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STANDING COMMITTEE ON RURAL AND REGIONAL AFFAIRS AND TRANSPORT
03/07/2008
Administration of the Civil Aviation Safety Authority

CHAIR —I welcome Mr Peter Ilyk. I invite you to make a brief opening statement before we go to questions.

Mr Ilyk —Excuse me, I have a bit of a cold, so I might be a bit hard to hear. Given the length of my submission I think it probably useful if I spend five or so minutes going through the issues I have.

In 2003 the governance arrangements for CASA were changed. The board was abolished and responsibility for managing CASA and setting its strategic direction was entrusted to a single individual. As a result of that change, in my view, the checks and balances which were in place up to that time were removed. No longer would changes to CASA’s strategic direction have to run the gamut of a critical review by a board, which was established to ensure that CASA remained focused on discharging its responsibilities to the public. Under the changed arrangements, the new director could impose his personal vision on the organisation without any effective review.

The immediate effect of this change was to move to a partnership policy with industry. There was little or no engagement with CASA staff or those with extensive experience in regulatory issues on this new direction. New strategic advisers were appointed and the focus was on establishing a new relationship with industry—a relationship where industry criticism was anathema and had to be prevented at all costs, even if it meant subordinating CASA’s regulatory responsibility to placate industry. As mentioned by the CEO himself, on joining his priority was to reduce burdens on the aviation industry and to improve relationships with industry. The lessons from the Monarch, Seaview and Senate inquiries were dismissed as being unsophisticated, were trivialised and were said to represent the blinkered view of the regulator’s role. Industry was to be viewed as CASA’s partner. Derogatory expressions were used to downplay CASA’s traditional role. CASA could not be seen to be a nanny regulator. Rather than enforcing safety rules, CASA’s new role was to encourage compliance.

Those in the organisation who held the view that CASA had a public duty to regulate were removed or counselled and ostracised by management. Even in submissions today CASA’s supporters vilify dedicated and professional staff as ‘recalcitrants’ who must be dismissed. Much of this was done under the guise of restructuring and market testing. However, this was essentially a sham with a predetermined outcome. My own experience bears this out. The market testing report for OLC was so flawed and full of errors and unsubstantiated generalisations that I was compelled to provide the deputy CEO with a 20-page report pointing out all the errors. But that was obviously ignored, because the consultant’s report provided the desired predetermined outcome. I have no doubt whatsoever that most of the other market testing reports were equally flawed.

In setting its new partnership policy it is interesting that CASA uses exactly the same justifications that have been used by the FAA in support of its cosy partnership programs with the airlines which have been rejected by the US congressional transportation committee. The FAA argued, as CASA now argues, that safety is the primary responsibility of the industry. The FAA, like CASA, downplays its responsibility for safety regulation. When criticised for its approach to safety, the FAA was unwilling to embrace the criticism and, like CASA, would say that there is no safety issue. The US congressional committee did not accept such justifications—and hopefully this committee will also reject this rationalisation.

What the FAA and CASA approach fails to recognise is that CASA is a government agency that was expressly established in the wake of two tragic accidents with the objective of regulating the aviation industry. It was not set up to be a partner with industry. It was not set up to promote industry. It was not set up to bow to industry pressure. CASA was set up to regulate the industry and enforce the safety rules. However, it is not surprising that CASA should adopt the same tactics as the FAA because, as the CEO admitted during estimates on 26 May 2006, he has based his philosophical approach on the FAA model, which has now been found to be wanting. The chairman of the congressional committee investigating the FAA made the following telling comments about the partnership approach of the FAA:

Doubtless some will argue that these compliance violations offered no serious threat to the flying public. No crash happened, no one died. But that is an irresponsible argument. It would be consistent with the ‘tombstone mentality’ that I have been fighting in the FAA and other agencies my entire career. The fundamental reason our air transportation industry is so safe today is that we have, historically, been obsessive about compliance with the federal aviation regulations. We insist on wide margins of safety. Non-compliance with these regulations erodes margins, and makes air travel less safe.

Compare that attitude with CASA’s approach that compliance with the regulations is almost irrelevant and a blinkered view. Whose view do you think an informed public would be more comfortable with? As the House of Representatives committee reviewing the establishment of CASA emphasised, CASA must be accountable to the parliament, to the minister and to the courts—and to no-one else. If it becomes accountable to the industry, it will be captured. In my view this is exactly what has occurred.

If CASA is to be a partner with industry rather than an independent regulator then that needs to be reflected in the act establishing CASA through proper parliamentary debate. It should not be the prerogative of a single individual to impose this approach on the regulator because, as he himself has said, ‘This is something that has been dear to my heart for some time.’ One of the points I make in my submission is that captured regulators use particular techniques to justify their approach. One of these techniques is to run PR articles claiming a course of continuous improvement. CASA’S spin-doctoring before Senate estimates and its press release bears this out. They say that wonderful progress has been made on all fronts, but if you actually speak with the staff you will find a totally different picture. Staff are demoralised, fear for their jobs and are afraid to raise their concerns. Staff and former managers with whom I have been in contact have expressed the same view. Obviously CASA management is not going to admit that. But suddenly we have all sorts of new specialists who will fix the safety problems.

