Developing Business Models in Aviation: Report from the RAG Working Group
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- Felicia Stewart
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1 Develping Business Mdels in Aviatin: Reprt frm the RAG Wrking Grup 1 General Framewrk Develpments in business mdels can cntribute t innvatin and lead t cmpetitin, which may increase availability f air transprt fr the cnsumer. Eurpean peratrs have been able t benefit frm a single set f harmnised rules in air peratins, cntinuing airwrthiness, air crew requirements, envirnmental prtectin and certificatin. 2 Backgrund Upn the request f Member States, the RAG Meeting f 7 Octber 2014 tasked EASA t assess the develpments f the business mdels used by airlines and t identify related safety risks psed t the aviatin system. EASA therefre set up a wrking grup f 11 NAA representatives t identify risks stemming frm the develpment in business mdels and t prpse pssible mitigating measures. The Wrking Grup (WG) has delivered a set f recmmendatins in the frm f actins fr further analysis r fr inclusin int the Eurpean Aviatin Safety plan (EASp). 3 Objective f the WG n New Business Mdels The WG assessed sme aspects in the develpments in business mdels, such as flight crew emplyment arrangements, remtely based peratins, the activities f ticket sellers, increased dependency n wet-lease, interperability, hlding cmpany wning the aircraft but multiple peratrs in varius cuntries perating the aircraft and the versight theref. During the curse f three mnths in early 2015, the WG develped an agreed understanding f assciated risks t aviatin safety, decided n a set f pssible mitigating measures and identified the challenges f delivering the desired utcmes. The WG als evaluated whether the existing safety regulatry system is adequate t address current and future safety risks arising frm develping business mdels. Therefre, the underlying principle f the WG was t develp ptential measures that States can use in their State Safety Prgramme (SSP) t mitigate the risks assciated with develping business mdels withut stifling innvatin r cmpetitin in the market and t prmte and ensure a cmmn regulatry safety playing field acrss the EU. 4 Activities f the WG The activities f the WG can be described as fllws: - Reviewed develpments in (multi-natinal) business mdels. Prprietary dcument. Cpies are nt cntrlled. Cnfirm revisin status thrugh the EASA intranet/internet. Page 1 f 11
2 - Assessed the challenges f facilitating innvatin and cmpetitin while maintaining adequate safety versight f thse types f peratins. - Studied assciated safety risks, where the existing system des nt adequately address these and identified a set f pssible prprtinate mitigating measures. - Assessed whether the existing regulatry and versight system includes prcesses that will adequately address safety risks that may emerge frm develping business mdels in the future - Develped recmmendatins in the frm f actins fr inclusin in the EASp 5 Interfaces The WG tk accunt f the fllwing measures already implemented: - EASA draft Wrking Paper n cperative versight - Pl f Inspectrs - The wrk already carried ut by Member States 6 WG membership The WG was cmpsed f 11 representatives frm interested NAAs wh are already adapting their versight t the develpments f business mdels. The NAA representative frm the UK CAA was elected as the chair f the WG. EASA staff frm the Flight Standards Directrate, Air Operatins, acted as the secretariat and prvided the necessary supprt. 7 Cre areas requiring mre in-depth discussin/research The WG was nt able t discuss all the develpments f business mdels. Due t the shrt time frame available f nly three mnths and the vast scpe f the tpic, the WG nly lked at sme cmmnalities, e.g. emplyment mdels, interperability, rle f ticket seller, lng-term wet-lease, and utsurcing. The fllwing require mre in-depth discussin and further research: - Discussins n Business Mdels shuld becme a cntinuus item in in the different frums (dealing with OPS, FCL, etc.). The WG n New Business Mdels shuld cntinue in ne frm r anther. - Enlarge the fcus frm an Air Operatins pint f view t include als