commonwealth of australia official committee hansard · crossin, eggleston, faulkner, ferguson,...

COMMONWEALTH OF AUSTRALIA

Official Committee Hansard

RURAL AND REGIONAL AFFAIRS AND TRANSPORTLEGISLATION COMMITTEE

Reference: CASA administration - air operator maintenance, regulation andoversight

FRIDAY, 4 MAY 2001

CANBERRA

BY AUTHORITY OF THE PARLIAMENT

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SENATE

RURAL AND REGIONAL AFFAIRS AND TRANSPORT LEGISLATION COMMITTEE

Friday, 4 May 2001

Members: Senator Crane (Chair), Senator Forshaw (Deputy Chair), Senators Ferris, McGauran, Mackay andWoodley

Substitute members: Senator O’Brien for Senator Forshaw

Participating members: Senators Abetz, Bartlett, Boswell, Brown, Buckland, Calvert, Chapman, Coonan,Crossin, Eggleston, Faulkner, Ferguson, Gibson, Harradine, Harris, Hutchins, Knowles, Lightfoot, Mason,McKiernan, McLucas, Sandy Macdonald, Murphy, O’Brien, Payne, Schacht, Tchen, Tierney and Watson

Senators in attendance: Senators Crane, McGauran and O’Brien

Terms of reference for the inquiry:Matters related to the administration of the Civil Aviation Safety Authority—Air operator maintenance, regulation andoversight.

WITNESSES

BILLS, Mr Kym Maynard, Executive Director, Australian Transport Safety Bureau .........................170

.........................................................................................................................................................................202

EDWARDS, Mr David George, Vice President, Line Maintenance, Ansett Australia and Air NewZealand Engineering Services......................................................................................................................203

ELDER, Mr Robert Stephen Toti, Executive Manager, Government, Industry and InternationalRelations, Civil Aviation Safety Authority..................................................................................................230

FARQUHARSON, Mr Terence Lindsay, Acting Assistant Director, Aviation Safety Compliance,Civil Aviation Safety Authority ...................................................................................................................230

FLANAGAN, Mr Michael James, Vice President, Engineering - Strategic Projects, AnsettAustralia and Air New Zealand Engineering Services ..............................................................................203

GEMMELL, Mr Bruce, Deputy Director of Aviation Safety, Civil Aviation Safety Authority ............230

HACKETT, Mr Robert John, Vice President, Quality Assurance, Ansett Australia and Air NewZealand Engineering Services......................................................................................................................203

HARRIS, Mr Peter Noel, Vice President, Government and International Affairs, AnsettAustralia and Air New Zealand Engineering Services ..............................................................................203

ILYK, Mr Peter, General Counsel, Civil Aviation Safety Authority .......................................................230

JENSEN, Captain Trevor George, Senior Vice President, Operations, Ansett Australia and AirNew Zealand Engineering Services .............................................................................................................203

LEAVERSUCH, Mr John, General Manager, Airline Operations, Civil Aviation SafetyAuthority........................................................................................................................................................230

MAXEY, Mr Wayne, Director, Regulatory Liaison-Customer Support, Boeing CommercialAirplanes ........................................................................................................................................................191

NAGLE, Ms Karen Ann, Risk Manager, Civil Aviation Safety Authority..............................................230

SCULLY-POWER, Dr Paul, Board Chairman, Civil Aviation Safety Authority .................................. 230

STRAY, Mr Alan, Acting Director, Safety Investigations, Australian Transport Safety Bureau ........ 170

TOLLER, Mr Michael Robert, Director of Aviation Safety, Civil Aviation Safety Authority ............. 230

VILLIERS, Mr David, Section Head, Airframes, Civil Aviation Safety Authority ............................... 230

Friday, 4 May 2001 SENATE—Legislation RRA&T 169

RURAL AND REGIONAL AFFAIRS AND TRANSPORT

Committee met at 8.33 a.m.

CHAIR—I declare open this public hearing of the Senate Rural and Regional Affairs andTransport Legislation Committee. The committee is meeting today to hold a further publichearing into matters related to the administration by the Civil Aviation Safety Authority of airoperator maintenance, regulation and oversight. The committee commenced this inquiry on 22October 1999 and held initial hearings on 10 and 11 July 2000 in Melbourne. Those hearingsfocused particularly on CASA’s oversight of the maintenance programs of the major airlines,Qantas and Ansett. A reporting date to the Senate is yet to be determined. The committee isconducting this inquiry under powers provided to Senate legislation committees by standingorder 25(2)(b) of the standing orders of the Senate and allows the committee to inquire intomatters relevant to the performance and administration of departments and agencies allocated tothe committee under standing orders.

The committee will today hear from representatives of CASA and Ansett on the oversight andauditing of Ansett maintenance regimes. Ansett has recently experienced well-documentedmaintenance problems with its Boeing 767 aircraft which have received considerable coveragein the media. The committee will also hear today from representatives of the AustralianTransport Safety Bureau and the Boeing Corporation. Today’s proceedings are public and opento all. A Hansard transcript is being made and will be available in hard copy from thecommittee secretariat next week or via the Parliament House Internet home page. Thecommittee has authorised the video and sound recordings, broadcastings and rebroadcastings oftoday’s proceedings in accordance with the rules contained in the order of the Senate of 23August 1990 concerning the broadcasting of committee proceedings.

While the committee prefers to hear all evidence in public, if the committee accedes to such arequest the committee will take evidence in camera and record that evidence. Should thecommittee take evidence in this manner, I remind the committee and those present that it iswithin the power of the committee at a later date to publish or present all or part of thatevidence to the Senate. The Senate also has the power to order production and/or publication ofsuch evidence. I should add that any decision regarding publication of in camera evidence orconfidential submissions would not be taken by the committee without prior reference to thepersons whose evidence the committee may consider publishing.

Before the committee commences taking evidence, let me place on record that all witnessesare protected by parliamentary privilege with respect to submissions made to the committee andevidence given before it. Consequently, any act by any person which may operate contrary tothese rules or to the disadvantage of a witness on account of evidence given by him or herbefore the Senate or any committee of the Senate may be a breach of parliamentary privilegeand may also be regarded as a contempt of the Senate. ‘Parliamentary privilege’ means specialrights and immunities attached to parliament or its members and others necessary for thedischarge of functions of the parliament without obstruction and without fear of prosecution. Ispecifically draw attention to the fact that all witnesses giving evidence today are protected bythe provisions of the Parliamentary Privileges Act 1987. In particular, section 16 of that actprovides that no evidence given to the committee, either orally or in writing, can be used in anyway in any matter arising before a court or tribunal.

RRA&T 170 SENATE—Legislation Friday, 4 May 2001


[8.37 a.m.]

BILLS, Mr Kym Maynard, Executive Director, Australian Transport Safety Bureau

STRAY, Mr Alan, Acting Director, Safety Investigations, Australian Transport SafetyBureau

CHAIR—Welcome. Mr Bills, would you like to make an opening statement?

Mr Bills—Not a statement as such, but I want to mention a couple of things. if I may.

CHAIR—Certainly.

Mr Bills—As you mentioned in your introduction, although the last formal hearing was inJuly last year, at the last estimates hearing on 19 February there were some questions in relationto this broad topic. I just want to mention a couple of things of significance since then.

CHAIR—It sort of lurches from one place to another, doesn’t it?

Mr Bills—It does. We have released a few fairly important reports since the last estimateshearing. There is the avgas contamination report but, of relevance to this hearing, I just want tomake sure the committee has copies of a couple of reports—firstly, the ATSB survey of licensedaircraft maintenance engineers in Australia and, secondly, the Qantas QF1 runway overrunreport because each of those has at least some relevance to this inquiry, and the first, obviously,substantial relevance. Also, I want to mention that the ATSB, as I think the committee knows,broadened its investigation into the safety deficiency that originated with Ansett 767s on 10April to include an examination of procedures for the control of the continuing airworthiness ofall class A aircraft, which includes the 767. On 12 April, we released a couple ofrecommendations in relation to that investigation.

CHAIR—Thank you. You did not mention Whyalla. Do you have any comments you wish toput on the record about where you are at with that?

Mr Bills—Yes. The interested party process is complete and the report is being finalised atthe moment. Mr Stray may give you an estimated date of release.

Mr Stray—We have had a significant amount of interested party input, which just arrivedyesterday. The closing date for submissions is Monday. That phase is actually complete and theinterested party review is under way. It largely depends how long that process takes to reviewthe comments, but we are hopeful of mid-June for release.