However, I think we need to stop and consider this in a bit more detail. What is CASA’S main role? It is to regulate aviation safety. What experience do these new specialists have in regulatory matters? What experience have they in compliance and enforcement or in interpreting and applying the aviation safety legislation? They are provided no training in these fundamental regulatory activities and we are expected to believe that somehow they will acquire this experience through osmosis. The problem of course is that those who had this background in the agency have been removed so there is nowhere to get that understanding.

It should come as no surprise to anyone that regulatory staff in an agency that is charged with administering complex and detailed legislation should have access to legal counsel to assist them in their duties, particularly new staff who have no background in such matters and receive no training. However, under the new CASA, the role of legal counsel has been undermined and managers are actively discouraged from seeking legal advice. According to the CEO in a speech to the Australian and New Zealand Aviation Law Association, managers should manage and not seek to avoid responsibility by passing it on to others. It is difficult to understand how seeking legal advice on the exercise of CASA’s regulatory powers should be so problematic to CASA management. In most regulatory organisations a failure to seek such advice would be the problem. However, this approach is driven by industry complainants who view CASA’s legal area as having an enforcement mentality. Of course such industry criticisms must be avoided at all cost. I was continually accused of this during my time as general counsel—however, I am happy to accept such criticism as a compliment.

An interesting facet of CASA’s new regulatory philosophy is to ask what the taxpayer receives for funding CASA to the tune of $113 million per year. CASA has made it clear that it has devolved responsibility for sports aviation and warbirds. It has embarked on a vigorous campaign to devolve responsibility for GA—they talk about ‘self-administration’; it is actually self-regulation—and let GA self-regulate. It has made it clear that it does not believe it has responsibility for aviation safety and that a new CASA will return responsibility for safety to the industry. So what is there left for CASA to do? The public and this committee should be alarmed at these developments.

This then leads to CASA’s major failure in the regulatory reform program. In the past five years CASA has managed to achieve basically nothing in regulatory development. I urge all members of the committee to carefully read attachment 4 to my submission, which provides a documented history of failure. After five years at the helm the CEO will be able to walk away without anything of substance to show for his stewardship of this program.

Just as an example, take the new maintenance suite of regulations. In February 2006 these regulations were promised to be finalised during 2006. This date came and went. In February 2007 a CASA media release announced that the new regulations would be completed by the end of 2007. This was confirmed by the CEO in May 2007. Then in November 2007 the project manager announced that the complete package ‘may’ be available around March 2008. It is now July 2008 and nothing has been released.

The problem is that this same sort of unaccountability applies to the whole reform program, not just the maintenance regulations. Senator O’Brien will no doubt remember the debate during estimates several years ago about classification of operations and the issues relating to parachuting operations, flying training in sports aircraft, and cargo-only operation in aircraft below 5,700 kilograms. They were all going to be fixed—soon. Nothing has changed. I had a very quick scan of the CASA submission last night. It is interesting that they can seriously try to spin-doctor it as a success. If the RRP is a measure of their success, then I suggest that the committee give the same weight to their statements about all of the other successes of the new CASA as detailed in their submission. The fact is that the RRP is a monumental failure.

The underlying issue with the reform program is that CASA has no managers in place who actually understand the regulatory development or the legislative process or have any relevant background or experience in this important area. From what I was able to see during my time, appointments were made on the basis of agreement with the CEO’s particular philosophy rather than on the basis of appropriate experience and background. It should be no surprise that development of legislation requires significant legal input, but the new CASA has avoided allowing legal staff any meaningful role in the reform program. Those who did understand the process have been removed, and of course it does not help when you set up a consultative process that empowers vocal minorities. How on earth can an organisation make a decision when your industry consultative body, the SCC, has, according to CASA’s own website, a combined total of over 200 CASA and industry participants in the SCC and its six subcommittees? No wonder no decisions are made.

On this same issue, the committee would be aware that, when CASA’s new enforcement regime commenced in 2004, there was a commitment to review the new procedures within 12 months. A detailed review was completed in July 2005. It is three years later and the review seems to have gone the way of the regulatory reform program.

As a final point, I would like to lend my support to the comments made by Mr Tully about CASA’s HR practices. However, my point here is different. It is that the failures of the HR area to act with any procedural fairness and, in some cases, questionable legality in the treatment of CASA staff are simply a reflection of the attitude taken by CASA management to its regulatory responsibility.

When you have a management culture that allows its senior managers free reign to ignore legal constraints and protections in relation to its own staff then you have an organisation that will inevitably ignore the legal responsibilities placed on it under the act in relation to regulation. In such a culture, the law and legal restraints are mere obstructions and annoyances. Getting results is all that is important—never mind the way the results are achieved. These are clear governance failures which have been allowed to flourish under the new arrangements. During my time as general counsel, I brought these matters to the attention of the CEO but they were simply ignored.

Not long after raising my concerns, I was also terminated. However, I have to stress to the committee that my termination was a relief rather than a matter of concern as it was clear to me that my ‘unsophisticated’ approach to governance and regulatory issues had no place in the new CASA. I clearly belonged in the world of the ‘nanny-regulator’ with a ‘blinkered view’ about CASA’s regulatory responsibilities.

Mr Chairman, if I could crave your indulgence for one minute, there is one issue that I did not raise in my submission—

Senator O’BRIEN —Mr Ilyk, being ironic on the record will not appear ironic, which I think is what you are being. Hansard does not record irony. Do I understand that last passage to be an ironic statement?

