the open skies" within the EU (and in the future across the Atlantic?) means a number of airlines that have significant UK bases are not paying towards the safety infrastructure from which they benefit. If hypothecation is too much of a problem then the industry could act as a collector by basing CAA charges simply on the passenger/unit of cargo. It is estimated that this charge would be below £1 per passenger. Given that most airlines have (and some still do) put all manner of operational costs into a taxes and charges" add on to the ticket price, the public will surely not stop flying because of a £1 charge?

  In summary, BBGA feels the Government needs to develop a policy for General and Business Aviation and revise the Civil Aviation Act to reflect this. The CAA must have a proper arbitration system. And the CAA funding basis must be revised to ensure the costs are borne by the beneficiaries of aviation safety regulation: the passengers.

THE PERFORMANCE OF THE CAA IN RELATION TO ITS STATUTORY OBJECTIVES

  BBGA's primary concerns with regards to the CAA's statutory objectives relate to those objectives themselves, as detailed in the above section of this memorandum. BBGA recognises that the CAA has overseen a world class safety record; one we trust will be maintained. This is of course the primary role of any safety regulator. But in many ways, the CAA is much more than just a safety regulator and we have concerns that the impact of CAA actions on UK competitiveness, particularly to Small and Medium size Enterprises (SME's) has been substantial. We believe the CAA should have a specific responsibility to promote the interests of all UK aviation, not just the large air transport operators. We feel the CAA has frequently been guilty of gold plating" regulations set at a European level. As in other fields this is often difficult to prove because our European partners are reluctant to appear to be under regulating and the European Commission has no interest in talking harmonising action against a member state that chooses to over regulate/over charge.

  BBGA would contend that the CAA's success in meeting it statutory objectives for the large air transport providers has been at the expense of an unwieldy regime for SMEs.

  To take as an example, the regulations for commercial operations; in the USA smaller operators have a distinct set of regulations aimed at the provisions of services by smaller operators; in the UK (and indeed Europe) the operator wishing to run pleasure flights is meeting the same regulations as a large airline. All too frequently the wording of regulations causes difficulty, for instance some engineering codes demand the presence of an Airworthiness Office". For large companies these exist, but for a SME, one has to specifically designate part of one person's office to this function. This is but one example of rules being appropriate only to large organisations.

  It is difficult to reconcile the CAA's performance with the European Charter for Small Enterprises which states that New regulations at national and Community level should be screened to assess their impact on small enterprises and entrepreneurs. Wherever possible, national and EC rules should be simplified. Governments should adopt user-friendly administrative documents. Small enterprises could be exempted from certain regulatory obligations". These worthy goals were re-affirmed as recently as 8 November 2005 by the ECOFIN Council where the Council notes that administrative procedures and complex regulatory requirements often impose the greatest burdens on SMEs and welcomes the intention of the Commission to address these burdens through its simplification and wider work programme while respecting the principles of subsidiarity and proportionality".

  BBGA is particularly keen that the principle of proportionality is enshrined in the CAA's activities. While recognising the Government policy of user pays", it cannot be correct for smaller companies to pay a vastly greater proportionate cost for regulation. This is particularly the case when those regulations have clearly been developed for large, not small, organisations.

THE EFFECTIVENESS AND EFFICIENCY OF THE CAA'S REGULATORY FRAMEWORK

  The UK aviation safety record is exemplary so from that point of view, the CAA's Regulatory Framework can be deemed effective. However, other states have achieved similar levels of safety without the industrial consequences of the CAA. BBGA feel it is totally unjust that the CAA charges the regulated for the policy work of developing regulation.

  The efficiency of the CAA regulatory framework varies hugely from sector to sector. Inevitably the framework works best for the large airlines for which it was designed. SME's and those involved with General Aviation end up paying a disproportionate cost for regulation that was not designed with them in mind. What is most striking is how the fees paid to the CAA are sometimes dwarfed by the costs SME's incur to meet the regulations that were designed for a different sector.

  BBGA members are particularly concerned at the lack of standardisation in the application of regulations across Europe. The CAA has spent a huge sum (the amount is not known) on the JAA in the last 20 years and there have been benefits, particularly for larger companies. But the examples remain legion of totally different interpretation of regulation by the CAA. Inevitably this is a more strict interpretation than our European colleagues. Too often the development of regulation seems to have been a war of attrition; witness this comment from one BBGA member relating to a rule that has been debated for over a decade:

    The CAA should accept that the fare paying public has a right to fly in aircraft that have demonstrated an acceptable standard of safety, provided that these aircraft are operated by responsible companies that adhere to the highest standards.

  Therefore without any further delay or procrastination the CAA should accept applications from suitably qualified UK companies to operate approved SET aircraft commercially at night and in SE-IMC in accordance with JAR NPA-OPS 29 in its latest form or in accordance with ICAO SARP. This would ensure a level playing field with other EU operators.