CHAIR—Obviously the things you have raised now will be matters for other hearings.Today we are here to deal with the Ansett issue. We will try to avoid getting into the othersunless, for some reason or other, they link together and you cannot avoid it. Otherwise we willnot get finished today. We will deal with the other issues on a separate date. Before we go to



questions, can you give us an overview of your role and where you are at with the latestgrounding of the 767s?

Mr Bills—I think we mentioned last time we were before you that we formally commencedour investigation on 11 January this year, although prior to that we had been monitoring theinitial grounding over Christmas of the 767s. Initially, the investigation was a safety deficiencyinvestigation, including examination of Boeing aircraft airworthiness, Ansett’s maintenancequality assurance system and CASA’s systems for compliance. Subsequent to that, we have alsolooked at the role of the FAA in the US. As I mentioned in my opening remarks, on 10 April webroadened the investigation, following new information we received in relation to an Ansettdeficiency on 9 April, to look at the airworthiness of class A aircraft more generally.

In terms of where we are at today, we released the two recommendations on 12 April. I amhappy to talk about that, or Mr Stray can talk about it if the committee requires. The broadscope of our investigation in relation to Ansett is that we are looking at the implications formaintenance systems management following significant organisational change. We are lookingat the ageing Boeing 767 fleet, we are looking at systems for monitoring and assessingcontinuing airworthiness, and we are looking at systems within the airline to ensure compliancewith authorisations to control maintenance. Those are the broad headings within Ansett.

In terms of the airline industry more broadly—and this will include Qantas and otheroperators of class A aircraft—we will be assessing the effectiveness of monitoring systems forairworthiness compliance. With regard to CASA, the broad topics that we are looking at are:systems to authorise airlines to control maintenance, systems for certification standards andcontinuing airworthiness of class A aircraft as defined in the Civil Aviation Regulations 1988, anew systems based approach to the surveillance of airlines, and systems to assess theeffectiveness of monitoring the airworthiness of compliance of airlines. In relation to FAA andBoeing at this stage we have the information we require, but we are considering what otherrequirements and aspects we may need to investigate. Broadly, that is where we are today. Youmay have more questions on the detail.

CHAIR—When do you expect to complete that overview under those broad headings? Iknow this stuff is always ongoing, but you must have a critical time schedule.

Mr Bills—At the last hearing in February we mentioned that we wanted to see CASA’s finalreport on their regulatory compliance investigation. At the stage of that hearing, the report wasexpected to be completed at the end of March. However, CASA has been putting a lot of itsresources into the current 767 problem and has not made as rapid progress with the report as itexpected. So it is yet to be completed—I am sure Mr Toller can give you more detail on that—and will take a bit of time. In terms of our inquiry, it is hard to put a date on it. There are at leasta couple more months of active work, and our normal interested party process and assessmenttakes one or two months in itself, so we are looking at three or four months at least.

CHAIR—We will be hearing from Boeing later in the day but, in terms of the issuing of theservice bulletins and the role of the FAA in the issuing of an unworthiness certificate, it seemsto me that there is a degree of hit and miss. There is no ranking. It is one thing to get a servicebulletin and say that this work may come on line at a certain time, but there does not seem to beany urgency or any rating of the importance of that particular thing. Do you have a view on how



that line of communication operates from an Australian perspective, when the communicationcomes from another country, in this case the US? Does it need upgrading? Is it sensitiveenough? Why doesn’t it promote more prompt action?

Mr Bills—That is the subject of the recommendations we issued on 12 April. We havebasically said that, while it is reasonable for the Australian regulator to put into Australian lawimportant safety-of-flight service bulletins that the United States FAA has mandated—and thatprocess will continue and will cover the vast majority of service bulletins with safety-of-flightimplications—that by itself is not enough, and the problems at Christmas and more recentlyhave underlined that. We believe there is a need for the regulator in Australia—either directly orindirectly through Ansett or through Qantas or one of the other operators—to make sure thatimportant service bulletins with safety-of-flight implications are put into Australian lawirrespective of what may or may not have occurred in the US or elsewhere where the aircraft ismanufactured.

Senator O’BRIEN—You talked about the formal commencement of the broader process on11 January. Is that the date the decision was made to commence? Or was the formal notificationon that date, with the decision having been made earlier?

Mr Bills—The decision was made on that day. We had indicated to CASA a few days beforethat we were considering doing it, and of course we had been monitoring it before that.

Senator O’BRIEN—You said there was a communication to CASA a few days before. Canyou tell us when that was?

Mr Bills—It was 8 January.

Senator O’BRIEN—That is when you were considering it, and it was confirmed to CASAon 11 January, when the matter was announced?

Mr Bills—Correct.

Senator O’BRIEN—The process was to include Qantas and Ansett?

Mr Bills—No. Initially we were looking at Ansett, CASA and Boeing. We have subsequentlybroadened it, on 10 April, to look at all class A aircraft.

Senator O’BRIEN—Ms Boughton was still on deck at that time, wasn’t she?

Mr Bills—Ms Boughton made the decision on 11 January. That is correct.

Senator O’BRIEN—So she would have formally written to CASA, Ansett and Boeing?

Mr Bills—I am not exactly sure.

Mr Stray—It was just to CASA, on 8 January.



Senator O’BRIEN—That was the only letter written?

Mr Stray—As far as I am aware.

CHAIR—Can we get a copy of that?

Mr Bills—Yes.

Senator O’BRIEN—The letter presumably details the proposed investigation, or just theintent to investigate?

Mr Stray—I will read a paragraph from the letter. It says:

The ATSB needs to ensure that actions subsequently taken by CASA and Ansett have addressed this safety deficiency. Iam therefore seeking from CASA a copy of any documentation from Ansett pertaining to the deficiency already providedto CASA and details of what action CASA has taken to ensure such a situation does not develop again, to enable theATSB to determine the scope of any safety deficiency investigation required to be undertaken.

Senator O’BRIEN—We will get a copy of that. Is it correct that there is a memorandum ofunderstanding between CASA and the ATSB on how the two organisations should worktogether?

Mr Bills—The MOU is dated 1996, and it is between CASA and BASI. We have not updatedit to include ATSB but, yes, that MOU still operates.

Senator O’BRIEN—What was the formal process, with regard to airlines, regarding this sortof inquiry? Was there something specified in that MOU in that regard?

Mr Bills—In what respect, Senator?

Senator O’BRIEN—Was there a process in your relationship with CASA for interlinkingwith particular airlines in your investigations?

Mr Bills—Do you mean in terms of running investigations in parallel?

Senator O’BRIEN—Yes.

Mr Bills—The broad terms of the MOU are that we respect each other’s differentinvestigation roles and, while our investigations have priority, we seek to ensure that we do notinterfere unduly with a CASA investigation or vice versa. In this case, I agreed with Mr Tollerthat we would work cooperatively as much as we could, because there were substantial areaswhere we were looking at the same thing. Obviously, when it comes to our assessment of theprocesses within CASA—or, for that matter, any other party—we need to make that judgmentourselves.

Senator O’BRIEN—So the basic question is: were the terms of the MOU followed inrelation to this investigation?



Mr Bills—I think there could have been better communication with CASA on the day that weannounced the investigation. We normally write a letter that reaches CASA before any publicannouncement. On this occasion, it did not occur. I am not sure whether that is in the MOU ornot, but that certainly is something I have spoken to Mr Toller about.

Senator O’BRIEN—Under the MOU, does it specify what steps you have to take when youplan to look at CASA’s administration?

Mr Bills—Mr Stray can pull out the MOU. The most important provision is probably 5.20,which says:

Before commencing an investigation of a safety deficiency which directly involves the operations of CASA, BASI willconsult with CASA and identify the perceived safety deficiency, the scope of the investigation and the potential formutual cooperation on the project. The parties agree that such investigations are not intended to extend to independentlyauditing CASA management practices.

That is basically the terms of that clause. There is a cooperation clause in section 6 of the MOU:

The parties agree that BASI—

read ATSB—

will consult with CASA officers as required in the course of an investigation, and may require information anddocuments from CASA and/or specialist technical participation in BASI investigations by CASA officers.

I was trying to look for one other clause, but that is the essence of it.

Senator O’BRIEN—Do I correctly assume that there were meetings or discussions betweensenior management members of both organisations, as well as Ansett and Boeing, in relation tothis investigation?

Mr Bills—Yes. There have been a number of meetings at a number of levels. I have had acouple of meetings with Mr Toller on 2 February and 23 March this year, but the investigationteams had a wide range of meetings with all parties.

Senator O’BRIEN—Is Mr Stray part of the investigation team?

Mr Stray—I have senior management oversight of the investigation.

