CAP 1068 Annual Report 2013 PDF

Annual Report & Accounts 2013
Civil Aviation Authority

CAP1068
Annual Report & Accounts 2013

Civil Aviation Authority
Presented to Parliament pursuant to section 15(2) of the

Civil Aviation Act 1982, as amended by the Civil Aviation Authority
(Auditing of Accounts) Order 1984.
Civil Aviation Authority 2013

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Contents
CAA Overview
Financial Statements
Statement by the Chair
Income Statement
71
Report of the Chief Executive
Statements of Comprehensive Income
71
Key Events
Balance Sheets
72
Board Members and Officers
Statements of Changes in Equity
73
Statements of Cash Flows
74
Notes to the Consolidated

75
Review 2013
Operating Review
12
Performance Indicators
37
Financial Review
44
Governance
Group Current Cost Income Statement
112
Group Current Cost Balance Sheet
113
Notes to the Current Cost Accounts
114
Group Five Year Summary
119
Corporate Governance
56
Report by the Board on

Remuneration Matters
62
Government Directions
Statement of Board Members

Responsibilities 67
Civil Aviation Authority (Report)

Direction 2012
120
Independent Auditors Report to the

Secretary of State for Transport
Civil Aviation Authority (Accounts)

Direction 2013
121
Annual Report & Accounts 2013 | Civil Aviation Authority
68
Statement by the Chair

Dame Deirdre Hutton
Like all regulators, the CAA exists to protect consumers. We do this in three
ways: keeping passengers safe as they travel by air, promoting value and
choice, balanced with the need to monitor the financial resilience of those
who offer consumers that choice, and making sure that, if problems occur,
consumers are able to obtain the protection to which they are legally entitled.
UK civil aviation has a proud track record on safety,
with one of the safest industries in the world. But
in a rapidly changing sector it is important that we
stay on top of our game. Our Enhancing Safety
Performance programme is about making sure
our approach to safety regulation keeps pace with
those changes, so we and the aviation industry are
focussed on the most important risks, and that we
have assurance that those risks are being tackled.
That has formed a major part of our safety regulation
work this year and recent events further emphasise
the critical importance of our constant vigilance in
relation to safety.
From April 2014 we will gain an additional and vitally
important role in protecting air travellers, when we
take over certain aviation security responsibilities
from the Department for Transport. Security policy
will rightly continue to be a matter for government.
But responsibilities for regulation of the industry,
including assessing compliance and undertaking
enforcement, will transfer to the CAA. A significant
programme of work is already under way to ensure
the transition goes smoothly.
This year, our ability to promote choice and value for

consumers was strengthened by the passage of the
Civil Aviation Act a significant update to the CAAs
regulatory framework. Most importantly, it gives
us a clear duty to put the consumer interest at the
heart of our economic regulation of airports. This will
be central to our approach as we make important
decisions on the future of regulation at Heathrow,
Gatwick and Stansted.
The legislation also gives us an important new
duty to publish - or require the industry to publish information that is helpful to consumers in making
informed buying decisions. We commenced, during
in a rapidly changing sector

it is important that we stay on
top of our game.
May 2013, a consultation of our policy statement
on how we will use these powers. The focus will
be on giving passengers the information they
value, so driving up standards. We have similar
new responsibilities in relation to environmental
information, and this will be an important tool in
our ability to incentivise the industry to tackle its
environmental impacts.
Despite tough economic times, the UK aviation

industry continues to offer consumers unrivalled
choice and value. But there are capacity challenges
ahead. So we welcome the governments
establishment of the Airports Commission to
consider the options for the future. We are
committed to supporting their efforts in any way
we can.
The year under review saw important changes

to the ATOL holiday financial protection scheme.
It has been extended to cover so-called FlightPlus holidays where holidaymakers buy both a
flight and either car hire or accommodation from
the same supplier within 24 hours. The new ATOL
certificate means that people now have much
clearer information about how their holiday is
protected if things go wrong.
I am grateful to our non executive directors Roger

Whitefield, Roger Mountford and Air Vice-Marshall
Barry North, who leave the CAA Board this year.
They have made a hugely valuable contribution to
our work and will be missed. The CAA has been
much supported by the commitment of all its Board
members and I would like to thank them all for their
continuing work on the CAAs behalf.
And, following some high profile court cases, we

have dealt with a significant increase in the number
of complaints from passengers dissatisfied with
the way in which their airline has dealt with their
request for assistance or compensation when they
have suffered delay or cancellation.
To assist us in our work, we have set up a new
consumer panel. Led by Keith Richards, it will be a
critical friend to the CAA, challenging us to make
sure the consumer interest is at the heart of our
work. And integration into the CAA of the work
formerly undertaken by the Air Transport Users
Council ensures our regulatory approach is informed
more closely by passenger experiences.
These days it is easy to take for granted the

freedoms and benefits that aviation brings us.
But the ability to exercise those freedoms with
confidence is dependent on effective regulation
to guarantee safety and fair play. The CAA is
firmly committed to that goal, and to adapting and
strengthening our approach in the interests of all
those who use air transport.
Dame Deirdre Hutton

Chair
18 June 2013
Report of the Chief Executive

Andrew Haines
For many, 2012 will be remembered
for the London Olympic and
Paralympic Games. It is a tribute
to the whole aviation sector that
thousands of athletes, officials and
spectators were able to reach the
UK efficiently and safely.
Effective preparations by airports and airlines,
efficient and safe management of airspace, and
a professional and responsible approach from the
General Aviation community to airspace restrictions
complemented by stunning aerial TV pictures, all
contributed to the success of the Games. I am
proud of the part the CAA played in making those
things happen.
At the same time, we have continued to focus on
some longer-term challenges. Among these is the
increasing importance of international co-operation,
and we are constantly strengthening our ability to
influence at both the European and global levels.
Much of what we do on the safety agenda is shaped
by the European Aviation Safety Agency (EASA) as it
takes on more responsibility for setting regulations.
The European harmonisation of pilot licensing has
involved work and upheaval for everyone, but does
promise a stable system with a level playing field
that enables UK pilots to enjoy freedom of access
and work across Europe. This year will see more

responsibilities transfer to EASA, notably in the
regulation of aerodromes and flight operations.
On the consumer protection front, the European
Commission has published its proposal to amend
the existing rules on compensation and assistance
for passengers facing delays and cancellations.
This would not just amend those rights, but also
the CAAs role in monitoring and enforcement. We
will continue to support the UK government as
negotiations over the proposal continue, and ensure
we are ready to deliver on any new responsibilities.
we are constantly

strengthening our ability
to influence at both the
European and global levels.
Co-operation with Europe is also central to making
airspace more efficient. Our Future Airspace
Strategy promises real capacity, efficiency and
environmental gains. This year saw an important
milestone with the publication of an implementation
plan, which has been acknowledged as leading
the way in taking forward the Single European
Sky initiative. It is also vital in delivering our
environmental objective to help the aviation
industry reduce its impacts on the environment. This
year we published a detailed programme for how
we will meet that goal.
While it is through changes like more efficient
airspace that major gains for industry will come,
we are also alert to the impact of our regulation on
the industrys costs, particularly during challenging
economic times. For many years the CAAs internal
processes systems have been in need of updating.
Our Performance and Process Improvement
programme, while requiring significant investment,
will ensure we provide a much better and more
efficient service to our stakeholders. We have
planned the programme in such a way as to
generate early efficiency savings that can then be
reinvested in improved systems and processes.
We are currently establishing a new shared services
hub a one-stop shop bringing together high
volume transactions like approvals and licensing
in one place. The programme will also provide the
internal systems to ensure we can fully implement
our Enhancing Safety Performance programme,
helping us make better regulatory decisions.
All these are examples of the progress we have

made this year in becoming a more effective
and efficient organisation: focusing on the things
that matter most, clear and proportionate in our
regulation and with twenty-first century processes
and systems. We are committed to building on
these achievements in the year ahead.
Andrew Haines
Chief Executive
18 June 2013
Key Events
2012
April
July
The CAA develops a self-assessment tool for flight

crew, to determine the likelihood of pilots having
sustained eye damage following a laser attack on
their aircraft. Over recent years, the deliberate
targeting of aeroplanes and helicopters in flight with
lasers by individuals on the ground has become a
major global problem for the aviation industry.
The CAA launches a four-year programme, to help

improve aviations environmental performance
and allow the sector to grow sustainably. This sets
out the CAAs activities over the next four years to
facilitate, advise, influence and regulate the aviation
sector so its environmental impacts can be reduced.
The CAA introduces new arrangements with

ABTA and Accredited Bodies approved by the
CAA, offering smaller travel businesses a low-cost,
one-stop shop approach to licensing following the
introduction of reforms to the ATOL scheme.
The CAA announces the appointment of Keith
Richards as the first Chair of the CAA Consumer
Panel. The Panel gives the CAA a sharper focus
on how its regulatory activity affects passengers,
and on how it can best enable choice and value for
current and future aviation consumers.
August
Following intensive research by our medical
department, CAA issues medical certificates to
pilots and air traffic controllers with insulin-treated
diabetes.
September
The CAA begins issuing the new European Aviation
Safety Agency (EASA) pilot licences. The transition
process to the new pan-European format is
expected to last five years.
May
The CAA hosts an event to launch an innovative
new chair for disabled children for use in passenger
aircraft. The TravelChair 2012, designed by the
childrens disability charity MERU, replaces a version
designed in 2002.
2013
October
January
The CAA welcomes new EU rules that standardise

working hours for European airline pilots, believing
that the new rules will benefit UK passengers and
will not compromise safety. The final draft includes
several additional changes requested by the CAA,
based on careful research.
The CAA publishes a review of its regulation of the

en route part of NATS air traffic control business,
NERL.
The CAA launches new standardised ATOL

certificate. The certificate sets out what consumers
have booked, how it is protected and by whom, and
what to do if something goes wrong.
The CAA releases new guidance for prospective
commercial pilots. The advice, including information
on protecting financial payments, is aimed at anyone
thinking of enrolling on a commercial pilot training
course.
November
The CAA and the Office of Fair Trading (OFT) launch
draft guidance designed to help the travel sector
comply with consumer protection regulations and
raise awareness of their legal responsibilities.
December
The CAA holds a conference in London to discuss
proposals to enhance the UKs airspace system,
through the Future Airspace Strategy (FAS), that will
increase airspace capacity, improve flight efficiency,
and reduce aviations environmental impact.
Following the Vauxhall helicopter accident the CAA

assists the Air Accidents Investigation Branch with
its work. Their report will be published later this year.
February
To support the ATOL Pack Peace of Mind campaign,
the CAA publishes travel research indicating the
limits to consumers understanding of how to
protect themselves from air travel insolvency.
March
The CAA launches a new training package to highlight
the importance of cockpit monitoring amongst flight
crew (where pilots check each others actions and the
aircrafts response) - an important tool in reducing the
number of potential safety incidents.
April
The CAA announces acceptance of more online
applications as part of a process to improve the way it
handles official transactions with the aviation industry.
The CAAs first thoughts on Heathrow, Gatwick and
Stansted airports future economic regulation are
published for consultation.
Board Members and Officers

Chair
Dame Deirdre Hutton

Appointed to the Board as a Non-Executive Member in April 2009 and took
up the position of Chair of the CAA in August 2009. She is currently a NonExecutive Director of Thames Water Utilities Ltd, a Non-Executive of Castle
Trust, serves as a Non-Executive Member of the HM Treasury Board and is
Pro-Chancellor of Cranfield University. She is Honorary Vice-President of the
Trading Standards Institute and of the Institute of Food Science and Technology.
Previously, she was Chair of the Food Standards Agency, Vice-Chair of the
European Food Safety Authority Management Board, Deputy Chair of the
Financial Services Authority, Chair of the National Consumer Council, Chair
of the Scottish Consumer Council, Vice-Chair of the Scottish Environment
Protection Agency and a member of the Better Regulation Task Force.
She has held a number of positions on a variety of bodies dealing
with food, environment and regulatory issues.
Executive Board Members
Andrew Haines
Appointed as Board Member and Chief Executive in April 2010. He is a NonExecutive Director of European Rail Finance (GB) Ltd. He joined the CAA after
a wide-ranging career in the rail industry including front-line management,
parliamentary liaison, policy development, project management and contract
negotiation. As Managing Director of South West Trains, he led the organisation
through a major transformation resulting in it being named Train Operator of
the Year. He headed up the Rail Division for First Group plc, which, under his
leadership, became Britains largest and most profitable train operating business.
Gretchen Haskins
Appointed as Board Member and Group Director Safety Regulation in April 2010.
Previously she was Director of Safety at National Air Traffic Services (NATS) as
well as Chair of the Civil Air Navigation Services Organisation (CANSO) Global
Safety Steering Group. Prior to NATS, she led a team of test pilots and aircraft
designers in the operational performance and safety certification of military
aircraft. She worked in industry, including as an expert advisor to NATO on
human performance and safety critical systems. She also served in the US Air
Force where she flew jet and piston aircraft and worked in nuclear certification
and safety of intercontinental ballistic missiles.
Richard Jackson
Appointed to the Board as Group Director Consumer Protection in October 2004
and is a Trustee of the Air Travel Trust Fund. He also became a Trustee of the
CAA Pension Fund in February 2008. Previously worked as a civil servant in the
Ministry of Defence and Head of Investment Banking at Daiwa SBCM Europe.
Chris Jesnick
Finance and Corporate Services Director and Chair of CAA International
Limited and is a Trustee of the Air Travel Trust Fund, a Fellow of the Chartered
Institute of Management Accountants and has worked for the CAA since 1996,
previously having a career in a variety of financial roles within the private sector,
predominantly in the energy industry.
Iain Osborne
Appointed to the Board as Group Director Regulatory Policy in January 2011. Iain
was previously Chief Executive of Northern Irelands Utility Regulator, where
he created a new regime for water regulation, as well as leading regulation of
electricity and natural gas. He previously worked in the European Commissions
Directorate - General for Competition on gas markets. Prior to that he was
Director of Consumer Markets at Ofgem. He has also worked for pan-European
telecommunications companies, the Department of Trade and Industry and
McKinsey & Company.
Mark Swan
Appointed to the Board as Group Director Airspace Policy in March 2009. He
previously held numerous appointments in the Royal Air Force since joining as a
pilot in 1979 and was formerly Director of Operational Capability for the Ministry
of Defence from 2006 to 2008.
General Counsel and Secretary
Kate Staples
Appointed as CAA Secretary and General Counsel in September 2010. Prior to
joining the CAA, she had led both the Rail Infrastructure & Safety and Aviation
& Commercial Legal Divisions at the DfT, having opted to join the public sector
after almost 10 years in private practice. She is also a Trustee of the CAA
Pension Fund.
Non-Executive Board Members
Dr Catherine Bell
Appointed to the Board as a Non-Executive Member in April 2006. She is Chair of
the Remuneration Committee and a member of the Audit Committee. She was
formerly Acting Permanent Secretary at the Department of Trade and Industry.
She serves as a Non-Executive Director of United Utilities Group plc. She is also
a Non-Executive Member of the Department of Health Board, Governor of the
London School of Economics and Trustee and Chair of the Investment Committee
of the Charity for Civil Servants.
David Gray
Appointed as a Non-Executive Member in November 2009 and is a member of
the CAA Audit Committee. From 2003 to 2007 he was a member of the Gas &
Electricity Markets Authority, and Managing Director Networks of its executive
arm, Ofgem. He is Chairman of Pitkin Petroleum plc, a member of the Council
of Management of the Regulatory Policy Institute, and a Governor of the Central
School of Ballet.
Michael Medlicott
Appointed as a Non-Executive Member in February 2010 and is a member of
the CAA Remuneration Committee and a Non-Executive Director on the Board
of CAA International Limited. He has many years experience of the transport
and tourism sectors, including a senior management position at Delta Airlines
and Chief Executive of the British Tourist Authority. He sat on the Board of
Manchester Airports Group from 2002 until joining the Board of the CAA. He is
Senior Non-Executive Director of OCS Group Ltd, and a Non-Executive Director
of Myriad Healthcare Group.
10
Roger Mountford
Appointed to the Board as a Non-Executive Member in April 2003 and
reappointed in 2008. He also serves as Chairman of the CAAs Audit Committee
and of the Air Travel Trust, and is also a member of the Remuneration
Committee. He is Chairman of the Trustees of the CAA Pension Scheme and a
Trustee on the Church of England Pensions Board. Formerly a merchant banker
in London and Hong Kong, he is Chairman of The Housing Finance Corporation
and HgCapital Trust plc. He is a Governor of the London School of Economics
and Chairman of the Schools commercial subsidiary.
Air Vice-Marshal Baz North

Appointed as Assistant Chief of the Air Staff on 1 March 2010 and joined the
CAA Board shortly after. AVM North joined the RAF in 1982 and trained as a
helicopter pilot and has held a number of positions within the RAF. As Assistant
Chief of the Air Staff, AVM North is a member of the Air Force Board. He is the
Release to Service Authority for all Royal Air Force aircraft, the MoDs senior
military officer for Space, and the MoDs lead for Air Policy issues.
Captain Roger Whitefield

Appointed to the Board as a Non-Executive Member in April 2005. He also
sits on the Board of CAA International Ltd, is a member of the Audit and
Remuneration Committees and serves as Non-Executive Chairman of Air Safety
Support International Ltd. He is also a member of the International Safety
Review Team. He spent 39 years with British Airways as a pilot during which
time he held many management positions including Chief Pilot Boeing 747 and
Concorde, General Manager Flight Operations Services and his last position
before leaving in 2005 was Head of Corporate Safety and Quality.
11
Operating Review
Enhancing aviation safety
The UKs aviation and related
travel industries are among the
largest in the world. As a result of
European liberalisation and strong
competition they offer consumers
an excellent choice of destinations,
airlines, airports and holidays,
while our manufacturing industry
continues to lead the world in
aircraft engines and components.
This sector has a strong safety
culture that encompasses airlines,
airports and air traffic control and is
one of Europes biggest recreational
aviation communities.
The year under review saw, overall, another good
performance for aviation safety, both in the UK and
worldwide. But this does not mean that air travel
is risk free and there is significant work underway
within the CAA and the industry at large to continue
to enhance safety.
The major event for both our safety and airspace
teams during the year was the London 2012
Olympics and Paralympics. Our challenge was
to ensure that the extra demand and unusual
operations taking place as a result of the Games
occurred safely and that the Governments airspace

security restrictions were implemented smoothly.
A major programme of co-ordinated work that
involved Government, the Ministry of Defence,
NATS and the industry resulted in a successful
Games from an aviation perspective. Perhaps
the biggest challenge was the introduction of
the Governments airspace security restrictions.
Although these required sacrifices by some airspace
users, the aviation community came together to
ensure that these significant changes to UK airspace
12
there is significant work

underway within the CAA
and the industry at large to
continue to enhance safety.
passed off without major incident. A large amount of
pre-planning and proactive safety management work
helped make this the case.
The CAA Significant Seven safety risks were
identified following analysis of global fatal accidents
and high-risk occurrences involving large UK
commercial air transport aeroplanes.
For each of these issues, joint CAA/industry task
forces were created to study the safety issue indepth and make recommendations on how their
risk could be mitigated. Tasks were consolidated,
prioritised and then shared and debated with
industry at a safety conference in 2010.
The key outcome from this conference was an
agreement that the significant risks as identified by
the CAA were indeed those that industry was also
worried about and that broadly the right actions/next
steps were identified by the task forces.
The conference also agreed that loss of control and
runway safety (primarily runway excursions) should
be prioritised over the other safety issues. This
prioritisation is reflected in the actions contained in
the CAA Safety Plan.
The Significant Seven are:

loss of control;
runway excursion;
controlled flight into terrain;
runway incursion;
airborne conflict;
ground handling; and
fire.
Work has continued throughout the year to directly
tackle these risks. Of the 40 Safety Plan milestones
relating to the Significant Seven that were due
for delivery by the end of 2012, 32 (or 80%) were
achieved.
We have also been working closely with industry
to develop our Enhancing Safety Performance
(ESP) programme - a new way of working for
our safety regulation team. It focuses our work
and interaction with industry on what have been
identified as the key risks, and identifies how to
deliver the best safety outcomes across the total
aviation system. This identification process will be
based on evidence from safety reports, statistics
and feedback from both our own investigators in
the field and industry itself.
The continued harmonisation of European aviation,
primarily through the European Aviation Safety
Agency (EASA), also played a major part in our work.
13
Our roll-out of European pilot licensing requirements

has been a significant task. And the introduction of a
Europe-wide scheme for pilot flight time limitations
continued to attract interest. We have provided
detailed input into the final regulations and we
believe they will provide an equivalent level of safety
to the UKs current system.
In Europe there are several high profile projects
underway to modernise and harmonise airspace.
Airspace is a key part of the UKs transport
infrastructure and is vital to all airspace users from
airlines to the military and private fliers. The UKs
current airspace system has not been significantly
updated for over 40 years. Our Future Airspace
Strategy (FAS) aims to deliver significant benefits
for consumers, the aviation industry and the
environment.
Key improvements that FAS can deliver include:
Allowing aircraft continuous climb-outs on takeoff that get aircraft to their optimum cruising
altitude as quickly as possible;
Providing aircraft with more efficient routings
that save time and fuel;
Better management of arrivals at airports, such as
reducing the time aircraft are in holding stacks;
Linking the whole aviation network together
to share up-to-date flight information, thereby
enabling better operational decisions and
increasing resilience to unexpected events;
Using the latest technology throughout the

system to increase airspace capacity and safety.
This includes the use of Performance Based
Navigation (PBN) allowing aircraft to utilise
satellite navigation, instead of ground based
navigational aids, to fly much more accurate
routes.
During this year we published the FAS
implementation plan that has been developed in
collaboration with airlines, airports, air traffic control
bodies, general and business aviation, the UK and
Ireland aviation authorities, the DfT and MoD.
Ensuring that the maximum amount of airspace
can be safely used in any future volcanic ash
incident remains a key priority. EASA has published
proposals for the introduction of certification
specifications for volcanic ash ingestion into turbine
engines. We are also facilitating work to harmonise
the processes and output of the two European
Volcanic Ash Advisory Centres (VAAC), as well as
overseeing Met Office developments in satellite
data analysis and integration into the transport and
dispersion modelling to improve the accuracy of
the areas forecast to be affected by ash. However,
despite enormous efforts by the CAA we have
been disappointed by the progress made in Europe,
following the Icelandic eruption in 2011.
We have also worked with the operator of the Met
Office Civil Contingencies Aircraft to enable it to be
equipped to fly into predicted high ash contamination
areas to provide data during any incident.
14
Work towards promoting

safety culture and safety
management systems
within industry has been
supported
The regulation of aviation security
The Civil Aviation Act transfers some aviation
security regulation functions from the Government
to the CAA. Planning for implementation of this
transfer is now well underway with a target for
completion of the work during 2014.
CAA International
Through a wholly owned subsidiary company, CAA
International Ltd (CAAi), the CAA delivers technical
advisory services, environmental consulting,
professional training and aviation examination
services. The work contributes specifically to the
overall safety of UK citizens travelling abroad and
helps raise safety standards worldwide.
that the UK meets international obligations on

aviation safety oversight in the UKs Overseas
Territories, such as the Falkland Islands and the
British Virgin Islands.
During the year under review ASSI has continued to
work with the authorities in the Overseas Territories
to enhance safety and build local competence in
the pursuit of regulatory autonomy. Work towards
promoting safety culture and safety management
systems within industry has been supported
through a number of training events and seminars
concentrating on the sharing of knowledge and best
practice. Significant work has been undertaken in
relation to the safety regulation of aerodromes with
During the year CAAi strengthened its position across

each of its service lines by winning key contracts to
support the European regulator as well as diversifying
its portfolio of clients and markets. CAAi is increasing
its presence in emerging markets such as Africa, and
is expanding its client base in Asia through its branch
offices in Singapore and Malaysia.
CAAi continues to provide support to other regulators
and to industry by building capacity inside their
organisations and enhancing safety performance.
Overseas Territories safety regulation

Air Safety Support International Ltd (ASSI), a wholly
owned subsidiary company of the CAA, ensures
15
We will continue to lead

on the aviation element
of delivering the
Governments spectrum
release programme over
the next 10 years.
the issuance of an aerodrome certificate to an airport

in the Eastern Caribbean which had previously been
closed. ASSI has also provided significant input into
the regulatory aspects relating to the construction of
the new airport to serve St Helena.
Some examples include:
Key safety aims and achievements
Ensuring EASA Flight Time Limitation opinion

was acceptable to the CAA;
In last years annual report we set out our key safety

aims. Below we describe the progress towards
those aims.
Worldwide safety outcomes benefit

UK consumers
Our implementation of EASA and ICAO rules has
enshrined our risk-based principles with EASAs
and ICAOs blessing. We are beginning to influence
international authorities so that rules and jointly
agreed actions are increasingly targeted on safety
outcomes.
Establishing a CAA Chair of group delivering

