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Civil Aviation Legislation Amendment Bill 1995

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House: House of Representatives

Portfolio: Transport

Commencement: The provisions of the Bill discussed in this Digest commence on a day fixed by proclamation, or if such a day is not fixed within 6 months of the Bill receiving the Royal Assent, at the end of that period.


To provide for the establishment of the Civil Aviation Safety Authority which, together with Airservices Australia which will be established by the Air Services Bill 1995, will replace the Civil Aviation Authority.


This Digest deals with the safety aspects of the Civil Aviation Authority (CAA) and does not deal directly with other responsibilities of the CAA or the effect of recent changes on aircraft charges.

A major change to the administration of civil air safety regulation occurred in 1988 with the establishment of the CAA as a statutory authority to undertake a number of functions, including those relating to the regulation of air safety, transferred from the Department of Transport. The role of investigating air safety incidents remains with the Department of Transport and is conducted by the Bureau of Air Safety Investigations (BASI).

In relation to air safety regulation, the CAAs main aims, as seen in its first Annual Report, are to minimise safety regulation while maintaining cost effective safety requirements and to increase the co- operation with industry to promote safety management. Major reasons given for the change in emphasis and the need to provide more cost effective safety regulation to the industry were the deregulation of the airline industry and the need to reflect modern technical and operational requirements. 1

A major change introduced by the CAA was the practice that safety management would be a major responsibility of the airlines and aircraft operators under the supervision of the CAA, rather than the area principally being the responsibility of the government. Linked with the change in emphasis was the transfer of costs for aircraft safety to aircraft operators. In the 1990- 91 Budget, the government announced that the operations of the CAA, with the exception of search and rescue, would be subject to a phased in cost recovery, with the revenue being raised from increases in the rate of excise on fuel used in aircraft. Following various complications, the phasing in of the transfer of costs for aircraft safety was postponed until July 1992. 2 In relation to the transfer of cost recovery to the industry, the CAA stated:

It is recognised that there will be a need for some education and a considerable amount of consultation with the industry to ensure the transfer progresses smoothly and cost- effectively without reducing the high level of safety now experienced. 3

In 1990, the CAA became a Government Business Enterprise and further changes to structure and emphasis occurred. In the 1990- 91 Annual Report of the CAA, the then Chairperson of the CAA, Mr Dick Smith, explained the requirement to balance the cost of safety supervision as follows:

Increasingly over the last 12 months the media - and therefore the community - have come to understand the complex balance between safety and cost. The result is that there is now less pressure to spend the limited amount of money available for safety as a reaction to newspaper headlines. The Authority's safety experts are now able to concentrate on areas where the best value is obtained for the safety dollar.

There have been claims that change in the CAA is taking place too quickly. When safety is a factor, we cannot afford to be complacent or slow. 4

A major change also occurred in the number of people employed by the CAA. The following table gives the total number of people employed by the CAA from January 1991 to January 1993 and the number proposed to be employed under the 1993 Corporate Plan of CAA until July 1997. It also lists the number of people employed in the Directorate of Aviation Safety Regulation (DASR), which has responsibility for setting standards, surveillance and safety regulation (it should be noted that the figures include support staff and that those for DASR from 1993 on may be subject to review):

>!/!*!>;;*|!!;>!!!;^*!! Jan 91 Jul 92 Jan 93 Jul 93 Jul 94 Jul 95 Jul 96 Jul 97 Total 7332 5442 5078 5016 4785 4531 4381 4295 DASR 727 502 510 512 512 512 512 512

Source: CAA Annual Report 1992- 93, p. 32.

In relation to the phasing- in of cost recovery for the setting and enforcement of safety standards, it was announced in the 1992- 3 Budget that the Government would continue to pay half of these costs to a maximum of $22.8 million (indexed) per year, with the recovery from industry being phased in over two years from 1 July 1993 (the 1994- 5 Budget provided $26.3 million for CAAs safety functions).

Concerns over CAAs safety performance have been expressed for a number of years. The Minister established a Safety Regulation Forum in March 1992 and it reported in August 1992. According to CAAs 1992- 3 Annual Report: `The Authority took action to progressively address the issues raised and the Safety Board Committee monitored progress.' However, concerns continued and in February 1993 the Chairman of the Board Safety Committee, Captain Terrell, was requested to examine the CAAs Safety Regulation and Standards Division and the Terrell report was presented in March 1993. In response to the recommendations of the Report, the Chairman of the CAA, Ted Butcher, stated:

That process resulted in an identification of a number of changes needed to redress perceptions that safety standards may have been compromised by the pace and extent of reform in the safety regulation area. Management is implementing these changes and the Board has undertaken to reinforce the prestige and power of the safety regulation function within the CAA. 5

The concerns over CAAs safety performance came to a head following the fatal crash of a Monarch Air Piper Chieftain near Young on 11 June 1993. While there was much media comment regarding the cause of the crash, the BASI report into the investigation was not released until July 1994. The report found that the cause of the accident was controlled flight into the ground and also found a number of defects with the aircraft, inspection procedures and concerns with the operator and the CAA. In summary, the major aircraft defects were:

the autopilot had been removed for maintenance and had not been refitted by the time of the flight; and

the absence of the autopilot rendered the Horizontal Situation Indicator (HSI) inoperative (which was particularly important in the low cloud weather conditions that prevailed at the time of the accident).