Senator O’BRIEN—Can you take me through the process you follow with both CASA andAnsett, and give me some sort of idea on the timetable you were working to?

Mr Stray—The investigation actually started while I was on leave prior to Ms Boughtonresigning. When I came back from leave I took over that role. The investigation hadcommenced and it was working pretty much in tandem with CASA in the full understandingthat both teams, the CASA investigation team and the ATSB investigation team, wouldcooperate and work together, but in the knowledge that there would be times when CASAwould divert down a regulatory path and we would divert down another path. There was broad



agreement at the senior management level that we would cooperate fully. I have made mentionof that on numerous occasions in media.

Senator O’BRIEN—That is the CASA process. What about Ansett?

Mr Stray—In the Ansett process the team has interacted with senior Ansett executives at thesafety level and the engineering level, and has had briefings by Ansett management and Ansettexecutives. Also, the Boeing Australia representative has interacted with our team.

Senator O’BRIEN—To what extent would this sort of investigation link in with Ansett’s andCASA’s own internal review processes?

Mr Stray—We do not seek to get heavily involved in their internal review processes but, as Isaid, we were working very closely with both organisations and we did have full cooperationwith both organisations’ teams.

Senator O’BRIEN—If CASA prepared some internal report into how they were working,would you have seen that?

Mr Stray—Not necessarily, but as part of our investigation we would seek that and if it wasnot offered we would seek to obtain such documents.

Senator O’BRIEN—Thank you.

Mr Bills—I found that relevant clause, in relation to your earlier question, which reads:

In accordance with paragraph 1.17 of the appendix to annex 13 to the Chicago convention, BASI may make formalcomment on CASA organisational and management issues and their perceived relationship to a current safety deficiencyor research topic.

Senator O’BRIEN—Thank you for that. In relation to the audit of CASA’s systemsundertaken by the authority’s quality and internal audit branch and signed off on 26 March thisyear, Mr Stray, according to a report in the Sydney Morning Herald you stated that the ATSBwas in fact briefed by the internal audit team and that briefing took place with Mr Toller’s fullknowledge and consent.

Mr Stray—That was not a true representation. There are two parts to that. I will come to theSydney Morning Herald one in a second. The briefing by that team was an informal discussion.That came about because our investigation team was in Melbourne working alongside theCASA investigation team at the Melbourne airline office of CASA reviewing files anddocuments in relation to the investigation. There was one file that they could not locate and theywent to the team leader, the CASA investigation team leader, and asked about that file. Theywere directed to another room where the CASA audit team had been looking through other files.When they went to that room they ran into the CASA auditors. One of our team membershappened to be a colleague of one of the auditors from years before and broad, collegiate-typediscussion ensued: ‘What are you here for, what are you looking for,’ that type of thing. Theyhad been unable to find the file as well so discussion just developed, but it was not a formalinterview process or briefing; it just happened.



Senator O’BRIEN—There was an exchange of information?

Mr Stray—Yes.

Senator O’BRIEN—It was not with Mr Toller’s knowledge or consent?

Mr Stray—Not with the auditors, but that is where the Sydney Morning Herald article got itwrong. I had been on media constantly since just prior to and after the release of therecommendations, and that is on the public record. With all the media I had said that ourinvestigation had been proceeding with the full cooperation of Boeing, Ansett, CASA and theFAA. And then, as to a further question from the media, ‘Was CASA senior management, MrToller, aware of that?’ I said that we had been acting and interacting with the CASAinvestigation team with Mr Toller’s full knowledge and agreement. However, they unfortunatelydid not put the cooperation thing, which I say is on many public records, but chose to justinterpret it as the audit team. They did not differentiate between the investigation team and theaudit team.

Senator O’BRIEN—Was that the only occasion where there was interchange betweenCASA’s audit team and your team?

Mr Stray—I believe up to that point. Yes, as far as—

Mr Bills—I should just say in relation to that Sydney Morning Herald article there are anumber of inaccuracies in the article. I wrote a letter to the editor about them. It was notpublished, but we did publish the letter on our web site.

Senator O’BRIEN—Okay. Perhaps for completeness of the record you might provide that tothe committee.

Mr Bills—Sure.

Senator O’BRIEN—I am sure in the reams of paper I have probably got it somewhere but itwill assist me to bring myself up to speed. Would it be fair to say—

Mr Stray—Excuse me, Senator, if I could just clarify that, up to that point of time that wasthe only contact with the auditors.

Senator O’BRIEN—Up to that point of time, but there has been contact since?

Mr Stray—Yes, there has been.

Senator O’BRIEN—When did that take place?

Mr Stray—That took place last Thursday—no, Monday this week.

Senator O’BRIEN—Monday this week, that is the 30th.



Mr Stray—Yes.

Senator O’BRIEN—So CASA was reviewing its own performance in relation to Ansett andATSB was undertaking the same sort of review, in part at least?

Mr Stray—In part, yes.

Senator O’BRIEN—So, given that CASA was conducting a review relevant to your owninquiries, did ATSB request a copy of their findings?

Mr Stray—Which findings?

Senator O’BRIEN—The CASA team’s findings—the audit team.

Mr Stray—We had a copy of the initial document, and we have recently requested a copy ofthe investigation team’s findings, which are not complete, but we have received an interim copyof those findings. That is the investigation team as distinct from the audit team.

Mr Bills—When Mr Stray referred to the initial document, that was the one at the end ofJanuary, which was not the audit team either.

Mr Stray—That was not the audit team, that was the investigation team.

Senator O’BRIEN—Beyond the meetings that you have described and the accidentalmeeting with the audit team, has ATSB interviewed any CASA officers in relation to the Ansettissue generally and the audit report in particular, or do you plan to interview CASA officerswith regard to that?

Mr Stray—On Monday this week we had an initial interview with two members of theCASA audit team. We plan to hold further interviews in the near future once we have obtainedmore documentation.

Senator O’BRIEN—Were those interviews organised through an informal process, or doesthe MOU require a more formal approach?

Mr Stray—There was a semi-formal approach through correspondence—a letter—and thenthere was subsequently a more formal approach.

Senator O’BRIEN—A semi-formal approach?

Mr Stray—Rather than what we call a notice to produce, we sent a letter to CASA.

Senator O’BRIEN—So there were two—a letter and then something more formal. Is thatwhat you are saying?

Mr Stray—Some days later, yes.



Senator O’BRIEN—What occurred that was more formal?

Mr Bills—The MOU does not require us to use a formal or an informal process. Under 19CCof the Air Navigation Act—which is the formal process that Mr Stray is referring to—thedirector can require documents or witnesses to appear before us as part of the investigation.

Senator O’BRIEN—Are you saying that you had to use 19CC to get information?

Mr Bills—The use of 19CC is a common mechanism which is used by the bureau. It conveysa protection on those who speak to us.

Senator O’BRIEN—You are communicating with CASA. You have written a letter to CASAasking for some information, and then subsequently it is deemed necessary to issue a directionunder 19CC. What sort of protection would CASA need?

Mr Bills—As I say, it is a fairly common process with our investigations.

Senator O’BRIEN—How many times have you used it in relation to CASA?

Mr Bills—A number of times. I could not give you the number.

Senator O’BRIEN—Perhaps you could take that on notice and let us know when and inwhat circumstances you have used it in the past in relation to CASA.

Mr Bills—Yes. I think it is worth noting that CASA’s own legal team has indicated thatCASA would prefer to receive a 19CC request, whereas I think more senior management aremore relaxed with a less formal approach. So there are some differences there that we need toresolve.

CHAIR—I would like to follow that up. Could you be a little more precise about theprotection and 19CC?

Mr Stray—Paragraph 8 says:

(8) The person is not relieved of the obligation to answer the question or produce the document, part, component or thingas the case may be.

Paragraph 9, which is the pertinent one, says:

(9) The answer to the question, the production of the document, part, component or thing, or any information or thingobtained as a direct or indirect consequence of the answer to the question or the production of the document, part,component or thing is not admissible in evidence against the person in a criminal proceeding or in a proceeding for therecovery of a penalty.

Paragraph 10 says:

(10) Subsection (9) does not render an answer inadmissible in evidence in proceedings in respect of the falsity of thestatement.



CHAIR—In English, does that mean it gives that person immunity from prosecution? I amtrying to work out what it really means.

Mr Stray—It is not admissible in evidence against the person in a criminal proceeding or aproceeding for the recovery of a penalty. That is provided we issue a written requirement toproduce. A verbal requirement to produce does not afford that protection.

CHAIR—Senator O’Brien mentioned CASA. Do you use similar proceedings when you aredealing with airlines, for example, or other operators?

