Guidance

Civil Aviation Authority review: report

Updated 17 July 2023

Ministerial foreword

I am delighted to publish this review of the Civil Aviation Authority (CAA), the first of 5 reviews the Department for Transport (DfT) is carrying out as part of the Cabinet Office Public Bodies review programme. We are committed to working in partnership with our public bodies to provide high quality, best possible value for money, services on behalf of government and the taxpayer.

The CAA has a world-leading role as the UK’s independent specialist in aviation and airspace, safety, security, consumer rights, spaceflight and economic regulation. The CAA’s functions and powers are set by Parliament in primary and secondary legislation. Its objectives are to make sure that:

• the aviation and aerospace industry meets the highest safety standards
• consumers have choice, value for money, protection and fair treatment when they fly
• there is an efficient airspace structure which enables new aerospace technologies and contributes to the management of aviation’s environmental impact
• the aviation and aerospace industry manages security risks effectively

The aviation and aerospace industry and the CAA have responded well to unprecedented challenges in recent years, and the industry will continue to undergo a period of renewal given the opportunities and challenges arising from economic growth, new technologies and external environmental factors.

The recent International Civil Aviation Organisation (ICAO) safety audit concluded that the CAA is a world class regulator, recognised internationally as a world leader in aviation safety. This conclusion is supported by this review, which has confirmed that the CAA is fit for purpose and delivers high quality services to the aviation and aerospace industry and the consumer. Many stakeholders contributed evidence to this review by responding to the CAA review: call for evidence and in numerous stakeholder engagement sessions, and I am grateful for that input, which has shaped an honest and rigorous report. I am confident that the aviation and aerospace industry and consumer voices have been heard and are reflected in the recommendations being made.

The review has set out a number of recommendations where change will bring improvement to the work the CAA does and the effectiveness and efficiency of the services it provides. The DfT will continue to work closely with the CAA to agree a plan for implementing these recommendations and monitoring their progress and the impact of change.

I would like to thank Jeremy Newman, who led this review, the team who supported him, as well as the CAA and departmental officials who have contributed to making this review a success. I am confident that this review will further the development of CAA as an organisation and help to ensure the aviation and aerospace industry remains a key contributor to the UK economy.

Baroness Vere

Minister for Aviation

Public Bodies review programme

Foreword

It has been a privilege to lead this independent review of the Civil Aviation Authority, as part of the Cabinet Office Public Bodies review programme.

As the Cabinet Office has noted

Public bodies… are a critical delivery arm of the government [that]… deliver public services and goods across the United Kingdom…

In carrying out this review, we have been mindful of the guidance issued by the Cabinet Office which includes:

The pandemic has stretched public bodies and required them to respond and adapt at a pace and scale that is unprecedented. It has also demonstrated the urgent need for public service reform, as articulated in the declaration on government reform. For public bodies that means:

• ensuring they are a necessity – government must assess whether a function should be delivered by the State, or whether an alternative is more fitting

• greater accountability – democratic accountability, and the robust debate it entails, helps to create better outcomes for the public. Public bodies should not be making decisions, which should be the remit of ministers - instead they must have a laser-like focus on delivery. Bodies must also appropriately contribute to the government’s priorities, working together with the government as one team

• reduced burden on the taxpayer – the impact of the pandemic on the public finances is significant. This comes at a time when the cost of our arm’s length bodies has continued to grow – by 2020 arm’s length bodies spend over £220 billion a year and employ over 300,000 people

• a culture of efficiency and transparency – Public bodies must spend taxpayer money with greater care. Effective public body boards will be at the heart of this mission - they will be charged with creating a culture of efficiency throughout their organisations. Public bodies must also be responsive and open to their users, the public. Performance, expenditure and other data should be shared openly.

It is perhaps inevitable that a review will focus on areas for improvement, and it was encouraging that we received much positive feedback on the role and effectiveness of the CAA. It was particularly pleasing to learn that other International Aviation Regulators hold the CAA in the highest regard. This is reinforced by the recently completed ICAO safety audit which rates the CAA as one of the best Aviation Safety Regulators in the world. It is thus easy to conclude that the CAA plays an invaluable role in respect of aviation safety and security.

While some other aviation regulators, notably the US Federal Aviation Administration, are part of government, the overwhelming evidence we received support the CAA remaining as an independent organisation, though it would benefit from clarifying its relationship with, and accountability to, DfT.

This report focuses on the key recommendations arising from the review, which are intended to contribute to the development of a better organisation and ensure appropriate levels of accountability, value for money, efficiency and transparency in accordance with the objectives of the review as set out by the Cabinet Office. It should also help enable the CAA to continue to play a leading role in giving assurance about the safety of emerging technologies, including those being developed to address the challenges of sustainability, as well as space flight.

During the course of the review, we have shared verbal feedback from our numerous meetings with stakeholders with the CAA and the DfT, which we are confident will inform the process transformation programme recommended by this review. It is very encouraging to note that the CAA and the DfT have already started work on implementing many of the recommendations of this review.

The aviation and aerospace sector has new opportunities from technology as well as environmental challenges and it will benefit from having a regulator that is able to adapt to these opportunities and challenges. I hope that this review will make a positive contribution to the further development of the CAA.

There is an opportunity for the UK to show leadership in the regulation of airspace management, developing innovative regulation that is effective while not burdensome, help address environmental challenges with appropriate regulation of new technologies and in other ways. The CAA is well placed to fulfill this role.

I finish by thanking the team who supported me in carrying out the review, the Board and many people at the CAA together with numerous people at the DfT who provided us with evidence and information, the Challenge Panel who ensured we remained focused as well as the hundreds of people and organisations who responded to our Call for Evidence, attended stakeholder meetings and who engaged with us during the review. Your input was critical to this review and will contribute to the CAA being an even better organisation.

