Aviation morale in New Zealand is sky high, with Air New Zealand among the beneficiaries of economic reform
Paul Phelan/Auckland
To the casual observer, New Zealand may appear to be the poor relation of its neighbour, Australia. Nothing could be further from the truth, particularly in the field of aviation.
Australians are selling their business and private aeroplanes, and New Zealanders are buying them. New Zealand is overhauling its aviation-rule structure, and Australia is looking to buy the finished product. Government aviation charges in New Zealand have dropped consistently over the last few years, while those across the Tasman Sea are growing in both quantity and diversity to the point where the major carriers are considering publishing an embarrassing analysis of government charges on their ticket covers. In addition, the overall financial results of the major carriers in both countries distinctly point to the relative gains of New Zealand's economic reforms.
Those contrasts, which are mirrored in most comparisons of the two countries' aviation sectors, reflect the efficiencies, reforms, and industry health generally in New Zealand that Australia has yet to enjoy. New Zealand's experience in developing and implementing its package of total reform and restructure is attracting interest worldwide as other civil-aviation infrastructures face the prospect of inevitable change.
KEY REFORMS
One key to the New Zealand reforms was the formation and incorporation of a forceful and dynamic Aviation Industry Association (AIA). An impressive number of groups, organisations and individuals meet annually to thrash out industry problems at an AIA conference lasting three-to-four days, from which industry leaders, government agencies and involved parliamentarians dare not be absent. This extraordinarily open process brings focused industry pressure on politicians and bureaucrats, who often energetically return the fire. It gives the industry's problems a public airing and it allows all participants an equal voice.
An early New Zealand success was the creation of the Airways Corporation to run the country's airways system, completed ahead of time and budget before the 1990 Act of Parliament which subdivided the rest of the Civil Aviation Authority's (CAA) functions into either "state-owned enterprises" or corporatised units.
"In the five years before corporatisation in 1987, the Government had lost NZ $120 million [$79million]," says Airways Corporation chief Pete Proulx, a Canadian. "Since corporatisation, we've returned $82.5 million to the Government in taxes and dividends. At the same time, we've given our customers discounts." These were typified by the charge to an airline operating a Boeing 737 from Auckland to Wellington; at corporatisation that charge was $1,700, "...now it's $625 and reducing, because the demand is increasing and we're doing it with the same or fewer staff".
Airways inherited some 1,200 staff, including 705 air traffic controllers. Staffing is now 685, including about 400 controllers. Proulx credits the reform both to efficiency gains through new technology and to the removal of several layers of middle management. "The distance between me and a controller is three levels. In Canada, a fair comparison would be eight levels. Once you start to introduce these levels of bureaucracy, nobody's responsible for anything. Budgets were centrally controlled in Canada - here it's delegated to the lowest level possible and managed there. People are generally more frugal when they own the budget, given the authority."
Economies have not been gained at the expense of fair air traffic control (ATC) pay. Proulx, who will soon host a conference of the 12 countries identified as operating "commercial" airways systems, has analysed foreign ATC pay and conditions. "Based on the value of money and average salaries," he says, "a New Zealand controller makes 2.5 times the average national salary. In Canada that's 1.7, in Germany it's 1.4. Although we've inherited most of our collective agreements from government, we need to interest our employees in productivity gains and we're willing to pay for it."
In a document called Airways Air Navigation Plan for New Zealand; 1995 to 2010, the corporation charts a clear path towards the implementation of full air navigation systems in the future and other initiatives. The plan, reviewed and republished every two years, gives service providers, manufacturers and operators a timetable for each objective, allowing orderly planning for the decommissioning of existing navigation aids and other equipment for training and reorganisation, and for capital expenditure on new equipment.
Airways will now complete a full analysis of cost savings over the period, says Proulx. "We didn't want to mix technical and economic studies, so we have a plan now to identify the cost reductions - technical staff, vehicles, aircraft, all replaced by high-technology installations and displays, the cost of which is minimal compared to the cost of ground based navigation aids."
WEAKNESSES
Proulx believes that most airways' systems weaknesses come from the misallocation of political responsibility. "We report to the Minister of State Owned Enterprises, who ensures we operate in a commercial manner and that we're a responsible part of the community; and to the Minister of Finance. If you report to a Minister of Transport, which happens elsewhere, because he's the policy maker he has the overwhelming temptation to want to help humanity, so he gets involved in making decisions that are sometimes more political than commercial. Everywhere I go, I tell them, if you're setting up an organisation, get a Minister of Trade and Commerce, or a Minister of Finance."