Mr Stray—Yes, we have done.

CHAIR—It is a normal procedure, is it?

Mr Stray—It is not abnormal, put it that way.

CHAIR—That means it is normal, doesn’t it, if you drop the ‘ab’ off? That is myunderstanding of English, anyhow.

Senator O’BRIEN—I am curious to know why CASA would require that protection. CASAare effectively a delegated authority of the Commonwealth, aren’t they? Why would theyrequire the protection that the person answering the questions not render themselves subject tocriminal proceedings or the recovery of a penalty? I am trying to see how that would work inwith CASA’s responsibilities. You would be looking, wouldn’t you—in relation to this—atoperators who might have broken other regulations?

Mr Bills—That is the normal use of it and, as I say—

Senator O’BRIEN—And that is what the parliament would have intended.

Mr Bills—I am not sure what parliament would have intended but certainly that would havebeen part of that, I imagine. As I say, Mr Ilyk within CASA, in terms of the legal side of it, hasindicated that CASA would prefer a 19CC approach. I have indicated that senior managementwithin CASA would prefer a less formal approach. There is a tension there. We have onoccasions done one thing and on other occasions we have done other things. We really need toresolve this. We are working with CASA to work out just what they would prefer in terms ofour seeking information.

Senator O’BRIEN—Can I go back a step? In this case, you issued a less formal notificationthat you required information—in other words, the letter that was mentioned earlier. I presumethat there was either a refusal to answer or a request for a direction under 19CC. Which was thecase?

Mr Bills—Neither was the case. There was no refusal to answer.

Senator O’BRIEN—And there was no request for—



Mr Bills—There was no request for a 19CC. Mr Stray tells me that is not accurate, so he willlet you know what happened.

Mr Stray—There was a decision taken by CASA that they wished to cooperate, but they sawa difference of legal opinion in our right to issue a 19CC and, on that basis, we were not goingto be given access to the people or documents until that was the case. So there was a form ofimpediment placed on our investigation which I then took legal advice on. I issued a 19CC onthat legal advice.

Senator O’BRIEN—If I understand you, Mr Stray, there was in essence a resistance to therequest in the letter and there was an indication that the material you were seeking would not beavailable to you, even under 19CC; is that right?

Mr Stray—It would not be available until their perception of a legal impediment wasresolved.

Senator O’BRIEN—Was that communicated in writing or verbally?

Mr Stray—I will get back to you on that. I am not sure if I have got that here.

CHAIR—Does the 19CC apply both ways or only for information that you are collecting? IfCASA wants some information from you or one of the airlines wants some information fromyou—somebody out there that you are dealing with—does that apply?

Mr Bills—No. It is only information that we require for our investigation.

CHAIR—We will have to get a copy of that and read it carefully.

Senator O’BRIEN—A copy of 19CC?

CHAIR—Yes. We will have to get the legal opinion as to what it means.

Senator O’BRIEN—I do not think you will need it. Mr Bills, you said in your letter to theSydney Morning Herald on 20 April that ATSB had received full cooperation in its investigationto date from Ansett, CASA, Boeing and the FAA. Is that correct, strictly speaking, given whatMr Stray has just told us?

Mr Bills—Mr Stray is referring to something that occurred after that date.

Senator O’BRIEN—After 20 April?

Mr Bills—Yes. I believe the letter was dated 23 April.

Mr Stray—We did receive written notice from CASA on 29 April regarding our 23 and 27April correspondence.



Senator O’BRIEN—Can the committee be supplied with those items of correspondence, thatis, your two items and CASA’s item of correspondence, please?

Mr Stray—Yes, we will supply those. I have some of those here; I am not sure whether Ihave all of them.

Senator O’BRIEN—If we could get what you have now and the rest as soon as possibleduring the day, that would be helpful. Mr Bills, am I correct in saying that ATSB’s authoritywith regard to the use of 19CC and CASA was tested at the time of the class G airspace trial?

Mr Bills—That is before my time, Senator. While I released the class G report, all the workhad been done before ATSB was created, effectively, and before I was involved. So I cannotanswer that. Mr Stray may be able to assist. I understand that there were some questionsregarding 19CC at that time. I just cannot give you the detail.

Senator O’BRIEN—Mr Stray, is it true that, during the time of the class G airspace trial,ATSB’s authority with regard to the use of 19CC and CASA was tested?

Mr Stray—That is correct.

Senator O’BRIEN—It was BASI at the time, was it not?

Mr Stray—That is correct.

Senator O’BRIEN—Did BASI seek and receive legal advice at that time in relation to itspower to use it?

Mr Stray—Yes, we did.

Senator O’BRIEN—Can the committee be supplied with a copy of that legal advice?

Mr Bills—We would need to take that on notice because legal advice within theCommonwealth may attract some—I am not sure whether or not that is something we canrelease publicly. We will take that on notice.

Senator O’BRIEN—I would understand that better if it were the subject of activeproceedings. It is really advice on how you implement the Commonwealth legislation, isn’t it?

Mr Bills—I do not believe there would be a problem.

Senator O’BRIEN—I am trying to be satisfied that there is not a real problem there.

Mr Bills—I am not aware that there is a problem. Having not read the legal advice in detailmyself, I am not sure what it includes.

Senator O’BRIEN—I take it I should be optimistic then about getting a copy.



CHAIR—I would not hold your breath.

Senator O’BRIEN—I never hold my breath, Chair. What role has the department and theminister’s office played in this interplay between ATSB and CASA?

Mr Bills—In what respect, Senator?

Senator O’BRIEN—Have there been any interventions, discussions or meetings?

Mr Bills—The department and the minister’s office have kept abreast of major milestones inthe investigation, as you would expect. The aviation division gives the minister advice onCASA and Airservices matters and are abreast of our work on a weekly, if not more frequent,basis. There has been active involvement by both the minister’s office and the rest of thedepartment.

Senator O’BRIEN—Presumably someone has been asked to brief the minister or his staff ona regular basis?

Mr Bills—For example, if a recommendation is about to be released or if we are broadeningour investigation as has occurred, we would certainly give the minister’s office prior notice.

Senator O’BRIEN—I am not asking generally but particularly in relation to what I havedescribed as the interplay between CASA and ATSB over this particular investigation. Has therebeen active involvement of the minister’s office?

Mr Bills—The minister’s office is aware of the general processes that have been under way.And, yes, I think they are actively involved in almost every significant matter that involves theportfolio—and they have been on this one.

Senator O’BRIEN—Have there been requests from the minister’s office for meetings withregard to this one, as you describe it—that is, the interplay between CASA and ATSB?

Mr Bills—There is a meeting that is intended to be held on Monday.

Senator O’BRIEN—Is that the first meeting that will have been held between the minister’soffice and ATSB about this matter?

Mr Bills—I think almost all other contact has been by the telephone or email.

Senator O’BRIEN—So what special circumstances led to the need for a meeting?

Mr Bills—As the investigation has broadened, I think there is a need to take stock and have acommon understanding of what each party is doing. I think that is, in part, the reason for ameeting; and also to make sure that lines of communication are clear.

Senator O’BRIEN—Is that the lines of communications between ATSB and the minister’soffice?



Mr Bills—And with CASA.

Senator O’BRIEN—What is the significance of this being the first meeting to take placeconsidering the fact that there has been what appears to me obviously to be some disagreementbetween CASA and ATSB about access to information and the use of 19CC?

Mr Bills—I think the 19CC issue is really just a question of making sure that both sides havea common legal understanding of whether it is necessary and desired.

Senator O’BRIEN—Whether it is necessary?

Mr Bills—Yes.

Senator O’BRIEN—Do you mean whether it is necessary in terms of protection?

Mr Bills—That is correct, and whether it is desired in the normal course of business CASAwould prefer us to use a 19CC instrument to seek information or to seek access to people—whether or not there are legal reasons for going down that route. As I say, there are someuncertainties there that CASA have raised and we are working through those with them.

Senator O’BRIEN—Who is going to be present at this meeting, apart from ATSB and theminister?

Mr Bills—As I said, from memory there will be Mr Stray and me from ATSB, Mr Toller andprobably Mr Matthews from the department as well.

Senator O’BRIEN—So you will have the minister, the secretary to the department, the headof CASA, the head of ATSB and Mr Stray.

Mr Bills—Yes. There may be one or two others.

Senator O’BRIEN—There will obviously be advisers and others might be present. It is afairly high-level meeting.

Mr Bills—Yes.

Senator O’BRIEN—And it follows on from this disagreement between CASA and ATSBabout access to information, doesn’t it?

Mr Bills—Chronologically, yes, it does.