experts regarding airwrthiness and crew training. - Review EASA s cnsultatin channels with NAAs, which shuld als ensure that NAAs can better exchange views n best-practices and enable NAAs t find slutins t cmmn prblems. - The principles behind many f the applicable rules have nt been drafted with thse current develpments in business mdels in mind. In the future, applicable rules shuld be evaluated and checked whether they are fit fr purpse taking int accunt the develpment f business mdels, such as types f emplyment, increased recurse t utsurcing, gvernance f the Prprietary dcument. Cpies are nt cntrlled. Cnfirm revisin status thrugh the EASA intranet/internet. Page 2 f 11
3 AOC that is utside the scpe f apprval, rle f the ticket seller, and ecnmic viability f an peratr. - Mst f the current EU/EASA rules fr gvernance f air peratrs were written when airlines were stable cmpanies with lts f state interest. Rules were written t prevent the risks in their traditinal business mdels. It is likely that these rules f gvernance need t be reviewed with the develpment f new gvernance structures in mind. Develping Business Mdels 8 Key Recmmendatins: Issue/Ratinale Mitigate the risks assciated with the emerging develpments in business mdels withut stifling innvatin r cmpetitin in the market and ensure a cmmn regulatry safety playing field acrss the EU What we want t achieve (Scpe and Objective). With increased cmplexity f the aviatin industry, the number f interfaces between rganisatins, their cntracted services and regulatrs are increasing. NAAs shuld wrk better tgether (cperative versight) and EASA shuld evaluate whether the existing safety regulatry system adequately addresses current and future safety risks arising frm develpments in business mdels. Hw we want t achieve it (Key activities) Deliverables Duratin - EASA and NAAs t prmte cperative versight and disseminate best practices n hw NAAs can better wrk tgether and participate in the versight f rganisatins/persns certified by anther Member State. EASA WP n cperative versight NAA grup n cperative versight & trial prject n cp. versight June year - Management systems f the peratr shuld capture new hazards that are intrduced by different emplyment mdels within an individual peratr, increased mbility f pilts, safetycritical services prvided by nn-certified service prviders and (lng-term) leasing. - Obtain better EU-wide ccurrence reprting data fr NAAs t prvide an pprtunity t benchmark an peratr s safety culture. Therefre, cntinue, repeat and widen the scpe f the survey f Netwrk f Analysts t better identify ptential hazards f new business mdels n ccurrence reprting. All NAAs shuld participate in the survey. The survey shuld include raw data n ccurrence reprts frm individual peratrs in A cmbined analysis by EASA n results f SMS data btained frm NAAs. Cntinue EASA Occurrence reprting survey 2 years 1 year Prprietary dcument. Cpies are nt cntrlled. Cnfirm revisin status thrugh the EASA intranet/internet. Page 3 f 11
4 rder t btain cnsistency in the type f ccurrences analysed. NAA s shuld use the results f their versight n ccurrence reprting as a perfrmance indicatr f the safety culture within an peratr. - NAAs need suitably qualified staff t assess the effectiveness f peratrs management systems t mitigate new risks stemming frm develping business mdels. - NAAs t have a thrugh understanding f peratrs gvernance structure. In particular influence f financial stakehlders and f the cntrlling management persnnel, where such persnnel are lcated utside the scpe f apprval. Affected Stakehlders Operatrs / Natinal Aviatin Authrities/EASA RMT.0516/0517 n inspectr qualificatin Research/ Guidance Material 2 years with fast track rulemaking 2 years 9 Detailed recmmendatins 9.1 Cperative Oversight Regulatrs wn prcedures and versight methdlgies are nt adapted t the develpments in business mdels. In additin, there is insufficient guidance n cperative versight, if it means ging beynd checking SACA ramp checks f peratrs that the NAA des nt certify. This means that the intent f the rule cntained in ARO.GEN.300(d) fr air peratins and ARA.GEN.300(d) fr air crew is nt clearly understd and that mre