Jeremy S Newman, Lead Reviewer

About the Civil Aviation Authority

The CAA is the UK’s independent specialist aviation and airspace, safety, security, consumer rights, spaceflight and economic regulator. It must carry out its functions so as to further the reasonable interests of users of air transport services, which includes passengers and owners of freight and the interests of those overflown by aircraft.

It is responsible for the regulation of aviation safety in the UK, determining policy for the use of airspace and making regulation decisions on airspace, the economic regulation of Heathrow airport, Gatwick airport and NATS, the licensing and financial fitness of airlines and the management of the ATOL financial protection scheme for holidaymakers.

The CAA is a statutory public corporation, established by Parliament in 1972 as an independent aviation regulator. Its costs are predominantly met from charges to those who it provides a service to or regulates. Most aviation regulations and policy are harmonised across the world to ensure consistent levels of safety and consumer protection. Worldwide safety regulations are set by the ICAO .

Executive summary

The CAA fulfils a critical role as the UK’s aviation and aerospace regulator. It is regarded as ‘world leading’ in its aviation safety role by other major International Aviation Regulators and others and received an outstanding review from the recent safety audit carried out by the ICAO. Overall, the CAA’s performance as a safety and security regulator is exemplary.

The CAA has an important role in respect of the safety regulation of emerging technologies and space flight. It also has an important role to play in supporting the DfT in addressing the challenge of sustainability and the move to jet zero.

While some other aviation regulators are a part of government, notably the Federal Aviation Administration (FAA), the US regulator, the overwhelming feedback is that the CAA benefits from its status as an independent entity and we recommend that CAA should continue in its current legal form.

However, some stakeholders are confused as to the respective roles of the CAA and the DfT. Some of the concerns raised during the review about the role of the CAA appear to reflect a misunderstanding of the role, responsibilities and powers of the CAA. Further, there was some limited feedback that, on occasion, the views of the CAA and those of the DfT may not be fully aligned. We have made some recommendations about changes to the CAA framework document, which governs the relationship between the CAA and the DfT. We believe that these should substantially address these issues and will help reinforce the CAA’s position as an independent regulator that works closely with the government. It is important to note that the recommended changes to the framework document are not merely an administrative convenience. They are designed to help facilitate the continuous improvement of the CAA and ensure it remains a world leading aviation and aerospace regulator able to cope with new and emerging challenges.

The recommendations that are enabled by changes to the framework document, particularly that the CAA should comply with Managing public money, should increase the democratic accountability of the CAA. It should also help strengthen the relationship between the CAA and the DfT, with better sharing of financial information, and give greater assurance that the CAA is delivering value for money.

The aviation sector and the CAA faced an unprecedented challenge from the COVID-19 pandemic. The DfT provided financial support for the CAA. Rightly, the CAA’s focus was on the sector and not its own internal organisation. However, the board has recognised that the CAA now needs to focus on being forward-looking and has endorsed the principles of an efficiency and reinvestment plan. This sets out how the CAA will achieve a 5% reduction in like-for-like costs over a 3-year period to both reinvest in a customer service and modernisation plan and also deliver CPIH-1% changes in the CAA’s statutory charges. The efficiency and reinvestment plan is challenging and delivers the 5% efficiency required by the Cabinet Office. Following detailed consideration, the board concluded that any further reduction in costs would damage the CAA and the services it provides, and we concur with this conclusion.

The efficiency and reinvestment plan, and related customer service and modernisation plan, will involve a significant upgrade in the CAA’s IT and enable most processes to be dealt with online, significantly reducing the volume of non-automated, manual and spreadsheet-based processes. This will be the most significant process transformation programme ever carried out by the CAA and appropriate governance will be important. The review makes a number of recommendations in respect of these plans and related activities.

The CAA has navigated the challenges and opportunities arising from the UK leaving the European Union and the need to rebuild capabilities that were previously handled by the European Union Aviation Safety Agency (EASA). Feedback, including from other leading international aviation authorities, is that the CAA has handled this well. They have suggested that outside EASA, the CAA can be more responsive as it no longer needs the agreement of other countries before making decisions and that this could be an advantage in regulating new and emerging technologies.

There are challenges in regulating safety for new and emerging technologies, which will also include developments to traditional aviation to address sustainability, particularly as regulation needs to evolve alongside the changes in technologies. These are different challenges to those facing traditional aviation and the CAA has recognised this. We have made some recommendations about the processes for the regulation of new and emerging technologies which are intended to enable the CAA to be world leading in this area as it is in the safety regulation of traditional aviation.

There was a note of caution from some, particularly, but not solely, General Aviation, that the CAA does not make changes from those regulations that applied when it was part of EASA without being clear why these changes are needed and that new regulations continue to be proportional to the level of risk. Our recommendations on greater engagement with CAA customers, which, as noted in the definitions, includes freight as well as passengers, should help ensure there is a good understanding of the reasons for any such changes.

While many stakeholders, as well as the largest CAA customers, were positive about their relationship with the CAA this view was not universal and the review makes a number of recommendations about engagement with aviation consumers, CAA customers and stakeholders generally. Alongside the CAA’s new consumer strategy, which is very much welcomed, this should help the CAA be more outward-facing and give greater confidence to all stakeholders.

There were examples of great initiatives at the CAA, and we were particularly impressed by the creation of the Skyline Board, which engages staff who work for the CAA directly with members of the board. This gives us confidence that the CAA is able to develop new initiatives and that it has committed and engaged staff.

We were also encouraged by the work that the CAA is doing to support the aviation and aerospace sector in addressing the challenges of sustainability. In particular, the CAA has established a sustainability panel with a very impressive membership, and we would encourage the CAA to make maximum use of this expertise. We note that the CAA has a supportive role in this work, which is led by DfT, and that the CAA can only operate within its existing powers and recognising its role as a regulator.