Mr Ilyk —Indeed, it was ironic.

CHAIR —Please continue, Mr Ilyk.

Mr Ilyk —There is one issue that I did not raise in my submission but I believe it is extremely important and I would just like to briefly raise it here in case the opportunity does not arise later. The issue is insurance. After the Monarch and Seaview accidents, the government of the day, under Laurie Brereton, realised that it would be incompatible for the new regulatory agency to have to obtain commercial insurance for its regulatory functions as this would compromise how the authority responded to coronial and other inquires. The government, therefore, indemnified CASA. CASA still paid the premium, but that premium for the insurance was paid to the Commonwealth for its indemnity.

In 1998, for some reason the department of transport insisted that CASA should once again obtain commercial insurance. This was subsequently put in place, despite objections from the CASA director. The inevitable result is that, in coronial inquiries, it is generally the insurer who is responsible for legal costs as well as running the case and determining how the case will be run. The lessons from Seaview and Monarch and the insurance arrangements, which were put in place to avoid this sort of conflict and allow the government to determine the best public interest approach to dealing with coronials, were simply ignored. In my view, the committee should look at this issue as part of its inquiry. I am surprised that this issue has not been raised by either CASA or the department as it is a fundamental governance issue for CASA.

CHAIR —Because that was a very passionate opening statement, with a lot of information and accusations, I am going to ask senators to show some restraint. I will give the call to senators, and I would urge them to let their colleagues follow with their questions so that each one has a chance to ask the questions. Senator Heffernan, have you a list of questions or is that a brief statement?

Senator HEFFERNAN —I have a question on that last point. Mr Ilyk, are you saying that the driver in a coronial inquiry is really the financial interests of the insurers rather than the adventure of the truth?

Mr Ilyk —That is exactly what I am saying. The fact is that the insurer has an interest in making sure that CASA has no blame, because, if it does, there will be litigation. Litigation will mean that the insurers will have to pay out. That was the whole problem with the Seaview and Monarch accidents. That is why at that time the government said, ‘If you make the regulatory authority subject to commercial insurance arrangements, that will be the inevitable result.’ That is actually what happened in Monarch. As a result of that, the government decided to indemnify CASA so that it could determine whether or not in any coronial there was a public interest to take a particular view as to how respond to that coronial.

Senator HEFFERNAN —You are a lawyer, I take it.

Mr Ilyk —Yes.

Senator HEFFERNAN —My difficulty with the process is that you do not necessarily seek the truth in a court. At a coronial inquiry, if there is a financial driver, it is an incentive to further exacerbate the problem, because you use a good lawyer not to tell a lie but to avoid the truth.

Mr Ilyk —I hope everyone tells the truth.

Senator HEFFERNAN —The reward or incentive to do that is ever so much greater because it is in direct relation to a financial outcome.

Mr Ilyk —Was that a question, Senator?

Senator HEFFERNAN —Yes. Do you think that is right?

Mr Ilyk —I think there certainly is an interest. The insurer has an interest to protect its—

Senator HEFFERNAN —Client.

Mr Ilyk —Its money—itself. It is the insurer, so it is the one that has to pay out. So it will raise particular arguments in order to make sure that there is no liability attributed to its client, which, in this case, happens to be the regulator. That was what was found to be the problem with the CAA response to the Monarch coronial inquiry.

Senator HEFFERNAN —Are you saying that there would be a different outcome if the insurer were not the respondent?

Mr Ilyk —There might very well have been. There might not have been the continual legal battles to try and avoid liability at all costs. The government might, in fact, have said: ‘We are at fault. The regulator is at fault. Maybe it didn’t do its job.’

Senator HEFFERNAN —I hear what you are saying. That is why I would get rid of two out of three lawyers.

Senator O’BRIEN —Following that, does it follow then that, at the coronial inquiry into the Lockhart River crash, the directions for the conduct of CASA’s case were necessarily made by the insurer rather than by CASA?

Mr Ilyk —I was not involved, but given that the—

Senator O’BRIEN —Is that your experience of what happened in previous cases?

Mr Ilyk —Yes.

Senator O’BRIEN —So you can say that, while you were general counsel for CASA, when there were coronial inquiries the case on behalf of CASA was conducted by, or at the direction of, the insurer.

Mr Ilyk —We had to notify the insurers that there was an accident and that a coronial inquiry was coming up. The insurers determine who will represent the insurer and CASA. Those lawyers then work with the insurer to work out what strategy to use in the particular coronial inquiry. So it is driven by that. CASA obviously has some say in it, but it is the insurer’s interests and their money, so they are actually running the case.

Senator O’BRIEN —What is the consequence of CASA not cooperating? Voiding the insurance?

Mr Ilyk —As with any commercial insurance, if you do not do what the insurer says then the insurer says, ‘Well, we’re not paying up,’ if there is some sort of litigation and you have not cooperated. You have a duty to the insurer, and that is the issue. The duty to the insurer is to protect the insurer’s interests. That is generally what happens.

Senator O’BRIEN —So that was your experience as general counsel for CASA.

Mr Ilyk —Yes.

Senator O’BRIEN —You ceased to be general counsel in 2006?

Mr Ilyk —I was general counsel from 1995 to 2006.