clarificatin is required. Therefre, the WG recmmends t prmte cperative versight as an imprtant tl in verseeing the develpments in business mdels by : - Disseminating Best Practices. - Share mre infrmatin between NAAs. - Better link SACA ramp checks with cperative versight - Receive ntificatin frm rganisatins n new lng-term remte peratins (+7 mnths) under ORX.GEN.130 and then share infrmatin with the authrity where the activity takes place (same fr ATO/ CAMO) 9.2 Discnnect between ecnmic and safety requirements EASA shuld facilitate infrmatin sharing between NAA s n crss brder activities and prvide clarificatin n the meaning f ARX.GEN.300(d). Prprietary dcument. Cpies are nt cntrlled. Cnfirm revisin status thrugh the EASA intranet/internet. Page 4 f 11
5 As a shrt term actin, EASA shuld create a frum fr NAAs t discuss cncrete examples f cperative versight. In the lnger-term, the financing methds underlying cperative versight shuld be clarified. The WG identified a discnnect between ecnmic and safety rules, which means that Regulatin (EC) 1008/2008 (Article 5) is nt fully aligned with the Air OPS rules f Regulatin (EU) 965/2012. As a result there are different interpretatins n the requirements cntained in Regulatin (EC) 1008/2008 and cnsequently there is a lack f a level playing field in hw the financial stability f an peratr is assessed in different Member States. In rder t btain a mre cmmn understanding amngst NAAs n financial viability assessments, the WG recmmended that: - the interface f the ecnmic and safety rules is imprved - there is a cmmn understanding amngst NAAs hw t assess the financial viability under Article 5 f Regulatin (EC) 1008/ New skills needed fr NAA persnnel t assess management system Tday the authrity requirements cntain few rules n inspectr qualificatin, especially in the area f evaluating an peratr s safety management system. With the fcus n perfrmance based regulatins and risk based versight (the terminlgy f which are cntained in the EASA prduced reprt A harmnised Eurpean Apprach t a Perfrmance Based Envirnment ), there is a risk that versight f peratrs is nt tailred t the risk prfile f the peratr and that inapprpriate apprvals are issued. In a cntext f develping business mdels, that intrduces new and evlving hazards int the peratin, NAAs need qualified staff t assess the effectiveness f the peratr s SMS t mitigate the new risks, such as remte basing, leasing, access t the cntrlling mind, different emplyment mdels. The WG als recmmends t prmte and t develp the idea f pling f inspectrs t assist in verseeing peratins. In the lnger-term, EASA shuld lk int cmmn training guidelines fr inspecting staff regarding the risks invlved by develping business mdels. 9.4 Annymus survey n ccurrence reprting t be cntinued The WG identified a lack f Eurpean benchmark safety-perfrmance data available t NAAs fr versight and rganisatins when setting-up their wn SMS system. With the intrductin f SMS Prprietary dcument. Cpies are nt cntrlled. Cnfirm revisin status thrugh the EASA intranet/internet. Page 5 f 11
6 acrss all dmains, experience with data cllectin and analysis will have t grw. Als the ccurrence reprting regulatin will increase quality f data. Therefre, the WG recmmends: - T develp guidelines fr NAAs n acceptable levels f reprting. NAAs t use the mandatry reprting n ne side and the availability f a just culture n the ther side as a perfrmance indicatr f the safety culture within a certified rganisatin. - that the Netwrk f Analysts shuld cntinue the annymus survey n ccurrence reprting and specifically t: repeat the survey ensure all NAAs take part in the survey, widen scpe f the survey Include data frm sme representative peratrs, wh prvide vluntarily raw ccurrence reprting data, which culd then be benchmarked mre in detail, t ensure that irrelevant ccurrences are filtered-ut and in rder t btain an additinal set f verified data. 9.5 Emplyment mdels within rganisatins The WG cnsidered the fllwing areas regarding emplyment f crews Different cntractual arrangements amngst crews nt always captured in the SMS. Tday, the management system (SMS) des nt systematically capture the crrelatin between different