16 November 2012

Another hectic week with much discussion around “value for money” including a review, within this context of the present governance and management structure of AIA …more on that in a moment.
 
In this issue :

• Pike River Inquiry recommendations – AIRCARE de risks aviation
• Value for money – it’s in the eye of the beholder
• LIB 4 - moving towards resolution 
• Aviation its in our DNA – shifting to premium class
• HNZ Global – Thailand, Philippines and Nelson growth   

 
We all now know from the Pike River Royal Commission of Inquiry that 29 New Zealanders died unnecessarily and a raft of remedial recommendations are about to flow through our economy.  Some recommendations are obviously linked to the coal sector but a number of the others have wide ranging implications for other sectors of the economy.  Recommendations 5-10 apply equally to all industries.        
 
AIRCARE’s vision creating one platform of assurance coalescing the whole ambit of regulatory audits from ACC, CAA, HSE, EPA etc etc around a robust system of safety is the best example we have in our industry of a comprehensive “best practice guidance” as it provides:

• Independent assurance you are at best practice.  This is critical if you hurt or fatally injure an employee. The Courts turn to best practice as the first point of reference. Average HSE fines today are around $50k plus employee compensation awards of around $15k plus legal fees etc
• A reduction in your CAA risk profile. CAA’s been risk profiling your business now for over five years but without really any objective measurement tools.  A two day audit by three auditors on the present charges costs around $9.9k – getting this reduced to say a minimum charge of $208 is achievable – AIRCARE provides a vehicle to do that    
• It integrates all of your compliance systems into one turn key operation. If you have QA already AIRCARE gives you the opportunity to migrate to ICAO safety management systems compliance. One v multiple audits equals a saving of up to $20k depending on number/frequency of other agency supplier audits.
• Protection of your brand and brand New Zealand.  Accidents can cost lives but they also destroy businesses.  How much is your business worth to your and/or your dependents!!!!
• Delivers that competitive edge to your customers, many of who are already seeing their own “value for money” by being able to leverage down their own risks – they do after all face potential HSE fines and/or reputational damage by not engaging with suppliers of services who are delivering independent assurance.     

 
Implementing AIRCARE costs around $3-$8k for a small business with on going costs potentially as low as $900 per year.  My view is AIRCARE represents “value for money” relative to the benefits listed above.
 
In Wellington speak “value for money” is extensively bandied around like it’s a cure for all inefficiency ills, which lead the “boots” to reflect even so on a recent report associated with the “Westland white bait” festival debacle. A bit of context - the festival held in Christchurch was hosted and paid for by the ratepayers of Greymouth; attracted 4000 people and lost a mere $100,000.  The Greymouth Council accepted the report as NOTED and then immediately proceeded to debate for 45 minutes the placement of an apostrophe in naming of a back country lane.  I suppose if you like white bait and attended the festival it was excellent value for money. However, as a ratepayer of Greymouth, you might be feeling more than a bit peeved.
 
I think you get my point “value for money” is in the eye of the beholder and generally not the one writing the cheque, which really leads onto my point that CAA is being enormously challenged by the concept of how they deliver measurable more value for massive increases in most charges. A fleeting encounter with the “powers that be” told us that our exemption application is causing some consternation.  A rejection raises the issue of why Australian pilots can fly domestic operations in New Zealand when New Zealand pilots cannot. Granting the application causes a fear the masses will decamp for the more financially benign pastures of CASA.
 
Clearly a large number of letters have flowed into Ministers’ offices, which were the inevitable consequence of such a massive increase.  If the democratic process is working this should start to create some urgency around a rethink.
 
LIB 4 is exactly in this category.  CAA recognize there is significant regulatory risk around the present stalemate situation and have initiated a peer review of the legal opinion we submitted some six weeks ago. Should the peer review support our opinion then we would anticipate LIB 4 will die a natural death.  On the other hand if the review supports the present LIB 4 interpretation we will impress on CAA the need for change.
 
Returning to our opening comment - as our strategy evolves to ownership and driving the growth agenda, structure and systems must similarly change. The Annual General Meeting in Wellington in 2011 began the process of change by making a number of significant changes to the governance and management of the AIA.  This process took further steps forward at the Governance Board and Executive meetings this week. At the next meeting of the Divisional Chairmen and AIA Executive to be held on 13 December further changes will be debated.  There is strong consensus that we need a specialized and not necessarily aviation specific skills orientated governance board to drive the growth strategy. However, concurrently we also need to closely attend to and support your aspirations.  With any change of this nature it’s very easy to become inward looking and I’d like to hear from you if you think we are not addressing the issues that really matter to you.
 
On a very enjoyable note it was great to catch up with the management and board of the new HNZ global and to actually witness the growth and development of that company in the oil and gas markets of Thailand and the Philippines.  Skillfully hidden was an even more stunning announcement made the next day of the establishment of a Helicopter Flight Training School in Nelson – a $1m plus investment click here. New Zealand companies partnered in a good international fit with owners empathetic to our environment means that we can develop scale and growth.  As one of the Directors of the governance Board reflected last week, “Boots, your challenge is shift the whole industry into premium class” ….on that note I must be away to a flight training meeting critical to the future of that sector.
 

Until we speak again take care and stay risk aware Red boots

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What's coming up?

IRD has released an issues paper reviewing the treatment of employee allowances - meals, accommodation, communication and clothing costs. Submissions are required by 1 February 2013. A summary of possible changes is available

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