Senator O’BRIEN —What point in 2006?

Mr Ilyk —May 2006.

Senator O’BRIEN —What was the situation then for Lockhart? When did that process start, and were you in any way involved in it?

Mr Ilyk —I was not involved in the coronial inquiry. That happened in 2005. The coronial inquiry did not start till after I had left. I had no involvement in that.

Senator O’BRIEN —But the insurer would have been notified.

Mr Ilyk —Absolutely.

Senator O’BRIEN —There would have been a process that commenced while you were there.

Mr Ilyk —They had been notified.

Senator O’BRIEN —So the process, so far as you are aware, started on Lockhart River in the same way as it started on all of the other matters.

Mr Ilyk —Absolutely.

Senator O’BRIEN —Do you know whether the insurer had particular counsel that they wanted engaged regularly in other matters?

Mr Ilyk —No. I know who was involved, but I have no idea of what basis it was on. It was a matter for the coroner to choose who he wanted as his counsel, and it was a matter for the insurers and CASA to decide which counsel they would use. I was not involved in that. That occurred after I had left.

Senator O’BRIEN —There have been certain comments made about counsel assisting the inquiry in relationship with CASA. Is there any connection, to your knowledge, between that legal practitioner and previous insurance cases?

Mr Ilyk —You are talking about Mr Harvey?

Senator O’BRIEN —Yes.

Mr Ilyk —Mr Harvey certainly represented CASA on a number of occasions and for the insurers, yes.

Senator O’BRIEN —For the insurers?

Mr Ilyk —Yes. Generally, most coronials were funded by the insurer.

Senator O’BRIEN —So the insurer chose the counsel in previous cases—

Mr Ilyk —Yes.

Senator O’BRIEN —and chose Mr Harvey?

Mr Ilyk —They chose him. Obviously, on some occasions they were chosen on the basis of what CASA wanted. I recommended Mr Harvey on a number of occasions; sometimes the insurer accepted it and sometimes it did not. It ultimately made its own decision.

Senator O’BRIEN —Thank you for that. In terms of your situation, one might expect that as a defence to matters that you raise it might be said that you have an axe to grind.

.Mr Ilyk —I have no axe to grind. The best thing that ever happened to me, I can tell you, is being terminated. My life is much better since I left CASA. I have no problems, no qualms about what happened to me, but I am concerned about what has happened to other staff, how it has happened and the direction the authority has taken.

Senator O’BRIEN —What we were led to believe in evidence from CASA was that, despite statements by Mr Byron about partnership with industry, in fact CASA had a dedication to enforcing regulation.

Mr Ilyk —Senator, I think you just have—

Senator O’BRIEN —I have read your submission and I know you have related a number of occasions where the issue of partnership was regularly referred to by Mr Byron. You also referred to job advertisements and statements in other documents. How recent are they?

Mr Ilyk —That is an interesting question, because I very briefly watched the Senate committee yesterday where CASA seemed not to know about this. I went back onto the website and googled it.

Senator O’BRIEN —This is the CASA website?

Mr Ilyk —I just went to Google, and there you go. This says:

CASA works to be a valued partner with the aviation industry …

Senator O’BRIEN —That was last night?

Mr Ilyk —Yes, that was last night.

CHAIR —Could you table that for us, Mr Ilyk?

Mr Ilyk —Yes.

Senator O’BRIEN —I guess what you are telling us in your submission is that in your experience, from what you have heard from people who still work for CASA and from its public pronouncements, it has not abandoned this concept of partnership with industry?

Mr Ilyk —I do not think it has abandoned it at all. If you look at some of the submissions in support from some of the industry, it is quite clear that that is the case. The idea is: why would you change that partnership, because it is good for you. I do not think it has been abandoned at all.

Senator HEFFERNAN —What does ‘good for you’ mean?

Mr Ilyk —I will put it this way. Look at Qantas. It is a large organisation; it has lots of people. Do you think that in the last 10, 15, 20 years it has contravened no safety regulation? None at all? Have a look at what action CASA has taken in relation to Qantas. None. Not even an infringement notice. Now I recall when I was at CASA issues did come up and I always thought: ‘If this happened to a smaller operator, CASA would do something. Why hasn’t any action ever been taken against Qantas?’ The answer was always: ‘We don’t want to upset Qantas. We want to make sure we have a collaborative approach with them because they may not speak to us.’

Senator HEFFERNAN —Does that apply to Kendall and Rex and Hazelton?

Senator O’BRIEN —It did to Ansett.

Mr Ilyk —I think it applies to all of the majors. I will ask the common question—

CHAIR —When you say ‘the majors’, who are the majors?

Mr Ilyk —Virgin, Qantas and all of the major RPTs—they are the main two.

Senator O’BRIEN —You have said that this partnership position, in your belief, is current, and you no doubt are aware that CASA sought to downplay that in their evidence.

Mr Ilyk —In my view, that is the case. I do not think much has changed. I think it is continuing down that direction.

Senator O’BRIEN —You talked about the regulatory development and its impact. We heard yesterday that 32 out of 60 regulations had been promulgated, a number were awaiting drafting and there were a number that were yet to be done. How does that align itself with your submission about failure in the regulatory development process?

