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International Civil Aviation Organization Funding of Regional Safety Oversight Organizations Simon Clegg General Manager Government & Strategy Civil Aviation.

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Presentation on theme: "International Civil Aviation Organization Funding of Regional Safety Oversight Organizations Simon Clegg General Manager Government & Strategy Civil Aviation."— Presentation transcript:

1 International Civil Aviation Organization Funding of Regional Safety Oversight Organizations Simon Clegg General Manager Government & Strategy Civil Aviation Authority New Zealand 27 October 2011

2 2 A. Options for funding General taxation and other revenues Competes with other demands like education, health, roads & other infrastructure Donor funding Frequently only short-medium term Cost recovery (User Pays) Through fees, charges, levies etc This ensures beneficiaries pay for the government services they receive or require – NZ government has controlled its public expenditures through user-pays funding of many of its regulatory activities

3 3 Public finance principles NZ Treasury guidelines – Public goods are activities that are difficult to exclude people from their benefits (eg making laws) - financed out of the public purse – Cost recovered activities consist of: Private goods where only the person who pays for the service can obtain its benefits (eg getting a licence) – financed by fees and charges Club goods where an identifiable group of people obtain the benefit but use by one doesn’t detract from another (eg safety investigation) – financed by levies

4 4 Public finance principles & Safety Oversight Element of State safety oversightFunding Sources State provides oversight element Funding Sources RSOO provides oversight element 1. Primary legislationPublic good – general taxationPublic good – general member assessment 2. Specific operating RegulationsPublic good – general taxationPublic good – general member assessment 3. CAA Structure & safety oversight function OverheadOverhead – general member assessment 4. Procedures and Technical Guidance OverheadOverhead – from general assessment or cost recovery 5. Qualification & training of technical staff OverheadOverhead – from general assessment or cost recovery 6. Licensing and CertificationCost recovery – fee, charge or levyCost recovery – special assessment or direct charge on operators 7. Surveillance ObligationsCost recovery – fee, charge or levyCost recovery – special assessment or direct charge on operators 8. Resolution of Safety concernsCost recovery or public good – general taxation Cost recovery – special assessment or direct charge on operators

5 5 B. PASO – funding background The current funding model for PASO relies on user fees/operational recharges to generate 80-90% of PASO’s revenue ie services are funded as private goods PASO’s revenues have been steadily improving  but are not adequate to ensure its financial sustainability

6 Comparison with CAA-NZ & CASA-Aust CAA NZCASA Aust % Government funding (public good)1231 User fees and charges (private good)13 Levies (club good funding)74 Aviation fuel tax (club good funding)54 Other (including interest)12 Total100 6

7 1. Passenger safety levy within PASO states ICAO figures show 1.25 million passengers carried on airlines from PASO states per year (2005) A similar number fly in & out on other airlines – If all PASO states collect $1.20-$1.70 safety charge per departing passenger, this will generate sufficient funds to make PASO financially sustainable Recent World Bank study has confirmed this range of charges would fund PASO oversight 7

8 1. Passenger safety levy states (2) These funds would be collected through a tax or a levy collected by airlines and forwarded to a PASO trust account – States would own the money in this account but PASO would have the first call upon it to fund its work under the approved annual workplans This option ensures that the aviation sector pays for its safety regulation 8

9 2. Aircraft movement safety levy Similar to 2, except that the safety levy is collected in respect of each aircraft movement This would involve a levy for each flight that takes off from a PASO state. – It would also allow a significantly reduced levy to be collected from overflight traffic This levy could be collected at the same time as air navigation charges levied by the three ANSPs in the region 9

10 2. Aircraft movement safety levy(2) – Similarly this levy revenue could be paid directly to PASO or alternatively into a trust account against which PASO could draw funds as it completed work. This option ensures recovery from all beneficiaries of safety oversight but is the most complex to implement 10

11 3. Consolidated upper airspace provider that funds safety oversight The region would establish a single regional ANSP that would fund regional safety oversight through PASO as part of its cost structure. (ie like ACSA) Considered in PIFS regional transport study in but not supported then – Will require significant changes to regional service provision and the way that airspace is administered in the region, thus will need ICAO support Likely to be expensive and take a considerable period of time to put into place 11

12 New, more direct payment method(s) Current method New method PASO DGCA Finance Ministry Airlines Pax PASO Airlines DGCA Finance Ministry Authorisation Unused levy Collector Pax Billing Payments 12

13 C. Funding of RSOOs & ICAO guidelines ICAO’s has authoritative guidance on charges for international aviation  Doc 9082 ICAO's Policies on Charges for Airports and Air Navigation Services  Doc 8632 ICAO's Policies on Taxation in the Field of International Air Transport is also relevant  Basic principle  where air navigation or airport services provided for international use, providers may only require payment for costs that are properly allocable to it 13

14 Funding of RSOOs & ICAO guidelines (2)  Costs of safety oversight also need to be recoverable to support user-pays approach and sustainable funding of RSOOs  Doc 9734B Safety Oversight Manual contains some guidance on funding  It should explicitly authorise user-pays cost recovery and provide guidance on this  Consequential amendments need to be made in Doc 9082 to allow costs of safety oversight to be recovered from operators/users  Airlines and other users must always be consulted and there should be transparency in costs 14

15 Wrap Up  Public finance principles can be applied to activities by RSOOs  PASO Council looking to use passenger levy as most efficient way to apply cost recovery and user- pays principles  ICAO guidance on RSOOs - and charges generally - should authorise cost recovery from operators/users 15


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