ICAO Annex 19 on Safety Management;
Taking a leading role in development and
implementation of EASA Flight Crew Licensing;
Influencing European General Aviation safety

strategy and new EASA approach to risk-based
standardisation.
We are working with international authorities
and other national aviation authorities to promote
sharing of information and best practice.
The CAA made a major contribution to the
ICAO 12th Air Navigation Conference, leading
on behalf of the UK, EU and ECAC states on
spectrum management, safety considerations and
modernising ATM economic assessments. We
continue to lead and play a key role in a number
of ICAO, global and European working groups
and panels to represent the UKs interests and to
promote best practice in emerging standards and
regulations.
We have continued to work closely with
international colleagues to promote best practice
and create a harmonised approach to the forecasting
and observations of volcanic ash and in the way that
these are then responded to in order to optimise the
safe use of airspace.
16
Reduced UK aviation safety risk through

State Safety Programme
UK State Safety Programme and National Performance
Plan (NPP) are yielding some safety improvements
with industry consultation and involvement.
Through the UK State Safety Programme (SSP) and
via DfT we have continued to engage with foreign
authorities to improve the approach to key risks, even
if they are beyond our direct responsibility. This has
resulted in an improvement in the safety standards
of foreign operators carrying passengers from the UK
and development of action plans to address issues
where there are high severity occurrence hotspots.
The National Performance Plan has played a part in
forming close cooperation and collaboration between
UK and Ireland in the context of the Functional
Airspace Block that has allowed safety data sharing
and improved the safety partnership. We have
established proactive assurance methods to help
ensure that the development of the future aviation
system delivers the intended safety benefits.
The CAA has continued to provide expert support to
Government to enable the sale of spectrum in the
2.6GHz band to proceed, meeting EU requirements.
Work this year has focussed on a radar modification
programme to overcome design limitations which
make them susceptible to interference from legitimate
mobile broadband signals. We will continue to lead on
the aviation element of delivering the Governments
spectrum release programme over the next 10 years.
Safety Regulation is risk-based, proportional,

transparent, consistent and targeted,
and more cost-effective
We have been working up the Total System Risk
Picture. The risk-based and proportionate approach for
regulating entities is established and we have started
to roll out to industry. We have designed a common
approach to policy and rule development. We test
our approach and methods against better regulation
principles and consciously seek to improve.
Improve industrys Safety Management System

(SMS), safety culture, Human Factors (HF)
capability and the Just Culture
SMS and HF capability maturity is starting to increase.
Just Culture awareness has been raised within
CAA and with industry accountable managers
emphasising the benefits to business of open
reporting.
17
Future Airspace Strategy (FAS) - Improved

surveillance environment based on appropriate
technology reduces safety risk
The FAS Industry Implementation Group has
delivered a realistic and achievable FAS Industry
Implementation Master Plan.
The FAS Deployment Plan was published in December
2012. The Strategy is backed by major airports, airlines,
NATS, the CAA, Irish Aviation Authority and the MoD,
who each have contributory outputs to deliver and are
committed to supporting implementation. The Plan is
a compilation of major airspace initiatives drawn from
the key investment programmes and strategic goals
of the organisations involved.
CAA has effective communication with industry

Industry has made significant contributions to our
strategy through joint working on improved national
safety outcomes, future aviation system and
industry capability.
We have a more co-ordinated and consistent
approach to communicating with stakeholders.
Ash resilience - Transitional state

Response to volcanic events makes use of improved
forecasting products, the growing coverage of the
safety case regime, and improvements to Original
Equipment Manufacturer (OEM) tolerance levels and
their derivation.
The Airspace Safety Initiative will deliver

tangible safety improvements
We have produced a revised Danger Area Policy
to ensure the optimisation of arrangements for all
users of airspace within the UK. We are working
with the service providers and aircraft operators
to review air traffic arrangements in the Lower
Airspace Radar Service scheme, to ensure that the
coverage is optimal across the UK and meets the
needs of the user community.
Progress towards delivering new solutions for

routeing aircraft through airspace to deliver
emissions reductions and reduced fuel costs.
We have been working on a project designing
departure procedures which employ the latest
aircraft capability and instrument flight procedure
design criteria, and the outcome will help inform
and validate the revised ICAO standards for PANSOPS (instrument flight procedure design). Our
expertise has been put to good effect in helping to
shape international aviation environmental standards
to minimise exposure and impact on the public.
Airspace changes have been made in collaboration
with our Irish colleagues that deliver benefits not
just within the UK but also deliver operational and
environmental efficiencies in Irish airspace.
We have provided oversight of a trial of operational
measures at Heathrow airport, aimed at reducing
delay, increasing resilience and facilitating recovery
18
We are working with the

service providers and aircraft
operators to review air traffic
arrangements
from disruption. As part of this activity we have
assessed the noise impacts of the use of these
measures.
We have completed second round noise maps as
required under the Environmental Noise Directive
(END) for nine UK airports, which will be used to
update those airports noise action plans.
We have contributed to the Governments plan

to adopt new night flying restrictions at the
designated airports, by assessing the impact of
current night flights, undertaken a literature review
of the health impacts of night noise, and from this
developed a methodology for monetising those
health impacts.
19
to ensure the UK can effectively influence

policy, rules and actions so they are increasingly
aligned to targeted safety outcomes with
agreed priorities and goals;
Prepare to transition to EASA implementing
rules for Flight Operations and Aerodromes
whilst influencing new EASA rules for Air Traffic
Management;
Work with CAAi to optimise opportunities to
promote aviation safety globally.
Focus on rolling out our new approach to safety
regulation on a greater scale internally and
externally to:
Increase our understanding and to reach
agreement on the key risks across the total
system;
Looking forward to 2013/14

We will continue to influence internationally and in
Europe, by engaging with international authorities so
that rules and jointly agreed actions are increasingly
targeted on safety outcomes.
In support of this we will:
Publish the UK State Safety Programme (SSP)
to improve our approach to key risks, even if
they are beyond our direct responsibility;
Work with industry to identify which risk

controls need strengthening, achieve clarity on
safety outcomes and to establish the actions
that would make the greatest difference;
Drive for the next set of measurable safety
improvements in each of the Significant Seven
areas;
Work with industry in further developing Safety
Management Systems (SMS), the role of the
accountable manager, human factors (HF) and
just culture;
Continue to develop the relationship with EASA
20
Protecting consumers is
central to our work
Continue to test our approach and methods
against better regulation principles and
consciously seek to improve.
We will drive safety improvements through new
and revised policies on Aeronautical Data Quality
and Performance Based Navigation in the UK with
clear guidance to stakeholders on how to implement
these effectively.
Optimise airspace efficiency through:

Issuing a location specific Performance Based
Navigation mandate to provide a scalable
standard template for future implementation;
Facilitating resolution of the conflicts between
wind farm developments and aviation through
publication of enhanced guidance material;
Ensuring that appropriate airspace
arrangements are put in place for the 2014
Commonwealth Games in Glasgow.
21
Improving choice, value and fair treatment

for consumers
Protecting consumers is central to our work and the
passing of the Civil Aviation Act 2012 in December
ensured that we are now better equipped to
undertake this task. It also gives us new powers
to empower consumers by giving them a fuller
range of information. Alongside this, significant
changes to the ATOL holiday protection scheme will
enable more travellers to be protected with a set of
regulations that also make protection much clearer
to understand.
also sought to place consumers at the heart of

aviation policy development.
In addition we shall continue with our role of

licensing and monitoring the financial conditions of
ATOL holders. Working with Government, we have
We are now deep into the process of determining

how we will use our new powers to regulate
airports we consider to have market power.
Regulating airports
The passing of the Civil Aviation Act 2012 has
enabled us to change the way we economically
regulate airports, focussing on the consumer and
bringing our work much more in line with the way
other industries are economically regulated.
22
we have sought

to place consumers at
the heart of aviation
policy development.
This work will be the first set of decisions and
requirements using the new legislation, which
enables the CAA to be far more flexible in its
approach to economic regulation. In the past the
CAA has had to set a price control on an airport
judged to have market power. In future the CAA
will be able to grant airports economic licences
with varying conditions to ensure consumers are
protected, reflecting the particular circumstances
of the airport in question, as opposed to the current
one-size-fits-all model.
In December 2012 we published, for consultation,
our provisional conclusion that Stansted has a
substantial degree of market power and that
continued economic regulation of the airport would
benefit consumers.
On 30 April we published our market power
assessments for Heathrow and Gatwick airports,
and also our initial proposals on how all three
airports should be regulated from April 2014.
In 2012/13 we published our decisions on complaints
that Heathrows and Gatwicks charges on airlines
were discriminatory. An important factor in both
decisions was our finding that the charges did not
harm consumers or competition between airlines.
Regulation of air traffic control services

In January 2013 we published the report of a review
into whether our regulation of NATS En Route
Limited remained effective in ensuring the continued
provision of a safe, efficient and sustainable en

route air navigation system. We had no concerns
about safety, but found that our regulation should
evolve to take account of risks that could arise from
future increases in traffic, new technology and the
increasing diversity of NATS activities.
Supporting the development of

UK aviation policy
At the request of Government, the CAA has actively
contributed to the development of the UKs Aviation
Policy Framework, published in March 2013. At all
stages we have sought to ensure that the consumer
is central to policy making, reflecting our duty to users
and a recognition that an approach targeted at meeting
the needs of passengers and users of air freight is
most likely to lead to satisfied consumers and an agile,
competitive aviation sector capable of servicing the
wider economy. Related to this, we have been feeding
into the work of the independent Airports Commission
set up by Government to advise on the need for
further UK airport capacity, work that continues into
2013-2014 as the Commission formulates its advice.
Working with industry to

improve performance
Following on from the publication of the South East
Airports Taskforce, we have worked with industry
stakeholders through the Airport Performance
Facilitation Group (APFG) to develop the concept of
passenger charters establishing minimum levels
23
We have monitored

passenger experiences
during disruption to identify
issues of consumer
detriment.
of service they can expect, as well as the idea of

capacity management guidelines to help ensure
airports do not schedule more flights than they can
reliably handle. Lastly in this area, at the request of
Government, we have overseen a trial to examine
the feasibility of introducing new operating rules at
Heathrow airport aimed at improving reliability.
Increasing ATOL protection

ATOL is the statutory financial protection scheme
for air holidaymakers and repatriates or refunds
customers when holiday companies fail. In 2012/13,
the relatively low number of travel firm insolvencies
meant that no repatriation operations were required
and around 1,350 holidaymakers were refunded.
During the year, we fully implemented the changes
brought about by the Governments reform of
ATOL in April 2012. These ensure greater clarity for
holidaymakers as to whether they are protected by
ATOL or not, and, by including Flight-Plus holidays,

mean that more travellers are protected when they
buy an air holiday. As a result, the travel industry
expected to sell an extra 2.8 million ATOL-protected
holidays this year. Implementation of the new
Regulations was supported by our largest ever
industry education programme to ensure the travel
trade fully understood and complied with the new
requirements.
In October, we introduced the new ATOL certificate.
ATOL certificates are given to holidaymakers when
they book ATOL protected products and show them
exactly what is covered and what to do if their travel
organiser fails.
To help those booking a holiday understand the
benefits of ATOL, we began a major consumer
awareness campaign during the winter peak
booking period. Entitled Pack Peace of Mind it
aimed to alert consumers of the recent changes to
ATOL and warn them of the importance of checking
they receive an ATOL certificate when they book.
Passenger empowerment and protection

Better information for the consumer is one way
of empowering consumers to take the decisions
that are right for them. In this vein, we have
also continued to enhance our role in ensuring
consumers have the best possible information to
make decisions on air travel. Building on this the Act
gives us a duty to promote better information on air
24
Advice and Complaints Team about delayed flights.

We have been working with airlines and with other
European enforcement bodies towards achieving
consistent and efficient handling of passenger claims
for delay compensation.
Consumer panel
travel, both on customer service and environmental

performance and we have started engagement with
the industry on how best to achieve this.
Through our website we have already published
a fees and charges comparison table that enables
travellers to check the cost of optional extras on
top of their headline fare. Following its launch in
2012 the table has been regularly updated and has
received over 10,000 visits.
During the year the Court of Justice of the European
Union issued a ruling on the rights of passengers
delayed by more than three hours. The Court rejected
a challenge to the EC rights legislation on delay and
cancellation and clarified that passengers whose
flights arrive three hours or more later than scheduled
are also entitled to claim for compensation, unless
the delay or cancellation was outside of the airlines
control. We have since seen a significant increase in
the numbers of passengers contacting our Passenger
Our new Consumer Panel was established during

the year, with nine members drawn from a range
of sectors with vast experience of regulating in
the consumer interest. The Panel is now providing
oversight and advice to our consumer work. Its
progress during the year is covered in its own annual
report which can be accessed via www.caa.co.uk.
Airport surveys
We conduct regular passenger surveys at UK
airports that provide valuable detailed information
to the CAA, the Government and industry on the
profile and trends of those travelling through UK
airports. The UK airports surveyed in 2012 included
Aberdeen, Birmingham, Bristol, Cardiff, Exeter,
Gatwick, Heathrow, London City, Luton, Manchester,
Nottingham East Midlands and Stansted. Further
details can be found on our website.
Further Regulatory work

Aviation statistics supplied by UK airports and
airlines continue to be used to support ongoing
analytical and policy work.
25
Key aims and achievements

Regulated airports will increase their focus
on improving the customer experience they
offer. They will continue to improve their
competitiveness and to play an important
facilitating role in the UK economy.
The Civil Aviation Act 2012 provides a legal basis for
more customer orientated regulation of airports. This
will enable the CAA to design economic regulation
at an airport that is proportionate to the degree of
market power the airport holds.
Consumer and competition issues will be

identified and resolved in a more structured
and consistent manner. Our priorities for action
will be clear. We will achieve the right balance
of formal and informal approaches and will use
enforcement powers where appropriate.
The new CAA-wide enforcement policy and

supplementary consumer enforcement guidance
are published and in operation. The Consumer
Issues Panel has met regularly to set priorities. A
number of companies have changed their practices
after discussions with us, and in a minority of cases
we have exercised our powers to secure formal
undertakings.
We will have improved the ability of the civil

aviation industry to deal with significant
disruption, through better anticipation and more
co-ordinated response. Consumers should
expect to be properly served, within reason,
despite disruptions, whatever the original cause
of the disruption.
The CAA chaired an Airport Performance Facilitation
Group (APFG) to oversee implementation by
industry of the recommendations of the South East
Airports Taskforce.
26
One recommendation was a trial of how operational

freedoms at Heathrow could improve the airports
resilience to disruption. We have overseen the way
the trial was run and will submit a final report to the
Government.
APFG also shared best practice among airports on
better serving the consumer, particularly at times of
disruption, through better anticipation and a more
co-ordinated response. We will take this forward as
part of our work on consumer policy, new airport
licences, and information powers.
Some airlines have shared and adopted elements of
best practice in communicating with passengers at
times of disruption. We have monitored passenger
experiences during disruption to identify issues of
consumer detriment.
The requirement to produce ATOL certificates

commenced on 1st October 2012. We educated
travel companies about what they needed to do
and worked with software system suppliers to
ensure that firms were able to issue certificates
from day one.
We used new powers in the ATOL regulations
to put in place seven Accredited Bodies. These
arrangements now effectively licence around
1,250 small businesses, protecting over 900,000
consumers in a way that reduces regulatory burdens
on business and risks to the ATT.
There will be marked progress towards an

optimum balance of capacity utilisation within
the known constraints, to benefit consumers.
We will increase clarity for consumers over

when their holidays are protected under the
ATOL scheme, and improve the resilience of
the Air Travel Trust (ATT).
This year, the main focus of ATOL activity was
ensuring that firms were complying with new
ATOL Regulations. We conducted our largest
ever trade education campaign in preparation for
implementation, which brought over 2.8 million
Flight-Plus holidays within the ATOL scheme,
resulting in greater clarity and protection for
consumers of air holidays.
27
CAA information campaigns

are achieving measurable
impact. For example radio
and TV appearances about
passenger rights resulted in
many extra enquiries to our
telephone advice line.
Progress on this has been only moderate. The

CAA has sought resilience to be more clearly
built into the airport capacity declaration process
and the European Commission reform of the EU
Slots Regulation. We also looked for progress on
scheduling guidance through the APFG, but have
seen only piecemeal progress.
Consumers will have access to more and better

relevant information about the price and nonprice aspects of their buying decision. They will
have accurate, comparable information when
they need it.
Airlines are complying with transparency rules on
compulsory charges, and card charges have either
been discontinued or are disclosed to consumers.
Guidance for travel agents and tour operators is
under consultation.
CAA information campaigns are achieving

measurable impact. For example radio and TV
appearances about passenger rights resulted in
many extra enquiries to our telephone advice line.
Denied boarding regulations and the industry

processes for prompt and correct handling
of claims will become a matter of routine
compliance, avoiding the need for CAA
to publicly demand that airlines comply
or take enforcement action except in rare
circumstances.
We have made some progress towards a shared
understanding of extraordinary circumstances
with airlines and other EU enforcement bodies. We
have embarked on gathering data to assess the
general state of compliance with legislation.
Industry will routinely meet its obligations to

Persons of Reduced Mobility (PRM) and failures
are remedied quickly, including through prompt
enforcement action, where necessary.
The CAA is operating effectively as complainthandler for PRMs, and we have close relationships
with disability representative bodies. The CAA and
industry worked successfully together to ensure
a smooth travel experience for PRMs during the
Paralympics.
28
Improving environmental performance

It is widely acknowledged that any future growth in
aviation must be sustainable. The industrys longterm aims for more efficient aircraft using more
sustainable fuels backed up by efficient airspace and
infrastructure, will help to achieve this.
regulation. This programme is aimed at helping

facilitate the sectors environmental performance
and generating benefits to consumers, the
environment and the sector itself.
Currently, a range of projects are underway

world-wide to help reduce aviations impact on
the environment. In the summer we launched a
four-year programme to help improve aviations
environmental performance and allow the sector to
grow sustainably. It sets out how we will facilitate,
advise, influence and regulate the aviation sector to
reduce its environmental impacts.
The strategy was developed following a public
consultation that attracted responses from across
the aviation industry and builds on our earlier insight
note on the environmental impacts of aviation.
It focuses on key areas including airspace, safety
and standards, incentives and metrics, and, noise
modelling and local impacts. The strategy includes
existing work such as progressing the Future
Airspace Strategy (FAS) and proposes new activities
only where we have a clear role to play, and the
capacity to deliver the activities in a cost-effective
way. We will use our expertise in areas such as
noise, airspace and safety to add value to aviations
efforts to reduce its impacts on the environment.
We already undertake a wide range of activities
that have a direct impact on the environment in
areas such as safety, airspace, noise and economic
29
the industry plans to

implement modern airspace
design and procedures
to achieve more efficient
flights.
We are committed to improving our own

environmental performance and efficiency. Our
targets for 2015 include reducing current energy
consumption by 15%, recycling 70% of office
waste, reducing overall waste produced by 10%,
and, reducing business travel by 10%.
Key aims and achievements

Consumers have access to accurate
and comparable information about the
environmental impacts of their travel choices.
The Civil Aviation Act achieved Royal Assent and in
May 2013 we published for consultation a statement
of policy setting out our strategy for deployment of
the Acts new environmental information powers.
Substantial progress has been made towards

delivering new solutions for routeing aircraft
through airspace and enabling new take-off and
landing trajectory improvements that will deliver
emissions reductions and reduced fuel costs.
The Future Airspace Strategy industry
implementation plan was published in December
2012. This sets out how the industry plans to
implement modern airspace design and procedures
to achieve more efficient flights.
An increasing number of initiatives to reduce

environmental impacts are being developed,
tested and progressed towards implementation.
In summer 2012 the CAA launched its environmental
programme setting out a programme of 25
workstream activities to be taken forward across
the CAA working with Government and industry
stakeholders. The CAA is committed to reporting
progress against the programme on a regular basis.
The first review will take place later in 2013.
30
Being a better regulator

At the CAA we are continually striving to improve
the effectiveness of our regulation and, where
possible, reduce the burden on those we regulate.
This has been key to much of our work during the
past year, and planned for the future.
We are committed to removing unnecessary
regulations and ensuring that any new or revised
requirements are effective and proportionate. An
example of this is our drive to introduce more
focused, risk-based regulatory oversight for
safety through our Enhancing Safety Performance
programme of work. Our work to develop a new
safety oversight regime that is performance-based is
about targeting our resources and those of industry
on areas where this will have the greatest effect,
and putting the right amount of effort into risks, and
indeed reducing effort where the risk itself does not
warrant significant oversight.
One of our key Better Regulation priorities is
transparency, not only in terms of accessibility to
information but also considering how we present it.
As a result we have undertaken a major review of
our website and implemented a new structure that
is based on a site visitors requirements.
make a significant improvement to our processes

and practices so improving the efficiency of
stakeholder transactions with us, and so improving
the customer experience we provide.
As well as our interaction with stakeholders through

the website we also need to improve the way we
ask those we regulate to interact with us so as to
reduce the administrative burden of complying with
regulations. Perhaps the most demanding change
project underway within the organisation aims to
We have also published our new Regulatory

Enforcement Policy which covers the entirety of
our enforcement work. The aim of the policy is to
provide clarity and certainty for consumers and
those we regulate about when, why and how we
will take action.
31
we are continually striving

to improve the effectiveness
of our regulation and, where
possible, reduce the burden
on those we regulate.
Better regulation aims and

achievements 2013
Being transparent for the benefit of stakeholders
is a high priority, second only to proportionality.
We make our policies, decisions and guidance
readily available and accessible.
The revised Aviation Policy and Environmental
Directions to the CAA have been incorporated into
the Airspace Change Process prior to consultation.
We continue to work closely with Government
on the Red Tape Challenge to identify domestic
legislation and regulations which could be amended
or revoked to reduce the regulatory burden.
As well as seeking to remove unnecessary
regulations we are also ensuring that any new or
revised requirements are effective and proportionate.
For example, when working with Government
to develop the ATOL reform legislation, we have
sought to minimise costs to business by introducing
provision for us to accredit third party bodies to
organise consumer protection which meets ATOL
requirements for smaller holiday companies.
A good consultation process, coupled with effective
stakeholder engagement, is a key aspect in ensuring
transparency. For example, we have sought to
improve the effectiveness of this in our ongoing work
to develop proposals for the next period of price
control at the regulated airports of Heathrow, Gatwick
and Stansted.
Appropriate performance and risk information is

shared with industry and consumers.
Proportionality is our highest priority for better

regulation. We will be much more risk-based
and therefore burdens will reduce as risks
reduce.
We have established a risk-based approach to
regulation. How this affects those we regulate is
established and informed by an outline of the overall
risk picture across the whole aviation system (not
just UK and UK businesses).
We will take a lead even where we do not have
responsibility, when it is the right thing to do.
32
We have identified where

we can make improvements
and have started to
streamline and rationalise
procedures.
We will be able to focus our resources and
those of industry as a result of the priority we
give to proportionality.
We will ensure that our Better Regulation

priorities make us more accountable through
internal assurance.
Our regulatory effort is targeted on risk. Rules and

policies are written to facilitate targeting by both the
regulator and those we regulate.
We are confident that we are delivering to our

Better Regulation priorities and have identified and
closed gaps in our Better Regulation goals.
One of our high priorities is to reduce

inconsistencies in our regulation.
We are more engaged with stakeholders,

supporting one of our highest priorities,
transparency.
Practices and policies are consistent across the CAA,

and we are working to build supporting systems to
ensure harmonisation as well as efficiency. Policy
development is co-ordinated within Groups and
directed across the CAA from the highest levels.
Enforcement will be transparent, proportionate

and consistent, which captures our three top
Better Regulation priorities.
We consult in a targeted and consistent manner,

co-ordinated across the CAA, seek feedback from
stakeholders and act on it. We use and respond
to feedback received and stakeholders have
been consulted and understand our performance
improvement goals for industry.
Enforcement policies and activities are explained

and publicised where appropriate.
Reduce administration burden for those we

regulate.
We have identified where we can make improvements
and have started to streamline and rationalise
procedures. This is supported by comprehensive work
on our systems, aimed at making it easier for those
we regulate to deal with us.
33
Being a more efficient organisation

