Memorandum submitted by Dr Ian R Harnett,
Harnett Air Services Ltd
Dr Harnett provides economic consultancy services
to a range of UK general aviation organisations, building on his
experience in economic forecasting and modelling gained at the
Bank of England and as Chief UK Economist, or head of European
Equity Strategy at a number of Europe's leading Investment Banks.
Harnett Air Services is a small company leasing its single-engined
aircraft for flight training and self hire. Dr Harnett is a UK
and FAA PPL and is a member of UK & US AOPA and PPL/IR.
The CAA has recently been involved in a number
of different initiatives that have placed UK General Aviation
(GA) under severe economic and regulatory pressure. The result
has been a sharp decline in General Aviation activity, placing
the future viability of the industry at risk and contrary to securing
the sound development of the civil air transport industry of the
United Kingdom" Civil Aviation Act 1982.
The policy initiatives to which GA has had to
respond include the Single European Sky proposal for a GA VFR
levy and raised IFR charges; the SRG charging scheme review, increasing
licensing, airfield and maintenance costs, the DfT proposal to
limit Foreign Registered Aircraft and the introduction of Mode-S
The CAA also appeared willing to increase the
size of controlled airspace, at the expense of GA access, and
allow UK airport operators to impose charging regimes that effectively
prohibit GA access to many regional airfields, resulting in sharply
lower activity levels. This appears to result from CAA sponsorship
of a very narrow definition of civil air transport industry",
ie the revenue generating airlines.
Our main concern is that these initiatives have
tended to be introduced with only limited economic analysis of
potential impacts on areas of aviation outside the airlines. Indeed,
the lack of economic data collected by the CAA on GAdespite
its responsibility so to do means that it is almost impossible
to perform accurate economic and regulatory impact assessments
for policy changes on UK GA.
The increased level of concern that these initiatives
have boughtwhich has resulted in high level of consultation
responses for each of the proposed changeshas culminated
with the current TSC review. Despite this the CAA appears unwilling
to heed the concerns of GAoften pressing ahead with changes
despite ongoing investigations, such as the Strategic Review of
General Aviation. This suggests that the CAA now needs an explicit
policy towards GA, guaranteeing access to airspace and airports
at a fair price.
The following represents my detailed comments
on the issues identified as areas that the Committee are keen
1. The remit, structure, and powers of the
1.1 The remit of the CAA appears to focus
heavily on the role of the British airlines" (Civil Aviation
Act 1982), with the need to further the reasonable interests of
air transport services" as a secondary consideration. Thus
it appears that the remit of the CAA is designed to limit the
claims of non-airline activity to UK airspace and airports, despite
the positive economic and infrastructure impact that UK GA could
provide to manyparticularly business users.
PROPOSAL 1.1 The remit of the CAA should
be revised to include a statement of policy towards UK GA which
provides for access to airspace and airports similar to the model
document produced below.
General Aviation is critically important to
the nation's economy and to the national transportation system.
General Aviation plays a crucial role in the flight training for
all segments of aviation and provides unique business, personal
and recreational opportunities. It makes vital contributions to
activities ranging from aviation training, to business aviation,
to personal aviation operations, to vintage aircraft preservation
and to sport flying including microlight, glider and balloon flights.
Accordingly it is the policy of the CAA to meet
the needs of General Aviation while continuing to improve its
safety record. These goals are neither contradicroty nor seperable.
They are best achieved by cooperating with the aviation community
to define mutual concerns and make joint efforts to accomplish
objectives. We will strive to achieve the goals through voluntary
compliance and methods designed to reduce the regulatory burden
on General Aviation.
The CAA's General Aviation programs will focus
To protect safety gains and aim for a new threshold.
To provide the General Aviation community with
responsive, customer-driven certification, licencing, and other
Product Innovation and Competitiveness
To permit the technology advancement of General
System Access and Capacity
To maximise General Aviation's liability to
operate in the airspace system and maintain access to airfields.
Affordability and Sustainability
To allow economic and efficient General Aviation
operations, expansion of participation and permit the stimulation
of industry growth. To secure the sound development of the General
1.2 The Structure of the CAA appears confused.
The split between SRG and ERG is not clearly defined. For example,
in the SRG Charging Review, there was no evidence of the economic
skills of the ERG team being employed. Indeed, the marginal cost
pricing preferred by ERG was not adopted, despite most of the
regulatory charges being required for commercial reasons.
1.3 Unlike other nationalised industries
there is no effective regulator of the industry that ensures that
ALL users of the resourcesairspace and airfieldsreceive
access at the lowest possible prices. Elsewhere the regulator
ensures that all those companies exploiting the resources for
profit attain only a reasonable return on capitaland do
not deter competition from emerging (See section 2.5). In the
case of aviation, however, the CAA appears to have not linked
the charging structure to the returns that accrue from the use
of the airspace despite the complaints of users.