emplyment types (e.g. temprary emplyment mdels, emplyment via emplyment agencies, pay-t-fly emplyment schemes) within ne rganisatin (AOC hlder) and levels f ccurrence reprting. Different emplyment mdels within ne rganisatin might have a ptentially negative impact n the peratr s safety culture and induce a ptential risk f an unstable wrkfrce. Therefre, the WG believes that in the shrt-term mre evidence shuld be gathered by recmmending that the peratr s management system shuld capture the increased differences in emplyment mdels within ne peratr, i.e. data by type f cntract n ccurrence reprting, fatigue reprting, sickness reprting, reprts n turnver, FDM events. The WG als stresses the imprtance f just-culture n reprting and believes that the imprtance f ccurrence reprting will increase due t the Occurrence Reprting Regulatin. In the lnger-term, NAAs shuld imprve evaluatin f an rganisatin s management system and ensure cnsistency in standards, as well as an imprved crss-dmain analysis f the management system Increased mbility f flight crew Increased mbility f flight crew, wh mve frm ne airline t anther airline at a faster pace, can create an increased demand n the training department within an rganisatin. Prprietary dcument. Cpies are nt cntrlled. Cnfirm revisin status thrugh the EASA intranet/internet. Page 6 f 11
7 The wrklad f the training persnnel is likely t increase and there might be mre pressure t qualify flight crew at a faster pace. It might als be mre challenging t establish a safety culture in this case and the peratr will mst likely fcus n detailed standard perating prcedures (SOPs) as an imprtant risk mitigating measure. Overall increased mbility f flight crew can result in a reductin in experience levels and in the efficiency f recurrent training. Indeed, the ORO.FC.230 rules (particularly the training f all majr failures ver a 3 years lng perid) were develped having in mind that the flight crew wuld stay in the airline fr several years. The peratr cnversin curses might nt always cver the reductin in recurrent training efficiency. Therefre, the WG recmmends in the shrter-term that the peratr s SMS shuld capture high turnver f flight crew within the rganisatin and evaluate whether safety might be impacted by a higher turnver rate f flight crew within the rganisatin. In the lnger-term, the WG recmmends t review flight crew training requirements (peratr cnversin curse) and t assess if they are suitable fr peratrs with high mbility f flight crew General wrking envirnment As a general rule, an peratr and crew members must ensure that crews may nt fly when unfit t fly. Crews might feel reluctant t reprt sickness/fatigue r ccurrences due t difficulties at wrk. The challenge is fr the Fatigue Risk Management t capture nn wrk related issues (i.e. actual rest during rest perid). Since there is n evidence t this date that there is a direct link between different emplyment mdels and ccurrence reprting, the WG recmmends that there shuld be mre research t establish the relatinship between emplyment mdels and reprting. In additin, the WG recmmends raising awareness amngst NAAs n management and recrding f flying and duty hurs accumulated utside the cre peratr. 9.6 Gvernance f the rganisatin In a transnatinal hlding with multiple AOCs, the Accuntable Managers invlved may have limited, althugh sufficient, authrity fr ensuring that all activities can be financed and carried ut in accrdance with the applicable requirements. Full financial and strategic cntrl may be exercised by the transnatinal hlding management. This means that decisins with a safety impact culd be made by management, that in regulatry terms, is neither an Accuntable Manager nr a Nminated Persn. Cnsequently, NAAs have great difficulty t hld thse respnsible fr the decisins t accunt. There is a risk that the Accuntable Manager des nt have the full cntrl f the peratin and executes decisins that might have safety implicatins n behalf f smene else. Therefre the WG recmmends: Prprietary dcument. Cpies are nt cntrlled. Cnfirm revisin status thrugh the EASA intranet/internet. Page 7 f 11