We strive to ensure that we are an efficient
and effective organisation which provides value
for money and meets the principles of Better
Regulation. As a body funded directly by charges
paid by those we regulate we fully understand
the difficulties the industry continues to face and
recognise this when setting our charges. As we
continue to develop the CAA as an organisation,
improving our efficiency continues to be a key
focus. We are determined to deliver long-term
efficiencies and better customer service by
improving our management structure, modernising
the way we manage and carry out our activities, and
interacting more collaboratively with the industry we

regulate. Over the last 10 years (2002/03 to 2011/12)
we have reduced our operating costs in real terms
by more than 25% - this has been actioned in a
period of significant growth and change within the
aviation industry.
Employment costs represent approximately 60%
of our total costs. Therefore they must be a primary
source of efficiencies if we are to deliver an acceptable
outcome. As part of the CAAs five year strategic plan,
which covers the financial years 2011/12 to 2015/16 we
have set ourselves stretching financial targets which
includes containing the growth in employment cost
which is predominated by ongoing pension costs. We
have set a financial target that employment costs will
grow by no more than an accumulative 16m during
that period. During the year, the first phase of the
strategy was implemented which included:
A performance-based total reward approach
for our staff that will enable us to recognise
and reward high performance. A market-driven
benchmarking exercise informed our approach
by enabling us to test our relative market
position on pay and benefits;
An agreement with the CAA trade unions to
limit wages and salaries increases to 4% over a
three-year period and removal of automatic pay
increments;
Closing the CAA Defined Benefit Pension
Scheme to new entrants;
34
Introducing a cap on the growth of future

pensionable earnings within the CAA Defined
Benefit Pension Scheme;
Strict control on the movement and recruitment
of colleagues which led to a reduction of over
30 full-time equivalents during the year.
More of our transactions and payments need to

be carried out online. We need more capable and
reliable systems internally and we need to find
process efficiencies to create capacity for new and
extended activities to improve our performance and
deliver better outcomes.
During the financial year ending 31 March 2013,

following a freeze on pay, the CAA had reduced the
wages and salaries bill to 50,389k a reduction of
1,405k (2.7%) when compared to the previous year.
Additionally, as compared to the five-year strategic
plan target of 16m we have achieved 4.2m savings
to date, which is 2.1m ahead of target.
We are committed to controlling costs while

investing to deliver savings and improvements
in the medium to long-term. Two work streams
in particular, Enhancing Safety Performance and
Performance and Process Improvements, will not
just add value and efficiency to the CAA, but will in
time bring significant benefits to industry as well.
We are conscious that there is much more we

can do to improve our efficiency. We support
and challenge operational managers to spend
their budgets more effectively and deliver more
regulatory improvements for every pound that is
spent. We have business plans that link costs to
our strategic outcomes and accurate reporting on
the financial performance to the CAA Board and key
stakeholders. This approach is further enhanced by
adherence to the corporate governance principles
enshrined in the UK Corporate Governance Code.
Our Performance and Process Improvement

programme will over time deliver a step-change
in the experience of our stakeholders when they
interact with us. It will also provide us with the tools
to be able to improve our safety oversight by making
the best and timely use of all the safety intelligence
available to us across the organisation and industry.
We will be able to provide our technical safety
experts and inspectors with a single pool of data on
the industry.
35
we will need investment

in new processes, systems
and skills.
Our Enhancing Safety Performance programme

will help us move to a more performance-based
process, and ensure that we only undertake tasks
that will bring significant safety benefit and that
this work is focused where it will have most effect.
Linked to this work is a review of areas where
we could seek to reduce or devolve aspects of
regulation to industry with appropriate safeguards

established. This is particularly relevant for some
areas of recreational aviation, a review of which
is currently underway. To achieve these two key
programmes, we will need investment in new
processes, systems and skills.
In order to achieve these outcomes we have set
ourselves financial efficiency targets for the next
three years of the Strategic Plan. These targets
include:
There will be zero increases in fees and charges
to those whom CAA regulates, except in
situations where material cross subsidies reside;
Where new activities are transferred from HM
Government, we will ensure that charges are
minimised to industry as far as that is possible;
We will ensure that CAA achieves the objective
of constraining the growth in employment
costs (including Pension costs) by 16m over
the Plan period;
We envisage that over the Plan period there
will be a reduction of an estimated 120 full-time
equivalents as a consequence of the Performance
and Process Improvements programme;
The Performance and Process Improvement
programme will be funded from existing
reserves and savings generated from the
programme. CAA does not plan to increase
charges to fund this programme of work.
36
Performance Indicators
Safety
Airprox
An Airprox is a situation in which, in the opinion of a
pilot or a controller, the distance between aircraft as
well as their relative positions and speed have been
such that the safety of the aircraft involved was or
may have been compromised.
The number of Airprox each year, in regulated
and unregulated airspace, is one indicator of the
effectiveness of air traffic separation measures
in the skies above the UK. The figures are a key
indicator of aviation safety. The UK Airprox Board
(UKAB), working with other aviation safety bodies,
is responsible for assessing the cause(s) and risk
involved in each Airprox reported in UK airspace. A
risk-bearing Airprox is one where there was either
an actual risk of collision or safety was not assured.
Identifying the causal factors behind these incidents
plays an important role in safety improvement work.
The Boards findings and the lessons identified
are disseminated widely throughout the aviation
community and are placed on the UKAB internet
website. Recommendations, made by the UKAB in
respect of improvements in flight safety, are also
published following despatch to the organisation(s)
to which they are addressed.
During 2012 a total of 161 Airprox were investigated;
this was the same total as in 2011. Commercial Air
Transport (CAT) aircraft were involved in 35 Airprox,
equivalent to 22% of the total. By comparison,
average figures over the preceding ten years for
37
In the three-year period from

2010 to 2012, there were no
fatal accidents involving UK
operators
Airprox involving CAT are 61 Airprox per annum,

comprising 35% of the total. One Airprox involving
CAT during 2012 was assessed to be risk-bearing. The
others were assessed to involve no risk of collision
or, in four cases, there was insufficient information
to determine the risk with any certainty. Typical
examples of the latter category include pilots sighting
objects, possibly small balloons, aerial lanterns or
model aircraft, that did not show on radar and could
not be traced. An analysis of Airprox in 2012 and the
previous five years is shown below.
Total Commercial Air Transport Risk-Bearing Airprox
Fatal Accident Rate

(per million flight hours)
100
64
35
1
/1
/1
10
09
08
/1
/0
08
07
07
06
/
05
/
04
/
06
0.00
05
With such small numbers annually, the statistics

for Airprox are vulnerable to small annual changes
having the appearance of significant trends.
Therefore it is too early to say whether the gradual
year on year reduction in CAT Airprox has ended
or whether 2012 is simply a blip on a continuing
downward trend.
UK
04
Risk-bearing CAT Airprox
0.03
03
/
CAT Airprox
0.06
03
Calendar Years
Total Airprox
EU States
2012
02
/
2011
01
/
2010
2009
02
2008
0.09
00
/
2007
22
40
0.12
35
66
0.15
50
0
The CAAs Safety Regulation Group (SRG) is

responsible for the oversight of UK-registered or
operated aircraft worldwide. In this section, safety
performance indicators are shown for UK-registered
or operated aircraft, using a three-year moving rate
of fatal accidents per million flight hours. A fatal
accident is defined as an accident which results in
fatal injury to any person in or upon the aircraft or by
direct contact with any part of the aircraft. Overall
the accident rate has remained stable in the period
2010 to 2012.
UK-Registered/AOC Fixed Wing Passenger Aircraft
UK-Registered/AOC Fixed Wing Passenger Aircraft
above 5,700kg
MTWA
above 5,700kg
MTWA
16
1
16
1
14
7
15
5
15
4
150
16
7
200
Fatal accident rates
Three-year period
(MTWA: Maximum Take-off Weight Authorised)
The three-year moving rate of fatal accidents for

passenger aeroplanes above 5,700kg MTWA for UK
operators has been compared to that of operators
from the EU. In the three-year period from 2010
38
8
6
4
2
2
/1
10
0
/1
/1
09
08
/0
07
/0
06
/0
05
/0
04
/0
4
/0
03
02
Fatal Accident Rate

/0
Three-year period
The three-year moving rate of fatal accidents for UK

small public transport aeroplanes has remained at
zero in recent years. The last fatal accident involving
UK small public transport aeroplanes occurred in
2000, when a Piper PA31 crashed into the River
Mersey during an Instrument Landing System (ILS)
approach resulting in five fatalities.
15
10
5
/1
2
Fatal Accident Rate

5
4
3
2
1
/1
2
10
1
/1
09
/1
08
9
/0
07
/0
06
/0
05
/0
04
/0
03
/0
/0
00
0
2

public transport freight operations has remained
at zero in recent years. In the period shown in the
graph (2000 to 2012), there were two fatal accidents
involving this category of aircraft. The most recent of
these was in 2001, when a Shorts SD360 crashed
into the Firth of Forth shortly after take-off, resulting
in two fatalities.
UK-Registered/AOC Public Transport Helicopters

above 3,175kg MTWA
02
Three-year period
/0
10
/1
1
09
/1
0
08
/0
9
07
/0
8
06
/0
7
05
/0
6
04
/0
5
03
/0
4
02
01
/0
00
/0
01
20
Fatal Accident Rate

00
UK-Registered/AOC Freighter Aircraft above 5,700kg MTWA
10
01
UK-Registered/AOC Freighter Aircraft above 5,700kg MTWA
UK-Registered/AOC Fixed Wing Public Transport Aircraft

below 5,700kg MTWA
/0
to 2012, there were no fatal accidents involving

UK operators and one involving operators from EU
Member States. Accidents involving third-party only
fatalities are not included. The UK fatal accident
rate in this category has remained at zero in recent
years; the last fatal accident occurred in 1999 when
a Boeing 757 made a heavy landing in Girona, Spain,
resulting in one fatality.
Three-year period
39
we have achieved 4.2m

savings to date, which is
2.1m ahead of target.
The fatal accident rate for UK public transport

helicopter operations fell to zero for the three-year
period from 2010 to 2012. The last fatal accident
involving this category of aircraft occurred in 2009,
where an SA332 Super Puma crashed into the sea
following gearbox failure and rotor head separation,
resulting in 16 fatalities.
Fatal Accident Rate

0.25
0.20
0.15
0.10
UK General
Aviation
below
5,700kgMTWA
MTWA
UK General
Aviation
below
5,700kg
0.05
Aeroplanes
15
10
10
/1
2
/1
1
09
08
/1
0
/0
9
07
/0
5
04
/0
6
05
/0
7
06
/0
8
03
/0
4
02
5
01
/0
2
/1
10
/1
09
/1
08
/0
07
/0
06
/0
05
/0
04
/0
03
Three-year period
Other
20
00
/0
/0
00
Helicopters
25
/0
/0
0.00
02
Fatal Accident Rate

01
30
Fixed Wing Public Transport Aircraft

above 5,700kg MTWA in UK Airspace
Three-year period

general aviation below 5,700kg MTWA, has been
separated into three classes of aircraft: fixed wing,
helicopters and other. The other category includes
airships, balloons, gliders, gyroplanes and microlights.
In the period 2010 to 2012, the fatal accident rates per
million flight hours for the three categories are listed
below:
The CAAs responsibilities for foreign-registered

aircraft extend only to the provision of air navigation
services and the safety of UK licensed aerodromes.
Nevertheless, in view of the public interest in
the safety of civil aviation in the UK, performance
indicators for all public transport operations in UK
airspace are shown above. The fatal accident rate
in this category has remained at zero in the period
2010 to 2012.
Aeroplane 9.1;
Helicopter 7.3;
Other 22.6.
40
Service
Departure delays
The CAA measures the punctuality of air transport.
The performance indicators below show the
number of departing flights that left the ten airports
(Heathrow, Gatwick, Manchester, Birmingham,
Stansted, Luton, Glasgow, Newcastle, Edinburgh and
London City) more than 30 minutes after the planned
departure time. In 2012 these ten airports accounted
for around 82% of all passengers departing from
British airports. The planned departure time is that
recorded with the appropriate Scheduling Committee
up to 24 hours before the flight. The CAA then
compares this report with the actual departure time
reported by the airport. All departing passenger
flights, excluding air taxis, at these ten airports have
been analysed for both British and foreign carriers.
The statistics do not analyse the cause of the delay,
which can occur for a variety of reasons.
Number of departures delayed by more than 30 minutes
Pilot licence issues - professional & private

In exercising its primary responsibility for the safety
regulation of UK registered aircraft, one of the CAAs
major tasks is the issue of flight crew licences and
associated ratings. The indicators below show,
for professional and private licences, the average
number of days taken to issue flight crew licences
and associated ratings, and the number of licences
issued per CAA licensing staff member.
Number of days to issue
Number of days to issue
Number of departures delayed by more than 30 minutes
Professional
Departures 000s
600
400
12
/1
3
11
/
/0
07
Calendar years
12
10
/11
2012
/1
0
2011
09
2010
2009
/0
2008
08
2007
/A
68
66
10
5
77
12
8
2
14
5
200
4.
3
4.
6
4.
2
2
4.
3.
3.
5
3.
3.
9
70
71
2
68
73
79
4.
5
4.
8
81
6
800
Private
Departures delayed 000s
1000
41
numbers of ATOL
protected passengers
stabilised while our charges
increased by less than
inflation."
Licences
issued
perper
staff
Licences
issued
staffmember
member
ATOL
applications:
average time to decisions
ATOL
licence applications:
Average time to decision
6
2.
6
2.
0
8
1.
1.
1.
1.
1.
1.
8
1.
8
2.
9
0
1.
1.0
500
7
1.
3
1.
1.5
1000
1.
2,
5
56
1,
2.5
2.0
1,
33
Applications for new licences
3.0
1.
07
4
7
2,
6
0
58
1,
50
1,
1,
32
02
01
2
2,
9
1,
8
1,
1,
1,
44
9
47
9
69
72
2000
0.5
3
/1
12
2
/1
11
10
/1
0
09
/1
9
/0
08
8
/0
7
06
05
/0
/0
13
12
/
12
11
/
11
10
/
/1
0
09
9
/0
08
8
/0
07
0.0
07
1500
3.5
Private
Applications to renew
3.
5
Professional
2500
The staff effort used to calculate the number of

licences issued per staff member is derived from
Metrics time recording data.
The second graph shows the average number of

decisions per staff member for new and renewal
ATOL applications.
Air Travel Organisers Licensing (ATOL)
ATOL applications:
number of decisions per staff member
ATOL licence applications:
Applications for new licences
11
14
11
96
11
120
11
12
13
150
90
15
13
15
17
15
20
30
17
60
3
/1
12
2
/1
11
1
/1
10
0
/1
09
9
/0
08
8
/0
07
7
/0
06
/0
The decrease in the average time to decision for

renewal licences in 2012/13 is likely the result of
businesses becoming used to the new requirements
that came into place under ATOL reform. The increase
in average time for new applications is largely due
to increased pressure on resources and a number
of particularly complex applications that took an
abnormally long time to process.
Applications to renew
05
The first graph below shows the average number of

weeks taken to reach decisions on applications for
new ATOLs and the renewal of existing ATOLs.
Number of decisions per staff member
42
23
.6
.8
23
25
21
.9
19
.
22
/0
.1
21
.2
6
20
/0
.5
19
.
20
25
20
.3
25
.1
30
.4
Pence 2012/2013
15
10
5
13
12
12
/
11
/
11
10
/
/1
0
09
/0
08
/0
07
/0
06
05
5
/0
04
03
/0
The third graph shows the average cost of

administering the ATOL scheme per passenger
protected by ATOL over the past ten years, adjusted
to todays prices. There was little change on last
years figure and this reflects the fact that numbers
of ATOL protected passengers stabilised while our
charges increased by less than inflation.
Cost per passenger protected by ATOL
02
The decrease in the number of renewal decisions

per staff member reflects a lower number of
renewals within scope, and the increase in the
number of new application decisions per staff
member reflects the larger number of new
applications that followed ATOL reform.
43
Financial Review
Significant financial developments
The financial year ended 31 March 2013 continued
to be a challenging environment for the CAA from
a financial perspective, with the suppressed global
economic climate continuing to put pressure on
income, which is heavily reliant on levels of activity
in the aviation sector. The primary income driver in
respect of variable charges to industry, is available
seat kilometres; these fell by 3.1% in the year to 31
December 2012. Despite these pressures, the CAA
achieved a rate of return of 5.5% for the Regulatory
Sector which was marginally below the 6% target rate
of return set by the Secretary of State for Transport.
This result was achieved by the CAA continuing to
implement cost saving measures and generating
income from its commercial subsidiary, CAA
International Limited (CAAi).
Cost saving measures were focused on
employment costs which represent approximately
60% of our total costs. During 2012/13, we moved
to a performance-based total reward approach
for our staff that will enable us to recognise and
reward high performance. A benchmarking exercise
informed our approach by enabling us to test our
relative market position on pay and benefits. In
addition, a number of proposals have been adopted
to limit our liability to increasing pension costs,
these included closing the Defined Benefit Pension
Scheme to new entrants and limiting further
increases in pensionable earnings to movements
in price inflation. The effects of these changes
combined with an overall zero based budget
approach to the CAA financial plan has meant that

for 2013/14 charges in the majority of cases were
held or reduced as compared to 2012/13.
The CAA is directed by the DfT to prepare the
financial statements in accordance with the
accounting and disclosure requirements of
companies legislation currently in force and
international generally accepted accounting practice.
However, the financial results of the Group are
assessed by reference to financial targets agreed
with the Secretary of State for Transport. The Group
Regulatory Sector target requires the CAA to set its
unit charges at levels sufficient to achieve a return
of 6% before interest on the average level of capital
employed, expressed in current cost terms. Although
the CAA is required to comply with International
Accounting Standard (IAS) 19 Employee Benefits
in accounting for pension costs in its financial
statements the regulatory target is based upon the
level of employer cash contributions paid to the CAA
Pension Scheme during the financial year, rather than
pension costs evaluated under IAS 19.
The CAA section of the Civil Aviation Authority
Pension Scheme is currently awaiting the outcome
of the formal valuation undertaken at 31 December
2012, the results of which are expected later in the
year. The latest formal valuation of the CAA Section
of the Civil Aviation Authority Pension Scheme at
31 December 2009 was approved by the Schemes
Trustees on 31 March 2011. The valuation revealed
an ongoing surplus of 99.7m on the technical
44
provisions agreed with the Scheme Actuary, whereas

under IAS 19 the accounts show a pension asset
of 554.0m (note 18). The methodology underlying
the actuarial valuation complies with pensions law
and the requirements of the Pensions Regulator,
and differs from that used for IAS 19 disclosures,
particularly in relation to the financial assumptions
used. Whilst the discount rate used for IAS 19
disclosures should be based on the yield of at least
AA-rated corporate bonds, irrespective of the risk
profile and funding strategy actually adopted, the
discount rates used for the 2009 formal valuation
were largely based on Government bond (gilt) yields
(which, as at 31 December 2009, were about 1.2%
pa lower than corporate bond yields). This reflects
the investment strategy of the Scheme where the
majority of the assets (about 84% as at 31 December
2009 and, currently, about 82%) are invested in gilts
as part of a strategy to match, so far as possible,
the Schemes pension liabilities by the cash flows
from a portfolio of index-linked gilts. In addition, the
formal valuation has a more prudent basis than IAS

19 disclosures and this is allowed for by means of
further adjustments to the discount rate and the
inclusion of reserves for contingent events, including
further improvements in longevity.
The wholly owned subsidiary company, CAA
International Limited, delivered an expanded
programme of global advisory services and training,
supporting industry and the Government both in
the UK and overseas. The company had another
successful year, achieving a turnover of 17.1m
(2012: 15.4m), an annual increase of 11.0%,
despite the difficult trading conditions created by
the global economy. The companys operating result
saw an increased profit after tax of 2.3m (2012:
1.3m) which principally reflects the increase in
income and continued downward drive on operating
costs during the year. The company employed an
average of 41 staff during the financial year with a
further 39 being supplied from other areas within
the Group.
45
Income generated within

CAAi increased to 17.1m
(2012: 15.4m) in the year,
an increase of 1.7m
Overall Financial Performance

In the year ended 31 March 2013, the CAA recorded
a loss before tax of 3.2m (2012: 0.2m). These
results included the effects of IAS 19.
CAA financial performance results

Group revenue
Operating costs
(excluding IAS 19
pension scheme
adjustments)
Group operating profit
2013 2012
m m
125.8 115.3
(125.6) (114.6)
0.2 0.7
IAS 19 pension sheme (5.3) (11.9)

adjustment
Group adjusted
operating loss
Net interest
Loss before taxation
Taxation
Loss after taxation
(5.1) (11.2)
1.9 11.0
(3.2) (0.2)
0.3 (0.1)
(2.9) (0.3)
Within the operating result the Regulatory Sector,

comprising the activities of the Safety Regulation,
Regulatory Policy and Consumer Protection
Groups as well as the result achieved by CAAi,
made an operating profit of 2.7m (2012: 2.3m)

and a loss after adjustments for IAS 19 pension
costs and net interest, but before tax, of 0.2m
(2012: 1.2m profit).
Revenue
Group revenue for the year ended 31 March 2013
was 125.8m (2012: 115.3m), an increase of
10.5m (9.1%).
The Regulatory Sector saw an increase of 2.9m
(4.0%) to 75.8m (2012: 72.9m). The increase in
income has arisen primarily as a result of average
increases of 2% across the main Statutory Charges
Schemes for 2012/13, as well as income received
in the year by the Regulatory Policy Group (RPG) in
respect of its periodic review of airport charges.
Income received within the UK En Route Air Traffic
Services sector rose by 4.8m compared to the
previous year, due to the recovery of additional
sums relating to pension liabilities in respect of
NATS pensioners inherited at the time of the
separation of NATS from the CAA in 2001.
Income generated within CAAi increased to 17.1m
(2012: 15.4m) in the year, an increase of 1.7m
(11.0%), this increase being due to business
expansion derived primarily from the EASA contract
as well as new training and examination services.
46
Operating Costs
Operating costs for the year ended 31 March 2013
were 130.9m (2012: 126.4m), an increase of
4.5m (3.6%). The significant areas of change are
described below:
Employment costs were 78.6m, showing no
movement compared to the prior year. Within
this figure defined benefit pension costs
increased by 0.8m to 21.1m, the increase
being attributable to the treatment of defined
benefit pension costs in accordance with
International Accounting Standard (IAS) 19
Employee Benefits. However, the financial
results of the Group are assessed by reference
to financial targets agreed with the Secretary
of State for Transport. This target excludes
the effects of IAS 19 on pension costs and
reflects instead the level of employer cash
contributions paid to the CAA Pension Scheme
during the financial year. The increase in
pension costs was offset by a decrease in
salary costs resulting from the reduction in
staff numbers and a pay freeze within the
Authority. The average number of employees
disclosed in note 3 to the accounts does not
reflect the true trend in staff numbers as a
significant number left the organisation in the
last two months of the year. The number of full
time equivalents as at 31 March 2013 showed
a reduction of 25 compared to the same time
last year;
Services and materials costs were 15.4m

(2012: 15.5m), a decrease of 0.1m (0.6%). The
decrease was principally due to a reduced level
of IT software expenditure in the year;
Repairs and maintenance costs were 2.7m
(2012: 2.9m), a decrease of 0.2m (6.9%)
primarily due to reduced IT hardware and IT
support expenditure during the year;
External research and development costs were
0.6m (2012: 0.5m). In addition to third party
expenditure, the CAA incurred 0.6m (2012:
0.5m) of internal costs, bringing the total
research and development expenditure to 1.2m,
an increase of 0.2m (20.0%) compared to the
prior year. The Safety Regulation Group involves
the aviation industry in determining the Groups
research and development programme, which
concentrated on aircraft safety during the year;
Other expenses were 31.2m (2012: 25.9m),
an increase of 5.3m (20.5%). A significant
proportion of this increase relates to additional
costs developing a CAA-wide enterprise
architecture and business analysis to carry out
business process re-engineering on the major
areas of the business. Additional costs were also
incurred on the pension scheme review and RPG
professional fees increased by almost 1.0m as a
result of activities carried out in connection with
the Airport Charges Review.
47
Corporation Tax
The estimated tax credit for this year is 0.3m (2012:
0.1m expense). A net deferred tax asset of 75k is
now recognised in the balance sheet, a movement
of 81k compared to the net deferred tax liability of
6k provided last year.
Capital Expenditure
Capital expenditure during the year totalled 1.7m.
The expenditure primarily included spend on
IT development projects and non-discretionary
property refurbishment. The net book value of the
Groups fixed assets at 31 March 2013 decreased in
the year by 1.1m to 15.6m (2012: 16.7m).
Financial Management
Treasury Policy
The Board has established terms of reference for
treasury policy, covering strategy, control and overall
financial management including compliance with
any borrowing covenants. All relations with banks
and other third parties are governed by dealing
mandates, facility letters and other agreements.
The CAA does not enter into speculative treasury
arrangements: all transactions in financial
instruments are matched to an underlying business
requirement. The CAAs Internal Audit function
regularly reviews treasury activities. The treasury

department works in close liaison with the various
business areas within the CAA to manage and
minimise all material financial exposures and to
anticipate the CAAs funding requirements.
The CAAs policy towards funding is to ensure that it
is not constrained by lack of funds needed to meet
its operational requirements and is not unreasonably
or imprudently bound by restrictive covenants or
liquidity risks. Working within the constraints of the
public sector, the CAA seeks to ensure that all of
its forecast cash needs for a period of at least 12
months ahead are capable of being met within the
targets agreed with HM Treasury.
An analysis of the CAAs debt is shown in note
15 to the accounts. The CAA makes its primary
placement of surplus sterling funds with the
Debt Management Office (DMO). Surplus funds
available for less than one month are placed
on short-term or overnight deposit at banks.
All deposits are made with banks with money
market funding of at least an AA credit rating. The
institutions used are kept under constant review
to secure the best returns available consistent
with the minimum credit rating. The CAA takes
steps to limit its credit exposure to individual banks
and other counter-parties. Exposure limits are set
following a review of credit ratings and aggregate
exposures are closely monitored. The majority of
the CAAs expenditure is settled in sterling.
48
The CAA is committed

to ensuring equality
of opportunity.
Financing
CAA Equality and Diversity Policy
The CAA borrows sums from the National Loans

