Select Committee on Transport Minutes of Evidence

Examination of Witnesses (Questions 361-379)


18 JANUARY 2006

  Q361 Chairman: Gentlemen, thank you for being patient. I am sorry to have made you wait. May I ask you, firstly, to identify yourselves, starting on my left?

  Dr Steeden: Mike Steeden, Director of Civil Air Transport at the SBAC, which represents about 2,500 companies operating in the civil air transport, defence and space markets.

  Mr Draper: Paul Draper, member of the General Aviation Alliance, which is a grouping of nine major organisations in general aviation with about 70,000 subscription payments.

  Mr Wilson: Mark Wilson. I am the Chief Executive of the British Business and General Aviation Association. I am speaking for those companies operating in the general aviation market and, insofar as it may be of interest to the later questioning, I am a vice-chairman of the EASA advisory board.

  Q362  Chairman: Lucky old you!

  Mr Robinson: Martin Robinson. I am the Chief Executive of the Aircraft Owners and Pilots Association, representing private aircraft owners, pilots, flight training organisations, many of which pass their pilots on to the airlines.

  Q363  Chairman: Thank you very much. You are all in the general aviation sector which we all believe to be very important. Could you tell us why you think your particular sector is distinct from airlines and other parts of the aviation industry?

  Mr Wilson: On the basis we sit on the cusp between commercial and general aviation, maybe I will start and my colleagues can follow. Firstly, we must note that the international standard called general aviation is not what people would automatically assume. I think most of my colleagues would agree the definition is that it is everything except for the airlines and the military. Where it is particularly different is that general aviation primarily comprises individual or small- and medium-sized companies, or those companies that share the characteristics of SMEs. We therefore manage to serve areas that the scheduled airlines do not, we go where they do not, they cannot or they will not, and I think we are important in terms of regional development, certainly as far as my members are concerned and there are obviously other interests which I will defer to my colleagues to outline.

  Mr Draper: I think we are also different in that we not only cover business, we cover the training of pilots who ultimately many end up within the airlines, but sports and recreational purposes is of ever-increasing importance within general aviation.

  Q364  Chairman: That is very useful. Do you know what the contribution of general aviation is to the UK economy?

  Mr Robinson: Currently there is a study which is being undertaken in conjunction with funding from the Department for Transport, the results of which we are waiting to learn.

  Q365  Chairman: And its parameters are about the economic contribution. It is presumably the economics of the industry.

  Mr Robinson: It is indeed, yes.

  Q366  Chairman: When do you expect that to report?

  Mr Robinson: We think there will be a preliminary report available by the end of January and we can make that available to you.

  Q367  Chairman: Have you all contributed to that in some way?

  Mr Robinson: We have.

  Dr Steeden: Chairman, may I have a shot at responding to the initial question just to clarify? With due respect to my friend's definition of general aviation, I think there is a commonly accepted usage that tends to distinguish between the large civil transports that are used by the major airlines and the lighter aircraft community. As far as the SBAC is concerned, our members operate across the full range of markets here. We serve both the airlines in terms of providing components, systems, air frames into that large civil air transport area and we also have companies that serve the lighter end of the market. We range from small- and medium-sized enterprises all the way up to the large companies such as Rolls Royce, BAe Systems and Airbus UK.

  Q368  Mr Martlew: On the funding and the efficiency of the CAA, do you really believe that you get value for money from the CAA?

  Mr Wilson: What we would probably contend is that the CAA is not the organisation it would be if it was just there to regulate general aviation and, therefore, we believe that we are paying a disproportionate sum because the regulation itself and the body itself is not set there to regulate general aviation, it is set there, as is laid down in its remit, to look after the large airlines and particularly to ensure that the airlines are able to be provide services to UK citizens. It is a worthy goal but not one we feel we should be paying for.

  Q369  Mr Martlew: So what is the solution?

  Mr Wilson: You can either have regulation which is proportional throughout and we recognise that may place a bureaucratic burden on the CAA itself, but I think just having a one-size-fits-all level of regulation, such as exists for commercial operations today, is not useful. It is not sensible for somebody who wishes to operate pleasure flights round a beach during the summer to have to approach the same document as British Airways has to approach.

  Q370  Mr Martlew: Do you believe that the 6% return is justified?

  Mr Robinson: No.

  Mr Draper: It is really a tax on safety in effect.

  Q371  Mr Martlew: If they do not get the return then will there not be a tax on the taxpayer.

  Mr Draper: Not necessarily because the CAA is self-funded by the participants and that includes us.

  Q372  Mr Martlew: So you are happy for it to be self-funded and not to pay a return?

  Mr Draper: Indeed it should be self-funded. We do not necessarily need to be a part of that regulation in that it needs to be risk based and proportionate. Over the years general aviation in various sectors has been very successfully self-regulated without a problem, such as the gliding community for 60 years, the PFA and various other sectors and we believe that is the way that it should move and there should be more self-regulation providing it is properly safety based.

