Draft Civil Aviation Bill - Transport Committee Contents

3  Reform of the Civil Aviation Authority

The Civil Aviation Authority

54. The CAA was established by the Civil Aviation Act 1971 as the UK's regulator for aviation and is funded through charges to industry. Its regulatory remit covers economic, safety, airspace and consumer protection issues. The CAA has four main responsibilities:

  • ensure that UK civil aviation standards are set and achieved;
  • regulate airlines, airports and National Air Traffic Services economic activities and encourage a diverse and competitive industry;
  • manage the UK's principal travel protection scheme, the Air Travel Organisers' Licensing (ATOL) scheme, license UK airlines and manage consumer issues, and;
  • bring civil and military interests together to ensure that the airspace needs of all users are met as equitably as possible.[71]

55. The draft bill proposes changes to the governance and powers of the CAA. In particular, the CAA would:

  • have concurrent powers with the Competition Commission to investigate and remedy anti-competitive behaviour, consistent with the Competition Act powers granted to other regulators;
  • have additional enforcement powers, including to powers to impose civil sanctions; and
  • appoint its own directors.

56. These, and other provisions in the bill, would give the CAA greater independence from Government and the ability to act more quickly and flexibly. We received no adverse comments on these proposals. They were welcomed by a number of witnesses who commented favourably on the performance of the CAA.[72] The CAA supported the measures.[73]

Publication provisions

57. The draft Civil Aviation Bill includes provisions for granting environmental and consumer publication duties to the CAA:

    It creates a new duty for the CAA to publish, or arrange for others to publish, in a format which permits comparisons, such information and advice as the CAA considers appropriate in order to: (a) assist users of air transport to compare services and make more informed choices; and (b) inform the public about the environmental effects (including emissions and noise) of civil aviation in the UK and measures taken to limit adverse environmental effects.[74]

This power would be in respect of all airports, not only designated airports. The powers, under clauses 80 and 81, are widely drawn and could also apply to a range of service providers, in addition to airlines and airports.

58. The Minister said that "shining the light of transparency" on the performance of the aviation industry would benefit passengers.[75] The industry, however, raised concerns about this provision. British Airways said:

    While supporting informed consumer choice, we believe that the CAA's powers to obtain and publish information are too wide in relation to airlines, where no market failure has been found. Use of these powers runs the risk of interference in the air transport market, harming competition and potentially misleading consumers. We therefore propose safeguards to limit the use of these powers.[76]

Airports cautioned that giving the CAA additional publication duties was unnecessary. Gatwick Airport pointed out that they are already undertaking reporting activities for the customer's benefit:

    We question whether there is a need to compel the CAA to perform a function that we are already undertaking ourselves, and indeed whether it is appropriate for the CAA, rather than an airport to determine, how best to publish information around what our environmental impacts are. In many cases, we use existing CAA data to do just that. There is a danger that the CAA could replicate the existing activities of airports in this area. The bill should ensure that this does not happen.[77]

59. The Airport Operators Association was also concerned about the cost implications, particularly for regional airports.[78] The Impact Assessment estimates the net costs to business at £0.55 million a year. As the benefits could not be quantified, the Net Present Value is negative (-£5.9 million over 10 years at 2009 prices). It also states that the proposal assumes that consumers will make decisions based on the additional information, such as baggage reclaim times and environmental performance of airlines, and that airlines will be incentivised to compete on such non-price factors. The CAA said that market research showed that consumers wanted more information to enable them to choose between airlines. However, there is little evidence to show that this would apply in the majority of cases, and plenty of evidence that the impact would be a marginal at most. Air passengers make their choices largely on the basis of ticket prices, flight availability and airport proximity, not peripheral performance issues, such as baggage handling times.[79] (See paragraphs 44 and 55.)

60. Whilst collecting and publishing information may sound straightforward, there are likely to be complications. There would be incentives for service providers to "game" the results; guidelines from the CAA would be needed to ensure consistency and comparability; audit checks would be needed to ensure validity;[80] and, as the Minister said, the CAA would need "to qualify and explain the figures ultimately published".[81] The Government has generally opposed centrally-imposed reporting regimes—with associated targets and costs. It has, for example, abolished the performance indicators regime for local authorities.

61. We encourage providers of air transport services to be open and transparent in relation to matters of concern to service users, the local community and the wider environment. We are concerned, however, that the provisions in clauses 80 and 81, granting powers to the CAA to require publication of consumer and environmental information, are too widely drawn. They risk creating bureaucracy and additional costs to the aviation industry while the benefits are less tangible. We recommend that the Government specify the types of transport service provider and information to be brought within these provisions. We also recommend that the bill make clear that publication requirements should not create disproportionate burdens for the aviation industry and that the CAA be required to demonstrate the value to passengers.

Efficiency of CAA

62. The CAA is a public corporation limited by guarantee. It is the only major economic regulator for which the National Audit Office (NAO) has no remit. When the CAA was established, via the 1982 Civil Aviation Act, the Comptroller and Auditor General was appointed as the CAA's statutory auditor and had statutory value-for-money access rights. However, the 1984 Civil Aviation Act (Auditing and Accounts) Order removed the statutory requirement for the audit of the CAA to be carried out by the Comptroller and Auditor General and the NAO's value-for-money powers. Although the draft bill contains various amendments to aspects of the CAA's governance and constitution, it contains no references to audit or value for money arrangements. There is no explicit efficiency duty for the CAA in the draft bill.

63. The Chair of the CAA acknowledged that the NAO had raised this issue with the DfT on a number of occasions. She said that as the CAA's costs are met by industry, not the taxpayer, it would not be appropriate for it to be subject to audit or value-for-money assessment by the NAO.[82] CAA Chief Executive Andrew Haines pointed to efficiency savings made by the CAA and plans for future improvements.[83] However, other industry regulators, including (ORR, OFGEM, OFCOM, and OFWAT) are funded by industry but are within the NAO's remit.

64. We recommend that an explicit efficiency duty for the CAA be inserted in bill. The Government should explain why the CAA is, apparently, unique among industry regulators in being outside the remit of the National Audit Office.

71   CAA website, About the CAA, www.caa.co.uk  Back

72   Ev w1 [Chartered Institute of Logistics and Transport]. The exception was the British Airline Pilots Association - see Ev w7. Back

73   Ev 42  Back

74   Draft Civil Aviation Bill: An effective regulatory framework for UK aviation: Policy Paper, Cm 8234-I, November 2011, p 19 Back

75   Q 172 Back

76   Ev 51  Back

77   Ev 60  Back

78   Q 18 [Mr Siddall] Back

79   Office of National Statistics, Omnibus Survey , February 2010, p 9 Back

80   The Royal Aeronautical Society says that the data should be peer-reviewed, published with sources and assumptions and warns against oversimplification, Ev w1.  Back

81   Q 174 Back

82   Qq 119-121 Back

83   Q120. He cited a 20% reduction in CAA costs in real terms over the past decade.  Back

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Prepared 19 January 2012