Fund at fixed rates of interest over specific periods,
repaying on an instalment basis. During the year
the CAA repaid 1.9m of existing loans. The carrying
value of the CAAs outstanding borrowings stood at
7.8m as at 31 March 2013 (2012: 9.7m). The CAA
also has in place a 5.0m overdraft facility with its
bankers, Royal Bank of Scotland, which was not
utilised during the financial year.
The CAA is committed to ensuring equality of

opportunity. It is our policy to treat all employees
and job applicants fairly and equally regardless of
their sex, sexual orientation, marital status, age,
disability, race, colour, nationality, ethnic or national
origin, religion or belief.
Financial Target
The CAA is set a financial target by the Secretary
of State for the Regulatory Sector, comprising the
Safety Regulation, Regulatory Policy and Consumer
Protection Groups as well as the result achieved
by CAAi. This is to achieve the higher of an annual
6.0% rate of return on average current cost of capital
employed or break-even after charging interest and
tax. In the year ended 31 March 2013, a rate of return
of 5.5% was achieved (2012: 4.2%).
Land and Buildings

There is a significant difference of 4.1m in the
values of land and buildings between the historic
cost accounts and the current cost accounts.
However, as the CAA does not anticipate any
change in use of any of the land and buildings,
no market valuations have been disclosed in the
historic cost accounts.
In respect of recruitment, career progression

and development, the CAA will ensure that no
requirement or condition will be imposed without
justification that could disadvantage an individual
on any of the above grounds. Wherever possible,
efforts will be made to identify and remove
unnecessary or unjustifiable barriers and provide
appropriate facilities and employment conditions to
meet the needs of any under-represented groups.
We are committed to the implementation of this
policy and to a programme of action to ensure that
the policy is, and continues to be, fully effective.
We will regularly review supporting policies,
procedures and selection criteria to ensure that
individuals are selected, promoted and otherwise
treated according to their relevant individual abilities
and merits. All employees are required to attend
equality and diversity awareness training.
To ensure this policy is operating effectively, and
for no other purpose, the CAA maintains records of
employees and applicants racial origins, gender,
disability and age group. Ongoing monitoring and
analysis of this information will form the basis for
49
the Safety Regulation

Group employs a team of
specialists. They have an
exceptionally wide range
of skills
appropriate action to eliminate discrimination and

promote equality of opportunity.
Continuously improving performance and

processes.
The CAA values the different ways employees

contribute to organisational goals and performance.
We aim to provide everyone with the opportunity
to contribute and compete on equal terms and we
promote fairness by ensuring that decisions made
about people are based on merit.
The CAAs commitment to taking action to embed

equality and diversity into the organisation is
relevant to all that we do and we will:
The CAA recognises the positive contribution that

individual differences can bring and how these
factors will support the CAAs stated Mission, Value
and Guiding Principles in particular:
Maintaining and developing excellence in people;
Working together effectively, internally and
externally;
Understand, value and welcome equality and

diversity in our workforce;
Ensure that all relevant policies reflect our
commitment to action;
Promote positive behaviours by treating people
with respect, consideration and without
prejudice;
Support the use of flexible working patterns
wherever possible to enable employees to
balance work and home responsibilities.
Developing and empowering staff, and valuing

their contribution;
50
Regulatory Policy Groups

approach is in general
to consider the extent
of competition and its
implications"
Business Sector Review
The CAAs activities are divided into seven sectors,
each of which are described below.
Safety Regulation Group

The CAAs Safety Regulation Group (SRG) ensures
that UK civil aviation safety standards are set
and achieved in a co-operative and cost-effective
manner. SRG must satisfy itself that aircraft are
properly manufactured, operated and maintained;
that airlines are competent; that flight crews, air
traffic controllers and aircraft maintenance engineers
are fit and competent; that licensed aerodromes are
safe to use; and that air traffic services and general
aviation activities meet required safety standards.
To monitor the activities of this complex and diverse
industry, SRG employs a team of specialists. They
have an exceptionally wide range of skills, including
pilots qualified to fly in command of current airliners;
test pilots able to evaluate all aircraft types; experts
in flying training, leisure and recreational aviation
activities; aircraft maintenance surveyors; surveyors
conversant with the latest design and manufacturing
techniques; flight test examiners; aerodrome
operations and air traffic control specialists; and
physicians skilled in all branches of aviation medicine.
SRG has been significantly restructured in recent
years, with some safety regulation responsibilities
being transferred to EASA; this transfer of
responsibilities has continued over the past financial
year. It was agreed with the DfT that some activities

associated with the transition of responsibilities to
EASA would not be funded by charges to industry or
EASA. These transition costs have reduced to 0.7m
(2012: 0.8m) in the year and are not included in the
SRG cost base. Instead, they have been transferred
to miscellaneous services, where they are funded
from existing CAA reserves. SRG also carried out
tasks under a commercially arranged contract
through CAAi with EASA including type certification,
continued airworthiness, design organisation
approvals and EASA certification and validation team
activities.
The operating costs of SRG for the year ended 31
March 2013 (excluding the effects of IAS 19 pension
scheme adjustments) were 60.3m (2012: 59.9m)
an increase of 0.4m (0.7%). Turnover for the year
has increased to 59.9m (2012: 59.0m), a rise
of 0.9m (1.5%). The net result was an operating
loss of 0.4m (2012: loss of 0.9m). Average staff
numbers for the year were 555 (2012: 551), an
increase of 4.
Regulatory Policy Group

The Regulatory Policy Group (RPG) is responsible
for the economic regulation of airports and en
route air traffic services provided by National Air
Traffic Services (NATS). It advises the Government
on aviation policy, including the liberalisation of
airline markets, issues of economic regulation
and competition in the supply of aviation services
51
and infrastructure, and economic aspects of

environmental policy. RPG also compiles statistical
information on airlines, airports and passengers,
which is published by the CAA. In pursuing its
regulation, RPGs approach is in general to consider
the extent of competition and its implications for
regulation and then to involve, to the greatest
extent possible, the commercial parties in the
regulatory process.
Operating costs of RPG for the year ended 31
scheme adjustments) were 8.9m (2012: 6.8m), an

increase of 2.1m (30.9%). RPG professional fees
increased by almost 1.0m as a result of activities
carried out in connection with the Airport Charges
Review. Turnover for the year increased to 9.1m
(2012: 7.6m), an increase of 1.5m (19.7%). The
net result was an operating profit of 0.2m (2012:
0.7m). The average number of RPG headquarters
staff in the year ended 31 March 2013 was 61 (2012:
60). In addition, RPG employed 102 survey staff at
airports (2012: 91), most on a part-time basis.
Consumer Protection Group

The Consumer Protection Group (CPG) is
responsible for the implementation of European
and UK legislation on the licensing of airlines. It
also administers the Air Travel Organisers Licensing
(ATOL) scheme, the licensing of air travel organisers
selling flights and package holidays in the UK. CPG
is responsible for managing the consequences
for consumers when an ATOL holder becomes
insolvent through organising repatriation flights,
dealing with hotels, and paying refunds where
appropriate to those who have not yet travelled.
CPG achieved an operating result of break-even
(2012: 0.6m profit). Operating costs of CPG for the
year ended 31 March 2013 (excluding the effects of
IAS 19 pension scheme adjustments) were 6.8m
(2012: 5.8m), an increase of 1.0m (17.2%). The
average number of CPG staff in the year ended 31
March 2013 was 60 (2012: 63).
52
CAAis principal business

activity throughout the
year has been to provide
independent expert advice to
assist clients worldwide to
enhance aviation safety.
Directorate of Airspace Policy
The Directorate of Airspace Policy (DAP) is
responsible for policy and planning for the safe,
efficient and sustainable use of UK airspace and
for supporting air navigation infrastructure. The
needs of all users, whether military, commercial air
transport or general aviation, are accommodated,
as far as possible, having regard for the
environment as well as economic and national
security considerations.
Operating costs of DAP for the year ended 31
scheme adjustments) were 1.0m (2012: 1.2m),
a decrease of 0.2m (16.7%). Turnover for the
year was 1.2m (2012: 1.2m), no change from the
previous year. The primary source of income is from
fees for environmental and airspace policy advice to
the Government and industry. The operating profit
for the year was 0.2m (2012: break-even). The
average number of DAP staff in the year ended 31
March 2013 was 59 (2012: 59).
UK En Route Air Traffic Services (UKATS)

The Single European Sky Regulation and the
Eurocontrol charging convention require that the
costs of providing en route air navigation services be
passed on to users of that service; it also governs
UK air traffic charges. The UK en route charges to
aircraft using UK airspace recover the costs of four
entities: NATS (En Route) plc, which incurs the
vast majority of costs recovered through en route

charges; the Met Office; the CAA; and the DfT.
Income is collected by Eurocontrol and disbursed
to each of the four entities. As a regulatory body,
the CAAs income is not volume related but is a
fixed charge, based on budgeted costs, designed to
achieve full cost recovery.
Costs of UKATS for the year ended 31 March
2013 were 12.6m (2012: 8.5m), an increase of
4.1m (48.2%). The CAAs UKATS costs arise from
the Directorate of Airspace Policy, depreciation
charges and costs of capital associated with the
refurbishment of the former NATS headquarters
building, and legal and financial support to the route
charges system. Operating costs rose by 4.8m
compared to the previous year, due to the recovery
of additional sums relating to pension liabilities in
respect of NATS pensioners inherited at the time of
the separation of NATS from the CAA in 2001.
Turnover for the year was 13.9m (2012: 9.1m),
an increase of 4.8m (52.7%). The net result is an
operating profit of 1.2m (2012: 0.6m).
CAA International
CAAis principal business activity throughout the
year has been to provide independent expert advice
to assist clients worldwide to enhance aviation
safety. The company provides advisory services,
training and examination services throughout the
world. The advisory services concentrate on aviation
53
most of the CAAs costs are

recovered from those that it
regulates"
safety and regulation issues, working closely with

clients to support their work across the complete
spectrum of aviation safety regulation. The company
provides international training courses for aviation
authorities and industry. It has developed a successful
examination service over a number of years, based
upon the UK syllabus (CAP 54), and has a number
of clients. The examination services are specifically
designed for civil aviation administrations who need to
issue their own professional licences and ratings, but
may not have the required resources or expertise to
develop their own question bank and testing system.
Additionally, the company holds regular seminars to
inform industry about the latest regulatory hot topics.
The company had another successful year, achieving
a turnover of 17.1m (2012: 15.4m), the increase
being attributable to business expansion derived
primarily from the EASA contract and new training
and examination services.
The companys operating result (excluding the
effects of IAS 19 pension scheme adjustments)
was a net operating profit of 2.9m (2012: 1.8m).
The company employed an average of 41 staff
during the financial year with a further 39 full time
equivalents being supplied from other areas within
the CAA. A combination of staff supplied from the
Authority and management charges in respect of
accommodation, IT services, insurance and central
administration functions, provided a contribution to
the CAA Regulatory Sector after corporation tax of
7.7m (2012: 8.3m).
Miscellaneous Services
This includes both the corporate functions of the
CAA and other activities, which are either funded
or operated by the CAA, but where a degree
of independence from the Regulatory Sector is
required. These include:
CAA Corporate Centre (including CAA Board,
HR, IT, Legal, Aviation Regulation Enforcement,
Finance & Corporate Services, and the PPI team);
Air Safety Support International Limited (a
subsidiary of the CAA);
Other activities (including the UK Airprox Board and
the administration of the CAA Pension Scheme).
Turnover for the year increased to 17.9m (2012:
16.7m), a rise of 1.2m (7.2%).
The net operating loss for Miscellaneous Services
(excluding the effects of IAS 19 pension scheme
adjustments) was 3.9m (2012: 2.1m). The
operating loss was partly due to EASA transition
costs incurred within the year of 0.7m (2012:
0.8m) and the cost incurred as part of the CAA
Performance and Process Improvement programme.
In order to finance these transition activities the DfT
and HM Treasury agreed that the associated costs
should not be borne by UK industry but financed
from existing CAA reserves.
The average number of staff in the year ended 31
March 2013 was 199 (2012: 203).
54
Financial Outlook
As most of the CAAs costs are recovered from those
that it regulates via Statutory Charges Schemes, the
aviation industry and consumers expect the CAA
to use the statutory income it receives efficiently
and effectively. Our challenge is to ensure that the
CAA is highly efficient without jeopardising the role
it undertakes as the UK aviation regulator. The CAA
is committed to controlling costs, while investing to
deliver savings and improvements in the medium to
long-term. The CAA has set explicit efficiency targets
in its latest Strategic Plan, as it cannot simply let
costs increase and expect to recover those increases
from industry. As employment costs represent
approximately 60% of our total costs, this must be a
primary source of efficiencies if we are to deliver an
acceptable outcome. During 2012/13, we moved to
a performance-based total reward approach for our
staff that will enable us to recognise and reward high
performance. A benchmarking exercise informed our
approach by enabling us to test our relative market
position on pay and benefits. In addition, a number
of proposals have been adopted to limit our liability
to increasing pension costs, these included closing
the Defined Benefit Pension Scheme to new entrants
and limiting further increases in pensionable earnings
to movements in price inflation. The effects of these
changes combined with an overall zero based budget
approach to the CAA financial plan has meant that for
2013/14 charges in the majority of cases were held or
reduced as compared to 2012/13.
During 2013/14 and beyond, our Performance and

Process Improvement programme will deliver a step
change in the experience of our stakeholders when
they interact with us and enable the target efficiencies
to be achieved. It is planned that the benefits of this
programme will shortly start to realise a reduced
cost of delivering our core processes and, in addition,
streamline current processes whilst delivering a more
flexible resource management model.
Miss C Jesnick
Finance and Corporate Services Director
18 June 2013
55
Corporate Governance
The Board recognises the
importance of good corporate
governance and has ensured that
appropriate corporate governance
procedures are in place within
the Authority and are kept under
regular review.
In late 2011 the CAA Board participated in a formal

evaluation of its performance, facilitated by an
external independent consultant, Douglas Board.
The evaluation highlighted a number of potential
procedural and developmental enhancements
to the Board, which were either subsequently
implemented or flagged for phased implementation.
The areas of enhancement included: Board agendas,
self appraisal exercises, mentoring and shadowing.
Throughout the year ended 31 March 2013, the CAA

has applied the principles and has complied with the
Code provisions set out in the June 2010 Financial
Reporting Councils UK Corporate Governance Code
as is deemed appropriate for a Public Corporation.
In July 2012 the Board conducted its annual

performance self assessment, which highlighted
further opportunities to focus the material presented
to the Board on key discussion items.
In addition, the CAA Audit Committee conducted
its annual assessment of the governance of the
CAA against the requirements of the UK Corporate
Governance Code and of its own work against the
Committees Terms of Reference, the results of
which were reported to the CAA Board.
It is the intention of the CAA Board to continue to
review its performance and that of its Directors
regularly. The terms of reference of all Board
committees can be accessed via the CAA website
(www.caa.co.uk).
Set out below is a statement on how the CAA has
applied the principles of the Code and the extent
to which the provisions in the Code have been
complied with.
56
Statement
The Code establishes 18 principles of good
governance, 15 of which apply to the CAA. The three
that do not apply cover: re-election of directors by
shareholders (B7); dialogue with shareholders (E1);
and the constructive use of the Annual General
Meeting (E2). The principles that apply are described
below.
The Board
The Board comprises the Non-Executive Chair, five
Executive Members, one Executive Director and six
independent Non-Executive Members, whose role
is analogous with Non-Executive Directors in a listed
company.
The Secretary of State for Transport appoints NonExecutive Board Members on fixed term contracts,
and sets the Board Chairs objectives. During the
reporting period there were no changes to the
composition of the Board. The Board considers all
Non-Executives appointed by the Secretary of State
to be independent.
Board Meetings and Attendance

The attendance of individual Board Members at
Board and Committee meetings of which they are a
member is shown below. Board Members may also
attend meetings of Committees of which they are
not a member, at the invitation of the Chair of the
Committee.
Reporting to the Board are Executive Directors who
have delegated responsibility for operations and
management, and for the development of strategy
and policies, subject to approval by the Board. The
Board is kept informed of developments within each
business sector through regular presentations by
Executive Directors and management.
The Board has a formal schedule of matters reserved
to it. In advance of meetings, appropriate and
timely information is provided to the Board in a form
and quality to enable it to maintain the strategic
direction, approve major capital expenditure, consider
significant financing matters and monitor the overall
performance of the CAA and key business risks.
Board Members have access to the advice and
services of the Secretary and General Counsel who
57
Board Members are offered

appropriate training so
that applicable rules and
regulations are complied
with.
Meeting attendance

(12 months to March 2013)
Board Audit Remuneration
backgrounds and experience complement those of

the Executive Members and bring an independent
judgment to Board decisions. They also comprise the
Audit and Remuneration Committees membership.
The Non-Executive Board Members are detailed
within the Remuneration Report. A senior NonExecutive Member was not appointed as it was
considered it would not add value to the CAA as it is
sponsored by the DfT and has no shareholders.
No. of meetings held
11
Dame Deirdre Hutton
11
*3
*4
A Haines
11
*4
*4
Dr C Bell
11
D Gray
11
*4
G Haskins
N/A
N/A
Board Committees
R Jackson
11
N/A
N/A
Three committees assist the Board.
C Jesnick
*11
*4
N/A
M Medlicott
10
N/A
R P Mountford
AVM B North
10
N/A
N/A
I Osborne
10
N/A
N/A
M Swan
11
N/A
N/A
Captain R Whitefield
11
Audit Committee
During the reporting period, the Audit Committee
was chaired by Roger Mountford and met four
times. The other members were Dr Catherine
Bell, David Gray and Captain Roger Whitefield.
All Committee Members are independent NonExecutive Members of the CAA Board. The
Committees terms of reference include the review
of the annual financial statements, internal financial
control and risk management systems, statutory
and other external compliance requirements, and
the planning, scope and results of both the internal
and external audit programmes.
*Meetings attended by invited non-members
is responsible for ensuring that Board procedures

are followed, and Board Members are offered
appropriate training so that applicable rules and
regulations are complied with.
The Non-Executive Members have responsibility to
ensure that strategies proposed by the Board are
fully discussed and critically examined. Their different
The Audit Committee meets regularly with both

the internal and external auditors to review internal
control and audit procedures and to receive reports
from management on internal financial controls.
The internal and external auditors, together
58
with the Chair, Chief Executive and other senior

management, attend meetings as required at the
invitation of the Committee. During the year the
CAAs Internal Audit function was evaluated with
assistance from the Chartered Institute of Internal
Auditors and the Audit Committee received a report
on the effectiveness of the Internal Audit with
recommendations that the Committee adopted.
Remuneration Committee
The Remuneration Committee consists of
independent Non-Executive Board Members and
met four times during the year. The Committee was
chaired by Dr Catherine Bell and the other members
of the Committee were Michael Medlicott, Roger
Mountford and Captain Roger Whitefield. David Gray
is invited to attend each meeting as an observer. The
CAA Chair and Chief Executive both attend meetings
at the invitation of the Committee when matters
pertaining to them are not under consideration. The
Remuneration Committees remit was extended with
effect from 20 February 2013, upon the introduction of
the Civil Aviation Act 2012. Further details are given in
the Report to the Board on Remuneration Matters.
Nominations Committee
The Civil Aviation Act 2012 empowers the CAA for
the first time to appoint Executive Members. The
Nominations Committee, comprising the Chair,
Chief Executive and at least one Non-Executive
Member, recommends such appointments or
re-appointments to the Board. Previously such
appointments were made by the Secretary of State.
The Terms of Reference of the Nominations

Committee were approved by the CAA Board in
February 2013, with the Committees inaugural
meeting scheduled to occur in July 2013.
Accountability and Audit

Financial Reporting
Detailed reviews of the performance and financial
position of each business sector are included in the
Operating Review. The Board uses this, together with
the Chairs Statement, to present a balanced and
understandable assessment of the CAAs position
and prospects. The Board Members responsibilities
for the financial statements are described within the
Statement of Board Members Responsibilities.
Internal Control
The Board is responsible for the CAAs system of
internal control and for reviewing its effectiveness.
Such a system is designed to manage, and cannot
be expected to eliminate, the risk of failure to
achieve business objectives and can only provide
reasonable and not absolute assurance against
material misstatement or loss.
The Board confirms that the actions it considers
necessary have been taken to remedy any failings
and weaknesses, which it has determined to be
significant from its review of internal controls. This
59
has involved considering the matters reported to

it and developing plans and programmes that it
considers are reasonable in the circumstances. The
Board also confirms that it has not been advised
of material weaknesses in that part of the internal
control system that relates to financial reporting.
There is a process which is embedded and on-going
for identifying, evaluating and managing the CAAs
significant financial, operational and compliance
risks; it has been in place for the year ended 31
March 2013 and up to the date of approval of the
annual report and accounts, is regularly reviewed
by the Board, and accords with the internal
control guidance for directors of the UK Corporate
Governance Code.
The Board receives reports from Executive
Directors, which consider possible control issues
brought to their attention by early warning
mechanisms embedded within operational units.