The Chair of the CAA has engaged actively in this review and initiated a number of changes in the CAA to reflect the emerging findings of the review.  Work has already started to implement many of the final recommendations of the review. With the recent resignations of the Chief Executive Officer (CEO) and Chief Operating Officer (COO), and the possibility that there will be other changes to the membership of the Board as the terms of some Non-Executive Directors (NEDs) come to an end, it is important that the CAA has a highly engaged, well-qualified Chair.

We set out a number of high-level recommendations which reflect these matters and:

• the recurrent themes from our meetings with the CAA’s customers
• a wide range of stakeholders
• the response to the call for evidence

These have all been shared with the board of the CAA who have confirmed that they are both implementable and a positive contribution to the CAA’s capability and effectiveness. They have also been shared with the leadership of DfT and the DfT team responsible for the sponsorship of the CAA, who have also confirmed they support the recommendations.

We have indicated the benefits to the CAA and the DfT from implementing these recommendations and have given high-level feedback on the evidence we obtained that led us to make these recommendations.

The aviation and aerospace sector has new opportunities from technology as well as environmental challenges and it will benefit from having a regulator that is able to adapt to these opportunities and challenges.

We believe that a strong, independent CAA with a positive and mutually supportive relationship with the DfT benefits not only the CAA and the DfT but will also help the aviation and aerospace sector and enable it to continue to be a significant contributor to the UK economy.

Review recommendations

1. Necessity of the organisation

Recommendation

The CAA fulfils a critical role as the UK’s independent aviation safety regulator, and we recommend that it should continue to do so. Whilst some other aviation regulators are a part of government, we recommend that CAA should continue in its current legal form.

Benefit

A strong, independent and highly regarded aviation safety regulator is fundamental to the continuing success of the UK’s aviation sector.

Supporting evidence

The recent safety audit carried out by the ICAO gave an outstanding report on the CAA. Feedback from other major international aviation regulators was universally positive about the CAA as an aviation safety regulator.

The overwhelming feedback from all stakeholders and other major international aviation regulators, is that the CAA, as well as the aviation and aerospace sector, benefits from the CAA’s status as an independent entity.

2. Governance

These recommendations deal with the relationship between DfT and the CAA, the accountability of the CAA to the DfT, and how the DfT exercises its role as the sponsoring department.

2.1

Recommendation

The relationship between the CAA and the DfT, the new responsibilities of the CAA for emerging technologies, space travel and sustainability, as well as the ability to implement some of the recommendations from this review, will be best enabled by updating the CAA framework document. Work on this is in hand, and it is recommended that the clearance process for a new framework document – supported by the DfT and the CAA – is started by no later than 30 September 2023 so that it can ideally be fully operational by no later than 31 March 2024.

The new framework document should be made readily available to all stakeholders, as well as the general public, on both the CAA’s and the DfT’s websites.

Benefit

The aviation and aerospace sector has new opportunities from technology as well as environmental challenges and it will benefit from having a regulator that is able to adapt to these opportunities and challenges.

Given the CAA’s critical role in the aviation and aerospace sector, significant changes in its responsibilities over the past few years and the likelihood these will continue to change, it is important that the CAA has a strong, positive and mutually supportive relationship with the DfT.

This can best be formalised, and secured, through a new framework document which will also enable the implementation of a number of other recommendations made by this review including:

• providing clearer guidance on priorities and accountability
• increase the democratic accountability of the CAA
• enable better sharing of financial information and other information with DfT
• give greater assurance that the CAA is delivering value for money

Making the framework document easy to access will help enable stakeholders to have a greater understanding of the roles, responsibilities, governance and accountability of the CAA.

The framework document is a core constitutional document. HM Treasury guidance states that it is imperative that it is kept up to date and is used as a guide to govern the collaborative relationship between the CAA, the DfT and the rest of government. A new CAA Framework Document will ensure full compliance with this guidance.

Supporting evidence

The current framework document has not been updated since 2015 and does not reflect the current scope and scale of activities of the CAA. It is not included in the list of framework documents on DfT’s website.

Feedback from many stakeholders showed confusion as to the respective roles and responsibilities of the CAA and the DfT. Concerns were raised by a large number of stakeholders about how the CAA is held accountable to the DfT, and the mechanism for this is not clear in the current framework document.

Certain recommendations of this review require changes to the framework document.

2.2

Recommendation

The CAA should be required to comply with Managing public money. Given the CAA’s status as a public corporation it is recognised that there may need to be certain exemptions to managing public money (MPM). These should be agreed by both the DfT and the CAA and should be reviewed on an annual basis. The requirement to comply with MPM should be included in the new framework document, which should also retain the obligation to comply with the UK corporate governance code (formerly known as the combined code).

Ideally, MPM should be in place by the start of the next financial year, which should be possible if the framework document has been agreed and is fully operational by 31 March 2024.

Benefit

Compliance with MPM provides confidence that public bodies are using their funds effectively, provide value for money and ensures appropriate accountability to DfT and Parliament. It should help address any concerns about any lack of democratic accountability and will ensure that the CAA is consistent with other UK Regulators.

Supporting evidence

Almost all the revenue of the CAA comes from statutory charges or grants from DfT and so falls within the definition of ‘public money’. It is not apparent why the CAA has not previously been obliged to comply with MPM. This is unusual when compared to other UK regulators, all of whom appear to be obliged to comply with MPM.

A number of stakeholders expressed concern about how the CAA was accountable to the DfT, government and Parliament.

2.3

Recommendation

The respective roles and responsibilities of the CAA and DfT across all areas of non-statutory responsibility, including on airspace modernisation, sustainability and emerging technology should be clearly defined in the new framework document. Work is in hand to address this, on both a formal and informal basis, and this should be formalised in the new framework document.

Benefit

A clear understanding of the roles and responsibilities of both the CAA and DfT will help both organisations work together in a mutually supportive and collaborative manner. Providing this clarification will ensure that all stakeholders are clear where responsibilities lie and will better enable them to engage appropriately with both the CAA and the DfT.

