Carriers cutting corners

  • Aviation regulators must monitor the financial health of airlines to ensure air safety

Sep 9, 2018-

Liberalisation in aviation in Nepal in 1992 was a major landmark as it ended the monopoly of state-owned Royal Nepal Airlines Corporation (RNAC). A whole bunch of new airlines entered the market; and though they could easily acquire aircraft, getting technical and marketing personnel was something else. The open sky policy meant experts with skills, qualifications and licences had greater options, and RNAC suffered a manpower drain which affected its operations significantly. New carriers faced an acute manpower shortage despite this headhunting strategy. Safety levels could be barely maintained because of the shortage. Most of the start-ups disappeared in the first five years.

Only when an airline is in a good financial condition can it make plans for human resource development. Otherwise the only concern will be immediate problem solving in order to keep aircraft from being grounded. This prevents the organisation from focusing on long-term goals, necessities and market. Anyone with a little knowledge of air transportation will be able to imagine how the situation will be at an airline with no strategic direction, millions of rupees in shareholder money at stake, a dictionary of regulations to follow and tonnes of requirements to fulfil for its aircraft to operate.

According to a report of the British Committee of Inquiry into Civil Air Transport published in 1969 with regard to the attitude of airlines to operational standards and economic strength, there could be a strong temptation, in the short term at least, to cut back expenditure on crew training and engineering maintenance because immediate savings can be made in these areas without affecting revenue. Airline employees depend on their salary to support their families, so the existence of the company means the existence of the staff. Employees may thus adopt procedures which benefit the company’s financial situation in the short term but which also jeopardise the safety position, the report added. For example, a pilot may decide to operate in marginal weather to avoid diversion, and an engineer may put aircraft in service whose airworthiness is questionable.

According to the Manual of Regulatory Audits of the Cooperative Development of Operational Safety and Continuing Airworthiness Programme-South Asia (COSCAP-SA), the effects of financial difficulties and subsequent impact on operations and maintenance actions are potential indicators of operational safety. The manual further states that any merger or change in controlling management, replacement of key post holders or other key personnel within a company can significantly affect the overall performance of the operator.

Loss of experienced personnel or lack of employee stability may be the result of or may result in poor working conditions or management attitudes that result in operational inconsistencies or the inability to meet or maintain regulatory requirements. The replacement of operations managers, maintenance managers, chief pilots or other key personnel within a company may require increased regulatory monitoring to ensure a smooth transition. Regulation, financial strength and safety are interrelated.

As the issuer of air operator’s certificates (AOC) to airlines, the Civil Aviation Authority of Nepal (CAAN) assesses the applicant’s ability to demonstrate adequate organisation, financial soundness and technical capabilities consistent with the nature and extent of the operations specified. CAAN assesses whether sufficient financial resources are available to the operator so that it is able to obtain all required equipment, facilities and manpower, and fully support operations in the early stages when revenues are difficult to predict and may be very low. Marginal or severely limited resources adversely affect safety and efficiency of operation. According to the manual of regulatory audits, it is necessary to make periodic audits to monitor the financial health of the airlines to ensure that no compromises have been made with regard to aircraft safety, ramp safety and implementation of safety management systems (SMS) and there are no overdue payments to service providers and employees.

In Nepal, where at times we as an air transportation service provider or aerodrome service provider trade off safety for revenue, financial audits of operators are not only relevant but necessary. Considering recent incidents and accidents which appear to have occurred due to avoidable negligence in terms of flight operations, ramp safety and implementation of SMS, it is high time to aggressively assess the relationship between operators’ financial health and its impact on safety. It’s time for us to start monitoring the financial health of the operators. The recent example of Nepal Rastra Bank regulating financial institutions to improve their financial health through capital increment or mergers can be a good case study for Nepal’s aviation regulator CAAN, and the apex body for aviation regulation, the Ministry of Culture, Tourism and Civil Aviation.

- Bhattarai is a technical officer at the Ministry of Culture, Tourism and Civil Aviation.

Published: 09-09-2018 07:54

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