8 - In the shrter-term: T establish clear guidance n cnditins fr acceptance f an Accuntable Manager and determinatin f wh the Accuntable Manager shuld be (see Frm 4 f cntinuing airwrthiness rules). - In the lnger-term: Mre research int gverning structures f peratrs and means t versee peratrs, where the gvernance f the peratr is established utside the peratr s scpe f apprval. NAAs shuld have a thrugh understanding f their peratr s gvernance structure and in particular stakehlders influence and the cntrlling mind f the peratr, where the true gvernance f the peratr is established utside the peratr s scpe f apprval. 9.7 Cntracted safety-critical services prvided by nn-certified service prviders Outsurcing activities, including safety-critical activities may have an advantage, ntably where the services rendered by the service prvider might be f a better quality than if the activity wuld have been dne in-huse. The peratr must ensure cmpliance with the requirements als fr the utsurced activity. In sme cases, where the peratr makes use f an ff-the-shelf prduct, the peratr might have little influence n the quality f the utsurced activity, e.g. utsurcing f flight dcumentatin nt adapted t the peratin. Depending n the size f the peratr and the size f the service prvider, the peratr might have little leverage t request a change in the services prvided. This means that rganisatins must be aware that with utsurcing it is pssible t intrduce new peratinal safety risks t an peratr that n lnger has the capability t determine and t mitigate. In additin, the peratr might nt have the in-huse knwledge/expertise in rder t cntrl the utsurced activity f a nn-certified service prvider. It is clear that the rganisatin s safety management system needs t capture cntracted activities. Yet, the WG recmmends the fllwing with regards t utsurcing f safety-critical services rendered by nn-certified service prviders: - In the shrt term: Draw NAA s attentin t nn-certified service prviders in certain safety critical areas, e.g. runway perfrmance, lad calculatin, navigatin charting, grund-handling, de-icing etc. Increase awareness amngst NAAs that in sme cases and depending n the size f the peratr, the service prvider might be f such a size, that the smaller peratr might nt have enugh leverage t adapt the utsurced activity t the needs f the peratr. - In the lnger-term: Cnsider the pssibility f pling audits f nn-certified service prviders (as per TGL 21) Cnsider future regulatry scheme fr certain nn-certified safety critical service prviders, e.g. grund handling, dangerus gds grund handling, take-ff and landing perfrmance planning, lad calculatin, navigatin charting. Prprietary dcument. Cpies are nt cntrlled. Cnfirm revisin status thrugh the EASA intranet/internet. Page 8 f 11
9 Establish a cmmn understanding amngst NAAs n what is an acceptable demnstratin f peratinal cntrl. 9.8 Rle f the ticket seller The evlving rle f the ticket seller has been amply presented by the Air Accident Investigatin Unit Ireland in their frmal reprt fllwing the Crk accident (Reprt N ) Tday, the rle f ticket sellers has changed and frm a passenger s pint f view, it is difficult t knw what airline will perate n a given day, if five different pssible peratrs are listed n the ticket. The rle f the ticket seller als raises the questin f the cntrlling mind f the rganisatin. The WG fully acknwledges that the rle f the ticket seller is utside the remit f EASA s safety regulatin. Nevertheless, the WG recmmends: - NAAs t have a thrugh understanding f their peratrs structures and their peratinal envirnment and in particular their relatinship with ticket sellers. - That there shuld be mre infrmatin n the rle f ticket sellers and their influence n peratinal cntrl (see Crk accident) 9.9 Wet lease-in agreements between EU peratrs Wet lease-in agreement means an agreement in the case f CAT peratins, between air carriers pursuant t which the aircraft is perated under the AOC f the lessr. Wet-lease enables peratrs t cater fr unfreseen needs. While the passenger is nt flying with the peratr, wh sld the ticket (the lessee), but with the wet leased-in peratr, wh is flying with wn crew and wn SOPs (the lessr), the lessee has a respnsibility t ensure that