Supporting evidence

Feedback from almost all stakeholders showed that they were unclear and confused in a variety of different ways about the extent of the CAA’s responsibilities and those of the DfT. Some criticisms of the CAA, primarily, but not exclusively, from General Aviation were based on a misunderstanding of its responsibilities in particular areas and an expectation that it had responsibilities that go beyond its current remit.

In areas of joint responsibility (for example, airspace modernisation) feedback from DfT suggested there might have been a lack of clarity in their expectations of the CAA.

2.4

Recommendation

The DfT’s, and the government’s, over-arching objectives for the CAA, taking into account the priority of its’ statutory functions, should be clearly stated in the new framework document. We note that the governing document for the Civil Aviation Safety Authority (CASA), the Australian aviation regulator, sets out its objectives which include:

• to continue to focus on aviation safety as the highest priority
• to consider the economic and cost impact on individuals, businesses and the community in the development and finalisation of new or amended regulatory changes
• to take a pragmatic, practical and proportionate approach to regulation as it applies to different industry sectors having regard to risk

We recommend that this, or something similar, be included in the new framework document.

Benefit

Setting out clear objectives for the CAA will ensure that these are known and understood by all stakeholders and will better enable the CAA to support the strategic aims and objectives of both the DfT and the government. Including these in the framework document will help provide assurance to stakeholders that the CAA’s objectives are aligned with government policy. In setting these objectives, the DfT will need to be mindful that the CAA must be able to undertake its’ statutory functions on an independent basis.

Supporting evidence

Whilst the Secretary of State for Transport sets out their priorities in an annual letter to the Chair of the CAA, these change each year and may reflect short-term issues and objectives. Currently, the objectives and the strategy of the CAA are set by its Board, with limited involvement of the DfT. Feedback from both the Call for Evidence and Stakeholder events suggest that greater, and more visible, alignment is needed between the DfT’s and the CAA’s strategic objectives.

A number of other leading international aviation regulators have clear objectives set by government, of which the governing document of CASA, the Australian regulator, appears to be an excellent example.

2.5

Recommendation

The DfT should clearly set out how it will monitor the CAA’s delivery of its non-statutory functions and what information the CAA needs to provide the DfT to enable it to do so. This should be included in the new framework document which should also set out what information the CAA needs to give the DfT to ensure the DfT has visibility of how the CAA delivers its statutory obligations, whilst ensuring this does not impact on the independence of the CAA in delivering its’ statutory functions.

Benefit

The provision of clear and transparent performance management information is important in ensuring the democratic accountability of the CAA, thereby ensuring continuing confidence in the CAA and its delivery of both its statutory and non-statutory functions. The CAA is currently developing a dashboard which will be shared with the DfT and board.

Supporting evidence

A number of stakeholders questioned how the CAA is held to account by the DfT and on behalf of taxpayers. The current performance information shared with the DfT is limited. Some expressed concerns that the systems used by the CAA make it difficult to both extract the required information and present it in a format that can be used effectively.

2.6

Recommendation

The CAA should clearly demonstrate it is fulfilling its role to enable and facilitate growth. In order to enable this, it is recommended that the new framework agreement acknowledges that making decisions on regulatory matters with greater speed and with greater clarity will help remove possible barriers to growth.

It should also confirm the CAA’s obligation to consider the economic effect of new and existing regulations and their impact on growth.

Benefit

UK regulators perform a key role in delivering objectives like protecting standards and resilient markets for UK consumers, but they also have a vital part to play in supporting a business environment that enables and facilitates growth. It is essential that the CAA is clearly seen to fulfil its growth duty on a basis consistent with its role as an independent regulator. Greater speed of decision-making, and greater clarity of the process, without compromising standards, should help enable and facilitate growth.

Supporting evidence

Feedback from meetings with CAA customers consistently identified that the time taken to make regulatory decisions is a barrier to growth by delaying investment decisions until there is certainty. This was a particularly significant issue for CAA customers using emerging technologies, where delays in regulatory decisions are likely to delay the relevant organisation’s ability to earn revenue and where even a short delay can be costly. Examples have been given around delays to licencing, approvals and certification, and lack of transparency and clarity about the process, the information required and timelines which causes financial issues for companies.

2.7

Recommendation

The CAA’s obligation to inform the DfT when the CAA is undertaking international work, including work done by CAA International (CAAi) should be included in the new framework document. CAAi is a subsidiary of the CAA. It offers commercial services to countries and others. It is a social enterprise and its profits are reinvested into the CAA’s work.

Benefit

Clear communication and sharing of information do not compromise the CAA’s independence or its ability to operate but will help ensure there is no scope for misunderstanding or inconsistency between the CAA and DfT, thereby enhancing the international reputation of both bodies.

Supporting evidence

There is currently no formal mechanism to share details of non-UK work carried out by the CAA or its subsidiary, CAAi. There have been a few occasions where the DfT was unsighted on activities being undertaken by CAAi.

3. Accountability

These recommendations deal with the CAA’s relationship with stakeholders, including aviation consumers (both passengers and freight).

3.1

Recommendation

The CAA should be clear as to the information it requires from its customers to make all regulatory decisions and should also be clear about the timetable for submission of information and decision making. These details should be set out on the CAA’s website for all significant regulatory processes by 30 September 2023 and for all other routine processes by 30 June 2024.

Benefit

Setting out clear and transparent requirements for regulatory decisions, together with a timetable, will ensure that everyone understands the regulatory process and will further enhance the reputation of the CAA. Adhering to the specified timeframes is an important element of customer service. As noted above, delays and uncertainty in regulatory decision-making is also a barrier to growth.

Supporting evidence

Feedback at most meetings with stakeholders included concerns that, other than in straightforward cases, the regulatory process is often unclear and that there can be significant delays in getting a final decision. A number of stakeholders said that there is limited feedback on reasons for delays. Most other regulators set clear timetables for the submission of information and receipt of the decision.