The Audit Committee receives regular reports from
Internal Audit, which include recommendations for
improvement.
The Boards agenda includes a regular item for the
consideration of risk and control. The emphasis is on
obtaining the relevant degree of assurance and not
merely reporting by exception.
Going Concern
The accounts have been prepared on the going
concern basis. The CAA is a Public Corporation and
the Board Members are satisfied, having approved
the Revenue Budget for the financial year ending
31 March 2014 and most recent Strategic Plan, that
the CAA has adequate resources to continue in
operational existence for the foreseeable future.
60
The Boards agenda includes

a regular item for the
consideration of risk and
control.
Compliance Statement
The Board considers that it has complied throughout
the year ended 31 March 2013 and up to the date
of approval of the Annual Report and Accounts with
the June 2010 Financial Reporting Councils UK
Corporate Governance Code, except in those areas
not deemed appropriate for the CAA, which are
disclosed and explained below.
not impaired. The external auditor shall not provide a

service which results in the external auditor auditing
its own firms work; the external audit firm making
management decisions for the CAA; a common
interest being created; or the external audit firm
being put in the role of advocate for the CAA.
Listing Rules require the Board to report on

compliance with the 52 Code provisions throughout
the accounting period. Save for those deemed
inappropriate for a Public Corporation, the CAA has
complied throughout the accounting period ended 31
March 2013 with the provisions set out in the Code.
The only exception to the Code provisions was as
follows:
A4.1: A senior Non-Executive Member was not
appointed as it was considered it would not add
value to the CAA, as it is sponsored by the DfT
and has no shareholders. The Secretary of State
for the Department for Transport has appointed
a Non-Executive Chair and considers her to be
independent.
The Provision of Non-Audit Services

by the External Auditor
It is the CAAs policy not to preclude its external
audit firm from providing non-audit services as long
as the independence and objectivity of the audit are
61
Report by the Board on Remuneration Matters

Until February 2013 the Secretary of
State for Transport was responsible
for approving the remuneration of
Executive Board Members. With
the introduction of the Civil Aviation
Act 2012, the remuneration of
Executive Board Members became
a matter for the CAA Remuneration
Committee with effect from 20
February 2013.
The Remuneration Committee consists of independent
Non-Executive Board Members. The Committee is
responsible for ensuring that effective performance
management arrangements are applied in respect
of Executive Board Members and for approving any
salary changes and performance related payments
made to Executive Board Members. Responsibility for
the appointment and remuneration of Non-Executive
Board Members remains a matter for the Secretary of
State for Transport.
During the year, the Remuneration Committee was
chaired by Dr Catherine Bell. The other members
of the Committee were Michael Medlicott, Roger
Mountford and Captain Roger Whitefield. David Gray
attended each meeting as an observer. The CAA
Chair and Chief Executive both attend meetings
at the invitation of the Committee when matters
pertaining to them are not under discussion.
The Committee has followed the provisions of the

UK Corporate Governance Code as disclosed in
the CAAs Corporate Governance Statement and
has complied with the Directors Remuneration
Regulations 2002, in so far as applicable to a Public
Corporation, and has also applied the principles
of good governance relating to Executive Board
Members remuneration.
Remuneration Policy
In considering appropriate levels of remuneration,
it is the Remuneration Committees policy that
reward should be appropriate to recruit, retain and
motivate Executive Members to deliver the CAAs
objectives effectively, and that value for money
will be maximised by varying pay by reference to
the performance of each Member. Each year, the
Remuneration Committee reviews base pay and
performance related pay for the Executive Members.
The current elements of the remuneration packages
can be summarised as follows.
Salaries and Fees

Salaries and fees are considered within the
framework of what the market determines is
required to recruit, retain and motivate Board
Members of the appropriate calibre. When
considering salaries, the total package of benefits
is weighed against that normally available in the
market place. Fees payable to Non-Executive Board
62
Members may vary from year to year by reason of

payment of per-diem fees for serving on panels that
determine licensing decisions.
Performance Related Pay

The Remuneration Committees long established
policy framework has been to consider performance
related payments for individual Executive Board
Members up to a maximum of 20% of basic annual
salary. In the last three years the Remuneration
Committee had set a limit of 10% of basic pay
for performance related payments in respect of
individual Executive Directors. For 2012/13 the
Remuneration Committee returned to the limit of
20% of basic pay for performance related payments
for individual Executive Board Members.
The Chief Executive and Executive Directors have
performance targets for a broad range of objectives
fundamental to the aims and performance of the
CAA. The Chair is not eligible for performance
related pay and the Chief Executive waived his

right to receive an increase in base salary and
performance related payments in his first term
of office (August 2009 to August 2012). His
performance related payment in 2012/13 reflects the
CAA Remuneration Committees consideration of
his remuneration in his second term of office (from
August 2012 onwards), in the same way as for other
Executive Directors of the CAA. Performance related
payments are not pensionable.
Benefits
Benefits paid to the Executive Board Members
predominantly relate to company cars and health
cover.
Pension Arrangements
Executive Board Members who were formerly
employees of the CAA may continue to be members
of the Civil Aviation Authority Pension Scheme
63
All current CAA Members

have fixed term contracts
of between three and five
years duration.
(CAAPS), which is a defined benefit scheme

governed by an independent trust. A description
of the Scheme can be found in note 18 of the
accounts. The Executive Board Members accrue
pension entitlement in the year at an annual rate of
1/59 of final pensionable salary (subject to a cap on
pensionable pay increases), up to a limit of 2/3 final
pensionable salary, in exactly the same manner as
CAA employees who are members of the scheme.
Pension payments increase in line with the Retail
Price Index. Death in service cover of four times
salary and spouses pension at the rate of 2/3 of
the members pension are provided at death. As at
31 March 2013, Andrew Haines, Gretchen Haskins,
Richard Jackson, Iain Osborne and Mark Swan were
members of CAAPS.
CAA Members Contracts

All current CAA Members have fixed term contracts
of between three and five years duration. The
periods of notice required for contract termination
are set at one year or less. Non-Executive Members
are appointed by the Secretary of State according to
the Code of Practice set out by the Commissioner
for Public Appointments. The maximum term of
office for any Non-Executive Member is ten years,
although exceptional approval was given to extend
Roger Mountfords appointment for 6 months
beyond that ten year maximum while a successor is
identified. Following enactment of the Civil Aviation
Act 2012, the terms of office of Executive Member
appointments are now a matter for the CAA. The

terms of office of individual Executive Members
will therefore be reviewed in the normal course of
events when the expiry dates are approaching.
CAA members contracts
CAA Member
Date of first
appointment
Date of expiry
Dame Deirdre Hutton 14 Apr 2009
31 Jul 2014
A Haines
6 Aug 2009
5 Aug 2017
G Haskins
1 Apr 2010
31 Mar 2014*
D Gray
16 Nov 2009
15 Nov 2015
R Jackson
1 Oct 2004
30 Sep 2015
Dr C Bell
1 Apr 2006
31 Mar 2014
M Medlicott
1 Feb 2010
31 Jan 2016
R P Mountford
1 Apr 2003
30 Sep 2013
AVM B North
1 Mar 2010
Ex officio
appointment
I Osborne
4 Jan 2011
9 Jan 2016
M Swan
1 Mar 2009
28 Feb 2017
Captain R Whitefield 1 Apr 2005
30 Sep 2013
*Gretchen Haskins is leaving the CAA with effect from

31 October 2013.
In the event of termination of a Members

contract, the Member would not be entitled to
any compensation, with the exception of Gretchen
Haskins, Richard Jackson, Iain Osborne and
64
Board Members Emoluments audited (excluding pension arrangements)

Financial year ending 31 March 2013

1
Salary
Benefits

and fees

2012/13
Performance
related pay
2012/13
Total
2011/12
Total

000
000 000 000
000
Dame Deirdre Hutton
130.0
0.0
0.0
130.0 130.0
A Haines
250.4
0.0
29.2
279.6 251.9
G Haskins
185.0
7.6
27.3
219.9 194.1
R Jackson
156.2
6.3
25.3
187.8 172.7
I Osborne
149.1
8.7
24.5
182.3 165.9
M Swan
146.0
13.8
22.7
182.5 168.9
C Jesnick
163.3
2.4
24.5
190.2 177.9
Dr C Bell
26.3
0.0
0.0
26.3 25.9
D Gray
27.6
0.0
0.0
27.6 25.9
M Medlicott
25.0
0.0
0.0
25.0 26.6
R P Mountford
77.7
0.0
0.0
77.7 77.4
AVM B North
0.0
0.0
0.0
0.0 0.0
49.3
0.0
0.0
49.3 48.0
Emoluments as per
Annual Accounts
1,385.9
38.8
153.5
1,578.2 1,465.2
Captain R Whitefield
1. Performance related payments for 2011/12 had not been agreed with the DfT and HM Treasury at the time of
finalising last years report, but the amounts awarded in respect of that year have been included in the 2011/12
comparative figures.
2. Andrew Haines chose to forgo consideration for an increase in base salary and performance related payments
in his first term of office (August 2009 to August 2012). His performance related payment in 2012/13 reflects the
CAA Remuneration Committees consideration of his remuneration in his second term of office (from August
2012 onwards), in the same way as for other Executive Directors of the CAA.
3. C Jesnicks term of office as a Member of the CAA expired on 28 February 2011. She continues as a Board
Member of the Authority. Her salary includes remuneration for her role as Chair and Director of CAA International
Limited, a subsidiary of the CAA.
4. Dr C Bells salary includes remuneration for her role as Chair of CAA Remuneration Committee.
5. R P Mountfords salary includes remuneration for his roles as Chair of Trustees of the Civil Aviation Authority
Pension Scheme, Chair of the Air Travel Trust and Chair of the CAA Audit Committee.
6. Captain R Whitefields salary includes remuneration for his role as Chair of Air Safety Support International
Limited, a subsidiary of the CAA.
7. Fees payable to Non-Executive Board Members may vary from year to year by reason of payment of per-diem
fees for serving on panels that determine licensing decisions.
65
Board Members Pension Arrangements - audited

Accrued
Increase/ Transfer value Transfer value
Board
Increase in

pension
(decrease)
of accrued
of accrued
Members
transfer value over

31/03/13
in accrued
pension
pension
contribution
the year, net of

during pension
as at
as at
during
Board Members

the year
31/03/13
31/03/12
the year*
contribution*

000
000 000 000 000
000
A Haines
17
5 559 355
204
G Haskins**
37
244
R Jackson*** 21
C Jesnick
I Osborne
M Swan
56
1,132
888
(2) 881 878
5 2,029 1,707
322
168
81
87
12
445
301
144
* The CAA Section of the CAAPS operates a salary sacrifice arrangement for all of the above. Board Members were
members of this arrangement and so have not directly paid contributions to the Scheme since the commencement
of the salary sacrifice arrangement. The amount of salary sacrificed is equivalent to the employee pension
contribution paid and was equal to 10,000 in relation to Andrew Haines, 7,272 in relation to Gretchen Haskins,
6,319 in relation to Richard Jackson, 6,797 in relation to C Jesnick, 5,775 in relation to Iain Osborne, and 6,060
in relation to Mark Swan.
** Gretchen Haskins joined the CAA from NATS in March 2010. In 2011/12, Mrs Haskins pension that had previously
been accrued in the NATS Section of the Scheme was transferred over to the CAA Section and a transfer value of
445,000 and an augmentation of 85,000 were paid, in order to provide continuous Pensionable Service and Salary
linkage on the entire pension. The figures provided at 31 March 2013 reflect the transfer and augmentation.
*** Richard Jackson took a drawdown of 100% of his accrued pension after reaching age 60, but is still an active
member and is accruing benefit. He took a pension commencement lump sum of 132,065 on 30 November
2012. The accrued entitlement at the year end and the transfer value at 31 March 2013 reflect the value of both his
pension in payment and his pension accrual after 30 November 2012.
Mark Swan, who would receive compensation on

broadly similar terms as those applicable to a
CAA employee.
using assumptions determined by the Trustees in

accordance with the transfer regulations that came
into effect from 1 October 2008.
The accrued pensions are the amounts that would

be paid if the Board Member left service at the
relevant date. The transfer values do not represent a
sum paid or payable to the individual Board Member,
they represent a potential liability of the Pension
Scheme or Group. They have been calculated
Dr C Bell
Chair, Remuneration Committee
18 June 2013
66
Statement of Board Members

Responsibilities
The Accounts Direction from the Secretary of State
for Transport, requires the Board Members to
prepare financial statements for each financial year
which give a true and fair view of the state of affairs
of the CAA and of the Group as at the end of the
financial year and of the profit or loss of the Group for
that period. In preparing those accounts, the Board
Members are required to:
Select suitable accounting policies and then apply
them consistently;
Make judgements and estimates that are
reasonable and prudent;
State whether applicable accounting standards
have been followed, subject to any material
departures disclosed and explained in the
financial statements;
for safeguarding the assets of the Group, and hence

for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
The Directors are responsible for the maintenance
and integrity of the companys website. Legislation
in the United Kingdom governing the preparation
and dissemination of financial statements may differ
from legislation in other jurisdictions.
So far as the Board Members are aware, there is no
relevant audit information of which the auditors are
unaware. The Board Members have taken all the
steps that ought to have been taken to ensure that
they are aware of any relevant audit information and
to establish that the Authoritys auditors are aware
of that information.
Prepare the financial statements on a going

concern basis unless it is inappropriate to
presume that the CAA will continue in business.
The Board Members are responsible for keeping
adequate accounting records that are sufficient to
show and explain the Groups transactions and which
disclose with reasonable accuracy at any time the
financial position of the Group and enable them to
ensure that the financial statements comply with the
Civil Aviation Act 1982 and the Accounts Directions
made thereunder by the Secretary of State for
Transport. They are also responsible for the Groups
system of internal financial controls, including the
propriety and regularity of the public finances, and
67
Independent Auditors Report to the

Secretary of State for Transport
We have audited the Group and parent Authority
financial statements (the financial statements) of
the Civil Aviation Authority for the year ended 31
March 2013, which comprise the Group Income
Statement, the Group and parent Authority
Statements of Comprehensive Income, the Group
and parent Authority Balance Sheets, the Group and
parent Authority Statements of Changes in Equity,
the Group and parent Authority Statements of Cash
Flows and the related Notes. The financial reporting
framework that has been applied in their preparation
is applicable law, International Financial Reporting
Standards (IFRSs) as adopted by the European
Union and the Report and Accounts Direction 2013.
We have also audited the supplementary Current
Cost Accounts which comprise the Group Current
Cost Income Statement, the Group Current Cost
Balance Sheet and the related Notes.
Respective Responsibilities of
Board and Auditors
As explained more fully in the Statement of Board
Members Responsibilities on page 67, the Board
is responsible for the preparation of the financial
statements and for being satisfied that they give
a true and fair view. The Board is responsible for
the preparation of the supplementary Current Cost
Accounts. Our responsibility is to audit and express
an opinion on the financial statements in accordance
with applicable law and International Standards on
Auditing (UK and Ireland). Those standards require
us to comply with the Auditing Practices Boards
Ethical Standards for Auditors.
This report, including the opinions, has been
prepared for and only for the Secretary of State for
Transport in accordance with the Civil Aviation Act
1982 and for no other purpose. We do not, in giving
these opinions, accept or assume responsibility for
any other purpose or to any other person to whom
this report is shown or into whose hands it may
come save where expressly agreed by our prior
consent in writing.
Scope of the Audit of the Financial Statements

An audit involves obtaining evidence about amounts
and disclosures in the financial statements sufficient
to give reasonable assurance that the financial
statements are free from material misstatement,
whether caused by fraud or error. This includes an
68
assessment of: whether the accounting policies

are appropriate to the Authoritys circumstances
and have been consistently applied and adequately
disclosed; the reasonableness of significant
accounting estimates made by the Board; and the
overall presentation of the financial statements. In
addition, we read all the financial and non-financial
information in the Annual Report and Accounts to
identify material inconsistencies with the audited
financial statements. If we become aware of any
apparent material misstatements or inconsistencies
we consider the implications for our report.
Opinion on Financial Statements

In our opinion:
the financial statements, excluding the Current
Cost Accounts, give a true and fair view of the
state of the Groups and of the parent Authoritys
affairs as at 31 March 2013 and of the Groups
loss and the Groups and parent Authoritys cash
flows for the year then ended;
the financial statements, excluding the Current
Cost Accounts have been properly prepared
in accordance with IFRSs as adopted by the
European Union and the Report and Accounts
Direction 2013; and
the supplementary Current Cost Accounts have

been prepared in accordance with the current
cost principles, accounting policies and methods
described in the Notes to the Current Cost
Accounts and the Report and Accounts Direction
2013.
Other Matter
At the request of the Authority, we have also
audited the part of the Report by the Board on
Remuneration Matters that is described as having
been audited. In our opinion, the part of the Report
by the Board on Remuneration Matters to be
audited has been properly prepared in accordance
with the Companies Act 2006.
PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
7 More London Riverside
London
SE1 2RT
21 June 2013
69
Income Statement
Year ended 31 March 2013

Group Group

2013 2012
Note
'000 '000
Revenue 2
125,842 115,270
Operating costs
Employment costs
(78,597) (78,566)
Services and materials
(15,366) (15,484)
Repairs and maintenance
(2,703) (2,932)
External research and development
(607) (546)
Depreciation, amortisation and disposals
(2,821) (2,919)
Other gains / (losses) - net
53 (145)
Other expenses
(31,166) (25,874)
Operating costs before income equalisation
(131,207) (126,466)
Income equalisation
1.21
292 22
Net operating costs
(130,915) (126,444)
Operating loss
(5,073) (11,174)
Finance income
2,411 11,489
Finance costs
(480) (530)
Finance income - net
1,931 10,959
Loss before income tax
(3,142) (215)
Income tax credit / (expense)

Loss for the financial year, transferred to reserves
285 (94)
14
(2,857) (309)
Statements of Comprehensive Income

Group Group
Authority Authority

2013 2012 2013 2012
Note
'000 '000 '000 '000
Loss for the year 14
(2,857) (309) (5,187) (1,636)
Other comprehensive (losses) / income:
Actuarial (loss) / gain on post employment benefit obligations 14,18
(49,283) 108,076 (49,283) 108,076
Movement on deferred tax relating to post

employment benefit obligations
14,18
Less deferred tax on pension contributions

charged to income statement
(703) (126) (703) (126)
Total comprehensive (losses) / income for the year
(34,771) 91,792 (37,101) 90,465
18,072 (15,849)
18,072 (15,849)
The notes on pages 75 to 111 are an integral part of these consolidated financial statements.
The Authority has elected to take the exemption under section 408 of the Companies Act 2006 not to present the
parent Authority Income Statement. The loss for the Authority for the year was 5,187k (2012: loss of 1,636k).
71
Balance Sheets
As at 31 March 2013

Group Group
Authority Authority

2013 2012 2013 2012
Assets Note
000 000 000 000
Non-current assets
Property, plant and equipment
9
14,420 15,721 14,387 15,656
Intangible assets
10
1,162 972
1,152 955
Investments in subsidiaries
11
- - - Deferred income tax assets
17
75 -
65 Retirement benefit assets
18
554,003 606,222 554,003 606,222
Total non-current assets
569,660 622,915 569,607 622,833
Current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
12
13
18,505 14,278 13,516 11,067

17,606 18,266 17,370 17,937
36,111 32,544 30,886 29,004
Total assets
605,771 655,459 600,493 651,837
Equity
Capital and reserves
Retained earnings
14
437,984 472,755 430,966 468,067
Total equity
437,984 472,755 430,966 468,067
Liabilities
Non-current liabilities
Borrowings 15
5,311 7,832 5,311 7,832
Trade and other payables
16
802 1,095 802 1,095
Deferred income tax liabilities
17,18
127,421 145,499 127,421 145,508
Retirement benefit obligations
18
1,555 1,423 1,555 1,423
Provisions for other liabilities and charges
19
1,317 1,234 1,317 1,234
Total non-current liabilities
136,406 157,083 136,406 157,092
Current liabilities
Borrowings 15
2,499 1,892 2,499 1,892
16
28,053 23,126 30,413 24,583
Derivative financial instruments
20
81 -
81 Current income tax liabilities
562 414 21 93
18
107 110 107 110
19
79
79 - Total current liabilities
31,381 25,621 33,121 26,678
Total liabilities
167,787 182,704 169,527 183,770
Total equity and liabilities

605,771 655,459 600,493 651,837
The notes on pages 75 to 111 are an integral part of these consolidated financial statements. The financial statements
on pages 71 to 74 were authorised for issue by the Board on 18 June 2013 and were signed on its behalf.
Andrew Haines
Chief Executive
Chris Jesnick
Finance & Corporate Services Director
72
Statements of Changes in Equity


Group Authority

Retained
Retained
Earnings Earnings
Note
000 000
Balance as at 1 April 2011
14 380,963 377,602
Comprehensive income
Loss for the year
14
(309)
(1,636)
14, 18
108,076
108,076
Other comprehensive income

Actuarial gain on post employment benefit obligations
Movement on deferred tax relating to post employment
benefit obligations
Less deferred tax on pension contributions charged
to income statement
14 (15,849) (15,849)
8, 14
(126)
(126)
Total other comprehensive income
92,101
92,101
Total comprehensive income
91,792
90,465
Balance as at 1 April 2012 472,755 468,067

Comprehensive income
Loss for the year
14
(2,857)
(5,187)
14, 18
(49,283)
(49,283)
Other comprehensive income

Actuarial loss on post employment benefit obligations
Movement on deferred tax relating to post employment
benefit obligations
Less deferred tax on pension contributions charged
to income statement
14 18,072 18,072
8, 14
(703)
(703)
Total other comprehensive losses
(31,914)
(31,914)
Total comprehensive losses
(34,771)
(37,101)
Balance as at 31 March 2013
437,984
430,966
73
Statements of Cash Flows


Group Group
Authority Authority

2013 2012 2013 2012
Note
000 000 000 000
Cash flows from operating activities
Cash generated from operations
22
2,910 3,862 2,646 3,135
Interest paid
(372) (489) (367) (489)
Net income tax paid
(353) (557)
Net cash generated from operating activities
2,185 2,816 2,279 2,646
- -
Cash flows from investing activities

Purchase of property, plant and equipment
(462) (365) (462) (331)
Purchases of intangible assets
(567) (261) (567) (236)
Interest received
76 83 75 80
Net cash used in investing activities
(953) (543) (954) (487)
Cash flows from financing activities

Repayments of borrowings
(1,892) (1,796) (1,892) (1,796)
Net cash used in financing activities
(1,892) (1,796) (1,892) (1,796)
Net (decrease) / increase in cash and cash equivalents (660) 477

(567) 363
Cash and cash equivalents at beginning of year
18,266 17,789 17,937 17,574
Cash and cash equivalents at end of year 13

17,606 18,266 17,370 17,937
74
Notes to the Consolidated Financial Statements

1. General information and significant accounting policies
The Civil Aviation Authority (CAA) is a public corporation, established by Parliament in 1972. The CAA is the
UKs independent specialist aviation regulator and its activities include economic regulation, airspace policy,
safety regulation and consumer protection. The Group comprises the CAA (Authority) together with its
subsidiary undertakings, Air Safety Support International Limited and CAA International Limited.
The principal accounting polices applied in the

preparation of these consolidated financial
statements are set out below. These policies have
been consistently applied to all the years presented,
unless otherwise stated.
1.1 Basis of preparation

The consolidated financial statements of the CAA
have been prepared in accordance with International
Financial Reporting Standards as adopted by the
European Union (IFRSs as adopted by the EU), the
Civil Aviation Act 1982 and the Accounts Directions
made thereunder by the Secretary of State for
Transport. The consolidated financial statements
have been prepared under the historical cost
convention on a going concern basis as modified by
financial assets and liabilities (including derivative
instruments) at fair value through profit and loss.
The preparation of financial statements in conformity
with IFRS as adopted by EU requires the use of
certain critical accounting estimates. It also requires
management to exercise its judgement in the
process of applying the Groups accounting policies.
The areas involving a higher degree of judgement
or complexity, or areas where assumptions and
estimates are significant to the consolidated financial
statements, are disclosed in note 1.22.
1.1.1 C
hanges in accounting policies
and disclosures
Adoption of new and revised Standards
The following standards, amendments and

interpretations to existing standards, issued by the
IASB and endorsed by the EU, are applicable to the
Authority for the first time in the current year and have
been adopted by the Authority with no impact on the
Authoritys accounting policies or on its results or net

assets included within these financial statements:
IFRS 7, Financial Instruments: Disclosures,
requiring additional qualitative and quantitative
disclosures relating to transfer of financial assets effective for annual periods beginning on or after
1 July 2011.
The following standards, amendments and
interpretations to existing standards relevant to the
Authority are not yet effective and have not been
adopted early by the Authority in these financial
statements:
IAS 1, Presentation of Financial Statements,
effective for annual periods beginning on or after
1 January 2013, amended to change the grouping of
items presented in Other Comprehensive Income;
IAS 19, Employee Benefits, effective for annual
periods beginning on or after 1 January 2013. The
revised standard includes a number of amendments
like the ability to defer recognition of actuarial
gains and losses has been removed. Also new
requirements to disclose quantitative information
of the sensitivity of the defined benefit obligation
to a reasonably possible change in each significant
actuarial assumption;
IAS 28, Investments in Associates and Joint
Ventures, effective for the periods beginning
on or after 1 January 2014. IAS 28 sets out the
requirements for the application of the equity
method to the accounting for investments in
associates and joint ventures;
IFRS 13, Fair Value Measurement, effective for annual
accounting periods beginning on or after
1 January 2014. IFRS 13 replaces the guidance on
75

fair value measurement in existing IFRS accounting
literature with a single standard.
The following standards and interpretations have
been issued by the IASB, but have not been
endorsed by the European Commission for their
application to become mandatory and these have
not been adopted by the Authority in these financial
statements:
IAS 27, Separate Financial Statements, effective
for annual periods beginning on or after 1 January
2014 - amendments triggered by IFRS 10 to
the portion that addresses the accounting for
consolidated financial statements;
IFRS 9, Financial Instruments, effective for annual
accounting periods beginning on or after 1 January
2015. IFRS 9 uses a single approach to determine
whether a financial asset is measured at amortised
cost or fair value;
IFRS 12, Disclosure of Interests in Other Entities,
effective for annual accounting periods beginning on
or after 1 January 2014. IFRS 12 requires extensive
disclosures enabling users of financial statements
to evaluate the nature of, and risks associated with,
interests in other entities and the effects of those
interests on financial statements.
mendment to IAS 12, Income taxes on deferred
A
tax;
mendment to IFRS 10, Consolidated financial
A
statements;
mendment to IFRS 7, Financial instruments:
A
Disclosures, on offsetting financial assets and
financial liabilities;
Amendment to IAS 32, Financial instruments:
Presentation, offsetting financial assets and
financial liabilities.
see note 11. Shareholding of more than one half

of the voting rights, the existence and effect of
potential voting rights that are currently exercisable
or convertible are considered when assessing
whether the Group controls another entity.
Subsidiaries are fully consolidated from the date on
which control is transferred to the Group. They are
de-consolidated from the date that control ceases.
The Air Travel Trust (ATT) does not operate for the
benefit of the Authority and its exclusion from the
consolidated financial statements has been directed
by the Secretary of State.
Inter-company transactions, balances and unrealised
gains on transactions between group companies are
eliminated. Unrealised losses are also eliminated.
Accounting polices of subsidiaries have been
changed where necessary to ensure consistency
with the policies adopted by the Group.
1.3 Segment reporting