  The CAA quite rightly develops regulations to improve safety, but its influence on British industry and its skilled personnel is such that these factors must be better balanced when regulation is developed, particularly for SME's. If the CAA feels that a requirement to promote industry is at odds with being a safety regulator then it must cede the ability to make regulation with submitting it to an outside body that can take on that responsibility. For instance it is ridiculous that the requirements of the CAA (and now EASA) for aircraft engineers have not been properly developed in conjunction with the Department for Education and Skills. The CAA regulation also impacts competitiveness so the lack of DTI involvement is surprising.

THE EFFECTIVENESS AND EFFICIENCY OF THE CAA IN THE DISCHARGE OF ITS DUTIES

  For a public body, BBGA recognises the CAA is relatively efficient at a macro level. BBGA welcomes the fact that management has sought to minimise the direct costs of CAA to industry in recent years (although we have grave concerns about the way CAA proposes to distribute those costs"). When placed alongside safety regulators of other sectors the CAA can be seen to perform well.

  No organisation can stand still however and BBGA would like to see efficiency targets established, not only at a macro level but with regards to specific sectors of the regulated industry.

  Our recognition of the macro efficiency of the CAA does not extend to a micro level. The whole of the CAA is set up to support the major airlines, from the Regional Office network to the CAA's involvement in decisions on bilateral air service agreements. This means an organisation that is set up to deliver to a particular sector fails to similarly deliver to other sectors.

  A particular concern of BBGA members relates to the impact CAA regulation can have within a small company. BBGA members report a huge increase in the total cost of regulation over the last five years, for smaller operators, their CAA fees will have doubled, flight training schools report similar magnitudes of increase. But these are dwarfed by the costs of additional personnel, equipment etc that the CAA's regulations (and interpretation thereof) demand. In many cases CAA has sought to transfer functions previously done by them to industry. From safeguarding at airports to the production of master minimum equipment lists, the pattern is the same. Industry takes over the work on the vague promise of reduced regulation, only to have the same time spent by the CAA either overseeing" the item recently relinquished or on some other area. This is particularly true in the operating world where the introduction of safety management systems by the industry seems simply to have given the CAA something else to oversee. An independent arbitration and reviewer of the CAA would help enormously in these cases.

THE EFFECT OF GROWING INTERNATIONAL AND EUROPEAN UNION CO -OPERATION ON THE WORK OF THE CAA

  The outward UK position has been, for many years, to support the harmonisation of rules throughout Europe. We have mentioned the way the CAA worked within the JAA above. The creation of EASA has fundamentally altered the CAA. It is no longer a stand alone authority. BBGA recognises that for many in the CAA this is a bitter pill to swallow as their prestige as one of the leading NAA's in the world is reduced. However we fear that in some cases the CAA is using their role as either subcontractors to EASA or as a competent authority to retain previously held positions, in conflict with the desire for a fully harmonised European system. This must stop.

  The development of EASA also further highlights the inequities of the CAA funding system. How can it be fair, or good for UK plc, for the exact same license or approval to be obtained at a fraction of the cost in another EU state? Already we are seeing engineering tasks being transferred from the UK to other EU states and this is before the transition period to EASA is even completed.

  EASA only provides regulation for aircraft above a certain threshold; the remaining aircraft (older types etc) remain under national control (these aircraft are defined in Annex 2 to regulation 1592/2002). BBGA has a real fear that the CAA will seek to maintain an infrastructure that simply cannot be supported by fees from the SME's looking after the Annex 2" types. BBGA recommends that CAA out sources the majority of the regulatory effort for these types to industry, simply maintaining an overseer role. There certainly should be no requirement for duplicated approvals, for example the CAA must accept that a company with a Design Approval from EASA is, without question, able to provide Design services to an Annex 2 aircraft type. They must not demand a separate UK approval for an identical role.

CONCLUSION

  BBGA would hope the inquiry would examine the following areas our members, mostly SME's, believe to be critical:

    —  Development of an independent arbitrator and reviewer of the CAA charged with an ongoing assessment of regulatory effectiveness and efficiency, together with provision of truly a independent appeals procedure.

    —  Development of a Policy for Business and General Aviation that would feed into a revised Civil Aviation Act that required the CAA to promote UK industry as well as regulate it. If the CAA cannot, as a safety regulator, promote industrial competitiveness then all regulation must be submitted to an independent, body that will ensuring UK industry will not be harmed by the proposed regulation.

    —  The rate the CAA is required to make as a return on capital employed should be reduced to 3.5% in accordance with Treasury instructions. The costs of policy development should be reduced and not collected from industry.

    —  An examination of the whole funding basis of the CAA should be completed aimed at ensuring the ultimate beneficiary of safety regulation, the public, particularly the passenger, bears the costs.

    —  The CAA must seek to harmonise the imposition of EASA rules throughout Europe. The CAA should seek to transfer much of the regulatory activity for Annex 2 aircraft to industry. The CAA should not continue to require duplicated approvals from industry.

14 November 2005



 
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