1.4 At present the CAA is Judge and Jury"
in many cases, without an adequate (cheap) form of arbitration.
For example, with the SRG charging schemesome 219 responses
were received raising 183 separate issues, in 855 identified comments.
The net result was only three minor changes in small charges,
with no subsequent redress short of the High Court.
1.5 The executive and non-executive structure
of the CAA appears weak. At an executive level the Chairman (Sir
Roy McNulty) acts as both Chairman and Chief Executive. The board
members are often ex airline or RAF personnel, while the Non-Executive
(Part-Time) Board members also fail to represent the broader user
groups of the CAA.
1.6 Most recently, there was also a worrying
development when in response to the CAA consultation on SRG charges
there was a suggestion that the structure of the JRT was determined
partly on the level of financial impact of each sector of UK aviationregardless
of the impact (Section 4.1.2 CAA SRG Response Document).
1.7 On a similar tack, the lack of an independent
Chairperson for official reviews such as the Strategic Review
of General Aviation, suggest that despite a major amount of work
there is no guarantee that any findings or recommendations will
PROPOSAL 1.2 The CAA structure should be
redefined with ERG responsible for the intellectual integrity
of the CAA methodologies and cost of CAA services with SRG solely
responsible for the regulatory regime.
PROPOSAL 1.3 The CAA regulatory activity
should be overseen by an Office of Air Regulation which would
set the economic parameters for the CAAsuch as the RPI
minus" regimes found in other industries, as well as setting
acceptable rates of return for commercial users of the national
PROPOSAL 1.4 There should be a review of
the corporate structure of the CAA board and its internal review
committees to provide more external objectivity.
2. The performance of the CAA in relation
to its statutory objectives and functions
2.1 One of the functions identified for
the CAA is the provision of assistance and information. While
staff in the statistical departments of the CAA are unerringly
helpful it is apparent that there is little information about
the WHOLE of the UK aviation industry, with very little data collected
on UK General Aviation. It is effectively limited to aerial activity
at 60 identified airfields and aircraft and aircrew licensing.
2.2 This lack of economic information is
in contrast to the USA where there is an FAA survey of General
Aviation. This General Aviation and Air Taxi Activity (GAATA)
Survey." allows detailed analysis of numbers and types of
aircraft, hours flown, IFR and VFR, regional activity. This ensures
that there is a greater coherence of policy formulation and an
ease of economic impact assessment that is not possible with the
limited range of UK data.
2.3 It is also not clear that the CAA has
adequately discharged its functions in respect of ensuring that
its own policies fit with national transport policy, especially
in its policies of access to airspace and airports.
2.4 The CAA has clearly encouraged airline
expansion. In 2004 Commercial Air Transport movements rose to
2.4 million up 85% from the 1.6 million in 1976. This has been
at the expense of GA movements. In 1976 GA movements accounted
for some 42% of all recorded activity, this has now fallen to
less than 23% of all movements. Despite this, the CAA chooses
to increase costs on the areas that have lower usage rates, whilst
cutting costs for those that are expanding at a non-sustainable
2.5 There is evidence from the last two
decades of how the impact of CAA regulation and charging regimes
has encouraged the growth of larger commercial aviation at the
expense of smaller AOCs who might provide competition for larger
airlines on domestic routes.
2.6 For example, commercial aircraft registrations
have grown at a rate of 60% in each of the last two decades, while
the smaller commercial aircraft above 5,701kg and less than 50,000kg
have seen zero or negative growth. Despite this, the SRG charging
scheme was revised to provide a 50% reduction in large airline
variable charges, saving one large airline over £6 million
a year) while smaller AOC charges are set to double.
2.7 We have already commented that the SRG
charging regime changes have brought about significant comment.
Why is CAA giving the airlines a major reduction in costs (boosting
potential supply) at a time when the aviation transport policy
is already in trouble due to lack of capacity at major airports?
It is also likely that the changes in the SRG charges will negatively
impact many smaller and medium sized airfields thus limiting future
2.8 There has been a lack of adequate impact
assessments for a number of changes that have affected UK GA (in
fact I cannot recall any having been published for the changes
I have been looking at over the last two years). More importantly,
the DFT sponsorship statement goes on to state:
Regulatory Impact Assessments: All primary and
secondary legislation relating to the CAA will be subject to regulatory
impact assessment. The CAA should seek to reduce unnecessary and
over-detailed regulation and ensure that necessary regulation
is clear and fair." DfT Sponsorship statement (Section 7.4)
2.9 The bulk of the responses to the SRG
charges from AOC operators and GA pilots clearly felt that the
regulation was neither clear nor fair. It is also interesting
to note that when the UK adopted the new EASA regulatory regimes
some 4,000 UK regulations were instantly removedsuggesting
that generally the CAA over-regulate"as was implicitly
also admitted in the DfT Foreign Registered Aircraft document:
In establishing these requirements the CAA, JAA
and EASA are obliged to take account of ICAO SARPs. However, the
requirements are more detailed than the ICAO standards and often
impose a higher standard, although occasionally the requirements
may be less restrictive than the ICAO standards." Paragraph
2.10 It is recognised later in the consultation
document that these higher standards" DO NOT appear to have
resulted in a significantly improved safety record for the UK
versus the US, Bermudan or Cayman registers. This lack of difference
makes it difficult to sustain an argument in favour of more detailed"
and supposedly higher" standards.
