International Civil Aviation Organization
Funding of Regional Safety Oversight
Organizations
Simon Clegg
General Manager Government & Strategy
Civil Aviation Authority New Zealand
27 October 2011
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
2
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
3
Public finance principles
& Safety Oversight
1. Primary legislation
Funding Sources
State provides oversight element
Public good – general taxation
2. Specific operating Regulations
Public good – general taxation
3. CAA Structure & safety oversight
function
4. Procedures and Technical
Guidance
5. Qualification & training of
technical staff
6. Licensing and Certification
Overhead
7. Surveillance Obligations
Cost recovery – fee, charge or levy
8. Resolution of Safety concerns
Cost recovery or public good –
general taxation
Element of State safety oversight
Overhead
Overhead
Cost recovery – fee, charge or levy
Funding Sources
RSOO provides oversight element
Public good – general member
assessment
Public good – general member
assessment
Overhead – general member
assessment
Overhead – from general
assessment or cost recovery
Overhead – from general
assessment or cost recovery
Cost recovery – special assessment
or direct charge on operators
Cost recovery – special assessment
or direct charge on operators
Cost recovery – special assessment
or direct charge on operators
4
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
5
Comparison with CAA-NZ & CASA-Aust
CAA NZ
CASA
Aust
%
%
Government funding (public good)
12
31
User fees and charges (private good)
13
13
Levies (club good funding)
74
Aviation fuel tax (club good funding)
Other (including interest)
Total
54
1
2
100
100
6
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
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
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
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
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
2001-02 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
New, more direct payment method(s)
• Current method
• New method
PASO
Unused levy
DGCA
Authorisation
PASO
Finance
Ministry
Finance
Ministry
DGCA
Airlines
Collector
Pax
Billing
Payments
Airlines
Pax
12
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
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
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 userpays principles
 ICAO guidance on RSOOs - and charges generally should authorise cost recovery from operators/users
15