3.2

Recommendation

The CAA’s performance dashboard should be updated to ensure that it provides a clear view and greater transparency of the CAA’s performance to the Board and the DfT. Consideration should also be given to publishing performance statistics on the CAA’s website. The form and content of an updated performance dashboard should be agreed with the CAA Board and the DfT by 30 September 2023.

Benefit

An updated performance dashboard will better inform the CAA’s board and the DfT as to the CAA’s current priorities and progress in the delivery of them. Greater transparency will help build trust and give the DfT even greater confidence as to how well the CAA is performing. Sharing information on the CAA’s website will help all stakeholders, especially aviation consumers and the CAA’s customers, better understand how well the CAA is performing. This will also support this report’s proposals to enhance the CAA’s relationship with its stakeholders.

Supporting evidence

The DfT advised that they receive less information from the CAA than from the DfT’s other arm’s length bodies (ALBs). Many stakeholders, particularly those who are the CAA’s customers, expressed concerns about the performance of the CAA and the extent to which it delivers value for money. This appears to reflect a lack of understanding and limited visibility of information. The ability of the CAA to demonstrate value for money in delivering its regulatory services was also seen as important, with a need for greater transparency and regular communication about performance.

3.3

Recommendation

The CAA should improve its current mechanisms for engagement with stakeholders to ensure that there are opportunities for engagement on strategic priorities including policy, guidance and process changes. This should include consultation with stakeholders to help the CAA determine the appropriate level and form of engagement with different groups of stakeholders.

The CAA should ensure that feedback is given to show how decisions have been informed by this engagement.

Consideration should be given as to whether the finance advisory committee could be more effectively used as part of this engagement strategy.

The CAA should report to DfT on progress in this regard in early 2024.

Benefit

Strong engagement with the CAA’s customers, and all stakeholders, will strengthen confidence in the CAA and will further enhance its reputation.

Appropriately targeted, structured opportunities for 2-way engagement (including a feedback loop) on policy, process and other issues that affect its customers, and stakeholders, will ensure greater buy-in and support for the CAA.

Supporting evidence

A recurrent theme from meetings with the CAA’s customers and stakeholders was a view that there is not sufficient meaningful engagement. A number of issues that were raised at meetings appear to be based on a lack of understanding and information, which would be addressed by a greater amount of 2-way engagement. Many expressed the view that they are unsure as to whether the CAA listens to, hears and acts upon concerns and feedback as they often receive no, or insufficient, response and visibility of action taken is often lacking. This reduces confidence amongst stakeholder groups as to whether the CAA is listening to and acting upon feedback given.

The CAA’s board has recognised the need to improve engagement and is already considering how the CAA can best improve its’ engagement with stakeholders in general and CAA customers in particular.

3.4

Recommendation

The board should improve its level of engagement with the aviation industry to increase their and the CAA’s visibility within the sector. In particular, there should be a programme for the NEDs to engage with specific stakeholders to increase internal and external visibility. The board is already taking steps to implement this recommendation.

The CAA should report on its engagement activities in its annual report.

Benefit

The CAA’s relationship and engagement with, and understanding of the challenges facing its, stakeholders will help in addressing the many challenges facing both the CAA and the UK’s aviation and aerospace sector. Greater engagement of the board, and its NEDs, with the aviation and aerospace industry will enable the board to understand better the pressures facing stakeholders and give greater confidence that decisions take into account the views and the needs of the sector.

Supporting evidence

Feedback from larger customers and significant stakeholders is that there are strong working relationships at senior level. Feedback from smaller customers, including those involved with emerging technologies, as well as individuals and the general aviation community was less positive. Comments from stakeholder events and the call for evidence indicate that the board, and particularly NEDs, should be more visible and engage proactively to build stakeholder relationships.

The board has recognised the need to engage more directly with CAA customers and has recently held 3 board meetings offsite at the location of regulated entities and had an engagement programme as part of the board meeting.

3.5

Recommendation

The CAA’s new consumer strategy should be approved by the board by 30 September 2023 and should be shared with the DfT and, ideally, published on the CAA’s website. Work has already started on this.

This strategy should include a commitment to invite the Chair of the CAA’s consumer panel to a minimum of 2 board meetings per year, and for that person to be sighted on all board agendas to enable them to indicate items that are likely to be particularly relevant to consumers.

Benefit

Having a consumer strategy in line with those already in place for safety, security and sustainability will demonstrate that consumer interest is equally important and help to drive a more consistent consumer mindset across the organisation. The proposed development of an associated consumer interest dashboard will strengthen governance in this area and give the opportunity to better utilise insight data to determine areas of focus that are important to aviation consumers.

Supporting evidence

Consistent feedback from all stakeholder groups was that the CAA needs to increase its consumer focus, and the CAA has recognised that it should be demonstrably much clearer in this area. To support the consumer strategy, the CAA has acknowledged that it should be more systematic in discussing aviation consumer interests at board meetings. At present the Chair of the CAA’s consumer panel is only invited to board meetings once each year and she has limited, if any, other engagement with NEDs.

3.6

Recommendation

One of the NEDs should engage on a regular basis with the Chair of the CAA’s consumer panel. Consideration should be given to direct NED engagement with the chair of other advisory panels and committees (for example, sustainability, finance).

Benefit

Direct engagement of a NED with the Chair of the CAA’s consumer panel will reinforce the CAA’s commitment to take into account the interests of consumers in board discussions. Direct NED engagement with the chairs of other CAA advisory panels will enhance the standing of those panels and better ensure their views are taken into account in board discussions.

Supporting evidence

There is no engagement between the Chair of the CAA’s consumer panel and the NEDs, other than at the one board meeting each year that the Chair of the CAA’s consumer panel attends, and there is limited feedback to the Chair of the CAA’s consumer panel on board discussions. An independent board review carried out in early 2022 referred to the lack of a consumer voice at board meetings.