Senator O’BRIEN—And it is the first such meeting?

Mr Bills—Yes, it is.

Senator O’BRIEN—What exactly is the role of the minister in ATSB’s investigationprocess?



Mr Bills—As I think Ms Boughton indicated to the committee in July last year, ATSB has anindependent investigation role but, as we have referred to today, in terms of the MOU we try tocooperate with the regulator as much as possible without crossing the line into what is properlya regulatory matter or crossing the line into what is properly one of our investigations.

Senator O’BRIEN—Would this be the first occasion that there has been a meeting at such ahigh level, Mr Bills?

Mr Bills—I mentioned before that there had been two meetings between me and Mr Toller.

Senator O’BRIEN—I am sure there would be plenty of meetings between you and Mr Tolleron a variety of issues. I am saying that this particular meeting on Monday involving you, MrToller, Mr Matthews and the minister would be the first occasion.

Mr Bills—It will be the first occasion when all those parties are in the room together. Theminister’s time is pretty scarce but, obviously, this has been a major issue, a major safetyconcern, for the Australian public.

Senator O’BRIEN—The major issue is the relationship between ATSB and CASA and thedispute between ATSB and CASA about access to information, isn’t it?

Mr Bills—No, I do not think that is the major issue. As I say, I think that is being pursuedparticularly through lawyers to make sure that we have a clear idea of perceptions and legalunderstandings on each side. I think the major issue is, really, to make sure that there is a clearunderstanding of the way forward in communication and progress on this investigation andother matters.

CHAIR—Is there any information that you would have liked to have received but did not getfollowing the legal advice?

Mr Bills—There is a large amount of information that CASA are currently compiling for usthat we have not yet got, but we know they are working on it.

CHAIR—That is not my question. You were always going to get that. My question related towhether, after the lawyers had gone through it and sorted out how the exchange was going tooccur, there was anything you had requested that you did not get. Because the way I understoodyour answer, you were talking about the logistics of it. Having gone through that logisticsprocess and sorted that out, did you get the material you required or requested?

Mr Bills—The reason I gave the answer I did is that we have requested the information thatCASA is compiling but we do not yet have it.

Senator O’BRIEN—Mr Stray appears to be able to add something.

Mr Stray—I am not sure of the context of the question that Senator Crane is asking—



CHAIR—My question was pretty simple; it was to me, anyhow. You had to set up a methodper the lawyers to sort out how these things exchange—and I think it is pretty obvious why youhave to do these things: you have to be above board and you have to be correct. Having put themechanism in place, is there a problem in getting information? Under the previousarrangements, because you did not have the legal logistics sorted out, there was a problem. Thatis how I interpreted what you said. Have you sorted that out? Is there a free flow of informationnow? I know there is still information coming. There is always a point in time when there is stillinformation to come and some you will have, but has that basic issue of your getting materialbeen resolved?

Mr Stray—The legal interpretation, as Mr Bills said, is yet to be resolved. Whenever wehave issued these documents in the past, we have eventually obtained either the people or thedocuments, so we have eventually got the end result. But, at this point in time, we are expectingthe documentation; it is being compiled. We have been assured that it is being compiled but thatthere is still the legal aspect to be resolved at that level.

CHAIR—It will come.

Senator O’BRIEN—No. Mr Chairman, with respect, you are not following what Mr Stray issaying. He is saying that, until the legal matters are sorted out, he is not assured of receiving theinformation.

CHAIR—I see.

Mr Stray—We have been told that the documentation is being prepared but that the lawyersare working on the legal interpretation of 19CC and these other issues.

CHAIR—And this is between your lawyers and CASA’s lawyers?

Mr Stray—Yes, between the lawyers for the department and the lawyers for CASA.

Senator O’BRIEN—And that is the subject that will be discussed on Monday?

Mr Stray—I have no idea.

Mr Bills—It may arise, but that is not the subject of the meeting.

Senator O’BRIEN—What is the subject of the meeting?

Mr Bills—I have had a couple of goes at answering that question.

Senator O’BRIEN—I know you have.

Mr Bills—The minister has called the meeting, and the subject of the meeting will bewhatever he makes it. But I understand that it will be looking at the cooperation between thetwo bodies, as I said before, and the progress on some of these issues. But, really, we are in theminister’s hands.



Senator O’BRIEN—So you are there as a matter of courtesy, I take it, and the minister hasno directive power in relation to ATSB?

Mr Bills—We are part of the minister’s department.

Senator O’BRIEN—Yes, but as to an investigation?

Mr Bills—But in terms of influencing the investigation, the minister has no power—that iscorrect—nor has the secretary or the department or CASA or anyone else.

Senator O’BRIEN—What about the process of an investigation?

Mr Bills—No influence whatsoever, provided, of course, that people are behaving ethically.If there were to be an ethical breach within ATSB, that would be a matter that would comeunder the Public Service Act and the secretary would have a direct interest in that.

Senator O’BRIEN—We have just been given copies of a variety of documents—a letterfrom ATSB to Mr Gemmell dated 23 April; a letter from Mr Gemmell to Mr Stray of 26 April; aletter from Mr Stray to Mr Farquharson of 22 April; the same letter to Mr Bailey and Mr Castle;a different letter to Mr Gemmell from Mr Stray of 27 April; and a letter to Mr Stray from MrGemmell of 29 April. Is that all of the correspondence or is there more to come?

Mr Stray—They are the letters, not the actual 19CC documents, but they are the letters.

Senator O’BRIEN—Obviously neither I nor the chairman has an opportunity to properlyassimilate that information on the spot. We also have your letter, Mr Bills, of 20 April to MrHywood, the Editor-in-Chief of the Sydney Morning Herald, and the letter to Mr Smith fromMs Boughton.

Mr Bills—Yes.

Senator O’BRIEN—In relation to the issue of the escape slides, which was a pretty criticalissue in all of this process, how many incidents involving problems with escape slides havebeen investigated by ATSB? Can you tell me that now?

Mr Bills—Mr Stray has actually brought along our occurrence records on escape slides sinceabout 1993, I think. He will let you know that.

Mr Stray—It is roughly one a year. We had a couple of requests from the media a couple ofweeks ago on this, so we have done a printout. These are public documents so we could tenderthem if you choose. That might be easier. There have been a number of them. They have beeninvestigated at various levels. Some have only been entered for statistical purposes looking atfurther trend analysis and some are being investigated more in depth.

Senator O’BRIEN—How many are there?



Mr Stray—Since 1993 there have been 15. What we provided to the media was a little bitless than that. I think there were about 11 or something like that. Since then we have had moreinput to our database.

Senator O’BRIEN—Is there any pattern in a class between particular operators?

Mr Stray—It is pretty much even between the two operators.

Senator O’BRIEN—So roughly two a year?

Mr Bills—Fifteen since 1993. Yes, it is about two a year.

Senator O’BRIEN—What sort of incident should that be categorised in terms of seriousnessas a safety issue? Does it generally fall into a particular category?

Mr Stray—Some of them have been categorised as category 5s.

Mr Bills—Category 5 is the bottom. It is just for statistical purposes. It is not investigated, assuch.

Mr Stray—There have been five of those 15 since the beginning of this year. So we arehaving them looked at more closely. We were notified of one the other day, and the intensity ofour investigation has therefore been increased to look at it. That will be happening over the nextweek.

Senator O’BRIEN—That is not the Ansett one; it is another one, is it?

Mr Stray—That one was not Ansett.

Senator O’BRIEN—I am asking these questions because that event was described by CASAas the last straw. So, while it may not be directly relevant, I wanted to understand how frequentsuch occurrences were and how they were categorised by ATSB. I have some questions aboutthe results of the survey of aircraft engineers. Is the importance of this report going to take on anew meaning because of the issues that have emerged with Ansett in recent months—that is, isthere a need to focus more sharply on the performance of airline maintenance staff and on theirworkload as well as the oversight of that work by CASA?

Mr Bills—The safety deficiency investigation that we have under way will look at thebroader issues and whether there needs to be further impetus. There are obviously somesignificant problems with control of maintenance for class A aircraft, and we are looking at that,as I said. The general maintenance report lists a number of recommendations which we thinkare important. Most of those are more of an operational nature. They deal with a range offactors, such as fatigue, spares and so forth, which are not related directly to the safetydeficiency investigation that we are undertaking.

Senator O’BRIEN—Specifically, could you comment on the basis for yourrecommendations to CASA—that is, 33, 34, 37, 38 and 40?



Mr Bills—Recommendation 33 covers hours of duty and limits or other means to ensure thatthere are not excessive levels of fatigue. As I said, that is an important operational matter, but itis not, as far as we know, related to the broader safety deficiency investigation that is coveringservice bulletins.

