Rising costs could drive bizav away from UK

 - May 16, 2011, 9:30 PM

Rising regulatory and administrative costs could drive business aircraft away from the UK, according to the British Business and General Aviation Association (BBGA). One significant source of additional expense could come if the UK Civil Aviation Authority (CAA) has to fully recover its costs from those it regulators, as is expected. But there is also now the prospect of new taxes, such as the extension of airline passenger duty (APD) to business and private aircraft.

Nonetheless, the BBGA broadly welcomes what it views as a more constructive relationship between the UK industry and its main regulator as the CAA embarks on a business-process re-engineering (BPR) exercise that includes an end to cross-subsidization in the way it accounts for industry fees. Unlike other European national aviation authorities, the UK organization is required to more than cover its overhead costs from service charges, explained BBGA’s recently appointed chief operating officer Marc Bailey.

 In March, CAA non-executive chairman Dame Deirdre Hutton told the BBGA annual conference that, under a new strategic plan now in preparation, the authority will “be more transparent, more streamlined, will work more closely with industry, and be more user-friendly.” BBGA chief executive Guy Lachlan has praised the agency for its “deliberate, outgoing, and inclusive” approach to the new plan. The industry lobby group has responded formally to proposals, but had received little feedback from BBGA members (or fellow UK aviation industry associations) by mid-April.

Recognizing the new attitude to industry, Bailey acknowledged “a step change” in CAA operating procedures, which had been evident in a workshop held in late 2010. “The bottom line is that [the authority] is trying to engage industry for BPR, looking to change its processes and make savings within its structure,” he said.

According to Bailey, the implication of ending internal CAA cross-subsidization is that extra money would have to come from GA, of which business aviation is but one element. “This will drive operators to [base aircraft in] Europe, where [cost-plus charging] does not happen.”

Bailey suggested that CAA internal cross-funding would not be available in two or three years’ time. As a result, he fears that the move could disadvantage British business aviation and he said the BBGA wants to see the impact of the change reduced, if not eliminated. The disadvantage stems from the fact that other European states do not require their aviation regulators to recover their costs directly from the industry.

A 20-year UK Future Airspace Strategy is another proposal to which the business and general aviation community needs to respond. “This is still in full consultancy mode, so we have not yet [established] a formal position,” said Bailey. “The CAA is being open; it’s not [happening] behind closed doors, so we welcome the openness, absolutely.’

Bizav Subset

In outlining strategic plans, Hutton was careful to identify business aviation as part of the larger general aviation industry that the CAA oversees. In this context, does the BBGA fear loss of identity for business aircraft operators? Bailey said that, as laid out, the plan seems to treat general aviation as “a secondary part of [civil] aviation, with business aviation as a subset,” a situation he attributed to the industry’s failure “to communicate our message.” He said UK tax and customs authorities suffer a similar lack of perspective. “We need to educate them more so that they understand. The message needs to get in there a little stronger.”

Plans to modify Britain’s controlled airspace during the 2012 summer Olympic Games in London is another example of the industry’s needs not being understood, according to Bailey, who fears the CAA might have been intimidated by government security concerns. Consultation on temporary airspace proposals ends this month.

Olympic Headaches

Under the temporary airspace proposals, Bailey cited potential problems for the flight-training sector, most especially for companies operating at airfields in the London area. “For two months, some [operators] will be shut out of their normal business,” unless the proposed changes are modified. “There will be no solo [flights], all [cross-country] flights will have to be ‘planned,’ and all aircraft must ‘squawk’ [a transponder identity code],” explained Bailey. As planned, in some cases there would be no means for general aircraft based close to the British capital to reach uncontrolled airspace beyond London’s greater metropolitan area.

Meanwhile, BBGA continues to oppose plans by the UK Border Agency (UKBA) to improve the General Aviation Reporting (GAR) system under which business-aircraft operators provide notice of inbound and outbound international flights for security and counter-terrorism purposes. The operators fear local procedural delays could negate the time private travelers otherwise might save over commercial passengers.

UKBA, created from former Customs & Excise and Immigration government departments, wants to enhance GAR arrangements from mid-2011 and points to GA’s inherent scope for security risks given “around 4,000 known [UK] landing sites [and] obvious potential for illegal flights anywhere.” Planned enhancement includes provision for automatic passenger-data checking against security and criminal records, with immediate notification when matches occur. According to Bailey, the required notification puts business-aircraft passengers at a disadvantage compared with executives traveling by scheduled commercial service.

The UKBA says compliance with notification requirements would “normally mean no delay on arrival.” Indeed, no change is planned to notice periods for inbound flights from European Union (EU) countries, the Common Travel Area (Ireland, the Isle of Man and the Channel Islands) and non-EU countries, some of those periods also applying to UK outbound flights.

Another area in which Britain’s business aviation industry fears it could lose privileges is travel tax, currently paid by commercial airline passengers but from which business aircraft passengers are exempt. The UK government may extend APD to cover business aircraft travelers, with a consultation process due to end on June 17, with a final decision anticipated in the fall.

Industry representatives infer from an initial consultation paper that aircraft with a takeoff weight of less than 5.7 metric tons (about 12,600 pounds) and business aircraft performing roles such as emergency medical services might remain exempt. A current “not carried for reward” APD-exemption privilege might be withdrawn, allowing the UK government to tax individual travelers on noncommercial business aircraft flights.

Bailey said that banded fees could be as high as £186 (about $300) per passenger, a rate equivalent to first-class, long-haul charges paid on commercial airline flights. BBGA believes commercial business aircraft operations should be subject to an appropriate APD charge, but insists that the levy should be proportionate and reflect actual services provided and distances traveled. As an extreme example, he speculated that helicopters carrying workers to North Sea oil rigs could be considered premium travel for APD purposes.