Mr Ilyk —I simply ask where they are. After five years, where are they? Where are the maintenance regulations that were promised in 2006? Where is part 91? Where is part 61? Where is part 121? There is nothing.

Senator O’BRIEN —What are those parts?

Mr Ilyk —Part 91 is general operating rules, 121 is for large aircraft and part 61 is for licensing pilots. Where are they? It is five years since this process started. It was five years before that. One of the issues, of course, is that back in 1996 we totally restructured the regulations. They were about 80 or 95 per cent complete. A new minister came in, was lobbied by industry, and all of that was dropped. Since then, basically nothing has happened—although we did have parts 21 to 35.

Senator O’BRIEN —What are they?

Mr Ilyk —They are the airworthiness provisions from the FAA. But I am just focusing on the last five years. There has been promise after promise after promise. You just have to look at attachment 4 to see what those promises are; there is nothing there.

Senator O’BRIEN —I have read attachment 4. When we received evidence that there were 32 regulations promulgated—

Mr Ilyk —They did release part 137. If you go through all the submissions, suddenly we were going to have press releases and there would be a new two-tier format. Well, that has come and gone. We are now issuing civil aviation orders again. That was all meant to go but the rationale is: ‘Well, we can’t actually change the regulations; it takes too long. So let’s just go back to issuing civil aviation orders.’ I am not criticising that; that may be a good thing. All I am saying is—

Senator O’BRIEN —That is the easy solution?

Mr Ilyk —Yes.

Senator O’BRIEN —Issue civil aviation orders because you cannot formulate regulations.

Mr Ilyk —Absolutely, especially when you have indicated through your media releases that that is not going to occur.

Senator O’BRIEN —You have spoken about Qantas, another longstanding matter. In terms of the relevance of industry’s influence in CASA in your time in CASA—up to 2006—what can you tell us has been the nature of industry’s influence since 2003?

Mr Ilyk —I think there was a lot of industry pressure to get rid of particular people. If you happened to criticise industry or took a tough stance, the inevitable result was that there would be complaints made to a CEO, and the first reaction was, ‘Well, industry complained; CASA must be wrong.’ I was continually being asked to justify why we did particular things. There was no: ‘Well, is that right? Is that wrong?’ It was always: ‘There’s a complaint. You’re wrong. Why have you done this?’

Senator O’BRIEN —That is your personal experience?

Mr Ilyk —That is my personal experience.

Senator HEFFERNAN —Did you take a bullet? Did they shoot you?

Mr Ilyk —Yes.

Senator HEFFERNAN —Why do you think they shot you?

Mr Ilyk —If you read all of the statements made about me by industry, the whole legal area was seen to have this enforcement mentality. We were seen as obstructionist to any progress that industry wanted to make. We were seen to be stepping in the way. We were accused of stopping regulatory development when, in fact, we had very little to do with regulatory development. The legal council was actually taken out of the regulatory development role, but we were being criticised for stopping regulatory development. It is simply untrue. In fact, I remember that back in 2005 I posted a response to those accusations on the SCC website which addressed all of those things and which basically indicated all of the statements that were being made by industry about the whole regulatory process and how it was totally misunderstood. They did not even know what they were talking about most of the time. I am happy to provide that to you.

Senator O’BRIEN —Perhaps I missed something in what you were saying, because there was some noise from outside. But you are very clearly saying that you came under pressure in relation to your role because of complaint from industry.

Mr Ilyk —Yes. I have no doubt about that.

Senator O’BRIEN —For, in your view, doing your job.

Mr Ilyk —For doing my job. Towards the end of my career, the CEO simply ignored all of my emails. I never got a response to anything. I sent minutes to him detailing what I believed were significant governance failures. There were no responses to any of those.

Senator HEFFERNAN —Do you have a piece of paper that would be evidence of the fact that you might have got the bullet because you were seen to be doing your job? Did someone complain and say, ‘This bastard’s too hard on us’?

Mr Ilyk —That is a whole separate area of inquiry that it would be useful for the committee to look at. I do not make any comments about that.

Senator HEFFERNAN —Do you think that the partnership between CASA and the industry—and you are talking about the bigger players—is putting lives at risk?

Mr Ilyk —If you simply have a look at what happened in the FAA and the relationship there, that is exactly what the committee was saying.

Senator HEFFERNAN —Are you saying that something similar to the case of the FAA and that southern airline which had several planes in the air that were not being inspected is going on in Australia?

Mr Ilyk —I am not saying that at all. What I am saying is that there is this notion that CASA does not have any real responsibility for safety regulation and that that is the responsibility of the industry, rather than acknowledgment that CASA is set up to regulate aviation safety and the regulations have some relevance to aviation safety. That, in the view of the current CASA, is simply not the case. That is a blinkered view. It is an unsophisticated view that the responsibility for aviation safety rests only with the industry.

Senator HEFFERNAN —Do you think that the air safety situation in Australia of 10 years ago, when everyone agrees to some extent that CASA was a bloody shambles, has improved today?

Mr Ilyk —That is a subjective judgement. I do not know that I can make that judgement. There have been no major accidents. Obviously, Qantas has not crashed. There have been a few misses.

Senator O’BRIEN —There have.

Mr Ilyk —For major RBTs, there certainly has been a major accident, with 15 people dead.

Senator HEFFERNAN —I heard a few things in the car. Accidents happen.