Operating segments are reported in a manner
consistent with the internal reporting provided to
the CAA Board. The CAA Board is responsible for
strategic decisions, the allocation of resources
and assessing performance of these operating
segments.
1.4 Foreign currency translation

(a) Functional and presentation currency
Items included in the financial statements of each
of the Groups entities are measured using the
currency of the primary economic environment
in which the entity operates. The consolidated
financial statements are presented in pound
sterling, which is the Authoritys functional and the
Groups presentation currency.
(b) Transactions and balances
1.2 Consolidation
Subsidiaries are all entities over which the Group
has the power to govern the financial and operating
policies so as to obtain benefits from their activities,
Foreign currency transactions are translated into

the functional currency using the exchange rates
prevailing at the dates of the transactions or
valuation where items are remeasured. Foreign
76

exchange gains and losses resulting from
the settlement of such transactions and from
the translation at year end exchange rates of
monetary assets and liabilities denominated in
foreign currencies are recognised in the income
statement.
Foreign exchange gains and losses that relate
to borrowings, cash and cash equivalents are
presented in the income statement within finance
income or cost. All other foreign exchange gains
and losses are presented in the income statement
within other gains/(losses) - net.
1.5 Property, plant and equipment

roperty, plant and equipment are stated at historical
P
cost less depreciation. Historical cost includes
expenditure that is directly attributable to the
acquisition of the items.
ubsequent costs are included in the assets
S
carrying amount or recognised as separate assets,
as appropriate, only when it is probable that future
economic benefits associated with the item will
flow to the Group and the cost of the item can
be measured reliably. The carrying amount of any
replaced part is derecognised. All other repairs and
maintenance are charged to the income statement
during the financial period in which they are incurred.
epreciation is calculated using the straight-line
D
method to allocate their cost or revalued amounts
to their residual values over their estimated useful
lives, as follows:
Freehold buildings
10-30 years
Leasehold buildings over the remaining life

of the lease
Plant and equipment 3-10 years
Furniture, fixtures
and fittings
10 years
Vehicles
5 years
ssets in the course of construction and installation

A
are not depreciated.
he assets residual values and useful lives are

T
reviewed, and adjusted if appropriate, at each
balance sheet date.
n assets carrying amount is written down
A
immediately to its recoverable amount if the assets
carrying amount is greater than its estimated
recoverable amount.
ains and losses on disposal are determined
G
by comparing the proceeds with the carrying
amount and are recognised within depreciation,
amortisation and disposals in the income
statement.
he Authority has taken advantage of the
T
exemption provided in paragraphs 27 and 28 of
IAS 23 (revised): Borrowing Costs, to adopt the
Standard prospectively for Property, Plant and
Equipment assets whose commencement of
capitalisation is on or after 1 January 2009, as
permitted by paragraph 251 of IFRS 1.
1.6 Intangible assets - computer software

omputer software licences and development costs
C
are valued at cost less accumulated amortisation.
They are capitalised as intangible assets and written
off on a straight line basis over their useful lives,
typically over 5 years. Assets in the course of
construction and installation are not amortised.
1.7 Impairment of non-financial assets

ssets that are subject to amortisation are reviewed
A
for impairment whenever events or changes in
circumstances indicate that the carrying amount
may not be recoverable. An impairment loss is
recognised for the amount by which the assets
carrying amount exceeds its recoverable amount.
The recoverable amount is the higher of an assets
fair value (less costs to sell) and value in use. For
the purposes of assessing impairment, assets are
grouped at the lowest levels for which there are
separately identifiable cash flows. Non-financial
assets that suffered an impairment are reviewed
for possible reversal of the impairment at each
reporting date.
77

1.8 Non-current assets held for sale
1.9.2 Recognition and measurement
on-current assets are classified as assets held for

N
sale when their carrying amount is to be recovered
principally through a sale transaction and a sale is
considered highly probable. They are stated at the
lower of carrying amount and fair value less costs
to sell if their carrying amount is to be recovered
principally through a sale transaction rather than
through continuing use.
Regular purchases and sales of financial assets are

recognised on the trade date, the date on which
the Group commits to purchase or sell the asset.
Investments are initially recognised at fair value
plus transaction costs for all financial assets not
carried at fair value through profit or loss. Financial
assets carried at fair value through profit or loss
are initially recognised at fair value, and transaction
costs are expensed in the income statement.
Financial assets are derecognised when the rights
to receive cash flows from the investments have
expired or have been transferred and the Group
has transferred substantially all risks and rewards
of ownership. Available-for-sale financial assets
and financial assets at fair value through profit or
loss are subsequently carried at fair value. Loans
and receivables are carried at amortised cost using
the effective interest method.
1.9 Financial assets

1.9.1 Classification
he Group classifies its financial assets in the
T
following categories: at fair value through profit or
loss, loans and receivables, and available-for-sale.
The classification depends on the purpose for which
the financial assets were acquired. Management
determines the classification of its financial assets
at initial recognition.
(a) Financial assets at fair value through profit or loss
are financial assets held for trading. A financial
asset is classified in this category if acquired

principally for the purpose of selling in the
short-term. Derivatives are also categorised as
held for trading unless they are designated as
hedges. Assets in this category are classified as
current assets.
(b) Loans and receivables are non-derivative
financial assets with fixed or determinable
payments that are not quoted in an active
market. They are included in current assets,
except for maturities greater than 12 months
after the balance sheet date. These are
classified as non-current assets.
(c) Available-for-sale financial assets are nonderivatives that are either designated in this
category or not classified in any of the other
categories. They are included in non-current
assets unless management intends to dispose
of the investment within 12 months of the
balance sheet date.
ains or losses arising from changes in the fair

G
value of the financial assets at fair value through
profit or loss category are presented in the income
statement within other gains/(losses) - net in the
period in which they arise. Dividend income from
financial assets at fair value through profit or loss is
recognised in the income statement as part of other
income when the Groups right to receive payments
is established.
Impairment testing of trade receivables is described
in note 1.11.
1.10 D
erivative financial instruments
and hedging activities
Derivatives are initially recognised at fair value on
the date a derivative contract is entered into and
are subsequently re-measured at their fair value.
The method of recognising the resulting gain or loss
depends on whether the derivative is designated as
a hedging instrument, and if so, the nature of the
item being hedged. The Group designates certain
derivatives as either:
78

(a) hedges of the fair value of recognised assets
or liabilities or a firm commitment (fair value
hedge); or
(b) hedges of a particular risk associated with a
recognised asset or liability or a highly probable
forecast transaction (cash flow hedge).
At the inception of the transaction, the Group
documents the relationship between hedging
instruments and hedge items, as well as its
risk management objectives and strategy for
undertaking hedging transactions. The Group also
documents its assessment, both at hedge inception
and on an ongoing basis, of whether the derivatives
that are used in hedging transactions are effective
in offsetting changes in fair values or cash flows of
the relevant hedge items.
The fair values of derivative instruments are
disclosed in note 20. Trading derivatives are
classified as a current asset or liability.
(a) Cash flow hedge
The effective portion of changes in the fair value of
derivatives that are designated and qualify as cash
flow hedges is recognised in equity. The gain or
loss relating to any ineffective portion is recognised
immediately in the income statement within other
gains/(losses) - net.
(b) Derivatives at fair value through profit or
loss and accounted for at fair value through
profit or loss
ertain derivative instruments do not qualify for
C
hedge accounting. Changes in the fair value of any
of these derivative instruments are recognised
immediately in the income statement within other
gains/(losses) - net.
1.11 Trade receivables

Trade receivables are initially recognised at fair
value and subsequently measured at amortised
cost using the effective interest method, less
provision for impairment. A provision for impairment
of trade receivables is established when there is
objective evidence that the Group will not be able
to collect all amounts due according to the original
terms of the receivables. Indicators that the trade

receivable is impaired are: significant financial
difficulties of the debtor; probability that the debtor
will enter bankruptcy or financial reorganisation;
and default or delinquency in payments (more than
365 days overdue). The amount of the provision
is the difference between the assets carrying
amount and the present value of estimated future
cash flows, discounted at the original effective
interest rate. The carrying amount of the asset is
reduced through the use of a provision account,
and the amount of the loss is recognised in the
income statement within other expenses. When
a trade receivable is uncollectible, it is written off
against the provision account for trade receivables.
Subsequent recoveries of amounts previously
written off are credited against other expenses in
the income statement.
1.12 Cash and cash equivalents

Cash and cash equivalents include cash in hand,
deposits held at call with banks or HM Treasury,
and other short-term highly liquid investments with
original maturities of three months or less.
1.13 Trade payables

Trade payables are recognised initially at fair value
and subsequently measured at amortised cost
using the effective interest method.
1.14 Borrowings
Borrowings are recognised initially at fair value,
net of transaction costs incurred. Borrowings
are subsequently stated at amortised cost. Any
difference between the proceeds (net of transaction
costs) and the redemption value is recognised
in the income statement over the period of the
borrowings using the effective interest method.
Borrowings are classified as current liabilities
unless the Group has an unconditional right to defer
settlement of the liability for at least 12 months
after the balance sheet date.
79

1.15 Current and deferred income tax
The tax expense for the period comprises current
and deferred tax. Tax is recognised in the income
statement, except to the extent that it relates to
items recognised directly in equity. In this case the
tax is also recognised in equity.
The current income tax charge is calculated on
the basis of the tax laws enacted or substantively
enacted at the balance sheet date. Management
establish a provision where appropriate on the
basis of amounts expected to be paid to the tax
authorities.
Deferred income tax is recognised, using the
liability method, on temporary differences arising
between the tax bases of assets and liabilities and
their carrying amounts in the consolidated financial
statements. Deferred income tax is determined
using tax rates (and laws) that have been enacted,
or substantively enacted, by the balance sheet
date and are expected to apply when the related
deferred income tax asset is realised
or the deferred income tax liability is settled.
Deferred income tax assets are recognised only
to the extent that it is probable that future taxable
profit will be available against which the temporary
differences can be utilised.
Deferred income tax is not provided on temporary
differences arising on investments in subsidiaries
as the timing of the reversal of the temporary
difference associated with the investment including
dividend policy is controlled by the Group.
1.16 Employee benefits

(a) Short-term employee benefits
The cost of short-term employee benefits
(wages, salaries, social security contributions,
annual leave, bonuses and non-monetary
benefits) are recognised in the period in which
the service is rendered and is not discounted.
The expected cost of short-term accumulating
compensated absences is recognised as an
expense as the employees render service that
increases their entitlement, or in the case of

non-accumulating absences, when the absences
occur.
(b) Post-employment benefits - pension obligations
The Civil Aviation Authority Pension Scheme is
a fully funded defined benefit scheme providing
benefits based on final pensionable pay. The
assets of the scheme are held in a separate
trustee administered fund.
The asset recognised in the balance sheet in
respect of the defined benefit scheme is the fair
value of plan assets less the present value of the
defined benefit obligation at the balance sheet
date, together with adjustments for unrecognised
past-service costs. The defined benefit obligation
is calculated annually by independent actuaries
using the projected unit cost method.
Actuarial gains and losses arising from
experience adjustments and changes in
actuarial assumptions are charged or credited
to equity in the statement of comprehensive
income in the period in which they arise.
The CAA also operates an unfunded scheme
for some past members of the Board. Costs
associated with this scheme are charged to the
profit and loss account in accordance with the
advice of a professionally qualified actuary. A
non-current liability is held in the balance sheet
in respect of post employment benefits payable
under this scheme.
c) Termination benefits
Termination benefits are payable when
employment is terminated by the Group before the
normal retirement date, or whenever an employee
accepts voluntary redundancy in exchange for
these benefits. The Group recognises termination
benefits when it is demonstrably committed to
either terminating the employment of current
employees according to a detailed formal plan
without possibility of withdrawal or providing
termination benefits as a result of an offer made to
encourage voluntary redundancy. Benefits falling
80

due more than 12 months after the balance sheet
date are discounted to their present value.
1.17 Dilapidations provisions

Provisions are recognised when the Group has a
present legal or constructive obligation as a result
of past events, it is probable that an outflow of
resources will be required to settle the obligation, and
the amount has been reliably estimated. Provisions
are not recognised for future operating losses.
Where there are a number of similar obligations,
the likelihood that an outflow will be required in
settlement is determined by considering the class
of obligations as a whole. A provision is recognised
even if the likelihood of an outflow with respect
to any one item included in the same class of
obligations may be small.
Provisions are measured at the present value of
the expenditure expected to be required to settle
the obligation using a pre-tax rate that reflects
current market assessments of the time value of
money and the risks specific to the obligation. The
increase in the provision due to passage of time is
recognised as interest expense.
1.18 Revenue recognition

Revenue comprises the fair value of the
consideration received or receivable for the sale
of goods and services in the ordinary course of
the Groups activities. Revenue is shown net of
value-added tax, credits and discounts and after
eliminating sales within the Group.
The Group recognises revenue when the amount
of revenue can be reliably measured, it is probable
that future economic benefits will flow to the
entity and when specific criteria have been met
for each of the Groups activities as described
below. The amount of revenue is not considered
to be reliably measurable until all contingencies
relating to the sale have been resolved. The Group
bases its estimates on historical results, taking into
consideration the type of customer, the type of
transaction and the specifics of each arrangement.
(a) Statutory charges

Revenue is primarily derived from 12 statutory
charges schemes approved by the Secretary of
State for Transport under section 11 of the Civil
Aviation Act 1982. The charges are published on
the CAA website and are normally for a period of
one year commencing on 1 April.
(b) Eurocontrol service charges
Revenue is derived from the collection of en
route air traffic service charges. These charges
are normally effective for a period of one year
commencing on 1 January.
(c) Sales of services
The Group derives revenue from non-statutory
aviation related activities which are either for a
fixed price, or derived on a time and materials
expended basis. The Group also derives revenue
from its commercial aviation related services in
providing examination services, training courses
and aviation consultancy services.
(d) Rental income
Rental income arises from the letting of leased
property in London, based on an open market
rate.
(e) Pensions administration
Revenue is derived from the recharging of the
cost of providing services to the Civil Aviation
Authority Pension Scheme.
(f) Interest income
Interest income is recognised on a timeproportion basis using the effective interest
method. When a receivable is impaired, the
Group reduces the carrying amount to its
recoverable amount, being the estimated future
cash flow discounted at the original effective
interest rate of the instrument, and continues
unwinding the discount as interest income.
Interest income on impaired loans is recognised
using the original effective interest rate.
81

1.19 Leases
Leases in which a significant portion of the risks and
rewards of ownership are retained by the lessor are
classified as operating leases.
Payments made under operating leases (net
of any incentives received from the lessor and
excluding costs for services such as insurance and
maintenance) are charged to the income statement
on a straight-line basis over the period of the lease.
Payments received under operating leases in
respect of sub-let office space (net of any incentives
given to the lessee) are credited to the income
statement on a straight-line basis over the period of
the lease.
1.20 Government grants

Government grants are recognised in the income
statement on a systematic basis over the periods
in which the entity recognises as expenses the
related costs for which the grant is intended to
compensate.
Under the direction of the Secretary of State for
Transport, Air Safety Support International Limited,
a subsidiary of the CAA, carries out enhancement
of regulatory oversight of aviation safety in the UKs
Overseas Territories providing further assurance
of safety standards. The operating costs are met
primarily by way of a grant from the Department for
Transport.
1.21 Income equalisation account

The United Kingdom is party to a multilateral agreement
(Eurocontrol) relating to the collection of en route air
traffic services charges. Historically, the participating

States have agreed that any difference between
income and defined costs should be recovered
from, or returned to, users of en route navigation
services by an amendment of the charges in later
years, with any such difference being provided for
as an asset/liability within the Eurocontrol income
equalisation accounts. The mechanism ceased with
effect from 1 January 2012 with any difference being
reflected in the results of the representative entities
of the participating States.
1.22 C
ritical accounting estimates
and judgements
Estimates and judgements are continually evaluated
and are based on historical experience and other
factors, including expectations of future events
that are believed to be reasonable under the
circumstances.
Estimates and assumptions concerning the
future are made by the Group and the resulting
accounting estimates will, by definition, seldom
equal the related actual results. The estimates and
assumptions that have a significant risk of causing
a material adjustment to the carrying amount of
assets and liabilities within the next financial year
are addressed below.
Pension benefits
The present value of the pension obligations
depends on a number of factors that are
determined on an actuarial basis using a number of
assumptions. The assumptions used in determining
the net cost (income) for pensions include the
discount rate. Any changes in these assumptions
will impact the carrying amount of pension
obligations.
The Group determines the appropriate discount
rate at the end of each year. This is the interest
rate that should be used to determine the present
value of estimated future cash outflows expected
to be required to settle the pension obligations.
The accounting standard IAS 19 requires that the
Authority selects a discount rate based on yields of
high-quality corporate bonds that are denominated
in the currency in which the benefits will be paid,
and that have terms to maturity approximating the
terms of the related pension liability. The funding
strategy actually adopted, and the investment
portfolio held, are ignored for the purposes of IAS
19.
Other key assumptions for pension obligations
are based in part on current market conditions.
Additional information is disclosed in note 18.
82

2. Segment information
The CAA Executive Committee has determined the operating segments based on the reports reviewed by the Executive
Committee that are used to make strategic decisions.
The Executive Committee considers the activities from a regulatory function perspective. The country of domicile is the UK for all of the
Group entities. The Executive Committee does not consider the performance according to the geographic location of its customers.
The reportable operating segments derive their revenue primarily from the regulatory sector, comprising the activities of Safety Regulation,
Regulatory Policy and Consumer Protection, in addition to that derived from the Directorate of Airspace Policy, UK en route air traffic
services and the commercial activities of CAA International. All other results are included in the Miscellaneous Services column.
In accordance with the Accounts Direction issued by the Department for Transport, disclosure is also given regarding revenue
analysed between statutory scheme charges and other income.
The segment information for the year ended 31 March 2013 is as follows:

Safety Regulatory Consumer Directorate UK en route

regulation
policy protection of airspace
air traffic

policy
services
Revenue
Statutory and
scheme charges
Eurocontrol service
charges
Other revenue
Total revenue
CAA Miscellaneous
Total
Intl.
services
000 000 000 000 000

000
58,748
7,800
6,097
22
000
000
- 72,667
- - - -
13,859
-
1,110
1,286
718
1,189
- 17,114
59,858 9,086 6,815 1,211 13,859

17,114
-
13,859
17,899 39,316
17,899
125,842
Government grant
Included within Miscellaneous Services is a grant from the Department for Transport (DfT) amounting to 2,097k during the year (2012:
2,013k). As in prior years, part of the DfT funding has been deferred to be utilised against operating expenditure in future years. In the
year to 31 March 2013 income of 356k has been deferred (2012: 57k deferred).


regulation
air traffic

policy
services
Operating costs
(excluding IAS 19
pension scheme
adjustments)
(Loss) / profit before
IAS 19 adjustments
CAA Miscellaneous
Total
Intl.
services
60,284 8,868 6,829 1,039 12,632

14,218
(426)
218
(14)
172
1,227
2,896
21,773
125,643
(3,874)
199
IAS 19 pension
scheme
adjustments
(3,001) (329) (326) (319)
Operating
(loss) / profit
(3,427)
(111)
(340)
(147)
1,227
2,672
(4,947)
(5,073)

income tax
(2,326)
(221)
(30)
1,227
2,754
(4,555)
(3,142)
-
(224) (1,073)
(5,272)
A reconciliation of operating loss to loss before income tax is provided as follows:
000
Adjusted operating loss for reportable segments
(5,073)
Finance income
2,411
Finance costs
(480)
(3,142)
83

2. Segment information (continued)
The comparable segment information for the previous year, ended 31 March 2012, is as follows:


regulation
air traffic

policy
services
Revenue
Statutory and
scheme charges
Eurocontrol service
charges
CAA Miscellaneous
Total
Intl.
services
000 000 000 000 000

000
57,893
6,519
6,095
13
000
000
- - - -
9,082
-
70,520
-
9,082
Other revenue
1,087
1,037
302
1,163
15,425
16,654
35,668
Total revenue
58,980
7,556
6,397
1,176
9,082
15,425
16,654
115,270
Government grant
Included within Miscellaneous Services is a grant from the Department for Transport (DfT) amounting to 2,000k during
the year (2011: 3,000k). As in prior years, part of the DfT funding has been deferred to be utilised against operating
expenditure in future years. In the year to 31 March 2012 income of 57k was deferred (2011: 264k released).


regulation
air traffic

policy
services

CAA Miscellaneous
Total
Intl.
services
000 000 000 000 000

000
000
000
Operating costs
(excluding IAS 19
pension scheme
adjustments) 59,866 6,828 5,790 1,181 8,508
13,607
18,773
114,553

IAS 19 adjustments
(886) 728 607 (5) 574
1,818 (2,119)
717
IAS 19 pension
scheme
adjustments (8,698) (946) (994) (931)
500
(521)
(301)
(11,891)
Operating
(loss) / profit (9,584) (218) (387) (936) 1,074
1,297 (2,420)
(11,174)
income tax (2,032) 604 475
(128) 574
2,192 (1,900)
(215)
A reconciliation of operating loss to loss before income tax is provided as follows:
000
Adjusted operating loss for reportable segments
(11,174)
Finance income
11,489
Finance costs
(530)
(215)
84

3. Employment costs
In respect of the employees included in the table below, the related employee benefits expenses are as follows:
Group
Group

2013 2012
(restated)

000 000
Wages and salaries
50,389 51,794
Social security costs
4,999 5,045
Defined benefit pension plan costs (note 18)
21,074 20,278
Unfunded pension plan costs (note 18)
234 199
Other employee benefits expense*
1,901 1,250
78,597 78,566
*O
ther employee benefits expense includes costs of relocation, car leasing and allowance costs together with
luncheon vouchers.
(2012 comparatives have been restated to ensure consistency with classification of expenditure in the current year.
Employee salary sacrifice amounts in relation to pension scheme arrangements are now correctly shown within
pension costs, instead of salaries, whilst termination payments are now included within wages and salaries costs
rather than pension costs.)
The average number of employees (including Executive Members) was:

By business segment
Group
2013
Group Group Group

2013 2012 2012
At 31 March Monthly Average
Safety regulation
543
At 31 March Monthly Average
555 553 551
Regulatory policy
59 61 61 60
Consumer protection
56 60 62 63
Directorate of airspace policy
57 59 58 59
CAA International
42 41 40 33
Miscellaneous services
190 199 198 203
947 975 972 969
85

4. Board Members emoluments

Group Group
2013 2012
000 000
Emoluments excluding pension contributions:

Salaries and fees
Benefits
Performance related payments

1,386 1,374
39 34
153 57
1,578 1,465
Pension contributions
190 157
Pension payments to past directors
105 101
1,873 1,723
Details of emoluments for each Board Member are included in the Report by the Board on Remuneration Matters.
This report includes all key management personnel.
86

5. Other gains / (losses) - net

Net foreign exchange gains / (losses) on operating activities
Group Group
2013 2012
000 000
53
(145)
6. Other expenses
Other items charged to the income statement are:

Group Group
2013 2012
000 000
Operating lease payments (note 23):

- Properties
- Vehicles

(6,659) (6,951)
(811) (967)
(7,470) (7,918)
Property lease payments are included within services and materials.

Vehicle lease costs are shown within employment costs 243k (2012: 284k) and other expenses 568k (2012: 683k).

Loss on disposal of property, plant and equipment
Loss on disposal of software and development costs

Group Group
2013 2012
000 000
(13) (10)
- (43)
(13) (53)
Losses on disposal are included within depreciation, amortisation and disposals.