3.7

Recommendation

The CAA should update its website, considering the views of stakeholder groups, including CAA customers and aviation consumers, to improve user experience and enable all stakeholders to more easily navigate, access and understand information, relevant guidance and policies.

We recommend that the board approves a timetable for the updating of the CAA’s website by the end of this year. If possible, short-term improvements, particularly easier navigation, should be implemented as a matter of urgency. The timetable for the implementation of the updated website should be agreed with DfT.

Benefit

The CAA’s website is a crucial part of its engagement with stakeholders, including its customers, potential customers and aviation consumers. A website offering a clearly signposted central repository of high-quality information that is easy to navigate will enable the CAA to operate more efficiently by reducing queries that would otherwise require direct contact.

The website is a main hub for aviation data, widely used by stakeholders both in the UK and internationally. Redevelopment of the CAA’s website will provide an opportunity for the CAA to work with DfT, and other stakeholders, to consider future data requirements.

Supporting evidence

Feedback from all stakeholder sessions and the call for evidence noted that the CAA’s website often gives a difficult user experience with navigation, content management, broken and incorrect links all being raised. Stakeholders advised that using ‘Google search’ is often the most effective way to find key documents.

4. Efficiency

These recommendations deal with the financial and process efficiency of the CAA.

4.1

Recommendation

The CAA should finalise, and then implement, its efficiency and reinvestment plan. This includes a significant upgrade in the CAA’s IT and ability to deliver services online. The principles of the efficiency and reinvestment plan, including the acceleration of the upgrading of the CAA’s IT systems and processes, have been endorsed by the CAA’s board and appear to be robust and appropriately challenging.

The plan sets out how the CAA will achieve a 5% reduction in like-for-like costs over a 3-year period to both reinvest in the CAA’s customer service and modernisation plan and also deliver CPIH-1% changes in the CAA’s statutory charges for the period of the Plan. Following detailed consideration, the board concluded that any further reduction in costs would damage the CAA and the services it provides and we concur with this conclusion.

The CAA should report to the DfT on a regular basis, not less than quarterly, on progress in finalising the efficiency and reinvestment plan. The plan, including an implementation timetable, should be finalised as soon as possible and by no later than 31 March 2024.

The plan should be implemented over a 3-year period starting on 1 April 2024. This timescale should enable the CAA to ensure it has the necessary capacity and capability to deliver all aspects of the plan, utilising external support, where necessary.

Benefit

The efficiency and reinvestment plan will demonstrate that the CAA has delivered a 5% reduction in like-for-like costs, as required by the Cabinet Office, albeit the CAA’s income is not primarily resource departmental expenditure limits (RDEL). The savings will be reinvested to enable the CAA to both increase the efficiency of its services and also deliver a reduction in its statutory charges in real terms (ie CPIH-1%) for the period of the plan. The CAA’s customer service and modernisation plan will involve a significant upgrade in the CAA’s IT and enable most processes to be dealt with online, reducing significantly the volume of manual and spreadsheet-based processes.

The CAA receives the majority of its income from the charges levied through its statutory power from those organisations and individuals it regulates (known as ‘user pays’). However, the CAA also receives funding directly from the DfT

• in the form of grants paid under statute and for specific purposes
• payments for the provision of assistance and advice in connection with the Secretary of State’s functions relating to civil aviation

Some of these payments are made using DfT’s resource programme budgets categorised as RDEL. RDEL programme spending relates to current expenditure and includes current grants and current procurement. HM Treasury consolidated budgetary guidance 2022 to 2023.

Supporting evidence

Feedback from CAA customers, and agreed by the CAA, is that many processes rely on non-automated and manual processes supported by spreadsheets, PDF forms and other paper-based systems.

The CAA has a large number of legacy systems, many of which are inflexible. Its IT/digitisation plan at the start of this review assumed it would take 10 years to upgrade the CAA’s IT systems and enable greater digitisation of processes, albeit the drone registration system clearly demonstrates the positive impact the CAA can deliver through modern IT systems. This current delivery model limits the CAA’s ability to effectively deliver greater efficiencies and improve customer service. This has been a consistent theme throughout the stakeholder sessions and was acknowledged in meetings with the CAA.

4.2

Recommendation

The timetable and milestones for the efficiency and reinvestment plan should be agreed with the department by no later than 31 March 2024.

The delivery of the plan should be subject to DfT oversight, the precise terms of which need to be agreed by the department and the CAA, also by no later than 31 March 2024. The detailed implementation plan should incorporate the CAA’s existing people strategy, and how it will ensure it has the necessary capability and capacity, as well as how the CAA will deal with its estate.

Benefit

An agreed implementation plan, with a timetable and milestones, will give confidence to the DfT, and stakeholders generally, that the CAA can deliver its efficiency and reinvestment plan and its customer service and modernisation plan. The successful implementation of these are critical elements to ensuring the CAA continues to be ‘fit for purpose’.

Supporting evidence

The principles of the plans have been endorsed by the board and have been subject to challenge as part of this review. However, the detailed implementation plan has not yet been completed and will require input from the CAA’s new CEO, who has not yet been recruited. While the CAA has mixed experience in introducing new IT, and has not done anything on the scale that is now proposed, the drone registration system demonstrates that the CAA has the capability to successfully implement new digital processes.

The CAA has recognised the need to consider its property requirements but has noted that this has to reflect its existing people strategy and the needs of the organisation taking into account changes that will arise from the implementation of the efficiency and reinvestment plan.

Engagement with the DfT should enable sharing of best practice.

4.3

Recommendation

The current review of the CAA’s scheme of charges needs to be concluded as soon as possible in order to reduce its complexity and make it easier to understand and administer. The scheme of charges needs to consider how provision for investing in the maintenance and upgrading of systems can be included.

The review should be completed in time to enable the required consultation with CAA customers in 2024 to 2025 and for changes to be implemented as part of the CAA’s efficiency and reinvestment plan.