the flight is cnducted safely. Therefre, especially fr lnger-term wet lease-in agreements, where the peratin f the lessr becmes smewhat integrated int the peratin f the lessee, the lessee shuld btain infrmatin n the lessr s safety management system. Fr shrt-term wet-lease agreements between EU peratrs, the WG prmtes the use f a 'preapprved list, including defined prcedures in the management system. Fr lng-term wet lease agreements between tw peratrs frm tw different Member States, the WG raises awareness that in this case versight arrangements culd be in place (cperative versight and exchange f infrmatin between NAAs) between the NAAs cncerned and that befre issuing apprval fr lng-term wet-lease-in, there shuld be gd cperatin between the NAAs f the lessr and the lessee (exchange n findings etc.). The WG als clarifies that wet-lease falls under cntracted activities. This means that the peratr s management system shuld reflect hazard identificatin and risk management issues in particular in case f lng-term wet-lease in. Prprietary dcument. Cpies are nt cntrlled. Cnfirm revisin status thrugh the EASA intranet/internet. Page 9 f 11
10 Finally NAAs shuld share best-practice n wet-lease framewrk cntracts (wh is respnsible fr FTL, wh is respnsible fr Grund handling etc.) an infrmatin page n the EASA external web with FAQs n this subject shuld be explred Wet lease-ut agreements with a third cuntry peratr In the case f a wet-lease ut with a third cuntry peratr, whereby the EU peratr is the lessee and the third cuntry peratr is the lessr a risk assessment f the peratr shuld capture the risks identified f perating in a different envirnment, including perating in a hstile envirnment r even a cnflict zne Interperability requiring c-peratin amngst NAAs Interperability refers t thse cases where a hlding cmpany wants t streamline its peratins acrss several AOCs f several Member States and t freely exchange aircraft and pssibly crews. Hwever, there is n clear definitin f this term. Regarding interperability it must always be clear under which AOC the specific flight is perated and what the hand ver pint in time between the related AOCs is. There may never be any dubt which peratr is respnsible at what time f the peratin. It must als be clear that each NAA is fully respnsible fr the AOCs established in its territry, even in the case f interperability between several AOCs. The WG recmmends that NAAs invlved in such discussins, shuld pay attentin t the fllwing: - Cmbined management systems - Applicable FTL schemes - Human factrs and CRM issues - Flight crew training - Apprvals - Ntificatin f changes Furthermre, the WG recmmends that EASA tgether with NAAs shuld develp a standard plicy n interperability and shuld als cnsider the additinal dimensin f interperability with third cuntry peratrs. In additin, the legal cnsequences stemming frm respnsibilities f state f registry and state f the peratr shuld be clarified. 10 Reference dcuments - draft Wrking Paper n cperative versight Prprietary dcument. Cpies are nt cntrlled. Cnfirm revisin status thrugh the EASA intranet/internet. Page 10 f 11
11 - Cmmissin Regulatin(EU) N 965/2012 f 5 Octber 2012 laying dwn technical requirements and administrative prcedures related t air peratins, and related decisins t Regulatin (EU) 965/ A harmnised Eurpean Apprach t a Perfrmance Based Envirnment: 20a%20Perfrmance%20Based%20Envirnment.pdf - Suitability f ecnmic regulatin f the Eurpean air transprt market (starting at p.99): en_cmmissin_staff_wrking_dcument.pdf - Study n the effects f the implementatin f the EU aviatin cmmn market n emplyment and wrking cnditins in the Air Transprt Sectr ver the perid 1997/2010 (being updated frthcming July 2015) t_fr_publicatin.pdf - Reprt f the wrking grup n scial dumping / frum shpping in aviatin, spnsred by the Danish Transprt ministry. sh.pdf - Ghent university study n atypical emplyment in aviatin, cmmissined by ECA, ETF and AEA, members f the EU sectral scial dialgue cmmittee fr civil aviatin. Prprietary dcument. Cpies are nt cntrlled. Cnfirm revisin status thrugh the EASA intranet/internet. 11 Page 11 f
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