Research expenditure (all in respect of safety regulation):
Group Group
2013 2012
000 000
Internal costs (included within employment costs)
(583) (479)
External costs
(607) (546)
(1,190) (1,025)

During the year the Group obtained the following services from the external auditor:
Group Group
2013 2012
000 000
Audit of parent company and consolidated financial statements
(58) (58)
Audit of subsidiary company financial statements
(15) (15)
Audit related assurance services

Non audit services

(2) (2)
(57) (64)
(132) (139)
All costs are shown within other expenses.
87

7. Finance income and costs

Group Group
2013 2012
000 000
Interest expense:
National loan fund borrowings
Other interest expense
Unwinding of discount on provisions (note 19)

Forward foreign exchange contract expense (note 20)
Finance costs
(370) (461)
(5) 69
(24) (138)
(399) (530)
(81) (480) (530)
Finance income:
Interest on short-term deposits
75 80
Financial income relating to employee benefit scheme:

Expected return on assets
Interest charge on liabilities
Net financial income in respect of employee benefit scheme (note 18)
Other interest income
82,467 95,510
(80,131) (84,104)
2,336 11,406
- 3
Finance income
2,411 11,489
Net finance income
1,931 10,959
88

8. Income tax (credit) / expense
(a) Analysis of a (credit) / expense charge in the year:

Group Group
2013 2012
000 000
Current tax:
UK corporation tax at 24% (2012: 26%) on loss for the year
542
Adjustments in respect of prior years
(75) (8)
Overseas tax
Total current tax
565
34
10
501
567
Deferred tax:
Origination and reversal of temporary differences
Adjustments in respect of prior years
Effect of tax rate changes
(150) (35)
65
(311)
(1)
IAS 19 movement
(703) (126)
Total deferred tax
(786) (473)
Net income tax (credit) / expense
(285) 94
(b) Reconciliation of effective tax rate:

Group Group
2013 2012
000 000

Tax calculated at applicable UK corporation tax rate of 24% (2012: 26%)
(3,142) (215)
(754) (56)
Tax effects of:

Expenses not deducted for tax purposes
Losses not set up as an asset
Effect of tax rate change
Adjustments in respect of prior years - current tax
407
470
70
(1)
(75) (8)
Adjustments in respect of prior years - deferred tax
65 (311)
Income tax (credit) / expense for the year (note 8a)
(285) 94
The standard rate of corporation tax in the UK changed from 26% to 24% with effect from 1 April 2012.
Accordingly the authoritys profits for this year are taxed at 24%.
89

9. Property, plant and equipment

Freehold Leasehold
Plant and Vehicles

buildings
buildings equipment
Group
Cost
At 1 April 2011
000
000
000
Furniture
Assets in
fixtures the course of
and fittings construction
000
000
Total
000 000
22,106
25,207
7,978
127
3,996
Additions
369
24
393
Disposals
(54)
(24)
(78)
(80)
80
28
28
28
(28)
22,026
25,287
8,321
127
3,972
Additions
127
989
1,116
Disposals
(7)
(444)
(68)
(519)
Re-classification
90
90
Transfers
90
24
(114)
22,026
25,280
8,094
127
3,928
989 60,444
16,731
14,126
7,425
98
3,211
- 41,591
749
1,470
201
13
79
2,512
(53)
(14)
(67)
17,480
15,596
7,573
111
3,276
747
1,462
152
125
2,494
(98)
98
(6)
(442)
(58)
(506)
18,221
16,616
7,627
119
3,441
- 46,024
Net book value

31 March 2013
3,805
8,664
467
487
989 14,420
Net book value

31 March 2012
4,546
9,691
748
16
696
24 15,721
Re-classification
Transfers
At 1 April 2012
At 31 March 2013
- 59,414
24 59,757
Accumulated depreciation
At 1 April 2011
Charge for the year
Eliminated on disposal
At 1 April 2012
Charge for the year
Re-classification
At 31 March 2013
- 44,036
At 31 March 2013 the Group had no contractual commitments for the acquisition of property, plant and equipment
(2012: nil).
The 2,494k (2012: 2,512k) depreciation charge is included within depreciation, amortisation and disposals.
90

9. Property, plant and equipment (continued)

Freehold Leasehold
Plant and Vehicles

buildings
buildings equipment
Authority
Cost
At 1 April 2011
000
000
000
Furniture
Assets in
fixtures the course of
and fittings construction
000
000
Total
000 000
22,108
25,204
7,806
85
3,912
59,115
Additions
335
24
359
Disposals
(8)
(17)
(25)
(80)
80
28
28
28
(28)
22,028
25,284
8,161
85
3,895
127
989
1,116
(2)
(4)
(369)
(68)
(443)
Re-classification
90
90
Transfers
90
24
(114)
22,026
25,280
8,009
85
3,851
989 60,240
16,731
14,126
7,281
75
3,149
- 41,362
749
1,470
180
71
2,476
(8)
(9)
(17)
17,480
15,596
7,453
81
3,211
747
1,462
132
118
2,462
Re-classification
(98)
98
(6)
(366)
(58)
(430)
18,227
17,052
7,121
84
3,369
- 45,853
Net book value

31 March 2013
3,799
8,228
888
482
989 14,387
Net book value

31 March 2012
4,548
9,688
708
684
24 15,656
Re-classification
Transfers
At 1 April 2012
Additions
Disposals
At 31 March 2013
24 59,477
Accumulated depreciation
At 1 April 2011
Charge for the year
At 1 April 2012
Charge for the year
At 31 March 2013
- 43,821
At 31 March 2013 the Authority had no contractual commitments for the acquisition of property,
plant and equipment (2012: nil).
The 2,462k (2012: 2,476k) depreciation charge is included within depreciation, amortisation and disposals.
91

10. Intangible assets

Group
Software
Assets in the
development
course of
costs construction
Total
Cost
000 000 000
At 1 April 2011
5,364
228
5,592
25
271
296
Additions
Re-classification
Disposals
Transfers
At 1 April 2012
Additions
Re-classification
Transfers
- (28) (28)
(137)
(137)
61
(61)
5,313
410
5,723
497
97
594
- (90) (90)
323
(323)
6,133
94
6,227
4,493
4,493
Charge for the year
353
353
(95)
(95)
4,751
4,751
314
314
At 31 March 2013
5,065
5,065
Net book value 31 March 2013
1,068
94
1,162
562
410
972
At 31 March 2013
Accumulated amortisation
At 1 April 2011
At 1 April 2012
Charge for the year
At 31 March 2013 the Group had no contractual commitments for the acquisition of intangible assets (2012: nil).
The 314k (2012: 353k) amortisation charge is included within depreciation, amortisation and disposals.
92

10. Intangible assets (continued)

Authority
Software
Assets in the
development
course of
costs construction
Total
Cost
000 000 000
At 1 April 2011
5,191
228
5,419
Additions
271
271
Re-classification
- (28) (28)
Transfers
At 1 April 2012
Additions
Re-classification
Transfers
61
(61)
5,252
410
5,662
497
97
594
- (90) (90)
323
(323)
6,072
94
6,166
4,404
4,404
303
303
4,707
4,707
307
307
At 31 March 2013
5,014
5,014
1,058
94
1,152
545
410
955
At 31 March 2013
Accumulated amortisation
At 1 April 2011
Charge for the year
At 1 April 2012
Charge for the year
At 31 March 2013 the Authority had no contractual commitments for the acquisition of intangible assets (2012: nil).
The 307k (2012: 303k) amortisation charge is included within depreciation, amortisation and disposals.
93

11. Principal subsidiaries and investments
Authority
Name
Country of
Nature of

incorporation
business

Proportion
of ordinary
shares held
by parent
Proportion
of voting
rights held
by parent
Investment
CAA International Limited

UK
Aviation
consultancy,

training &
examination
services
100%
100%
Air Safety Support International Limited

UK
Regulatory
oversight
100%
100%
Authority
Shares in group undertakings
There was no movement in the investments in subsidiary undertakings during the year.

2013 2012

Beginning and end of year
2 2
Investments in Group undertakings are recorded at cost which is the fair value of the consideration paid.
94

12. Trade and other receivables

Group Group
Authority Authority
2013 2012 2013 2012
000 000 000 000
Trade receivables
6,547
Less: provision for doubtful receivables
(430) (386) (110) (313)
Trade receivables - net
6,117
4,729
2,891 2,716
Prepayments
2,615
3,338
2,552 3,247
Other receivables
9,822 6,261 8,073 5,104
Less: provision for doubtful other receivables

Trade and other receivables (current)
Other receivables (non-current)
Total trade and other receivables
5,115
3,001 3,029
(49) (50)
18,505
14,278
- -
13,516 11,067
- - - 18,505
14,278
13,516
11,067
The carrying amounts of trade and other receivables are deemed to approximate to their fair value.
As at 31 March 2013 trade receivables of 1,920k for the Group and 938k for the Authority were past their due date
but were not doubtful. The ageing analysis of these is as follows:

Group Group
Authority Authority
2013 2012 2013 2012
Past due:
000 000 000 000
Up to 3 months
1,638
2,499
276
776
118 493
121
- 112
1,920
3,396
From 3 to 12 months
Over 12 months

820
938
1,541
2,146
The decrease in the Authoritys trade receivables being classified as past due has arisen as a result of a change in
policy in the determination of payment terms for invoices. The majority of invoices are raised with terms of payment
now due to align with wording within the Statutory Charges Schemes, whereas they would have previously been
raised with payment terms of 30 days.
95

12 Trade and other receivables (continued)
Movements on the Group and the Authority provision for doubtful trade receivables are as follows:

Group Group
Authority Authority
2013 2012 2013 2012
000 000 000 000
At 1 April
386
652
313
462
Provision for doubtful receivables
362
216
55
149
Receivables written off during the year as uncollectible
(165) (383) (165) (280)
Unused amounts reversed
(153) (99) (93) (18)
At 31 March
430
386
110
313
The movement on the Group provision for doubtful other receivables is wholly attributable to unused amounts reversed.
The creation and release of provision for doubtful trade receivables have been included in other expenses in the
income statement. Amounts charged to the provision account are generally written off, when there is no expectation
of recovering additional cash.
The maximum exposure to credit risk at the reporting date is the value of each class of receivable mentioned above.
The Group and the Authority do not hold any collaterrol as security.
The value of trade and other receivables are denominated in the following currencies:

Group Group
Authority Authority
2013 2012 2013 2012
000 000 000 000
UK pounds
Euros
US dollars
Other currencies

13,725
10,077
11,074
8,133
2,621
1,281
- -
- -
20
15
- -
16,369
11,376
11,074 8,133
96

13. Cash and cash equivalents
The following cash and cash equivalents are included within the cash flow statements:

Group Group
Authority Authority
2013 2012 2013 2012
000 000 000 000
Cash at bank and on hand
1,010
1,451
774
1,122
Short-term bank deposits
3,596
815
3,596
815
Short-term HM Treasury deposits
13,000
16,000
13,000 16,000
17,606
18,266
17,370 17,937
The carrying amounts of cash and cash equivalents are deemed to approximate to their fair value.
14. Retained earnings

Group Authority
Note 000 000
At 1 April 2011
380,963
377,602
Loss for the year
(309)
(1,636)
Actuarial gain on employee benefit scheme
18
108,076
108,076
Movement on deferred tax relating to employee benefit scheme
18
(15,849)
(15,849)
(126)
(126)
At 31 March 2012
472,755
468,067
At 1 April 2012
472,755
468,067
Less deferred tax on pension contributions charged to income statement
Loss for the year

Actuarial loss on employee benefit scheme
18
Movement on deferred tax relating to employee benefit scheme
18
Less deferred tax on pension contributions charged to income statement
At 31 March 2013
(2,857) (5,187)
(49,283) (49,283)
18,072
18,072
(703) (703)
437,984
430,966
Retained earnings represent the cumulative surpluses and other gains made by the Authority and the Group since its
inception.
97

15. Borrowings

Group Group
Authority Authority
2013 2012 2013 2012
000 000 000 000
Non-current
National Loans Fund
5,311
7,832
5,311 7,832
5,311
7,832
5,311 7,832
National Loans Fund
2,499
1,892
2,499
2,499
1,892
2,499 1,892
Total borrowings
7,810
9,724
7,810 9,724
Current
1,892
The borrowings are repayable to the National Loans Fund on an instalment basis, the final instalment being due for
repayment during December 2019. The borrowing rates are fixed for the entire period of the loans. These borrowings
are unsecured.
The carrying amounts and fair values of borrowings are as follows:

Carrying Carrying
Fair Value
amount amount
Fair Value
2013 2012 2013 2012
000 000 000 000
Non-current
5,311
7,832
5,708
7,687
Current
2,499
1,892
1,989
1,883
7,810
9,724
7,697
9,570
The fair value of borrowings is calculated by discounting the cash outflow by the rate ruling at the balance sheet date
for borrowings with similar maturity and repayment style. The fair values are based on cash flows discounted using a
rate based on the borrowing rates between 0% and 0.87% (2012: 0.44% and 0.99%).
The carrying amounts of the Group and Authoritys borrowings are denominated in sterling.
The Group and Authority have maximum borrowing powers of 550 million (2012: 550 million) under the Civil Aviation
Authority (Borrowing Powers) Order 1995. Below are details of the Group and Authoritys undrawn and uncommitted
borrowing facilities:

2013 2012
000 000
Bank overdraft facility
5,000
5,000
98

16. Trade and other payables

Group Group
Authority Authority

2013 2012 2013 2012

000 000 000 000
restated
Current liabilities:
Trade payables
1,411
1,870
Social security and other taxes
1,585
1,622
1,578 1,622
Accrued expenses
9,160
8,191
8,200 7,615
12,338
8,906
10,839
7,777
3,183
2,245
787
643
376
292
376
292
28,053
23,126
802
719
376
802
1,095
Amounts due to related parties (note 25)
Deferred income
Other payables
Income equalisation (note 1.21)

1,331 1,830
7,302
4,804
30,413 24,583
Non-current liabilities:
Other payables
Income equalisation (note 1.21)

802
719
- 376
802
1,095
The carrying amounts of trade and other payables are deemed to approximate to their fair value.
Last year accrued expenses included a provision of 79k relating to property repairs at Northgate House (see note 19).
99

17. Deferred income tax
The gross movement on the deferred income tax account is as follows:

Group Group
Authority Authority

2013 2012 2013 2012

000 000 000 000
At 1 April
Income statement credit
354
15
359
(81) (348) (80) (344)
At 31 March (75)
(65) 15
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current
tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the taxation authority where there
is an intention to settle the balances on a net basis. The offset amounts are as follows:

Group Group
Authority Authority

2013 2012 2013 2012

000 000 000 000
Deferred tax asset to be recovered
after more than 12 months
(693) (876) (692) (876)
Deferred tax liability to be recovered after more than 12 months
618
882
Deferred tax (asset) / liability (net)
(75)
627
891
(65) 15
The movement in deferred income tax assets and liabilities during the year is as follows:

Deferred tax liabilities
Group Group
Authority Authority
Accelerated tax
Total
Accelerated tax
Total
depreciation depreciation
000 000
000 000
At 1 April 2012
Credited to the income statement
At 31 March 2013

Deferred tax assets
At 1 April 2012
Charged to the income statement
882
882
891
891
(264)
(264)
(264)
(264)
618
618
627
627
Group Group Group Authority Authority Authority

Tax losses
Other
Total Tax losses
Other
Total
000 000 000 000 000 000
(115) (761) (876) (115) (761) (876)
115
At 31 March 2013
68
183
- (693) (693)
115
69
184
- (692) (692)
Deferred income tax assets are recognised for tax loss carry-forward to the extent that the realisation of the related tax benefit through
future taxable profits is probable. The Group has not recognised deferred income tax assets of 70k (2012: 115k) in respect of losses
amounting to 291k (2012: 478k) that can be carried forward against future taxable income. The Group expects to have taxable profits
in the longer term once the general economic conditions improve.
The Finance Act 2012, which provides for a reduction in the main rate of corporation tax from 24% to 23% effective from 1 April
2013 was substantively enacted on 3 July 2012. This rate reduction has been reflected in the calculation of deferred tax at the
balance sheet date.
The Government intends to enact future reductions in the main rate of corporation tax down to 20% by 1 April 2015. As this rate
was not substantively enacted at the balance sheet date, the rate reduction is not yet reflected in these financial statements in
accordance with IAS10, as it is a non-adjusting event occurring after the reporting period.
Included within deferred income tax liabilities is an amount of 127,421k (2012: 145,493k) relating to the pension scheme surplus
(see note 18).
100

18. Retirement benefit obligations
The Civil Aviation Authority Pension Scheme (Scheme) is a fully funded defined benefit scheme providing benefits based
on final pensionable pay. CAA closed the Scheme to new entrants as from 30 November 2012. In its place a Defined
Contribution Scheme is available to new entrants. In order to further mitigate the increase in the Scheme liabilities the CAA
have introduced a cap on the growth of future Pensionable earnings. The cap is based upon the members pensionable
earnings as at the 31 March 2013 level plus inflation.
The assets of the Scheme are held in a separate trustee administered fund. The pension cost relating to the Scheme
is assessed in accordance with the advice of independent qualified actuaries and is such as to spread the cost of
pensions over the working lives of the employees who are Scheme members.
Until 31 March 2001, National Air Traffic Services Ltd (NATS) was a subsidiary of the CAA. Upon separation of NATS
from the CAA, two sections of the scheme were established, namely the CAA section and the NATS section. The
assets and membership of the scheme prior to transfer were allocated between these sections in accordance with
Statutory Instrument 2001, Number 853, Transport Act 2000 (Civil Aviation Authority Pension Scheme) Order 2001.
The CAA provides pension administration services to the scheme and has charged 6,971,034 (2012: 5,268,458) for
its services during the year.
The CAA also operates an unfunded scheme for some past members of the Board. Costs associated with this
scheme of 233,898 (2012: 199,321) were charged to the profit and loss account in accordance with the advice of a
professionally qualified actuary. A non-current liability of 1,555k (2012: 1,423k) and a current liability of 107k (2012:
110k) are held in the balance sheet in respect of post employment benefits payable under this scheme.
The last formal actuarial valuation of the CAA Section of the Civil Aviation Authority Pension Scheme was carried out as at
31 December 2009. A formal valuation of the Scheme is currently under way and the results are expected later in 2013.
The last valuation revealed an ongoing surplus of 99.7 million. The methodology underlying the formal valuation differs
from that used for annual IAS 19 disclosures, particularly in relation to the financial assumptions used. The discount rates
used for the 2009 formal valuation were largely based on Government bond (gilt) yields. This reflects the investment
strategy of the Scheme where the majority of the assets (about 84% as at 31 December 2009 and, currently, about 82%)
are held in a portfolio designed to match, as closely as possible, projected payments to current pensioner and deferred
members. However, IAS 19 requires that projected future benefits are discounted at the yield on AA-rated corporate
bonds; at 31 December 2009 these were about 1.2% p.a. higher than gilt yields resulting in a substantial reduction in the
present value of benefit obligations compared with the formal actuarial valuation.
In addition, the formal valuation has a more prudent basis than IAS 19 disclosures and this is allowed for by means
of further adjustments to the discount rate and the inclusion of reserves for contingent events, including further
improvements in longevity. The main differences between the methodology used for the 31 December 2009 valuation
and that used for IAS 19 disclosures are:
Measurement of liabilities using IAS 19 assumptions:
i)
Discount rate based on AA-rated corporate bond yields
ii) No allowance for a reserve for changes in mortality and contingencies

Measurement of liabilities for the 31 December 2009 formal valuation:
i)
Discount rates:
pensioner and deferred liabilities - gilt yields less 0.1% pa
pre-retirement discount rate for active members - gilt yields plus 3.0% pa
ii) Allowance for a reserve for changes in mortality and contingencies in respect of SPADs (Separation
Pensioners and Deferreds). This reserve amounted to about 5% of the Schemes liabilities as at 31
December 2009.
101

18 Retirement benefit obligations (continued)
THE FOLLOWING INFORMATION HAS ALL BEEN CALCULATED IN ACCORDANCE WITH IAS 19

Group and Authority
2013 2012

000 000
Balance sheet assets for:
Post employment benefits - fully funded pension fund
426,582
460,729
Balance sheet obligations for:

Non-current post employment benefits - unfunded pension scheme
Current post employment benefits - unfunded pension scheme
Post employment benefits - unfunded pension scheme
(1,555) (1,423)
(107) (110)
(1,662) (1,533)
Income statement charge for:

Pension benefits (note 3)
Post employment benefits - unfunded pension scheme (note 3)
Total income statement charge
21,074 20,278
234
199
21,308
20,477
Funded pension benefits:

The amounts recognised in the balance sheet are determined as follows:

Group and Authority
2013
2012

000 000
Fair value of plan assets
Present value of funded obligations
Surplus in funded scheme
Related deferred tax liability at 23%/24%
Net surplus in funded pension scheme
2,391,070 2,256,980
(1,837,067) (1,650,758)
554,003 606,222
(127,421) (145,493)
426,582 460,729
The movements in the defined benefit obligations over the year are as follows:

Group and Authority
2013 2012

000 000
At 1 April
1,650,758
1,574,169
Current service cost
21,050
19,981
Interest cost
80,131
84,104
239
285
Actuarial losses
181,141
61,936
Benefits paid
(96,276) (90,014)
Contribution by plan participants
Past service cost

At 31 March
24
297
1,837,067 1,650,758
102

18. Retirement benefit obligations (continued)
The movements in the fair value of plan assets in the year are as follows:

Group and Authority
2013 2012

At 1 April
Expected return on scheme assets
Actuarial gains
Contributions by the employer
Contributions by plan participants
Benefits paid
At 31 March
000 000
2,256,980
2,072,800
82,467 95,510
131,858
170,012
15,802 8,387
239
285
(96,276) (90,014)
2,391,070 2,256,980
The amounts recognised in the income statement are as follows:

Group and Authority
2013 2012

Current service cost
Past service cost
000 000
21,050
19,981
24
297
Total profit and loss charge included in employment costs
21,074 20,278
Interest cost
80,131
Expected return on funded pension scheme assets
84,104
(82,467) (95,510)
Total charge to finance income (note 7)
(2,336) (11,406)
Total included in income statement
18,738
8,872
Analysis of amounts recognised in statement of comprehensive income:

Group and Authority
2013 2012

Actual return less expected return on pension scheme assets
Experience gains and losses arising on the scheme liabilities
Actuarial (loss)/gain recognised in statement of comprehensive income
000 000
131,858 170,012
(181,141) (61,936)
(49,283) 108,076
The actual return on the scheme asset was 214,325k (2012: 265,522k).
103

The principal actuarial assumptions used for the purposes of IAS 19 were as follows:
As at 31 March

2013 2012
% pa
% pa
Discount rate
4.3 5.0
Inflation assumption
3.6 3.4
Rate of increase in salaries
2.0/3.6
3.4 / 4.5
Rate of increase in pensions in payment *
3.6 3.4
Rate of increase for deferred pensioners **
3.6 3.4
Expected long-term return on scheme assets
3.8 4.8
* In excess of any guaranteed minimum pension

** In excess of any guaranteed minimum pension and non-revaluing pensions
Assumptions regarding future mortality experience are set based on actuarial advice in accordance with published
statistics in the UK. Mortality assumptions are based on PA92 series tables with 92 series improvements, with
medium cohort projections calendar year 2017 for current pensioners and 2027 for current non-pensioners. The
expected lifetime of a current pensioner who is aged 65 and the expected lifetime of a current non-pensioner (at age
65) are shown in years, below, based on the above mortality tables.

Males Females
Current pensioner
89.2
89.2
Current non-pensioner
91.0
90.9
The CAA is required to contribute to the Scheme at the rates agreed at the last scheme specific funding valuation as at
31 December 2009. This is subject to review at future valuations. This rate was set at 12.0% of pensionable earnings
for the year 2012/2013 in respect of which the CAA paid contributions of 15.8 million (including payments of 24k
relating to past service costs). The expected contribution in the 2013/2014 year is 17.0 million. The expected future
benefit payments for 2013/2014 are forecast to be 99.7 million.
Market value of assets and expected rate of return on assets:

As at 31 March

Equities *
Debt securities
Market Value
Market Value
2013 2012
000 000
334,750 331,776
2,008,498 1,857,494
Other
31,084 45,140
Real estate / property
16,738 22,570
Total value of assets
2,391,070 2,256,980
* Including private equity and hedge funds
104

As at 31 March

Fair value of scheme assets
Present value of defined benefit obligation
Surplus in the scheme
As at 31 March

2013 2012 2011 2010 2009

000 000 000 000
2,391,070
000
2,256,980 2,072,800 2,025,600
1,865,480
(1,837,067) (1,650,758) (1,574,169) (1,573,079)
(1,292,297)
554,003
606,222
498,631
452,521
573,183
2013 2012 2011 2010 2009

000 000 000 000
000
Experience adjustment on scheme liabilities:

Liability loss / (gain) during period
Liability loss / (gain) expressed as a
percentage of scheme liabilities
424
0.0%
5,079
21,420
(108,733)
0.3% 1.4% (6.9%)
Assumption adjustment on scheme liabilities:

Liability loss / (gain) during period
Liability loss / (gain) expressed as a
percentage of scheme liabilities
180,717
9.8%
56,857
(31,265)
379,220
3.4% (2.0%) 24.1%
(89,334)
(6.9%)
Experience adjustment on scheme assets:

Asset (gain) / loss during period
Asset (gain) / loss expressed as a
percentage of scheme assets
(131,858) (170,012) (37,399) (158,298)

(5.5%) (7.5%) (1.8%) (7.8%)
206,538
11.1%
105

19. Provisions for other liabilities and charges

At 1 April 2012 restated
Unwinding of discount
Expenditure charged against provisions
Building Repairs
Group Authority
000 000
1,313
1,234
24
24
59
59
At 31 March 2013
1,396 1,317

Group Group Authority Authority

2013 2012 2013 2012

000 000 000 000
Analysis of total provisions:
restated
restated
Non-current
1,317 1,234 1,317 1,234
Current
79 79 - Total provisions
1,396
1,313 1,317 1,234
Last year the 79k provision was included in accrued expenses (see note 16).
Building repairs
Provisions are recognised in respect of:
the cost of building repairs that will be recovered from the head leaseholder to restore the property at
45-59 Kingsway, London to its original condition on the termination of the lease in 2019
the cost of building repairs that will be required to restore the property at Northgate House, Crawley, to
its original condition on the termination of the lease in 2013.
The provisions are based on estimates made by independent property consultants of the terminal dilapidation liabilities
and related professional fees that will arise.
20. Derivative financial instruments

Group
Group
Authority
Authority
2013 2012 2013 2012

000 000 000 000
Forward foreign exchange contract liability
81
-
81
Total derivatives
81
81
106

21. Financial instruments by category

Group Group
Authority Authority

Loans and Loans and Loans and Loans and
receivables
receivables receivables receivables

2013 2012 2013 2012
Note 000 000 000 000
Assets as per balance sheet
Trade and other receivables
excluding prepayments
12
15,890 10,940 10,964 7,820
13
17,606 18,266 17,370 17,937
Net book amount
33,496 29,206 28,334 25,757
The Group and the Authority had no assets at fair value through the profit and loss and no assets available for sale.