Mr Ilyk —The point to be made is the same point that Mr Oberstar made in the FAA. The fact that there have not been any accidents and the fact that people have not died does not mean that there is no safety problem.

Senator HEFFERNAN —I hear that. Obviously, speed cameras work. I slow down when I see the speed camera. If you have not got oversight, you might cut corners because of cost pressures. If you cut too much of the corner, eventually you will run off the road.

Senator O’BRIEN —What if you have not got a visible regulator? You are making a comparison with a speed camera.

Senator HEFFERNAN —The speed camera is visible.

Senator O’BRIEN —If you have not got a visible regulator, industry may be more inclined to cut corners than they otherwise would be.

Mr Ilyk —I think that is exactly what happened in Seaview, Monarch and ARCAS. Those coronial inquiries and the royal commission looked at all those things and made the point very clear: if you start going down the partnership route suddenly the industry is your customer. The customer is always right, so what do you do? You work to please your customer.

Senator O’BRIEN —Indeed, you mentioned ARCAS and, as I recall, it was a matter that was before this committee for some time. One of the allegations was that there was a closeness between the management of ARCAS and a key officer with CASA.

Mr Ilyk —Indeed.

Senator O’BRIEN —And that officer, shortly after the inquiry, ceased to be with CASA.

Mr Ilyk —That is correct. One of the recommendations of ARCAS was that CASA recommit itself to a vigorous enforcement policy. The board of the day did exactly that. That is gone.

Senator HEFFERNAN —We had evidence of a Mr Purdy. Do you know who Mr Purdy is?

Mr Ilyk —Yes, I do.

Senator HEFFERNAN —Did he have a close relationship with some people in CASA?

Mr Ilyk —He was an officer in CASA.

Senator HEFFERNAN —Sorry—I didn’t mean CASA. My take of the evidence was that there were some instructions issued through CASA that were not followed up. Did Mr Purdy issue the instructions?

Mr Ilyk —As I recall, at that time Mr Purdy was responsible for the airline office based in Brisbane. I am not sure what to say next.

Senator HEFFERNAN —Here is your big opportunity; you were the lawyer—

Mr Ilyk —All I can say is that as I sat through meeting after meeting in CASA and listened to issues involving some airlines, I always queried: ‘Why are we not taking any action? We would have if it was a smaller operator.’ The answer I kept getting was: ‘We don’t want to upset them. They won’t speak to us. Therefore, it is better that we have this cooperative thing. That way we get to know what’s going on.’ That was the attitude.

Senator O’BRIEN —In terms of your take on the US experience and what is happening with the FAA—

Mr Ilyk —New industry?

Senator O’BRIEN —and Transport Canada, where would you put CASA in relation to those two organisations?

Mr Ilyk —About where the FAA is.

Senator O’BRIEN —CASA say that FAA regulate more than CASA.

Mr Ilyk —FAA regulate more than CASA? If that is the case then it is even worse. If FAA regulate more than CASA and the congressional inquiry has found such significant failings in the FAA then the situation in Australia must be worse than it is in the FAA. I would have put it about the same.

Senator HEFFERNAN —Why is it a common perception—whether it is a reality, I am not qualified to make a judgement—that FAA have this less than perfect work record as does, maybe, as you say, CASA? Is that because of cost pressures? Is the global population wanting to fly at less than the cost of production, as it were, for the industry? Are airfares too cheap so costs have all been pulled down to the point where they are cutting corners?

Mr Ilyk —Economics probably has a lot to do with a lot of this. If you cut corners on safety, if you do not do your safety inspections, it costs you less so obviously there is some incentive to do that. What happened in the FAA situation was that you had the carrier doing exactly that. They had a self-reporting system; they did not self-report. The individual inspectors who discovered that tried to do something about it and they were threatened with the sack and all sorts of things. It was only after the congressional inquiry got involved that suddenly the FAA saw the problems. Suddenly the FAA did all of the inspections; suddenly the FAA issued millions of dollars in fines.

Senator HEFFERNAN —Most typical developed airports in their business plan have everything but the landing aircraft as their business driver—the industry of the industrial estate, as it were, like Schiphol or Canberra or Sydney. Do you think it is a flawed business plan? If you impose the right set of conditions on safety, supervision, fuel costs, et cetera then air fares would have to be a lot higher and we are sort of flying in this false economy with aviation.

Mr Ilyk —A lot of people do make that point, and I think it is a valid point to make. You have to look at the cost of safety and the cost of compliance. You cannot go into a business like aviation and run it on a shoestring. And that is probably one of the problems: there are too many operators chasing too few dollars. That tends to be what happens.

Senator O’BRIEN —Going back to your evidence about your communication—or lack of it—with Mr Byron and presumably others, you talked about a series of memos and emails. Were any of those answered, formally or informally?

Mr Ilyk —One of the ones that I sent to the CEO at the time outlining my concerns about governance failures in CASA was never answered formally. We had a CEO meeting about three months later and the only response I got from the CEO was, ‘Don’t you ever send me a minute like that again.’ At that point I knew I was on the slippery slope out.

Senator O’BRIEN —How long was it?

Mr Ilyk —It was not long after that that the market testing report came along. They did all of the market testing and: ‘Wow! We do not need a general counsel. We do not need legal counsel.’ That is what happens.