PROPOSAL 2.1 The CAA should introduce a
survey of UK GA in order to establish the trends that will influence
policysimilar to that found in the USA.
PROPOSAL 2.2 Economic Impact Assessments
and Regulatory Impact Assessments should be carried outex-post
by a third party in order to establish whether there has been
a systematic bias in favour of airlines and major airports at
the expense of other airspace usersand whether National
Transport policy has been compromised.
PROPOSAL 2.2 There should be a REGULATORY
AUDIT to see how many other pieces of regulation introduced by
the CAA are not germane to General Aviation.
3. The effectiveness and efficiency of the
CAA's regulatory framework and in the general discharge of its
3.1 It should be clear already that there
are severe doubts about the effectiveness and efficiency of the
CAA's regulatory framework as they impact General Aviation.
3.2 This is highlighted by the decline that
has been seen in UK PPL issuance, down some 40% since 1997 as
the costs and complication of obtaining a full JAR licence have
increased. Even with the introduction of the NPPL (with lower
costs and medical requirements) licence issues are 17% down on
1992 levelswhile commercial licences have risen 75% over
the same period.
3.3 One of the biggest issues for UK licensing
is why only 2% of UK PPLs have an instrument rating while in the
US almost 50% of active PPLs have the increased skills that boost
safety as well as giving access to the airways and A class airspace
that an instrument rating allows.
3.4 The regulatory framework may have helped
boost commercial aviation activity, but using CAA airfield movement
data it is possible to show that General Aviation movements have
fallen by almost 30% since the mid 1990s, with private aircraft
movements down some 45% at those airfields which handled more
than 10,000 movements a year in 1997.
3.5 The lack of a national airfield policy
means that smaller airfields which might provide alternatives
are not being protected. The regulatory regime does not protect
airspace or access for General Aviation, since revenue generating
passengers (or a multinational business) are the only way to pay
for increased en-route or airfield landing and handling charges.
3.6 It is possible that the CAA has cooperated
with both the airlines and the airport operators in squeezing
GA out of a number of regional airfields. It is apparent that
those airfields where GA has been excluded via increased costs
have seen there overall activity rates rise rapidly since 1997
(Stansted +85%, London City (+76%) Luton +48%).
3.7 It is also far from clear that the CAA
has been improving its own efficiency. The SRG report fails to
explain why 6,624 new license issues and renewals requires a section
that costs some £8 million, or over £1,200 per issuance.
Indeed, there is no assessment as to whether the size of FCL is
appropriate to changing level of PPL activity.
3.8 The current regime allows airsports
groups to self regulate. This could be extended to allow non-commercial
aviation regulation to be devolved to representative bodies.
3.9 The tax on safety" that means that
the CAA pays a 6% charge to HMT should be re-examined. This was
introduced at a time when government bond yields were higher.
It is also clear that the UK Government is a major beneficiary
from a safety regime for which it now contributes nothing.
PROPOSAL 3.1 There should be an examination
of the extent to which there is a policy of excluding GA from
regional airports (and reduce activity levels in surrounding smaller
airfields) so as to maximise revenue generation from airspace
PROPOSAL 3.2 There should be a national
strategy sponsoring smaller airfields.
PROPOSAL 3.3 There should be a National
Audit Office investigation as to the potential for savings from
changed regulatory regimes / devolution of responsibilities to
GA or specialist licensing authorities.
PROPOSAL 3.4 The CAA required return should
be cut to a more economically sensible figure and the UK Government
required to contribute for the benefit they receive from a lack
of aviation related disasters.
4. The effect of growing international and
European Union cooperation on the work of the CAA
4.1 The introduction of the JAA and now
EASA has placed considerable strain on UK General Aviation.
4.2 The fact that EASA removed some 4,000
regulations, with seemingly limited impact on safety, highlighted
that there is scope from integration to align the regulatory regime
to a more satisfactory arrangement.
4.3 The CAA and DfT should explore why 14,500
pilots decided to obtain FAA pilots ratings (over 3,000 of whom
have commercial ratings) and why almost 1,700 FAA mechanics, service
some 828 N" registered aircraft (of a total fleet of 1,285
Foreign Registered Aircraft), rather than just trying to ban them.
PROPOSAL 4.1 That the CAA and EASA should
as quickly as possible see their regulatory regime converge on
that of the FAA, who have successfully encouraged aviation of
all types to grow alongside each other, without compromising safety
for any parties.
15 November 2005