Senator O’BRIEN—In your comments you mention this report.

Mr Bills—Yes.

Senator O’BRIEN—Basically, I am asking for the basis of the recommendations to CASAthat I have outlined. No. 33 says that ATSB recommends that CASA ‘ensure, through hours ofduty limits or other means, that maintenance organisations manage the work schedules of staffin a manner that reduces the likelihood of those staff suffering from excessive levels of fatiguewhile on duty’. Presumably that means you discovered that there were excessive levels offatigue.

Mr Bills—Absolutely.

Senator O’BRIEN—Presumably it was desirable that CASA implement a mechanism tocurtail that.

Mr Bills—That is correct. It is directly related to your inquiry, but I thought the preface toyour original question was relating it to our current investigation, which is why I was havingdifficulty.

Senator O’BRIEN—We are very cautious.

Mr Bills—But, if you want to go through the detail of the rationale for theserecommendations, that is fine. Mr Stray can give you some information and, if you need moreinformation, Dr Hobbs is with us as well.

Mr Stray—Senator, I think you will recall that back in the 19 February hearing, I think itwas, when you raised the issue of duty limits for flight crew, I raised the issue of the definitionof ‘flight crew’. That is licensed personnel essential for the safe operation of the aircraft. Imentioned at that time that cabin crew were not covered by that, because they were not licensedand therefore there was no requirement. So this flows through with these concerns of excessiveduty and the fatigue aspect in that, throughout the industry, not only maintenance engineers—but we are dealing today with maintenance engineers—but all personnel who are responsible insome way for the safe operation of an aircraft need to be assured that the duty of care is taken toensure that they are not fatigued. So if it requires some form of duty limitation, then that is whatwe are recommending to bring that about.

Senator O’BRIEN—Given that we have a limited amount of time, there were a number ofquestions I asked, and perhaps you can take those on notice and respond. Under the currentlegislative regime, can CASA, in fact, do what you are asking in these recommendations? Therewas a suggestion in the media that CASA currently has no power to enforce them. Specifically, Iam referring to comments in the Financial Review of 18 April.



Mr Bills—It is probably worth saying that we did discuss the recommendations with CASAbefore they were finalised. The two—I think there were two—CASA officers in themaintenance area of CASA welcomed the recommendations. I am not aware that there is anyproblem with CASA implementing that recommendation, but we have yet to get CASA’s formalresponse on it. So I imagine if there is any problem they will mention that. But we believe it isan important issue to address.

Senator O’BRIEN—It would be interesting. Mr Toller is in the room, so he might like tocomment on that later. It may be just an assumption or a view of the author of the article, or itmay be totally unconnected with CASA’s view. That is the point I am making. He might clarifythat later. Can you explain for the committee the basis for ATSB’s recommendation to CASAregarding service bulletins? Your media release of 12 April states:

That ATSB recommends that CASA take responsibility to ensure that all service bulletins relevant to Australianregistered class A aircraft are received and assessed for safety of flight implications.

There is another recommendation in the same media release. Do those two recommendationsreflect a view that CASA has not been independent enough in how it deals with servicebulletins—in other words, leaving it to the airlines?

Mr Bills—I think I have alluded to some of that answer, but Mr Stray will provide somemore information.

Mr Stray—The recommendations are aimed at ensuring that steps are taken within theAustralian context to ensure that the continuing airworthiness requirements for this class ofaircraft are adequately covered. As Mr Bills alluded to earlier, a service bulletin is not amandatory requirement. That has to be mandated in the form of an airworthiness directive. Ifthe manufacturer issues a service bulletin, that is somewhat optional. As I have said to themedia, it could be akin to a recall notice on a vehicle. You can choose to accept or reject that,but once the RTA or some other body says that your car cannot be reregistered until you candemonstrate compliance with that, that then mandates it. So it is a similar context.

There was a change back in the early 1990s where the CAA went away from that role andplaced more reliance on the FAA or the operators to comply with service bulletins. We believethat, as our recommendation says, they should take responsibility to ensure that all servicebulletins relevant to class A aircraft are received and assessed for this safety of flightimplication. Then they mandate accordingly in our Australian context, without solely relying oneither the FAA, the CAA Britain or whoever in other countries. When we have recommendedthat they take responsibility to ensure, that is not meant to imply that they must actually do thetask; they must ensure that the task is done adequately to ensure the safety of flight ofAustralian operated aircraft.

Senator O’BRIEN—I understand that. Thank you very much.

CHAIR—I raised that particular question at the very beginning and I am intrigued, but wecannot pursue it now. We will wait until estimates. I am sure this would have come up in theinvestigation, but how many of these service bulletins—and the rating that you would have put



on them as to the seriousness of them—did you deal with in coming to that recommendation?Could you get that information for us, please?

Mr Stray—That is an extremely broad ask because there are—

CHAIR—No, I said you obviously came to this recommendation with some factualbackground behind it. I asked: how many did you deal with? I did not ask you to go back andget all that appeared. How many did you deal with to come to that recommendation? It mighthave been half a dozen; it might have been one; it might have been 10; I have no idea. If it ispossible to get that information, I would like it. I am not asking you to spend three months on itwhen you have more important work to do.

Mr Bills—I think we broadly looked at the system rather than recommendations per se, butwe will have a look.

CHAIR—Thank you. I thank you very much for being here with us today. Obviously, if wehave more questions, we will come back to you, or if you have more information please let usknow. It is not that far from estimates, so I guess we will have another chat.

Proceedings suspended from 9.48 a.m. to 10.03 a.m.



MAXEY, Mr Wayne, Director, Regulatory Liaison-Customer Support, BoeingCommercial Airplanes

CHAIR—Welcome, Mr Maxey. I particularly acknowledge the fact that you have flown outfrom the US for these Senate hearings. We greatly appreciate that. I also understand that MrKen Moreton, Director, Corporate Affairs, is with you in an advisory role and will not be givingevidence. Do you have any comments to make on the capacity in which you appear?

Mr Maxey—As to what my responsibilities are as director of regulatory liaison, on behalf ofthe large in-service fleet of airplanes that we have with our customers, we provide a tighterlinkage to our regulatory authorities for the in-service fleet.

CHAIR—I now invite you to make an opening statement. We have a submission from youfrom Boeing. Are you happy for this to be published and put on the public record?

Mr Maxey—Yes, we are.

CHAIR—As I mentioned to you earlier, could you particularly address in principle whatyour service bulletins mean in the process that Boeing operates and also give us an overview ofyour FAA in the US and a comparison of that with, for example, CASA in Australia.

Mr Maxey—One thing I would like to clarify is that I am here to share with you how weaddress these issues within Boeing from a process standpoint. I am not really prepared to gointo the details of what has been occurring here in the past several months. I have not been ableto be involved in those details lately. But I can certainly go into the details of our processes,how we do things—as you addressed a moment ago—how we develop service bulletins, howwe interface and how we interact with the authorities. Another area that I am prepared to speakabout, if you desire, that is covered in my submission is the overall 767 safety and reliability,and the robustness of that. I can share some of that with you. Again, it is covered in mysubmission. Also, I have some information as to how we view, and on our philosophy toward,the ageing structures and ageing systems of an aeroplane as it matures. I have details here. Ifyou like, I can give you a brief overview on that as to our concept and philosophy.

Thirdly, I am certainly prepared to go into the item that you mentioned and talk about how weevaluate in-service events as they occur, how we determine what corrective action should betaken for which ones, how we develop the service bulletins and categorise them as to whetherthey are safety or non-safety and, likewise, how that information will be provided to ourauthorities that will lead them to make the decision if something is going to be mandated or not.I can cover all three of those areas.

CHAIR—Certainly speak to your submission. It is incorporated into Hansard, so you do nothave to read it word for word. We would appreciate it if you would speak to it and raise thoseissues which you believe are relevant, and then we will certainly fill in with questions.

Mr Maxey—I am not going to read it, as you suggest. I will be very brief. As far as the 767safety and reliability are concerned, I just want point out a few key points. Commercial aviationhas always been the safest mode of long-distance travel, but it is getting even safer recently.



Thirty years ago fatal accidents on commercial jetliners occurred approximately once in140 million miles flown; today this number is once in 1.4 billion miles flown—that is a tenfoldimprovement. If we look at the 767, it compares very favourably with those statistics and iteven stands out from those statistics.