The CAA’s scheme of charges should continue to adopt the ‘user pays’ principle.

Benefit

A simplified, more transparent scheme of charges will improve the customer experience and enable the CAA to operate more efficiently. It should significantly reduce queries about charges. A simpler scheme will be easier to administer and should reduce the costs. Efficiency savings can be reinvested into ongoing maintenance and upgrading of systems and enabling the CAA to continue with a reduction in charges in real terms.

Supporting evidence

Almost all CAA customers have said that the scheme of charges is difficult, if not impossible, to understand and lacks transparency as to the basis and calculation of the charges. The CAA acknowledged this and are committed to introducing a more straightforward scheme as part of their efficiency and reinvestment plan.

Whilst some CAA customers, particularly General Aviation, would prefer an alternative funding model (for example, government pays) most recognise that the user pays model is appropriate and that it is similar to the funding model of most other UK Regulators. The funding model of most other leading international aviation regulators include an element, often significant, of user pays.

5. Efficacy

These recommendations deal with the composition of the CAA’s board, the possible need for additional consumer protection powers, risk appetite for new and emerging technologies and the economic regulation activities of the CAA.

5.1

Recommendation

The skill requirements of the board should be reviewed to reflect the changing needs of the organisation and inform NED appointment decisions. As a minimum, in addition to the existing range of skills, the board should include NEDs with significant experience of working in a consumer-facing business and experience in the delivery of significant process transformation programmes. This should be done as part of the consideration of the renewal of NED board terms and the recruitment of new NEDs as required.

The board skills matrix should be updated to include both these skills.

Benefit

The CAA’s ability to successfully navigate the challenges of the past 5 years, most notably the pandemic and the impact of leaving the EU, reflects the strength of the CAA’s leadership (both Executive and Non-Executive) during this time. The CAA should ensure that it has the capability, skills and experience for the challenges it now faces and to enable it to support an evolving commercial aviation sector, emerging technology and sustainability.

Supporting evidence

The current board skills matrix does not include consumer-facing experience or experience and expertise in IT, digitisation and organisational change. It appears that whilst some NEDs have some experience of consumer-facing issues only one existing NED suggested they could be classified as ‘expert’ in this area. It appears that a number of NEDs have expertise and experience of digital transformation.

The review and the call for evidence did not explicitly explore board skills with stakeholders, although some concerns were raised about the CAA’s capability to meet the challenges to modernise its operation and improve its delivery.

5.2

Recommendation

Subject to Cabinet Office guidance, either the Secretary of State should appoint a Deputy Chair (typically this would be one of the NEDs on the Board), or the Senior NED should have an outward-facing role as well as the current internal role.

The CAA should continue to be fully supported in its efforts to ensure continuity of senior management and its board.

Benefit

With the recent departure from the CAA of both the CEO and the COO, and with the possibility there will be other changes to the membership of the board as the terms of some NEDs come to an end, it is important that there is support for the Chair, who has a critical role in leading the CAA during a period of significant change.

A Deputy Chair (or Senior NED, with the usual outward- facing role) will provide the board with the additional capacity to engage with the DfT and other key stakeholders. It is also good corporate governance.

Supporting evidence

Many customers mentioned their concern in relation to leadership of the CAA with the announced resignation of the CEO and with, at that time, no visible recruitment process yet in place for a successor. A large number of stakeholders indicated a desire for greater engagement with the CAA’s board to help them better understand the issues faced by the sector and to help the CAA develop its capabilities to deal with them.

The challenges of emerging technologies and sustainability were constant themes.

5.3

Recommendation

Contingent on the CAA optimising the use of its current consumer protection powers, and demonstrating that it is doing so, Ministerial consideration should be given to providing the CAA with additional powers to more effectively regulate (in the interest of consumers) where it considers that an aviation related business has breached consumer rights law:

• to make directions to remedy such infringements or stop them from happening in the future
• to impose financial penalties, where appropriate

Benefit

Granting extra powers, that have already been the subject of consultation and discussed by the CAA and the DfT, will enable the CAA to be a more effective regulator, ensuring that breaches are addressed in a proportionate and timely manner.

Supporting evidence

There was strong feedback from relevant stakeholders that, due to its current limited powers, the CAA are unable to effectively hold airlines to account. There was a view from some consumer groups and some airlines that the behaviour of a few is probably unlawful, and that the CAA relies on competition to address this rather than using its powers to at least ensure compliance with the law.

The CAA noted that legal enforcement can be complex, costly, time-consuming and not retrospective and will not always represent an efficient and the most effective use of the CAA’s resources. Airline stakeholder groups highlighted that the CAA sends out blanket communications about performance issues rather than directly targeting the offenders. This potentially weakens the impact of any messaging.

The BEIS committee report Post pandemic economic growth (HC 759) published 25 October 2022, recommended that the CAA needed stronger powers. This was a view raised and agreed upon in many conversations, with a consensus that the CAA has less power than it needs to effectively regulate in the consumer interest. The Aviation consumer policy reform consultation of January 2022, outlined examples of the kinds of powers that the CAA could be granted.

The CAA has recognised that additional powers would make a positive difference and that having more effective enforcement powers would potentially make those it regulates think harder about how they behave in relation to consumers.

5.4

Recommendation

The CAA should work alongside providers of new and emerging technology in developing regulation, recognising that these regulations need to evolve alongside the development of the new technologies and this needs to be an even more collaborative relationship than is the case in more traditional regulation. The CAA needs to explain to these providers how the recent restructuring of its regulatory team will facilitate this.

Benefit

Increased stakeholder engagement and joint working within this sector will increase transparency and enhance the reputation of the CAA. It will also contribute to more efficient and effective decision making, reducing costs for all, especially smaller companies, and promote growth not only in the sector, but also that of UK PLC.