  Dr Steeden: In terms of value for money from the CAA, I think I share views that have been frequently expressed already. As far as our members are concerned the relationship with the CAA is long standing and it is highly professional. I do not believe that our members would see an issue. Our area of concern is primarily the certification of products and services and so in that area I do not think we have an issue. On the 6% return, again I share some of the views that have been expressed here. I believe the actual number this year in terms of the rate of return on average capital employed is running at something like 18%, which is something of a catch-up exercise following the holiday" that followed on from 9/11. I would observe that from the point of view of companies in our community that is a very nice arrangement if you can get it. I do not think that they understand why that sort of facility should be provided. I think they probably would have some measure of difficulty with it. I think they would look at the rates that you can achieve these days on retail savings investments and ask why this particular privilege is being offered. It is not the biggest issue out there for us as far as the CAA is concerned but I think those would probably be the views.

  Mr Draper: My colleague has mentioned an 18% return and that is in an environment where charges from the CAA to the GA community are increasing and I think questions need to be asked.

  Q373  Clive Efford: Do you believe that general aviation pays its fair share in terms of recouping the costs of the services that the CAA provides?

  Mr Wilson: I think it does. If the regulation was proportionate then the user pays principle can be carried forward. If the regulation is disproportionate then you end up with a disproportionate impact on particularly smaller- and medium-sized companies, which I think goes against the policy not only of this country but within Europe.

  Q374  Clive Efford: So you are not suggesting a charge for the service rendered but on a pro rata basis based on the size of the organisation?

  Mr Wilson: No. I am noting that if you are a small organisation the amount of burden not only that you pay in terms of fees to the CAA but that it takes in terms of your personnel is significantly larger as a proportion of your turnover than if you were a larger company, and that is our concern. Because regulation is not proportionate at the present time the fees cannot be done on a user pays basis. We believe that general aviation does pay its way.

  Q375  Clive Efford: What do you mean by regulation is not proportionate? Is there not a minimum standard that everyone is going to have to meet however big they are?

  Mr Wilson: That is precisely the problem. The regulations tend to have been developed with larger interests in mind, not with general aviation in mind. Our colleagues across the Atlantic enjoy a completely different set of regulations for smaller air transport operations to their larger cousins and we do not have that here, it is one-size-fits-all.

  Mr Robinson: In a recent consultation exercise with the Civil Aviation Authority AOPA initiated, along with the support of colleagues like the BBGA, an independent report which was produced by Helios Technology into the actual impact of the CAA's charges on our sector of the aviation community, a copy of which we are quite happy to forward to you. This report bears out a lot of what Mr Wilson has been saying about the fact that the smaller companies pay a disproportionate level of charges in relation to their turnover.

  Q376  Mrs Ellman: Sir Roy McNulty admitted he had not paid sufficient attention to general aviation and he said that was going to be put right, and he referred to the joint review. Are you confident there will be changes? Where would you like the major changes to occur?

  Mr Draper: I do not think we are confident that the changes will be made to assist general aviation. One of the prime changes we would suggest needs to be made is that general aviation needs to be recognised by having a representative on the board of the CAA. There is no GA representative on the board and we believe that, understandably though it is that they have a remit to look after the airlines, GA is left out of the picture. It has very little, if any, mention in the CAA Chairman's annual report and it does not figure in their corporate plan. We are a large sector and we are a different sector and we need to be looked after or regulated in a different way.

  Mr Wilson: As you will have seen in our written evidence, we would propose the development of an actual policy for business on general aviation, something that we hope could be allied to the review of the aviation White Paper that is expected to be undertaken this year. We think that would strengthen the position of the industry and ensure that Sir Roy and his successors will pay suitable attention to general aviation in the future. In his defence, Sir Roy has instigated reviews on general aviation which we are most welcome to be participating in and we hope they will have a fruitful outcome. Maybe that could lead towards policy.

  Mr Robinson: I welcome Sir Roy's comment, of course. However, they are probably a little bit too little, too late with the advent of EASA coming on-stream. In the future most of our members will be under some form of European regulation. Perhaps I could quote from an interview we conducted with Mr Gooding(?). He says in the interview that it is their intention to reduce the burdens on general aviation which they are very aware of, and he also goes on to say that we need general aviation in Europe and we need to promote it because it is weak. If we could get our own Civil Aviation Authority to come out and say words like this it would be such a boost to our community.

  Q377  Mrs Ellman: Should the CAA be audited by the National Audit Office?

  Mr Robinson: I believe the CAA does its best through the finance advisory body on which I sit to be as transparent as possible with its fees and charges. However, as has been stated previously, I think it would be a good measure if there was some kind of independent external audit and the National Audit Office seems the right body to conduct that independent review.

  Q378  Mrs Ellman: The Hampton Report suggested that regulators move towards risk-based assessments. Have you seen any changes in relation to general aviation in this area?

  Mr Wilson: Not yet, but all of us are engaged in discussions with the CAA that are based on some of the premises of the Hampton Report and we would hope that risk-based regulations, with proportionality in the way it is brought forward, would come out of some part of the aforementioned strategic look at general aviation.

  Dr Steeden: As we move towards EASA and away from the CAA I think the recommendations of Hampton and the work that has been done generally by the Better Regulation Task Force need to be taken up by EASA in formulating the way forward as far as their processes are concerned. That is something that perhaps has not happened yet, although the Better Regulation Task Force has already produced reports in the area of regulation by the European Commission and its agencies. That is where the emphasis of Hampton and where the emphasis of better regulation needs to lie now.

  Q379  Mrs Ellman: Is there any concern that light-touch regulation might compromise safety?

  Mr Robinson: Not if it is risk-based.

  Mr Draper: I would like to endorse that comment, Chairman.

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