Another thing we look at is dispatch reliability—that is, how reliably can an aeroplane bedispatched for mechanical or technical reasons. The 767 for many years has exhibited dispatchreliability of approximately 98.7 per cent of the time—that is for technical reasons. There areother things that lead to delays outside of the mechanical aspects, but this is a very good rate.As a matter of fact, I did look at the Ansett fleet, and they are right in there with averagedispatch reliability of the 767. Again, I think this is a testimonial of the robustness of theaeroplane—if you do not have a robust aeroplane, you cannot achieve those kinds of goals andobjectives.

The Boeing ageing structures and systems philosophy is based on a concept that properlymaintained aeroplanes may be operated safely until economics dictate retirement. I think that isvery important. When an aeroplane is retired, it is typically not because you have flown it Xnumber of years or so many cycles. You look at the economics. As an aeroplane matures, it goeswithout question that the maintenance cost will increase. As far as that aeroplane continuing tooperate safely, if it is properly maintained you can fly it for a long time. But you reach a point—and every operator has to make this assessment—where the maintenance cost escalation of theaged aeroplane versus a trade-off of procuring new equipment. I think that is an importantphilosophy.

We go to great lengths to support this. We design our airplanes with certain goals andobjectives, and we take that very seriously. Once we design that airplane, we will continue totest—we do a lot of testing—to prove out our design philosophy. We even go to the extent oftaking airplanes or large parts of airplanes—maybe a wing or other large components—andexposing them to many lifetimes of exposure that they would encounter during operation. Manyof those components are even taken ultimately to destruction. That is a good way, and webelieve an effective way, to continue to obtain data that reinforces our design after the fact.

Beyond that, we closely monitor the inputs we receive from all operators. In other words, asthese planes are used in service, that feedback to us as to how the operating of parts is meetingthe expectations we have, et cetera, is continually monitored. That also provides data for us tocontinue to validate our design. In addition to that, from time to time, to gain additional data wewill go out and take an airplane that is scheduled for maintenance—we select airplanes that areat certain points in terms of utilisation, number of flight hours and number of cycles—and wewill do a survey of the airplane. We are not surveying it from an operator’s standpoint as to howthey are maintaining it, but we are going in and truly looking at the airplane to see if there arediscoveries that we should be aware of. Maybe things are not performing quite as well as wehad predicted in some cases, and performing better in others.

So with all this information, this is continuous feedback to us. We will take that continuousfeedback and, as required and as appropriate, we will make modifications and adjustments toour maintenance recommendations to support these airplanes as they mature. Sometimes wewill make design changes or design improvements. The point is, this is continuous feedbackthroughout the life of the airplane, to support the philosophy we have that if you maintain these



airplanes properly you can fly them for a long, long time. You end up making an economicdecision as to when the appropriate time is to not fly them and replace them with differentairplanes. Again, there are more details in my submission.

Thirdly, I will address the item ‘Process for Evaluation of In-Service Events’. Again, I have alot of detail, but I will walk us through this at a high level, and then maybe we can havequestions if you want to explore certain areas. Again, we continually monitor the airplanes inservice by getting feedback from operators. We have more than 300 field service reps aroundthe world, that are located with the airlines—so we really have a situation that encourages thefeedback to us. We review all this feedback we receive—and it is more than 300,000 pieces ofcorrespondence a year flowing back and forth between us and our customers.

We might see something that is an area we need to address—it could be a safety or a non-safety area. If it is non-safety, we could look at that and decide that something is not meetingour expectations or that there is an area for improvement, and then we could consider making achange that would further help our operators. We also look at the feedback that we get ineverything that is fed to us, to determine if there are possible safety implications. As anexample, we are mandated by our regulatory authorities that any event we learn of that meetscertain criteria they have provided to us, the FAA, regardless of where it comes from—a US ora non-US operator—we are required by law to report to the authorities. So that is one clearmeans of us providing information to the authorities, FAA, on these types of issues.

Once we learn of an event within Boeing, we pursue the path of a possible safety issue. Wemake our assessments, we gather the facts and data and then we look at what the correctiveaction should be. This corrective action could take the form of many ways of mitigating thesituation. It could be everything from determining that we need to go out and do inspections.Maybe we need to repeat inspections. It could mean that we merely need to replace a part with alike part based upon some criteria that we determine, or it could mean that we need to make amodification or a design change. So there are many paths and solutions that we could come upwith to address this.

We would develop our solution or means of mitigating the issue and then we would gothrough a safety assessment process within Boeing. This is a robust process. It has been aroundfor many, many years. The authorities acknowledge our process—they are very much aware ofit. It is a data driven process. We make an assessment, based on facts and data, as to whether ornot it is safety issue. We believe we try to err on the conservative side in that process. As anexample, when we bring the people together to look at the facts and data and go through theprocess to establish whether or not it is a safety issue, we have five or six voting members onthat panel. All it takes is one person to say, ‘I believe it is safety’, then by definition it is safety.So it is not a majority rule. One person dissenting, saying, ‘I believe this is a safety issue’, saysit is safety.

Then we would proceed to develop the service bulletin, which is our way of providinginstructions to our fleet as to what we believe and recommend they should be doing. We wouldhave advised the FAA of these issues and we would obviously continue coordination. The FAAwould be aware that we are developing the service bulletin and they would make theirassessment as to whether or not they are going to mandate that action in the form of anairworthiness directive. They have the ultimate and final decision as to whether or not they will



mandate that—but that is something the authorities do: finally decide whether to mandate thataction.

There is another thing I should point out. I mentioned earlier that we get continuous feedbackthroughout the life of these aeroplanes. It goes without saying that there are times when, basedupon the facts and data that we have available at the time the decision is made, we may make adecision that it is not a safety issue. But, as we get additional feedback, learn more and get moreinformation, it is not uncommon to revisit that issue with the facts and data and may considerchanging it from what we had considered earlier as a non-safety to a safety. The point I amtrying to make is that, once we make a decision, that does not put it to bed and to rest; we willcontinue to take the data and re-evaluate as appropriate.

CHAIR—I would like to begin by going straight to the service bulletin. You mentioned theservice bulletin and you used the words ‘our way of instructing’. Do you have different ratingsin terms of service bulletins—for example, urgent, not so urgent, doing your normalmaintenance? When you send that to the various people who use your aircraft around the world,what status do they carry or do they all have the same status?

Mr Maxey—Firstly, all the bulletins that we issue have the same status. We do not tailorbulletins for regions of the world or for operators. We distribute the bulletins to the operatorsthat are affected. For example, if it is a 767, obviously you would not send that bulletin to non-767 operators. Further, if it is a 767, we have different engine types on that aeroplane and, if itwere an engine type of bulletin, it would only be appropriate to send it to the operators withthose engines. So we tailor the distribution along those lines. Regarding compliance time orrecommendations, no, that does not vary from region to region or operator to operator. They allgo out the same. Did I understand your question correctly?

CHAIR—Yes, that is three-quarters of the answer. The next part is the severity of theproblem that you have identified. Do you put a rating on that? One might be 12 months—I ampulling these figures out of my head—but with another you may think there is a much greaterdegree of urgency and it should be fixed immediately or within the next couple of months or so.Do you put a rating on the severity of the problem?

Mr Maxey—The way we address that is, in our service bulletins, if it is a safety issue weidentify that as an alert. That flags it; it makes it stand out. So if it is for safety, it categorises itthere. Regarding the level of alertness, there is a portion in our bulletins which says thecompliance that we recommend. That is where we would say: for this bulletin, since it has beendeemed ‘safety’, we recommend that you should do this in X number of days or X number ofmonths or whatever. We identify that by the time frame within which we recommend operatorsshould complete that. Supporting that, as we analyse the situation, when we learn of somethingthat could be a safety issue, that almost never means that as of tomorrow you are in an unsafesituation. We have caught something very early that, if allowed to continue for a while, willneed to be addressed.

So in analysing the situation we again gather the facts and data and determine at what rate itwill deteriorate—if it is a deterioration or something—and how long it will take to get to thestate where it could become a safety issue. All of that goes into determining what therecommended compliance is. We take all the facts and data and turn the technical people loose



to do their analysis. That is how we come up with the recommendations that we have in termsof compliance. That can vary all over the place. Some of them have to be almost immediate;others can be a long way off. We make it consistent with what we believe are the needs.

CHAIR—So the operator who receives that could not possibly have any misunderstanding asto the time scale that you put on that in which it should be addressed?

Mr Maxey—We believe it is quite clear. There is an air transport association made up ofmember airlines in the US and a few outside the US. This organisation has put together a lot ofdocumentation and publications that the industry generally adheres to. There is one called ATASpec 100. It tells people—like Boeing—who develop service bulletins what the format andcontent should be. It gives you some guidelines to bring a degree of consistency to the servicebulletins that are developed throughout the industry, as well as making sure that the key andcritical information is contained.

