Mission Aviation Fellowship

ATO regulatory oversight debate hots up

The flight training industry is continuing to seek financial oversight of UK Approved Training Organisations (ATOs) in the aftermath of the collapse of two majors UK schools, FTA-Global and Tayside Aviation, which resulted in the loss of millions of pounds of students’ training funds.

Following FTN’s announcement that the UK Civil Aviation Authority (CAA) may be falling short in its regulatory oversight duties, a number of ATOs, industry associations and other interested parties have begun petitioning government for enhanced oversight of flying school finances.

On 22 June, the British Airline Pilots Association (BALPA) and aviation representatives wrote to Transport Secretary Mark Harper asking that the CAA be forced to provide financial oversight of ATOs. BALPA said: “We do not believe that to date the UK CAA has discharged this responsibility diligently, or indeed at all.”

BALPA is seeking three changes to the current regulatory oversight system. The first request is to limit ATOs from taking more than £5,000 in advance payments or ‘deposits’ from customers and that these deposits can be paid by credit card (without surcharge), limiting the financial risk to students. BALPA adds that it has anecdotal evidence that some ATOs will not allow credit cards to be used for advance payments.

BALPA agrees with FTN that the CAA may be failing in its statutory duty to provide financial oversight of ATOs

BALPA’s second request is that the CAA be compelled to review its oversight procedures in order to achieve proper compliance with ATO regulations. BALPA agrees with FTN that the CAA may be failing in its statutory duty to provide financial oversight of ATOs as laid out in retained EU law following Brexit.

As reported last month, FTN has found a regulatory obligation that appears to require the CAA to confirm the ongoing financial stability of ATOs during periodic audits, a requirement that the authority is currently denying. BALPA’s final request is that Government considers the establishment of a consumer protection scheme in a similar manner to the protection provided to consumers under the ATOL scheme.

BALPA Interim General Secretary Miranda Rackley said: “Flight schools going bust is financially devastating to hardworking students who deserve to have their money better protected from flight school failures.

“Pilot training is amongst the most expensive training of all professions, and unlike other careers such as law and medicine, there is no student funding available. Many trainees resort to family support to find their training, with some remortgaging family houses.

“Government needs to step up and protect students that are so vital to the future of the aviation industry.”

“The CAA have been asleep at the wheel. They need to fix the system so this doesn’t happen again.”

Alex Whittingham, Managing Director of Wings Alliance and Bristol Groundschool, and a co-signatory to the joint letter, added: “The CAA have been asleep at the wheel. They need to fix the system so this doesn’t happen again.”

Thomas Dunn MBE, chairman of UK ATO group Aeros, has also joined the debate, writing to Sir Stephen Hillier, chairman of the CAA. Dunn told Hillier that industry has lost confidence in whether CAA inspectors are suitably qualified to assess not only the financial status of ATOs but also the ‘Fitness of Character’ of ATO directors.

“I believe the root cause of these failures can be attributed to the lack of detailed assessment of ATO and DTO applications with the lack of proper assessment of you Fitness of Character policy,” says Dunn. “As a consequence, applicants of questionable ‘Fitness of Character’ are being aided and abetted to misappropriate millions of pounds from their customers through inappropriate methods such as abuse of the deferred income system. There remain in the UK at least two further large, approved training organisations who have taken millions in advance payments from their students and another financial collapse cannot be ruled out.”

According to CAA policy, the authority is under an obligation to be satisfied, on an ongoing basis, of the fitness of character of the individuals and post holders which it license

According to CAA policy, the authority is under an obligation to be satisfied, on an ongoing basis, of the fitness of character of the individuals and post holders which it licenses. The policy states that the CAA must consider options for any regulatory intervention when available information indicates that a person may no longer have the fitness of character appropriate to the privileges of the licence or authorisation. Recognising that this is not a ‘one-size-fits-all’ policy, the CAA adds that its powers to intervene in these sorts of cases are discretionary and therefore the authority doesn’t set out specific action to be taken in every circumstance, but the requirement nonetheless remains.

Anecdotal evidence given to FTN appears to show that the CAA has been largely ignoring this requirement. A source who wishes to remain anonymous has told FTN that they were contacted by a CAA inspector in an unofficial capacity a few weeks ahead of the collapse of FTA-Global. The CAA inspector advised that the person should be careful when doing business with the ATO as it was believed to be in dire financial straits. This was at a stage when the ATO was still actively taking deposits from students signing up to training programmes with the school.

In the House of Lords on 26 June, Conservative peer Lord Balfe sought clarification on CAA regulatory oversight responsibilities from the Department of Transport. He asked the DfT: “ following the closure of three flight schools this year, what further protection they intend to give trainee pilots from UK flight school failures.”

Responding to Lord Balfe’s question, Aviation Minister Baroness Vere of Norbiton said: “Responsibility for regulating flying training in the UK rests with the Civil Aviation Authority (CAA). The CAA’s approval of a flying school or training establishment as an Approved Training Organisation (ATO) are designed to provide confidence that they are able to perform their operations safely. However, as the CAA does not regulate the ongoing financial viability of flying schools or clubs, approval to conduct flight training does not imply any certification of financial stability. I have asked my officials to engage with the CAA to consider this in more detail.”

In some respects, the situation of the aviation industry asking for better regulation from the
CAA is not new. For many years ‘air taxi’ business aircraft and charter operators complained to the CAA about blatant ‘grey charters’ taking place in the UK. These were essentially illegal public transport flights – private aircraft operators undertaking paid charters. The CAA largely brushed these concerns aside until the footballer

Emiliano Sala was killed on just such an illegal flight. In the same way, many in the flight training industry fear that it may take an even bigger flying school collapse for the CAA to take action. As well as the risk to individual’s hard-earned money, many fear that the reputation of UK flight training also stands to suffer serious and long lasting damage.

 

Author: FTN Editor

Share This News On