The inspection program for the aircraft was found to suffer a number of defects, including:

when informed that the autopilot was unserviceable and that repairs had been delayed, the CAA, at Monarchs request, issued a Permissible Unserviceability Approval (PUS) that was valid until 16 May 1993 to allow the aircraft to operate subject to conditions, including that two pilots be on each flight (a PUS is intended to be an interim measure until a defect is rectified). The PUS applied only to the inoperable autopilot and not other instruments;

a further PUS was issued on 14 May 1993 as the autopilot had not been fixed. Again the PUS related only to the autopilot;

the aircraft underwent a regular maintenance check beginning on 31 May 1993, during which the autopilot was removed for repair. The engineer carrying out the check on the instruments and electrics on a sub- contract basis noted that the HSI and autopilot had been removed and was unable to complete the check as the HSI had been removed (the check could be completed without the autopilot as this was covered by the PUS) and requested to be informed when the HSI had been replaced so that the check could be completed; and

on 2 June 1993 the engineer checking the instruments and electrics learned that the aircraft had departed. He was informed by a Monarch engineer that the HSI had been refitted and tested by a radio engineer and a pilot. Consequently, the engineer inspecting the instruments and electrics certified his work. This was after the aircraft had been returned to service.

In relation to Monarch Air, the problems principally related to the organisation of the company and its finances and BASI found that Monarch's maintenance practices had been a concern for the CAA prior to the accident. BASI found that: `The inference that could be drawn from the way in which Monarch operations were conducted was that there was a significant management bias towards commercial operations at the expense of safety.' 6

As a routine part of its investigations, BASI investigated the role of the CAA and reached a number of negative findings, including that:

the activities of the safety Division `appeared to be biased towards promoting the viability of the operator rather than on promoting safety';

the relevant office of the safety Division had failed to formulate and undertake an program of surveillance of Monarch and acted reactively rather than proactively;

resources at the district level were insufficient for the tasks imposed; and

operating procedures were inadequate to ensure that Monarch maintained the standards required by the holder of an aircraft operators certificate of the class held by Monarch. 7

It should be noted that the above comments do not imply that the matters referred to were solely responsible for the Monarch Air crash, but were seen by BASI as contributing factors, along with other factors, to the crash.

The Governments reaction to the BASI report was contained in a News Release by the Minister for Transport dated 20 July 1994. The major features of the response were:

the establishment of the Aviation Safety Agency (ASA) within the CAA;

a recommendation that the government assume financial responsibility for the public interest safety regulation; and

the establishment of an inquiry into air safety for the commuter and general aviation safety sectors by the House of Representatives Standing Committee on Transport, Communications and Infrastructure (the Committee has yet to report and is continuing to take evidence).

However, further concern about CAAs safety function were raised following the crash of a Seaview Air aircraft on route to Norfolk Island on 2 October 1994. At the time of writing, a BASI report into this accident has not been released although there has been considerable media comment on CAAs monitoring of Seaview Air and allegations that the CAA had been informed of defects in Seaview's operations prior to the accident.

The governments reaction to the Seaview accident involved a number of steps:

on 10 October 1994 the then Director of the Director of Aviation Safety was transferred to international Division of the CAA and a new Director was appointed;

on 12 October 1994 the Minister announced that ASA would be established as an independent, statutory body rather than as part of the CAA and that the funds provided by the Government for safety regulation would be increased;

on 20 October 1994 the Minister announced that a judicial inquiry would be held into the operations of the CAA and that this would be independent of the House of Representatives inquiry (the judicial inquiry is due to report by 31 May 1995);

surveillance of low capacity passenger and charter operations was increased. By 16 November 1994, 733 inspections involving 278 companies had been conducted under the increased surveillance program and four airlines, including Seaview, had been grounded; and

57 additional staff were made available for safety regulation.

The re- organisation of the bodies responsible for aviation was announced by the Minister on 28 March 1995. There will be three bodies with responsibilities in the aviation area:

Airservices Australia (AA) which will be responsible for air traffic services, air navigation facilities, the provision of aeronautical information, rescue and firefighting services and search and rescue. AA will be a government business enterprise.

Civil Aviation Safety Authority (CASA) which will be responsible for setting safety standards, registration of aircraft, licensing, compliance with safety regulations and safety promotion and education. CASA will be a government authority.

BASI which will retain responsibility for safety investigation and will retain its present structure.

Main Provisions

The Civil Aviation Act 1988 (the Principal Act) will be amended by Schedule 1 of the Bill. The object of the amendments is to establish a regulatory framework for maintaining, enhancing and promoting safety in civil aviation ( Item 14).