Senator HEFFERNAN —Have they got one now?

Mr Ilyk —No. There is no general counsel there. In fact, the idea as I read it in the CEO’s speech to the Aviation Law Association last year is, ‘We don’t need a general counsel because that suggests that legal is a core function of the authority.’ That is simply not the case. It is simply meant to be in the background, a subordinate sort of thing. You get a situation where you take away all of the regional counsel that were put in place to help CASA staff to understand their legal responsibilities and to make sure that they interpreted the legislation correctly. They were all taken out. It was tried to be centralised. Managers were discouraged from seeking legal advice because their role is to manage—they should know what they should be doing; they shouldn’t bother seeking legal advice. Yet, we are dealing with complex legislation and complex procedural enforcement strategies. All of those things require legal input. It should not be a surprise that you need to have that input, but they simply say ‘We don’t need that.’ That is one of the issues facing CASA today.

Senator O’BRIEN —Regarding the rights and powers of CASA inspectors and officers and the rights and obligations of the industry participants, you are saying that you were told that the philosophy of CASA was that you did not really need to be informing people about that. Are you saying that the new directive of CASA was that there did not need to be a detailed understanding of that or an advisory process to keep on top of that? What I want to know is: how are officers to do their jobs operating within the law?

Mr Ilyk —They probably make it up as they go along. They are discouraged from seeking legal advice on their powers.

Senator O’BRIEN —So specifically there has been some direction to officers in the field, has there?

Mr Ilyk —Have there been directions? I do not know, Senator, but have a look at Mr Byron’s speech to the Aviation Law Association where he makes it clear that, in his view, there was too much reliance placed on legal. Managers should not have to hide behind the law. They should make their own decisions and be accountable for them. Seeking advice on your regulatory powers is not hiding behind anything. That is doing your job properly, making sure that you discharge your statutory responsibilities. That is not hiding behind anything. Managers are not lawyers; they are not versed in the law; they are not versed in statutory interpretation. That is why you have a legal area to help them do their job. That has simply been discouraged and taken away.

Senator O’BRIEN —Did you raise these issues with Mr Byron in any form?

Mr Ilyk —That new policy happened after they dismantled OLC after I was terminated.

Senator O’BRIEN —Okay. So how recently was that?

Mr Ilyk —And they are the issues that I raised in my 20-page response to the market testing report, these very issues: that this is a flawed proposal and that the people who did that market testing report had absolutely no understanding of the role or responsibilities of a regulator. But they provided the convenient answer to dismantle OLC. In fact, it is interesting, if I could just mention—

Senator O’BRIEN —It is always hard to do these things on the wrong area. But if you have documents which support what you have been saying—

Mr Ilyk —Yes, Senator.

Senator O’BRIEN —I think the committee would be happy to receive them, including that document you have just mentioned, which is the response to the market testing—

Mr Ilyk —I do not think it is appropriate for me to make that public. That was legal-in-confidence.

Senator O’BRIEN —All right.

Mr Ilyk —I do not want to make that public, but I am happy to provide that to the committee on a confidential basis.

Senator O’BRIEN —Okay. I think we will consider that. I cannot make that decision for the committee.

Mr Ilyk —In fact, you could probably ask CASA for it. They have it.

Senator O’BRIEN —Okay. We will see what we can and cannot get. As for the nature of your communications with Mr Byron—I have seen somewhere there is a discussion about that—you would expect that CASA still has your written communications?

Mr Ilyk —They should have; they cannot destroy the documents. That is an offence. So they might have, but they certainly cannot destroy them.

Senator O’BRIEN —So they should have details of communications between you and Mr Byron both ways.

Mr Ilyk —Yes.

Senator O’BRIEN —On file.

Mr Ilyk —Yes. I would be surprised if they did not. I mean, they are official records.

Senator O’BRIEN —Do you have copies?

Mr Ilyk —I may have.

Senator O’BRIEN —Okay. I think you have answered my questions about the regulatory matter—that is, the making of regulations, I should say—and the FAA and the Canadian problem. In terms of your evidence about Monarch, Seaview, Arcas and Aquatic Air, to your knowledge, how many people remain at CASA who have the continuity of knowledge of those events?

Mr Ilyk —Probably one, I suspect.

Senator O’BRIEN —Is there any reason we ought to be concerned about that?

Mr Ilyk —I think the committee should be concerned about the fact that all the lessons of the past have been forgotten. They have been forgotten now. The people who were there, who did remember that, have been removed. As I said in my submission, a point of pride in this organisation is that we have got rid of all of the managers. All the people who actually understood and learnt the lessons of the past are gone; they have been removed. Now that is a point of pride. In my view, to lose that amount of experience and corporate knowledge would be a tragedy for most organisations, but here it is touted as a success. This is the success of CASA: we have got rid of all the managers who used to be there, because they are unsophisticated, because they have a blinkered view of the regulator’s role.

CHAIR —Are we talking natural attrition, redundancies or moved on?

Mr Ilyk —Most of them have been moved on.

CHAIR —Okay. Sorry, Senator O’Brien.

Senator HEFFERNAN —In the time that they were the managers, though, CASA did not enjoy a spectacular success in aviation’s eyes, did it?

Mr Ilyk —Well, it did not enjoy success in not being criticised by industry—

Senator HEFFERNAN —Ten years ago there were endless complaints and there still are endless complaints.

