First, they put your head in a cloud. Then they slip their fingers into your wallet

27 February 2016 / by the GAA team / Consultation, Costs, Governance, Medical, Opinion, Overview

The last time we looked at the CAA’s current pricing review, we showed how the authority rewrote history to claim that it had discovered a public good element in the Medical Application Fee – and hip-hooray, folks! The fee looked as if it was coming down.

Black and white? Not quite

Black and white? Not quite

But now we have discovered yet another piece of CAA sophistry: The secret art of increasing a fee while making it look like a price cut.

You’ll recall the CAA’s epiphany. It looked like a minor miracle. The CAA had experienced a flash of insight to which it had been blind three years earlier. Back then, it refused to accept that there was an element of public good in the medical application process. But now, like Paul on the road to Damascus, it seemed to have relented and repented. And when we asked the CAA to

“advise the methodology and the justification that has been used by the CAA in calculating the revised medical application fee? In particular, what value has been attached in the calculation to each of the public good, private good, and club good categories?”

the CAA answered:

Exactly where the balance lies between Club Good and Private Good is difficult to establish. However, based upon our analysis of the workload of the Medical Unit, our estimate is that the benefits derived from Medical Certification are distributed approximately as below:

Club (passengers): 48%

Private (pilots and air traffic controllers): 52%

The CAA propose that the Application Fee for a Medical Certificate be set at the rate of $210.45 incl. GST ($183.00 excl. GST).

You’ll notice that this judgement was based on their own “analysis”. How the “workload of the Medical Unit” could have had any material influence on the ratio calculation is anyone’s guess…  we may need to leave that to a future generation of bureaucrats to explain.

It is also well worth noting that when the CAA came up with its 48% – 52% split, that was a purely arbitrary decision without any consultation with interested parties. We, along with AOPA, Aviation NZ, and NZALPA presented the Club/Private Good case when we went to the Regulations Review Committee in March 2013. At the time, the CAA and the MoT strenuously argued that we were incorrect in our assertion that there was a Club Good.

The last paragraph in our quote from the CAA would alert even a half-witted six-year-old in possession of a pocket calculator. It turns out to be all smoke and mirrors.

If we use the current medical application fee of $313 as the baseline, a reduction in the fee to $210.45 sounds like a step in the right direction – though not a big enough step, considering that our neighbouring regulator CASA charges NZ$78 for a comparable medical application fee.

However, if we take the proposed new figure of $210.45 and say that this represents 52% of the actual medical application fee, we find that it equates to 52% of $404.71.

So the CAA had slyly raised the medical application fee! Then its spin-doctors (who, for all we know, may also work part-time in the Medical Unit) cunningly disguised it as a price reduction by using that new inflated figure before applying the 52%.

If we more honestly apply 52% to the existing $313 fee, the calculator shows a fee of $162.76. This is what everyone would have been charged for the last three years if the RRC had agreed with the combined submissions, instead of nodding away a flawed proposal simply because it had been properly processed.

Do please bear in mind that even $162.76 is still double the CASA medical application fee of NZ$78.

If you ask the CAA how it is saving money and raising efficiency in the Medical Unit, you’ll get this response:

There has been a reduction in staff over time in line with the reducing applications for medical certification. Since the 2012 restructure the medical administration staff has reduced from 7 to 5.5 advisors. Overall total staff numbers have reduced from 12 to 10.

The reduction in the number of medical certificates over the period 2010 to 2014 was 1,668 (from 8293 to 6625) and the number of senior medical officers was reduced by 1 (from 3 to 2).

In addition, it should be noted that the Aviation Medicine team has significantly contributed to the reduction in CAA overhead costs, with a reduction of 30% in floor space it currently occupies.

Approximately $300,000 in savings have been achieved with the reductions noted above.

Well, we say that this is another case of more mirrors and even thicker smoke.

An artist's impression of trying to find the centre of the CAA

The CAA’s sickening downward spiral, created by “user pays” fees and charges

The reduction in the number of medical certificates over the 2010 to 2014 period was a foregone conclusion, predicted by almost everyone outside the CAA after it brought in a short-sighted policy to introduce the exorbitant medical application fee. As we forecast, many pilots have exited aviation entirely. Others have downgraded to RPLs and microlight certificates.

Using the CAA’s own figures, a decrease of 1668 medical certificates over the period has meant a reduction of income to the Medical Unit of at least $522,000. This is calculated on the basis that each and every medical certificate would have attracted the $313 medical application fee. Set against that is a reduction in costs of just $300,000. A significant part of this has been achieved by a 30% reduction in floor space occupied by the Medical Unit.

Using figures supplied to us by the CAA in April 2013, the average annual rental for levels 14 and 15 of the Asteron Centre was $556.44 per square metre.

If we conservatively use these figures (and bearing in mind that we would have expected rental costs in this prestigious location to increase over the period), this floor space reduction is a one-off saving that cannot be repeated in the next three-year review. It follows that a large percentage of the $300,000 saving was attributable to the reduction in floor space the Medical Unit occupied.

What we can see, through this dense fog, is a significant decrease in income and workload within the Medical Unit which has not been offset by a corresponding increase in efficiency and reduction in costs. The shortfall appears to be around $200,000.

In previous discussions with the Director about the consequences of a policy that actively encouraged pilots to withdraw from Class 2 medical certification due to the financial costs involved, we suggested that the cost of the medical application fee must surely rise due to the basis on which it had been previously calculated: the operating costs of the Medical Unit, divided by the number of requested medical applications.

Graeme Harris was somewhat coy and suggested that we could not draw the conclusion that the medical application fee would correspondingly rise in proportion to a falling user-base. However, it seems that – as we predicted – it has now risen, from $313 to $404.71, or by about 29% (which is not far off the CAA’s stated but unverified 20% decline in the demand for medical applications).

An overt price rise would have resulted in a serious backlash from the GA community. The CAA tried – and almost succeeded – to perform a perfect somersault by first agreeing with the view we put forward in our submission to the Regulations Review Committee, playing with the numbers and then seeking to hide its increase in plain sight.

When you think you've found the goalpost, they move all the balls

And just when you think you’ve found the goalposts, they move all the balls

It’s becoming obvious that CAA policy can be hard and soft. It will change to suit CAA needs; but it is invariably rigid in the face of a concerned but captive client base.

Is it any wonder that cynicism and distrust of the CAA is encouraged by this latest piece of creative chicanery?

The effects of medical certification costs have been far more serious than merely harming grass-roots general aviators. We now have a much-diminished pool of older, experienced instructors available to pass down their knowledge, gained over many thousands of hours. This, of course, is of no particular interest or concern to non-flying administrators within the CAA who have no knowledge of such things.

If the CAA was genuine in its ‘safety first’ policy within aviation, it would be trying to retain these instructors, who have so much wisdom and experience to offer, instead of increasing the financial burden they bear just to maintain their certification.

We know the cause, and we all know who caused it  – let the culprits now consider the effect.