Airways has been aggressively exporting its capabilities, with a one-year contract in Bermuda, work with the European Bank of Restoration and Development on ways to help set up systems in central and Eastern Europe, and supplying ATC consultancy services to Vietnam.
More recently, Proulx's offer to contract Airways' services to Fiji, which serves a large flight-information region covering several Pacific nations, has met with a negative response from the Fijian Civil Aviation Authority's chief executive, Jone Koroitamana. Proulx's argument is that small Pacific nations should participate in a regional ATC centre to benefit from the economies of scale available from the New Zealand system, while sharing the profits. While a single regional ATC centre makes theoretical sense, such a project could founder on the lack of political will to make it work, especially when Australia's modernised system is launched in 1996.
In a display of industry co-operation rare elsewhere, the AIA has signed a memorandum of understanding (MoU) with the CAA detailing the two groups' responsibilities and undertakings. The MoU (one of two now signed with industry groups) requires summit meetings of the CAA's director, members and officials with senior AIA representatives at least every two months, to help the CAA shape safety programmes and establish priorities. CAA chief Kevin Ward also plans to sign MoUs with other key industry groups.
Ward, outspoken about New Zealand's unimpressive general-aviation (GA) safety record, warns that with a vastly reduced workforce of about 120, and largely user-paid funding, the CAA will focus on the concept of "100% compliance", and on audit rather than surveillance. Insurance was claimed on 40, of a total of some 400 New Zealand-registered helicopters in 1994; an outcome that Ward says, is unacceptable and two-to-three times the rate in Canada or the USA. He bluntly told the AIA's conference in July: "Some have yet to grasp the concept of 100% compliance. You don't want repeat and blatant offenders in aviation; neither do we; neither does the general public. Those who have demonstrated their incompetence or who disregard the system will be better off out of it."
Ward adds that the industry will see more of a "Fit And Proper Person Test," provided for in the Civil Aviation Act. "An industry safety culture based on individual responsibility, has to be driven from the top," says the CAA, foreshadowing safety awareness seminars for higher levels of industry management. "The big difference is that the more open process has made a smaller, but far more involved and responsive bureaucracy. Industry has had to make more decisions, and to be far better managers both in the way they run their businesses and in their approach to safety. Consultation takes more time, but is less expensive overall because rules are made to work. Audits are cost-recovered on an hourly basis, but for a good operator with the right procedures in place, there's no reason why they should be expensive or time consuming."
The CAA has now begun a total rewrite of the aviation rules, in full consultation with industry. The new rules and their numbering, will correspond with US Federal Air Regulation numbers and incorporate relevant European regulations, but will purge and replace outdated rules, reaching back to the early 1950s. This process is generating widespread interest from foreign civil-aviation agencies including those of Canada, Norway, the UK and Australia (which has shown interest in possibly buying rights to the new rule system).
A computerised database aviation-safety monitoring system is also being installed to respond to incidents. "If you have an incident it goes into a computer and raises a flag, goes through the database to find all the commonalties, and identifies problem areas so you can jump on them early," says the CAA. Ward has set safety targets of zero transport accidents by the year 2000, and of halving GA accidents in the same period.
Major operational and airworthiness standards initiatives have also been devolved to industry. An incorporated industry joint venture, Aviation Services, undertakes much of the ground examinations and licence flight- testing except for instructors, audited by the CAA. "It's a process where a standard has been established, and it's up to the industry to ensure it's met," says the CAA.
AIRPORTS
Twelve major airports have been corporatised, with ownership shared between local and national governments in varying ratios, and under legal constraint to operate as business undertakings. This has not yet produced all the expected benefits, with users complaining of non-transparency in pricing and charging, of either insufficient or excessive investment, and of a lack of consultation. The Government, which remains a partner in 15 other airports it regards as non-commercial, says, however, that the process will expand to embrace them in the interim, while the whole future of airport ownership is further reviewed. Meanwhile, the Government is insisting on more detailed cost and revenue disclosure, and on industry consultation on airport charges and capital expenditure.
The Government has not yet decided the future of its interest in airports. Finance minister Bill Birch has told the industry: "The Government does not consider itself a long-term owner of airports." It has foreshadowed divestment in favour of private-sector involvement, and some local government bodies have already also shown interest in divesting their equity.
Source: Flight International