Mr Ilyk —Of course, and there always will be. My point to you would be that I would rather be criticised for being a tough regulator and be criticised by industry than to see what has happened in Lockhart River.

Senator HEFFERNAN —Do you think that is the reason they got rid of them—because they were seen to be tough regulators?

Mr Ilyk —They were gotten rid of because a lot of these people stood up and said, ‘We do not agree with the way things are being done.’ I point the committee to the submission from Mr Rod Bencke. He has not been called, but he has a very good understanding of what has happened. There are a lot of people who have just been moved on because they were seen as obstacles. They were seen as being supportive of regulatory development that was in the public interest.

Senator O’BRIEN —In relation to an issue that has been raised with us about the implementation of the new direction or directions—all of the new staff that are on board with CASA—what do you know about the steps that have been taken within CASA to train or equip officers to understand their roles in this reformed environment?

Mr Ilyk —Since I left I do not know very much at all, but I have received correspondence from some CASA staff that suggests that there is none. There is no training. In fact, one of the items—I cannot find it in my papers here—had the current manager saying: ‘In the past, new CASA staff were given detailed training about their regulatory responsibilities, about the direction and about all of these things. That simply does not happen.’ I cannot speak—I am not there. I am just relaying what I have heard from existing management.

Senator O’BRIEN —So current staff who have communicated with you are saying that they are not being provided with training.

Mr Ilyk —The new staff are not. In fact I would ask: since my departure, how many training sessions have there been for CASA staff in relation to regulations, about interpretation or about anything? Probably none. I used to do quite a significant amount of training.

Senator O’BRIEN —So you used to do training?

Mr Ilyk —I used to go around the country doing training myself. That has stopped. In fact, I went on to the CASA website the other day just to see. When I was there I issued the initiative of aviation rulings. The purpose of the aviation rulings was to explain to industry what particular regulations meant in terms of their need to comply. I had a look to see what rulings had been placed on the website since I had left. None. It is not important anymore.

Senator FISHER —I want to ask a bit more about your concerns about CASA being in a state of regulatory capture, as you put it, and about it being too close to the industry that it is supposedly regulating. I want to ask you in particular about the non-fare-paying sector of the industry. You may or may not be aware, for example, that we heard from the likes of AOPA yesterday about their concerns, which are somewhat contrary in that respect to the views that you have put. For example, AOPA’s submission says:

AOPA believes CASA continues to over-resource its habitual attention to the ‘nonpaying passenger’ segment.

They further say:

By imposing—

for example—

airworthiness constraints above those recommended by manufacturers, AOPA believes CASA is imposing unwarranted costs—

et cetera. They essentially conclude that CASA’s present regime is ‘militaristic, prescriptive, and varying in approach to industry concerns’. What do you say of concerns expressed by the likes of AOPA to that end?

Mr Ilyk —I am not surprised AOPA said that. That is exactly what they have been saying for years. Have a look at what I say in my submission about what they said about Seaview and Monarch. They basically dismiss all of the lessons of that. Having said that, I think that there is a tendency in CASA to go for the easy targets, which can be those sectors that are not necessarily fare paying. It is much harder to take action against the larger airlines. It is quite easy to target the private pilot and those types of things. CASA does that, and I do not think we can deny it. If you look at the amount of regulatory action that is taken, you will see that the bulk of it is in that area. I do not know whether or not that is appropriate. All I am saying is that there may be some issues. But I do not think the fact that CASA takes action should be a concern, because that what CASA’s role.

Senator FISHER —You are suggesting the majority of action is taken in respect of the likes of Seaview and Monarch, where fares were paid, were they not—people were paying for their seats?

Mr Ilyk —Yes, of course.

Senator FISHER —To the extent that there is also a private aviation market for non-fare-paying passengers, which is the context of the AOPA criticisms of CASA that I read to you from AOPA’s submission, your general observations are that CASA is guilty of regulatory capture. What would you say about the concerns expressed by the likes of AOPA that CASA is unduly focused on the non-fare-paying sector?

Mr Ilyk —I do not have much to say about that at all. The fact is CASA is meant to regulate all of the industry. That is what the act is about. So it should be taking action where it finds breaches.

Senator FISHER —Is it fair to suggest that your criticism of CASA, in respect of its being guilty of regulatory capture, is that it is focused more on the commercial aviation sector?

Mr Ilyk —No, I think that has been captured by organisations such as AOPA as well.

Senator FISHER —Thank you.

Senator HEFFERNAN —This committee is concerned and governments of all persuasions for many years have been concerned that CASA might be dying the death of a thousand cuts. Part of the death by a thousand cuts is that you do not really notice it as it is happening, but it happens. I think the previous witness, Mr Tully, was trying to tell us that. Part of that, from the evidence we have received, is that you can, without really recognising it, deskill an organisation. Part of that is that if you are brought into CASA as a pilot but you are about to become a regulator you need to learn that you are no longer a pilot and that you are a regulator, and you need to have a course that sets that out for you. Do you think that is a flaw in the system at present?

Mr Ilyk —Absolutely.

Senator HEFFERNAN —Thanks.

CHAIR —Mr Ilyk, thank you very much.

Proceedings suspended from 11.03 am to 11.17 am