CASA will be established by Item 18 which will amend Part II of the Principal Act which currently provides for the establishment and operation of the CAA. The effect of the amendment is to replace the CAA with CASA. CASAs functions are dealt with in new section 9 of the Principal Act and include:

the safety regulation of civil aviation in Australia and of Australian aircraft operating outside Australia;

encouraging voluntary industry adherence to safety standards;

to conduct regular reviews of civil aviation safety; and

to co- operate with BASI.

Section 9AA of the Principal Act, which requires the CAA to perform certain environmental tasks in relation to aircraft, will be repealed by Item 22. Such tasks will in future be performed by AA.

In performing its functions, CASA must regard safety as its most important consideration. However, as far as practicable CASA is to have regard to environmental protection when performing its functions (proposed section 9A).

The Minister may notify CASA of the Minister's views in relation to the appropriate strategic direction of CASA and the manner in which CASA should perform its functions. CASA is to take account of such views when performing its functions (proposed section 12A).

Part III of the Principal Act deals with the regulation of aviation safety and will be amended by the addition of a new Division 1 dealing with general regulatory provisions. CASA must grant a permission under the Principal Act (e.g. permission to operate an aircraft in Australia) if satisfied that the applicant has complied with, or is capable of complying with, the safety rules (proposed section 18).

Section 27 of the Principal Act deals with the issue of Air Operators Certificates (AOC). An AOC must be held in respect of an aircraft for it to be able to operate in Australia. Items 77 to 89 will insert new provisions dealing with applications for, the issuing of and conditions that may apply to AOCs and the new provisions will substantially strengthen the procedure involved in each of these processes. In relation to applications for an AOC, the main changes are:

applicants will be required to lodge a copy of the flight manual and other manuals required to be kept for each type of aircraft covered by the AOC;

CASA will be given power to require applicants to produce information or to allow an authorised officer to carry out a test or inspection, including inspections of aircraft, premises used in the operation and procedures and practices used in the operation;

CASA will be able to require applicants to conduct proving flights or to carry out other tests and demonstrations; and

CASA may refuse to consider an application until the requirements have been met.

CASA must issue an AOC if satisfied of a number of matters, including:

that the applicant has, or is capable of, complying with safety rules (CASA may take the financial position of the applicant into account when determining if it is so satisfied);

that the organisation making the application is suitable having regard to the proposed operations;

the organisation's structure, organisation and employees are sufficient to carry out the proposed operations; and

that there are suitable procedures and practices to ensure that operations are carried out safely.

AOCs will be issued subject to any conditions specified in the Civil Aviation Orders, certain mandatory conditions imposed by this Bill, and subject to any conditions that CASA may impose. The mandatory conditions are contained in proposed sections 28BD to 28DH which provide that the holder of an AOC:

must comply with the civil aviation rules;

must take all reasonable steps to ensure that activities relating to an AOC are performed with due care and diligence including that there is adequate management control and adequate communication within the organisation. Directors of a corporation will be required to conform with these requirements;

must maintain an appropriate organisation and ensure that sufficient qualified people are employed and maintain an operational headquarters and suitable buildings having regard to their operations; and

is to maintain a reference library of operational documents and material and material required to be maintained by the Civil Aviation Orders.

Proposed section 28BB will give CASA power to impose conditions on AOCs, while proposed section 28BC will limit the circumstances in which conditions may be applied. Basically, CASA is not to impose a condition or suspend or cancel an AOC except to ensure the safety of operations and that maintenance and airworthiness are of a standard necessary in the interests of safety.

Other provisions contained in Schedule 1 are largely of an administrative manner and include provisions relating to:

the composition of CASAs board (a Chairperson, Director and between 1 and 3 other members - the Minister is to appoint the members and Director, although the Director is to be appointed on the recommendation of the Board);

the preparation of a 3 year corporate plan; and

that money appropriated by Parliament for CASA is payable to CASA.

The clauses of the Bill deal with the transition from CAA to CASA and AA. Staff of the CAA will become employees of AA unless an authorised officer has made a determination that they are to become an employee of CASA. They are to be employed on terms and conditions no less favourable than in their current employment, although the terms and conditions of employment may vary after commencement ( clause 8).

Clause 9 provides that the assets and liabilities of the CAA are to be transferred to AA unless an authorised officer has directed that an asset or liability be transferred to CASA and such a transfer will not be a disposal of the assets or liability for the purposes of the capital gains tax.

The Civil Aviation Orders and AOCs in force at the time of transfer will remain in force ( clause 13).

The transfer of assets and liabilities will not be subject to State and Territory stamp duties ( clause 15).


1. See CAA Annual Report 1988- 89, p. 33.

2. CAA Annual Report 1990- 91, p. 17.

3. Ibid., p. 10.

4. Ibid., p. 4.

5. CAA Annual Report 1992- 93, p. 3.

6. BASI, Investigation Report 9301743, p. 53.

7. Ibid., pp. 54- 56.

Chris Field (Ph. 06 2772439)

Bills Digest Service 10 May 1995

Parliamentary Research Service

This Digest does not have any legal status. Other sources should be consulted to determine whether the Bill has been enacted and, if so, whether the subsequent Act reflects further amendments.

Commonwealth of Australia 1995.

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Published by the Department of the Parliamentary Library, 1995.