19 October 2012

HOT OFF PRESS -CAA merge Airlines and GA Group under General Manager Mark Hughes. This change is about having one system of safety across all operational groups and is a "heads up" to the type of change SMS will introduce.


Red Boots is out of the office today meeting with CAA on their strategic pathways – a critical consideration for all members so another edition from New Boots though Red Boots has contributed a great deal. 
 
Let's start with a quick review of events since I was last in charge of the keyboard and then move on to what is most certainly the topic of the moment - the new CAA charges.
 
The three areas I think need to be worked on;  continue the successful launch of 'One Industry', ensuring we have a sound financial base to deliver the support the industry needs and most important of all, a renewed and fresh emphasis that the AIA is a 'Membership Organisation', hopefully for all aviation.
 
One Industry; some progress – see comments below relating to Aviation Training but at the moment  CAA charges and a few other matters (also discussed below) have rather dominated events.. 
The financial base. Irene and Sarah (our Finance Manager) are commendably enthusiastic on the need to know how the income and costs of our various activities match off.  Some of the project work is itemised in separate budgets so they know about that but a number of our other activities require more detailed examination, e.g.  does the revenue from each division match the costs they incur?  Do all the training courses cover their costs?  Are there external parties that benefit from what we do without paying for it?  That process starts on Thursday and will be the basis for, among other things, next year's budget and subscriptions.  There is a view that in some areas small operators pay rather more than big ones but do the big operators use our services as much or do they use their own resources?  There is no shortage of questions. The AIA is a membership organisation. 
 
My thanks to the members of the AAA, NZHA, Flight Training and AEANZ Divisions that have all been kind enough to have me at their recent meetings and get the flavour of the issues they face.  l plan to catch-up with Chairs of the other Divisions in the next month.  Many thanks also to those of you that contacted me individually.
 
Yesterday Red boots and I met with the Chair and Director of the CAA for well over an hour.  Red boots subsequently produced a written summary of the meeting for distribution to the Governance Board and Advisory Council Members; I believe it well worth copying to you:-
 
"Progress on the two issues of the medical charges and CAA hourly rate was better than expected/anticipated. 
 
There is considerable pressure on CAA to restructure inefficiencies out of the organisation.
The medical/license unit head count drives the need to recover $2.25m; their systems and processes are manual and investigation is presently underway to automate, and deliver lower cost product.  They have invited us to participate constructively in finding a solution. 
While they make the point the new Regulations provide them with a three year time frame within which to restructure, they also accept that in reality they don’t have that long – maybe 12-18 months.
 
The increase in hourly rate charge to $208 appears acceptable to industry but the increases beyond that point to $248 and $284 are objectionable.
We pointed to a number of inequalities with the way aviation was being treated relative to maritime.

• Cross subsidisation was being largely eliminated by the increased changes but cross subsidisation of government services by industry of around $1m remained, CAA said this is an issue to take up with MOT and Treasury as it was not of their doing.
• The excise duty on Mogas used by aviation was also a source of funding particularly as Maritime was permitted to tap into this source (subsequent comment from MOT later in the day suggest there is not much in this for aviation).
• CAA are relinquishing space in their new building and a consolidation was occurring with Av Security, this represents 500 SQ and they were looking for sub tenants. “Did we know of any?” was the question asked.

 
If they do not need to increase the rates beyond $208 because of efficiency gains and expansion of other sources of income they will look at some relief but at the moment the pricing model is saying they need to increase prices to build a sustainable CAA.       
 
They were not aware of the NZALPA challenge to the charges (click here). They are aware that if ALPA is successful they will have to start again the consultative process in this area. In their view ALPA will not be successful because they were consulted in 2010 with the rest of the aviation community."    
 
It’s also important that you keep getting the message across to wider government so please please fill in the “better public service survey” (click here).  Forty of you have already done this and this means 40 voices expressing their views about aviation and how the public service is impacting on your business, both good and bad       
 
It is obvious that most of the funding problems relate to decisions and events that happened way before Graeme and Nigel were in their current roles, many years ago in one or two cases. They are now facing up to the issues.  Because of that I felt some sympathy for them. I also feel the same for a member of our Governance Board who had to front up to his Minister this week for mistakes that also happened years ago and have since been corrected; but that is the nature of big jobs.  Who they in turn must have sympathy for are those facing the pressures - the many cost pressures impacting on you in the market.  If those pressures cause some to exit the industry then their pricing model and structure will also fail and that is a lose/lose.  I think a win/win in this case is a bit much to hope for but it will not work if either party becomes the clear loser.   There are many other organisations and individuals that have contacted the CAA on these cost increases, particularly the medical charge and that topic won't go away anytime soon.  The current Chair and Director of the CAA have the confidence of the great majority of members for their recent actions and communication style and we told them that, but also added that retaining that confidence would depend on how these cost issues were resolved.
 
In a number of ways the CAA is a mirror of our businesses by facing the same cost and resource challenges.  Smart business find solutions and we need to work with, not against them, by sharing some of those solutions for their and our benefit.  Maybe that way a win/win will be possible. 
 
Flight Training – setting the direction, directing the pace of change (read more) 
 
Aviation Training New Zealand  - seizing the $2Bn opportunity (read more)     
 
AEANZ – plotting the new direction (read more)  
 
Drugs and Alcohol – proposed definition of impairment constraining operators “decision making (read more)
 
 
ACC – charges going down for all aviation groups and application to extend work place discounts based on AIRCARE™ assurance programme (read more)
 
 Federated Farmers agree to support call for EFTS funding reform for pilot training (read more) 
   
Trade Mission India going very well according to reports with a number of new avenues opened up. Heads of agreement signed (click here)

Lead Auditor Training - CAA 5-9 November, cost $1500, places limited (click here)   

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

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What's coming up?

SMS, Risk Management and Operational Risk Management Training for a full week – week after next (click here)

 

Proposal for airport tax
Marlborough Chamber of Commerce general manager Brian Dawson is advocating the tax on passengers to pay for an expansion of the airport terminal at Woodbourne. read more


 

AIA members deals