Supporting evidence

The CAA’s rapid capability and innovation departments were specifically mentioned by emerging technology stakeholders as doing some good work, but not in a joined-up way. Some feel that the CAA is reluctant to engage and work with SMEs and use their ideas. They also felt that the CAA needed to listen to their issues and generally engage with the sector more. It is a fast-paced industry with technology constantly evolving and the CAA needs to respond accordingly.

5.5

Recommendation

The CAA should engage with DfT to ensure that the CAA’s risk appetite for new activities (for example, emerging technologies) is consistent with the delivery of government policy as far as possible whilst recognising the CAA’s independent statutory responsibility for safety.

Benefit

The CAA’s focus and leadership on aviation and aerospace safety and security is the cornerstone on which its domestic and international reputation is built. The stable and predictable aviation sector will undergo significant change as new technology comes to market.

Developing regulations for emerging and new technologies (such as drones, commercial space vehicles) is challenging for both the CAA and other aviation and aerospace regulators. It is important to maintain safety standards whilst being able to regulate or certify innovative technology quickly. These regulations, and the speed with which they are developed, is likely to have a significant effect on the growth of this sector.

Supporting evidence

Feedback from other leading international aviation regulators highlighted the challenges of regulating rapidly developing technologies. They all stressed the need to ensure that regulation of this sector needs to be coordinated with government policy and the extent to which it wishes to encourage leadership in the development of new technologies.

A few of these regulators, as well as some other stakeholders, suggested that being outside the EU gives the UK more flexibility, and an ability to move more quickly, in developing regulation and addressing the regulatory challenges around emerging technologies compared to themselves and others, with ‘sandbox’ being specifically mentioned.

5.6

Recommendation

The process for conducting economic regulation should be reviewed when the current Heathrow review (known as H7) is concluded.

Given the short timescale before the commencement of Heathrow review 8 (H8), it is recommended that this review should be of the process, governance and ‘mechanics’ on a basis to be agreed between the CAA and the DfT.

As the H7 decision is currently the subject of an appeal, it is inappropriate to make specific recommendations about the current process. However, we recommend that the review should include ‘lessons learned’ from all the CAA’s economic regulatory activity, and not just H7.

In addition, the department, taking into account the views of the CAA and other interested parties, should consider whether a wider review of the basis, scale and scope of all the CAA’s economic regulatory activity is required.

Benefit

A review of the process for conducting economic regulation would enhance confidence in this process and its outcomes.

Consideration by the DfT as to whether there should be a review of the basis, scale and scope of the CAA’s economic regulatory activity will address any concerns about this and will remove any uncertainty and thus reinforce the CAA’s role.

Supporting evidence

Given the status of the H7 review, feedback from relevant stakeholders was clearly influenced by their views on the possible outcome of the current process.

The CAA confirmed that, on conclusion of H7, they intend to conduct a ‘lessons learned’ review to look at how it might be possible to improve the process prior to the commencement of H8. We will share all relevant feedback we received as part of this review with the CAA and DfT at that time.

In addition, we received representations about the basis, scale and scope of the economic regulation and whether there needs to be a more fundamental review of this. This goes beyond the scope of this review and is a matter of government policy. If it is decided that a wider review is appropriate, then we will share all relevant feedback we received as part of this review with the DfT at that time.

Definitions

The review used the descriptors that the Civil Aviation Authority uses to define consumers, customers and stakeholders.

CAA stakeholder

A term that includes aviation consumers and CAA customers as well as any other parties the CAA might deal with including the DfT, Parliament those overflown by those regulated by the CAA, trade bodies, and other regulators both domestically and internationally.

Aviation consumer

A paying customer (passenger or freight) of those the CAA regulate and for whom they have a regulatory function relating to how they are treated.

CAA customer

A person or organisation seeking regulatory approval from the CAA and paying for that approval under the CAA’s statutory scheme of charges.

Terms of reference

Read our review terms of reference.

Organisations interviewed as part of the review

Organisations that met with the Lead Reviewer either individually or during stakeholder events.

The review’s 4 stakeholder events included:

• airlines
• airports
• General Aviation (including representatives from business aviation organisations, drone operators and private pilots)
• new and emerging aviation technology organisations

Stakeholders:

• Aerofirm
• Aircraft Owners and Pilots Association
• Airlines UK
• Airport Operators Association
• All Party Parliamentary Group - General Aviation
• Altitude Angel
• Association of British Travel Agents
• Association of Remotely Piloted Aircraft Systems UK
• Aviation Environment Federation
• Birmingham Airport
• Blue Bear Systems
• Board of Airline Representatives UK
• Bristol Airport
• British Airways
• British Balloon and Airship Club
• British Gliding Association
• British Microlight Aircraft Association
• British Model Flying Association
• Civil Aviation Authority of New Zealand (New Zealand Aviation Regulator)
• Civil Aviation Safety Authority (Australian Aviation Regulator)
• Connected Places Catapult
• Cranfield University
• Eastern Airways
• Easy Jet
• Electric Aviation
• Federal Aviation Administration (US Aviation Regulator)
• Flyby Technology
• GA4Biz Alliance
• Gatwick Airport
• General Aviation Awareness Council
• General Aviation Safety Council
• Heathrow Airport Limited
• Heathrow Association for the Control of Air Noise (HACAN)
• HM Treasury
• International Air Transport Association
• International Airlines Group
• Irish Aviation Authority (Irish Aviation Regulator)
• Light Aircraft Association
• Luton Airport
• Luton and District Association for the Control of Aircraft Noise
• Manchester Airports Group
• National Air Traffic Services
• Neuron
• PPL/IR (Europe)
• Ryanair
• Sees.ai
• Shared Airspace Council
• Stansted Airport Watch
• The Independent Flight Examiners and Instructors Association
• UK Research and Innovation - Future Flight
• Vertical Aerospace
• Virgin Atlantic
• Virgin Orbit
• Which Magazine

Call for evidence

In addition, we received 444 responses to the Call for evidence from 157 organisations and 284 individuals.