Aviation Safety

In 1985, the then Minister for Aviation, Mr Peter Morris, announced that following wide consultation with industry, staff associations and other interested individuals and organisations, the Government had agreed to the adoption of the Bosch strategy and to a set of major cost recovery principles which underlie the report.

Unfortunately, in 1990, the Federal Government appeared to ignore some of the recommendations of the Bosch Report, when the Minister for Shipping and Aviation Support, Senator C ollins, announced that aviation regulatory services provided by the CAA would be progressively cost recovered from November 1 1991 and that the Government Safety C ontract would be phased out over three years.

On April 19 1991, the Minister announced that the first phase of the withdrawal of the Government’s Safety C ontract payment to the CAA would take effect from the beginning of the 1992/93 fiscal year and that with the exception of search and rescue costs, the CAA would be required to recover the full cost of safety regulation directly from the aviation industry, from the beginning of 1994/95.

The Minister subsequently delayed the start date for phasing out the safety contractfor 12 months, not through Government generosity, but purportedly because of unresolved legal implications on the introduction of a tax to replace the safety contract. (Refer separate lawarticle elsewhere this issue). The Federal government plans to table the Aviation Safety Levy Bill during the late autumn sittings of Parliament for resolution before the next financial year.

Involvement by CAA

As a result of Ministerial direction, the CAA began to develop options for the structure of a cost recovery system for the safety regulation services that it provides. The CAA identified annual costs for safety regulation to total $45m and it planned to recover the costs at the rate of one third ($15m) of the total cost in the first year, two thirds ($30m) in the second year and full cost recovery ($45) in the third year. CAA developed a system of a flat fee per aircraft for some aircraft categories and a maximum takeoff weight (MTOW) related formula for other categories. Aircraft categories and the current proposed charges and conditions are shown at Table 1.

A CAA/industry joint working party was then formed to identify and develop options for the future structure of the safety tax, for consideration by industry. After an initial look at improving the structure for 1992/93 (which is to be reviewed before the end of that year) the working party will focus on options for the longer term structure ofsafety regulation costs.

At a CAA Industry Consultation Meeting on 15 April 1992, the CAA announced that it had identified a $5m reduction in costs that affected the payment by industry for the first year. The proposed charges for the first year were reduced by approximately two thirds to recover $10m in FY 92/93, but no changes were made to costs recoverable in the following years.

The proposed levy is based on the following current criteria provided by CAA:

Table 1 – Proposed criteria for determining Aviation Safety Levy

Indicative annual costs for representative aircraft are shown at table 2.

Whilst the proposed levy is shown for the first year only, the potential exists for costs to rise by a factor of three in FY 1993/94 and by four and a half times in FY1994/95 and in subsequent years. Obviously, this will depend on the actual cost of safety regulation services provided by the CAA and onany new formula yet to be determined.

Unfortunately, the CAA has not been able to provide industry with a detailed breakdown ofits annual costs for safety regulation. The identification of such costs is essential to ensue that the correct expenditure can be attributed to safety regulation services and that there is no cross-subsidisation.

Furthermore, the CAA has not identified au recipients of its safety regulation services in order to make equitable charges. Aircraft owners, to which the tax will apply, are not the only recipients of CAAsafety regulation services. Indeed, the Federal Government introduced safety regulation legislation in the

early 1920s to protect the people on the ground from dangerous flying machines. The same legislation remains in force today.

CAA proposes that aircraft owners pay the aviation safety levy. Presumably, the Federal Government expects airlines and commercial aircraft owners to collect the tax from their clients, on their behalf, by way of fare increases. Itis worth noting that another Federal Government tax, the departure tax, is not added to the cost of airline tickets as it is paid for by individual travellers. Special arrangements have been put in place for international air travellers to buy tax stamps. One hopes that a similar arrangement will not be necessary for domestic air travel!

Hold the Levy

It appears to be far too early for the Federal Government to introduce the Aviation Safety Levy for the following reasons: • The Federal Government agreed with the Bosch Report which recommended that regulatory costs should be separated from other costs and that there should be no charge to industry for setting and enforcing standards for regulatory services.

• The Federal Government needs to explain to industry whyit now disagrees with the Bosch Report, particularly in relation to proposed charges to industry for setting and enforcing standards for regulatory services.

• Industry has doubts about the fairness of the safety levy and has insisted that a sunset clause be included in the draft Bill so thatif the Bill is implemented, it can be reviewed at the end of the first year.

• CAA has advised industry that their costs for safety regulation and the system of charges, will be subject to review after the Bill has been approved by the Federal Government.

• CAA made huge adjustments to the cost of the first year recovery costs from $15m to $10m in a very short period, but they are unable to provide a detailed breakdown of those costs to industry. CAA needs to provide industry and the Government with detailed expenditure on the full range of safety regulatory services that it provides.

• The Federal Government has instructed the CAA to prepare the Aviation Safety Levy Bill in time to be introduced during this autumn parliamentary session. The Government appears to have acted with indecent haste as the CAA has had insufficient time to gather all the facts in relation to this levy nor has it had the opportunity to assess the ramifications in the aviation industry that could result from the introduction of such a Bill.

• The Government seems eager to introduce a Bill knowing that the costs for the provision of services, which should be recoverable on a “user pays” basis is combined with costs associated with setting and enforcing standards for safety services. The beneficiaries of the latter may differ to those of the former. The Aviation Safety Levy should be replaced bya more equitable system devised by the CAA in conjunction with industry. After all, industry does not disagree with the “user pays” principle in relation to fees for service, provided that the payments are equitable. Failing that, the Government should adopt the unanimous industry recommendation made at the last CAA/Industry Consultative Meeting on April 15 1992, that a twelve month moratorium be placed on the introduction of the Aviation Safety Levy Bill.