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CAA funding review: Political leadership is now essential

Since our update last month, we’ve achieved much greater clarity around a few things:

  • The Minister of Transport, Simon Bridges, is still waiting for the final Cabinet paper and Regulatory Impact Statement on proposed charges.
  • He believes that these two papers are months away, not weeks.
  • He has given an undertaking that the Chairman of the Board will respond to our letter calling for independent and open and transparent analysis of the Regulatory Impact Statement, but told us that he doesn’t think such transparency is necessary.

So what does this all mean?

It is by no means certain that the new levies and other changes will occur in November as planned. This triennial review of charges is already running at least 12 months late. Some say that if there is no decision on changes before the end of the year, it will be very difficult to impose them until after the election.

We are quite happy with (and support) a number of the CAA’s proposed changes. We oppose only one of them: the proliferation of new levies on commercial general aviation. All the others are either unequivocally supported or backed with some reservations about their consistency with the user pays philosophy.

The GAA is opposed to the introduction of new levies because:

  • They are unfair and unjust – some sectors, notably GA commercial, will have to pay for audit and surveillance through the proposed new levy, while all other groups get this service for free.
  • Commercial GA will have to pay for educational, safety investigation/prosecution and safety promotion and implementation of rules under the levy arrangements, while all other sectors have these activities paid for by the levy on passengers.
  • Safety in commercial GA is highly vulnerable to increased costs – a recent statement by the CAA’s Deputy Director responsible for GA confirms this point, saying a recent survey of more than 600 helicopter pilots has shown cost-consciousness was a major safety issue for the group.
  • The CAA doesn’t need the money. It is extraordinarily well resourced, reporting reserves of more than $5m in the 2015 financial year.
  • Obedience to Treasury and Audit office guidelines for charging in the public sector is leading to an internationally uncompetitive industry, with the CAA’s hourly rate significantly in excess of the UK or Australia.
  • Levies are like taxes – they only increase. When the aviation industry is expanding, the CAA over-recovers – and if there is a a shortfall, charges are increased with government approval.

Last time, the CAA had some justification for a rate hike but on this occasion there should be only one recommendation and that is to reduce present charges because the Authority is rolling in money.

And that’s why the Regulatory Impact Statement is so critical.

Simon Bridges: Time for some serious attention

Simon Bridges: Time for some serious attention

If you get this high-level analysis wrong, things go really pear-shaped. We are surprised that the Government doesn’t see the RIS as a key part of managing its political risk – and there is significant risk if the analysis is wrong.

We know through our network that the hourly rate charges are doing a lot of damage. There is a commitment out there to bring in new equipment and technologies, but exorbitant CAA costs are having an impact. New Zealand is simply not always getting the best kit because CAA charges can be as high as $60k per aircraft and these charges must be paid up-front, before the aircraft is productive. So we get new aircraft, but perhaps not always with the best technology and safety benefits.

At no time did officials tell ministers that this would be one of the downside consequences.

We cannot understand why Simon Bridges is so quick to rule out any engagement with the industry on developing the RIS.  The CAA clearly understands (or has allegedly been told as much by an astounding 600 helicopter pilots in what appears to be a private survey) that commercial pressures are substantial in the sector.

So why aren’t the Ministry of Transport and CAA open to engaging independent and informed advice on the issue? This is the best way of managing the political risk.

Aviation safety is not some esoteric flight of fantasy by number-crunchers in gold-plated towers with water views. It is a very practical matter to which we all contribute, so why won’t Wellington officialdom accept we should have input into this critical paper? We have nothing to hide.

I am disappointed that, despite Minister Bridges’ commitment, the Chairman of the Civil Aviation Authority has chosen not to respond to my letter of mid-July on the RIS issue. Now I do know that The CAA’s apparent position is that it has made recommendations to the Minister, and that’s it. However, it also appears that the CAA is still having major input into the development of the RIS Why wouldn’t CAA want to put the best possible advice to the Ministry?

At the behest of the Auckland National Party MPs, we filed a formal complaint via Andrew Bayly, MP for Hunua. Its content has not yet been widely circulated, but we’ve done some more work on the impacts of all the changes proposed and concluded that the new levels of cross-subsidy are larger than the current ones.

The GAA believes that the Authority’s underlying strategy is aimed at taking our focus off its exorbitant hourly rates, and the escalation to a 100% cost recovery hourly rate of $466 per hour plus GST.

The real issue is benchmarking CAA charges so that they are internationally competitive. This would mean hourly rates of between $150 and $190 per hour and a medical application fee of no more than $80. Forget the Treasury and Audit Office guidelines; this is about making New Zealand’s aviation industry as attractive as possible, and that means safe and cost-competitive.

Our message to you: It’s really important to keep talking to your local MP, because sooner or later Minister Bridges will make a recommendation to his Cabinet colleagues.

Our message to Simon Bridges: It really is time to seriously consider and discuss our sector’s competitiveness, and that requires accountability and leadership.

 

♦ If your experience with the CAA – on any issue – has been disappointing, don’t keep it to yourself and them. Please share it with fellow aviators. Email admin [at] caa [dot] gen [dot] nz. Your privacy is assured.

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