Group 2012
Group 2013

Liabilities
Other Total

at fair value
financial
through the
liabilities at
profit & loss amortised cost

Liabilities
Other Total
at fair value
financial
through the
liabilities at
Note
000
000 000
000
000 000
Borrowings 15
-
7,810 7,810
9,724 9,724
Liabilities as per balance sheet

20
Trade payables, other payables

and amounts due to related parties 16
Net book amount

81
-
81
- 81
5,396 5,396
13,206 13,287
through the
liabilities at

4,834 4,834
14,558 14,558
Authority 2012
Authority 2013

Liabilities
Other Total

at fair value
financial
- -
Liabilities
Other Total
at fair value
financial
through the
liabilities at
Note
000
000 000
000
000 000
Borrowings 15
-
7,810 7,810
9,724 9,724
Liabilities as per balance sheet

20
81
Trade payables, other payables

and amounts due to related parties 16
Net book amount
81
- 81
- -
10,222 10,222
7,996 7,996
18,032 18,113
17,720 17,720
Financial risk management disclosures are set out in the Financial Review on pages 48 and 49.
107

22. Cash generated from operations

Group Group
Authority Authority
2013 2012 2013 2012
000 000 000 000
(3,142) (215)
(6,045) (2,034)
Adjustments for:
Depreciation, amortisation and adjustment on disposal
Disposal of software and development costs
Disposal of property, plant and equipment
Income equalisation
Finance costs - net
2,808
2,865
43
13
10
2,769
2,779
- 13
(292) (22)
(292) (22)
(1,931) (10,959) (1,935) (10,950)
Changes in working capital:

- Trade and other receivables
(4,228)
1,703
(2,449) (803)
- Trade and other payables
4,222 (1,625) 5,125
IAS 19 current service costs net of cash contributions
5,272
11,891
5,272
11,891
129
92
129
92
59
79
59
2,910
3,862
2,646
3,135
Unfunded retirement benefit obligations

Provisions
Cash generated from operations
2,174
108

23. Commitments
(a) Capital commitments
Capital expenditure contracted for at the end of the reporting period but not yet incurred was nil (2012: nil).
(b) Operating lease commitments
The Group leases offices (part of which are sub-let) and plant and machinery under non-cancellable
operating lease agreements. The lease terms are between 1 and 10 years. The majority of lease
agreements contain provisions for upwards rent reviews, amounts which are agreed between the lessor
and the lessee as the best rent likely to be achieved if let at open market conditions.
The Group also leases vehicles under cancellable operating lease agreements. The Group is required to
give, in some instances, 30 days notice for the termination of such agreements. The lease expenditure
charged to the income statement during the year is disclosed in note 6.
At the balance sheet date the future aggregate minimum lease payments and receipts under noncancellable operating leases fall due as follows:
Operating lease payments

Group
2013
2013
Properties Vehicles
2012 2012
Properties Vehicles
000 000
000 000
No later than 1 year
6,488
627
6,560
630
Later than 1 year and not later than 5 years
25,524
410
25,859
366
Later than 5 years
10,872
17,139
42,884
1,037
49,558
996
Operating lease receipts in respect of sub-let office space

Group
2013 2012
Properties Properties
000 000
No later than 1 year
4,899
4,899
19,597
19,597
Later than 1 year and not later than 5 years

Later than 5 years

8,574 13,473
33,070
37,969
109

24. Contingencies
Group and Authority
The Group does not anticipate that any material contingent liabilities will arise other than those for which
provision has been made (note 19).
25. Related-party transactions

Group
The Civil Aviation Authority is a statutory corporation whose duties, powers and functions are established in
and pursuant to primary and secondary legislation. By virtue of provisions in the Civil Aviation Act 1982, the
Airports Act 1986 and the Transport Act 2000 in specified circumstances the Secretary of State may direct
the Civil Aviation Authority as to the performance of those duties, powers and functions.
The Air Travel Trust (ATT) exists to fund repatriation or reimbursement of holiday-makers in the event of
the failure of a tour operator. The ATT is funded by contributions made when ATOL-protected holidays
are purchased and, in certain circumstances, has recourse to bonds or insurance. K Staples, C Jesnick, R
Jackson and R Mountford were Secretary and Board Members of the CAA and Trustees of the ATT during
the year. As detailed in note 1.2, the ATT is excluded from the consolidated financial statements of the
CAA.
During the year, the CAA charged 157,743 (2012: 126,770) for failure administration services to the ATT,
of which nil (2012: nil) was accrued at the year end. The CAA also recharged 780,454 (2012: 351,640)
to the ATT during the year for legal fees, accommodation costs, accounting and other administrative
services, of which 342,911 (2012: 9,640) was accrued at the year end.
During the year, K Staples, R Jackson and R Mountford were Trustees of the Civil Aviation Authority
Pension Scheme (R Mountford as Chairman). Details of the Scheme and the transactions between the CAA
and the CAA Pension Scheme are disclosed within note 18.
The Confidential Human Factors Incident Reporting Programme (CHIRP) is a company limited by guarantee
with charitable status and the programme continues to be supported by the CAA. During the year, R Jones,
CAAs Head of Flight Operations, was on the CHIRP Board of Trustees. During the year, the CAA incurred
expenditure of 348,900 (2012: 317,100) in support of the programme.
Board Member emoluments
See note 4 together with the Report by the Board on Remuneration Matters.
110

25. Related-party transactions (continued)
Authority
The following transactions with subsidiaries occurred during the year:

2013 2012

000 000
Re-charge of Corporate legal, finance, IT and facilities costs
CAA International Ltd
596 739
Air Safety Support International Ltd
298
265
52
52
45
90
Provision of Radio Licencing service to CAA International Ltd
282
285
Re-charge of Corporate Board Member costs
Work carried out on behalf of CAA International Limited with regard to

commercial aviation related services
4,467 5,909
Provision of technical assistance to Air Safety Support International Ltd
35 33
Interest on inter company trading balances:

Payable to CAA International Ltd
(12) (6)
Payable to Air Safety Support International Ltd
(3) (2)
The year-end balances owed by the Authority were as follows:

2013 2012
Note
000 000
6,049 3,798
1,253 1,006
16
7,302 4,804
As part of the treasury function, the Group operates a cash pooling arrangement for the Authority and its subsidiaries.
111
Group Current Cost Income Statement


2013 2012
Note
000 000
Revenue 125,842 115,270
Net operating costs
(125,643) (114,553)
Historic cost operating profit before net
finance income and income tax expense
Current cost operating adjustments
2
3
199
717
(1,305) (1,228)
Current cost operating loss before net

finance income and income tax expense
4
(1,106) (511)
(405) (447)
Current cost loss before income tax expense

Income tax expense
(1,511) (958)
(420) (220)
Current cost loss 7

(1,931) (1,178)
112
Group Current Cost Balance Sheet

As at 31 March 2013

2013 2012
Note
000 000
Assets
Non-current assets
6 20,307
21,848
Deferred income tax assets
75
Total non-current assets
20,382 21,848
Current assets
Trade and other receivables 18,505 14,278
17,606 18,266
Total current assets

36,111 32,544
Total assets
56,493 54,392
Equity
Capital and reserves:
Current cost reserve
Retained earnings
7
7
163,253 162,377
(147,127) (145,196)
Total equity
16,126 17,181
Liabilities
Non-current liabilities
Borrowings
5,311 7,832
803 1,095
Deferred income tax liabilities
- 6
1,555 1,423
1,317 1,234
Total non-current liabilities
8,986 11,590
Current liabilities
Borrowings
2,499 1,892
28,053 23,126
81 Current income tax liabilities
562 414
107 110
79 79
Total current liabilities
31,381 25,621
Total liabilities
40,367 37,211
56,493 54,392
113

1. Statement of accounting policies
The Group is set financial targets by the Department for Transport of a 6.0% rate of return for the regulatory
and en route sectors. The targets are based upon the annual rate of return before interest, on average
capital employed revalued at current cost for the target period. The financial target is calculated to provide
sufficient reserves for future capital investment, interest payments and corporation tax.
The differences in accounting convention used when comparing current cost accounts with historic cost
accounts are:
i)
The current cost accounts have been prepared in accordance with the withdrawn Statement
of Standard Accounting Practice Number 16, by the application of Government indices to the
historic cost of fixed assets together with a working capital adjustment, so as to allow for the
impact of price changes on profits and losses and asset values.
ii) The treatment of the pension scheme under IAS 19 has been excluded from the balance
sheet and the profit and loss account. The IAS 19 current service cost of 21,074k (2012:
20,278k) has been replaced with the cash contribution of 15,802k (2012: 8,387k) made
to the pension scheme, within the current cost profit and loss account. Net finance income
of 405k (2012: 447k) excludes other finance income; this represents the net interest
earned from the pension scheme assets and charges from the scheme liabilities of 2,336k
(2012: 11,406k). A reconciliation of these adjustments is given in note 2 to the current cost
accounts. A statement of recognised gains and losses is not included within the current cost
accounts, however a statement of reserves is given in note 7 to the current cost accounts.
The alternative basis has been used as it provides a more consistent basis for assessing the financial target
set by the Department for Transport.
114

2. Reconciliation of historic cost operating (loss) / profit excluding IAS 19
pension scheme adjustments
Group result for the year ended 31 March 2013

Historic cost IAS 19 current
Employer Restated operating

operating
service cost contributions
profit / (loss)

profit / (loss)
(note 18)
(note 18)
excluding

IAS 19 costs

2013 2013 2013
2013

000 000 000
000
UK en route air traffic services
1,227 - - 1,227
Safety regulation
(3,427) 12,001 (8,999)
(425)
Regulatory Policy
(111) 1,313 (985)
217
Consumer protection
(340) 1,304 (978)
(14)
(147) 1,274 (955)
172
CAA International
2,672 895 (671)
2,896
(4,947) 4,287 (3,214)
(3,874)
Operating (loss) / profit
(5,073) 21,074 (15,802)

1,931
(2,336)
Loss before income taxation expense

Income tax expense
(3,142) (206)
285
(705)
(420)
Loss before income taxation expense
(2,857) (626)
199
(405)
Group result for the year ended 31 March 2012

Historic cost IAS 19 current
Employer
Restated operating

operating
service cost
contributions
profit / (loss)

profit / (loss)
(note 18)
(note 18)
excluding

IAS 19 costs

2012 2012 2012
2012

000 000 000
000
1,074
-
(500)
574
Safety regulation
(9,584)
14,233
(5,535)
(886)
Regulatory Policy
(218)
1,549
(603)
728
Consumer protection
(387)
1,627
(633)
607
(936)
1,524
(593)
(5)
CAA International
1,297
853
(332)
1,818
(2,420)
492
(191)
(2,119)
Operating (loss) / profit
(11,174)
10,959
20,278
(8,387)
(11,406)
717
(447)
(Loss) / profit before income taxation expense

Income tax expense
(215)
(94)
(126)
270
(220)
(Loss) / profit before income taxation expense
(309)
50
115

3. Current cost operating adjustments

2013 2012
000 000
Depreciation
1,150
Working capital

1,038
155 190
1,305
1,228
The working capital adjustment is made to allow for the effects of price changes on working capital by applying the
movement in the UK Retail Price Index during the year to debtors, bank balances, creditors and provisions held as part
of monetary working capital.
The depreciation adjustment is the difference between depreciation charges on the current cost of tangible fixed
assets and those included in the historic cost accounts.
4. Current cost loss before net finance income and income tax expense

2013 2012
000 000
Safety regulation
(1,300) (1,738)
Regulatory policy
182
697
Consumer protection
(51) 573
CAA International
2,868 1,792
CAA regulatory sector
1,699
1,324
152
(28)
899
286
(3,856) (2,093)
(1,106) (511)
116

5. Current cost return on capital employed

Operating profit
Average capital
Return on capital
employed employed

000 000
1,699
30,931
5.5
The Group is set a financial target by the Department for Transport.

The target for the CAA regulatory sector is based upon the annual rate of return, before interest,
on average capital employed revalued at current cost, over the target period.
The reporting business segment and target rate of return is as follows:

Target period
Target rate
01.04.12 - 31.03.13
6.0%
The business segment is required to achieve the higher of either the annual target rate of return on the average
current cost of capital employed or break-even after charging interest and tax.
6. Tangible fixed assets

Gross
Depreciation
Net
000 000 000
Land and buildings
88,071
71,549
16,522
Plant and equipment
20,962
19,327
1,635

Under construction
109,033 90,876 18,157

2,150
2,150
At 31 March 2013
111,183
90,876
20,307
At 31 March 2012
106,274
84,426
21,848
Tangible fixed assets are stated at indexed historic cost less accumulated depreciation.
The indexed historic cost has been calculated by applying relevant official Government indices.
The same asset lives are used for both historic and current cost accounts
(see accounting policies 1.5 and 1.6 of the historic cost accounts).
117

7. Statement of reserves

2013 2012
000 000
Current cost reserve

At 1 April
162,377
161,306
Revaluation surplus reflecting price changes on

tangible fixed assets and deferred government grants
721
881
Working capital adjustment
155 190
Movement during year:
At 31 March
163,253
162,377
Current cost profit and loss account

At 1 April
(145,196) (144,018)
Movement during year:

Current cost loss
At 31 March
(1,931) (1,178)
(147,127) (145,196)
The current cost accounts exclude the effects of IAS 19 in respect of accounting for the pension scheme.
The pension fund asset and liability (note 18, historic cost accounts) have therefore been excluded from the
current cost accounts balance sheet.
118
Group Five Year Summary

2013 2012 2011 2010 2009
m m m m m
Income statement (historic cost accounts)
Revenue
Operating loss before net finance income
and income tax expense
125.8
115.3
109.4
110.3
104.2
(5.1) (11.2) (15.0) (8.0) (15.0)
1.9
11.0
14.0
0.6
12.5
Income tax expense
0.3 (0.1) (0.6) (0.1) 0.1
Loss for the financial year (2.9) (0.3) (1.6) (7.5) (2.4)
Balance sheet (historic cost accounts)
Non-current assets
Current assets
569.7
477.4
387.9
348.1
437.2
36.1 32.6 30.8 42.3 40.9
Total assets
605.8
510.0
418.7
390.4
478.1
Reserves
438.0
472.8
381.0
338.2
424.2
Equity
438.0
472.8
381.0
338.2
424.2
Total liabilities
167.8
37.2
37.7
52.2
53.9
605.8
510.0
418.7
390.4
478.1
0.2
0.7
0.7
1.7
(3.2)
Income statement (current cost accounts)

Historic cost profit / (loss) excluding
IAS 19 accounting adjustments
Depreciation adjustment
(1.2) (1.0) (0.9) (0.7) (0.5)
Working capital adjustment
(0.1) (0.2) (0.2) 0.0 0.0
Current cost operating (loss) / profit for the year
(1.1) (0.5) (0.4) 1.0 (3.7)
Balance sheet (current cost accounts)

Non-current assets
20.4
21.9
24.2
27.1
28.9
Current assets
36.1
32.5
30.8
42.3
40.9
Total assets
56.5
54.4
55.0
69.4
69.8
Reserves
16.1
17.2
17.3
17.2
15.9
Equity
16.1
17.2
17.3
17.2
15.9
Total liabilities
40.4
37.2
37.7
52.2
53.9
56.5
54.4
55.0
69.4
69.8
(1.1)%
(2.6)%
(4.2)%
(2.1)%
(3.2)%
Operating loss expressed as a return on

average equity (historic cost accounts)
Outturn against financial target set by
the Department for Transport
5.5% 4.2% 7.6% 6.7%

(5.9)%
119
Civil Aviation Authority (Report) Direction 2012

The Secretary of State for Transport, in exercise of his powers under Section 21(2) (d) of the Civil Aviation
Act 1982 hereby specifies that the Annual Report of the Civil Aviation Authority, (the Group which is
comprised of the Authority and its subsidiaries) shall include:
1. the agreed performance and service aims of the Group, and the outturn against them;
2. the main features of the latest Strategic Plan of the Group;
3. a fair and full review of development of the business during the year, the significance of the
circumstances facing the Group, and indication of likely future developments for each of the
significantly different classes of business. The review should deal separately with the Group's financial
position and should include:
a) a comparison of results against target including explanation of the relationship between current and
historic cost accounts and the significance of returns on assets employed;
b) comments on and changes in funding levels;
c) significant changes in property, plant and equipment and intangible assets, with a brief description
of assets involved;
d) indication of activities in the field of research and development;
e) comments on other relevant aspects of the financial results;
f) summary of significant events since the end of the reporting period.
4. five year summary of the Group's financial results, including and identifying inter-alia:
a) for historic cost accounts, appropriate analyses of income and expenditure and assets and liabilities;
b) income statement and balance sheet adjustments to current cost accounts;
c) total equity;
d) profit/loss expressed as a return before interest on average historic cost of total equity analysing
the results between different classes of the business;
e) profit/loss before interest is also expressed as a return on average current cost of total equity
excluding treatment of the pension scheme under International Accounting Standard 19, analysed
between the different classes of business.
5. this Direction and the Accounts Direction;
6. the Report Direction issued to the Civil Aviation Authority dated 21 March 2011 is hereby revoked.
Jonathan Moor
Director General Civil Aviation, Department for Transport
Signed by authority of the Secretary of State
Dated: 2 May 2012
120
Civil Aviation Authority (Accounts) Direction 2013

The Secretary of State for Transport, with the approval of the Treasury, in pursuance of section 15(1) of the
Civil Aviation Act 1982, hereby gives the following Direction:
1. The statement of accounts, which it is the duty of the Civil Aviation Authority (the Group, which is
comprised of the Regulatory Authority and its subsidiaries) to prepare in respect of its financial year
ending 31 March 2013 and in respect of any subsequent accounting year, shall comprise:
a) an annual report;
b) a statement on internal control;
c) a statement of Board members' responsibilities;
d) an income statement;
e) a statement of comprehensive income;
f) a balance sheet of the Regulatory Authority and of the Group;
g) a statement of changes in equity;
h) a statement of cash flows;
including in each case such notes as may be necessary for the purposes referred to in paragraphs 2 and
3 below.
The statement of accounts shall, without limiting the information given, meet insofar as they are
appropriate to public corporations:
a) the accounting and disclosure requirements of companies legislation currently in force;
b) the accounts disclosure requirements of paragraphs 9.8.6 and 9.8.8 of the Financial Services
Authority Listing Rules;
c) standards and interpretations issued by the International Accounting Standards Board and the
International Financial Reporting Interpretations Committee;
d) any additional disclosure or accounting requirements that the Treasury may issue from time to time
in respect of public corporations accounts.
2. The accounts should reflect the effect of changing prices. This information should be presented as a
supplementary set of accounts to the main IFRS accounts;
3. Clarification of the application of the accounting and disclosure requirements of the Companies Act
and accounting standards is given in Schedule 1 to this Direction. The annual accounts shall include the
information set out in Schedule 2 to this Direction;
4. The Direction issued to the Authority dated 2 May 2012 is hereby revoked.
Jonathan Moor
Director General Civil Aviation, Department for Transport
Signed by authority of the Secretary of State
Dated: 30 May 2013
121
Civil Aviation Authority (Accounts) Direction 2013
Schedule 1
Schedule 2
1. The Companies Act 2006 requires certain

information to be disclosed in the Directors
Report. To the extent that it is appropriate, the
information relating to the Civil Aviation Authority
shall be contained in the Annual Report.
Supplementary Information
2. The income statement shall be prepared in

accordance with International Accounting
Standard (lAS) 1.
1. The income statement or the notes thereto shall

include:
a) analyses of revenue and operating profit or
loss over the following:
Safety Regulation;
Regulatory Policy;
3. The balance sheet shall be prepared in

accordance with lAS 1, separating the
classification of the current and non-current
assets, and current and non-current liabilities on
the face of the balance sheet.
Consumer Protection;
4. The Civil Aviation Authority does not gain

economic or other benefits from the Trustees'
ability to govern the financial and operating
policies of the Air Travel Trust Fund (ATTF).
Accordingly, the ATTF shall not be consolidated
as part of the Group financial statements.
Miscellaneous Services.
Directorate of Airspace Policy;

UK en route Air Traffic Services;
CAA International;
b) revenue shall be analysed, as appropriate,
between statutory and scheme charges and
other income;
c) expenditure shall be analysed between
employment costs, services and materials,
repairs and maintenance, research and
development, depreciation and amortisation,
other gains/(losses) - net, income
equalisation and other expenses;
d) a statement showing separately the interest
on capital loans.
2. The balance sheet or a note thereto shall show:
a) the Group's maximum borrowing power;
b) all sums borrowed showing separately
amounts borrowed from the National Loans
Fund and other borrowings and showing
separately when repayment is due.
3. The statement of accounts or notes thereto
shall include:
a) statement of the rate of return achieved by
the Regulatory operations based upon the
average total equity;
b) an explanation of the manner in which
the returns have been computed and a
definition of the target to be achieved;
c) comparisons with other financial targets
which have been agreed with the Group;
d) the amount, source and purpose of capital
grants receivable.
122

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Annual Report & Accounts 2013

Civil Aviation Authority

Annual Report & Accounts 2013

Presented to Parliament pursuant to section 15(2) of the

Civil Aviation Authority 2013

Statement by the Chair

Report of the Chief Executive

Statements of Comprehensive Income

Board Members and Officers

Statements of Changes in Equity

Statements of Cash Flows

Notes to the Consolidated

Group Current Cost Income Statement

Group Current Cost Balance Sheet

Notes to the Current Cost Accounts

Group Five Year Summary

Report by the Board on

Statement of Board Members

Civil Aviation Authority (Report)

Independent Auditors Report to the

Civil Aviation Authority (Accounts)

Annual Report & Accounts 2013 | Civil Aviation Authority

Statement by the Chair

Annual Report & Accounts 2013 | Civil Aviation Authority

This year, our ability to promote choice and value for

in a rapidly changing sector

Despite tough economic times, the UK aviation

The year under review saw important changes

I am grateful to our non executive directors Roger

And, following some high profile court cases, we

Annual Report & Accounts 2013 | Civil Aviation Authority

These days it is easy to take for granted the

Dame Deirdre Hutton

Report of the Chief Executive

Annual Report & Accounts 2013 | Civil Aviation Authority

and work across Europe. This year will see more

we are constantly

Annual Report & Accounts 2013 | Civil Aviation Authority

All these are examples of the progress we have

The CAA develops a self-assessment tool for flight

The CAA launches a four-year programme, to help

The CAA introduces new arrangements with

Annual Report & Accounts 2013 | Civil Aviation Authority

The CAA welcomes new EU rules that standardise

The CAA publishes a review of its regulation of the

The CAA launches new standardised ATOL

Annual Report & Accounts 2013 | Civil Aviation Authority

Following the Vauxhall helicopter accident the CAA

Board Members and Officers

Dame Deirdre Hutton

Annual Report & Accounts 2013 | Civil Aviation Authority

Executive Board Members

Annual Report & Accounts 2013 | Civil Aviation Authority

General Counsel and Secretary

Non-Executive Board Members

Annual Report & Accounts 2013 | Civil Aviation Authority

Air Vice-Marshal Baz North

Captain Roger Whitefield

Annual Report & Accounts 2013 | Civil Aviation Authority

Annual Report & Accounts 2013 | Civil Aviation Authority

occurred safely and that the Governments airspace

there is significant work

in a rapidly changing sector

we are constantly

there is significant work

Work towards promoting

We will continue to lead

We are working with the

we have sought

We have monitored