CHAIR—Would you have a sample of service bulletins that you could table for thecommittee?

Mr Maxey—I do not happen to have one with me but there is not a problem in providingone.

CHAIR—I would like to see two or three so that we can see the difference between them andhow they operate. It is up to you what you give us but I would like them from both ends of thescale—the really urgent ones as against the not so urgent ones.

Mr Maxey—One thing I suggest is that, since many of these service bulletins can be verydetailed and very long, we could take some of the first few pages in the bulletins that addressexactly what you are talking about—the category of the bulletin and how compliance getspresented. Then there are the detailed instructions to the technician and mechanic. That may ormay not be something that you want included.

CHAIR—What we really want is to look at the system. We do not want to be told how to fixup an aeroplane we know nothing about.

Mr Maxey—That is no problem. We can provide some examples of the pertinent parts.

CHAIR—In terms of those service bulletins, it is actually your FAA that makes the decisionas to whether or not it is an unworthiness problem or situation. Do you send all service bulletinsto the FAA or do you decide which ones you should send to them to examine? Have Imisunderstood what you told us?

Mr Maxey—First of all, all service bulletins are FAA approved. We produce many servicebulletins that are non-safety related. We have a delegation system where people are delegated bythe FAA that will approve ongoing product improvements. If the service bulletin is addressingsomething that will be mandated by the FAA, the FAA personally approves that prior to beingreleased. If there is something on which they are going to issue an airworthiness directive,typically, if we have a service bulletin, then they would refer back to our service bulletin tellingpeople how to accomplish that through this airworthiness directive. Again, the bulletins that we



release that are mandated through an airworthiness directive or by whatever other means therecould be, are reviewed by the FAA. When I say they are, on occasions, due to timing, et cetera,they will work closely with one of our people who has been delegated, but either way they aredoing it on behalf of the FAA.

CHAIR—You send those service bulletins to the operators where it is applicable to the sortof plane they have. You have made that quite clear. What about the authorities around theworld? For example, do you send a copy of that service bulletin to our CASA?

Mr Maxey—I cannot say whether or not we send one to CASA. We have a distribution list.Where people who have made a request to be on our service bulletin distribution list, weprovide it to them. I cannot tell you whether or not CASA is on that list—I would have to goback and look. I believe they are, but I would not want to second-guess that.

CHAIR—If you could do that, we would appreciate it, thank you.

Mr Maxey—Yes.

Senator O’BRIEN—I want to follow through on a similar manner. Could you tell us howmany service bulletins Boeing would have issued regarding the 767 aircraft since January lastyear? Would it be a lot or a few?

Mr Maxey—I do not have that number. This may or may not be relevant; I can tell you thenumber we have issued since the 767 was placed into service.

Senator O’BRIEN—Okay, if you could tell us that.

Mr Maxey—Since the 767 was first introduced 18 or 19 years ago, we have produced morethan 2,500 service bulletins. Of that number, approximately 150 to 160 have been determined tobe safety or alert bulletins. That is slightly more than five per cent, I believe.

Senator O’BRIEN—Would it be possible to get details on how many alert service bulletinsor safety service bulletins have been issued since the beginning of last year? I am not sayingnow; that might be something someone could supply us with later.

Mr Maxey—Sure. We can start in January 2000, maybe?

Senator O’BRIEN—Yes. That would be good.

Mr Maxey—That information is readily available. We can certainly provide it here too. Wealso provide a lot of this information electronically where our customers and others can go inand access it. That information is freely available to all of our customers, too, where they can goin and access it. I realise that you do not have that access, but we can provide it.

Senator O’BRIEN—That would be good. Do I take it that any of the alert or safety bulletinswould be time sensitive? Do they have a time for action?



Mr Maxey—I think virtually all alert or safety bulletins have a compliance recommendationby Boeing. It depends on the situation—some of these are time driven and others may concernhow many cycles, a ‘cycle’ being one take-off and landing. You build the compliancerecommendation on what fits the need.

Senator O’BRIEN—So presumably, following your other evidence, some of those alert orsafety service bulletins would have had some sort of mandate applied by the FAA?

Mr Maxey—Yes.

Senator O’BRIEN—Perhaps when you are pulling out that information you could identifythat number?

Mr Maxey—What we could do, I think—it would probably be much easier, because whatyou are really asking about is a 767; we are not talking about all models—is look at the servicebulletins that have been issued since, say, January 2000. I could have the people likewise look atthe airworthiness directives that have been issued for the same time frame.

Senator O’BRIEN—If we could marry that up, that would be very helpful. I understandwhat you said in your opening comments about what you could address, but there are certainmatters that I think I should put to you. You may be able to answer these or you may want totake them on notice. The director of the Civil Aviation Safety Authority, Mr Toller, told themedia here in Australia on 10 April:

... Ansett was certainly conforming to an agreed process and procedure and timing, that Boeing had said these checksneed to be done, or these check should be done.

They are not even mandatory.

They are just a recommendation.

Mr Toller later said:

What worries me more, I think, than the issue of the timing of Ansett doing these checks is whether Boeing realised howserious—

Or, the potential seriousness of the cracks in this position.

He is obviously talking about the engine mounting issue. Then on 12 April Mr Toller said:

What I have said and I have said very strongly, is that I am not convinced that Boeing understood the magnitude of theproblem in this area—

that is, the engine mounts. What is the magnitude of the problem with these aircraft and, withhindsight, did Boeing fail to give this service bulletin the weight it deserved and therefore allowaircraft to operate when they should have been on the ground?

Mr Maxey—First of all, to address the comments that you mention there, I must say that Iam not that close to that, so I do not feel qualified to address that issue. But again what I dowant to point out is that when we issue recommendations or bulletins we take a hard look at the



facts and data available at that time—how many reports we have had, what the nature of theproblem is, whether it is referring to a crack, whether it is a very small crack and what thepropagation rate would be to get to the level where it would become a safety issue. They are thefacts and data that we look at in making a determination about whether there is safety or not.

But again, when these types of instructions go out, we keenly listen to the findings of ouroperators and we continue to learn. We go back and reassess the matter based on the new factsand data when it is appropriate, based upon feedback from operators, including people likeAnsett here. What we would do is reassess it with the additional or new facts and data and thenmake another independent determination. So in answer to your question about whether wefollowed our process, I believe we did follow our process, because our process is to look at theinformation available at that time. But we can certainly continue to gather data, information andfeedback, and we will take that additional information and go back and run it through theprocess again. That is typically the way these occur, because you will see some small numberthat were considered not to be safety that we do change due to findings.

Senator O’BRIEN—In relation to this particular matter can you give the committee somedetail on Boeing’s contact with CASA regarding the engine mount service bulletin and on anydiscussions that might have taken place about the weight or lack of weight that the bulletinmight have been given?

Mr Maxey—Again, I am not familiar with that. The only thing I can say is that I know thatCASA had representatives in Seattle, I believe it was last week, to have some additionaldiscussions. I believe they had discussions with the FAA. I know they had discussions withBoeing in depth, and I would say at a technical level, about the detail. Perhaps we should callupon some of the people that were there from CASA to share that with this.

Senator O’BRIEN—Sure.

Mr Maxey—We really do want to support those discussions in Seattle.

Senator O’BRIEN—Would such a high level meeting between CASA and Boeing be anunusual event?

Mr Maxey—Sorry?

Senator O’BRIEN—Would it be an unusual event for the Australian regulator and Boeing tohave high level meetings in Seattle?

Mr Maxey—First of all, my understanding of the meetings is that these were meetingsbetween some of CASA’s specialists with people in Boeing at similar levels. It was at that level.No, obviously our No. 1 focus is working with our FAA. They are the ones who we work withobtaining the certificates for the aeroplanes, so we naturally work with them on a much morefrequent basis. But it is not uncommon for us to have discussions and dialogue with otheragencies around the world. I think that type of thing in itself fosters a good atmosphere andrelationship. So we occasionally have people visiting us in Seattle, understanding how we dothings. We have exchanges like that. We do value those relationships and appreciate the need for



them. But, again, it is a much less frequent type of discussion than we would have with ourlocal authorities.

Senator O’BRIEN—By ‘local authorities’ do you mean FAA?

Mr Maxey—Yes.

Senator O’BRIEN—What about here in Australia? Is there a process of ongoingconsultation between Boeing and CASA—at meetings here in Australia with your localrepresentatives, for example?

Mr Maxey—No, there is no schedule to meet on a periodic basis. But what I can say is that,over time, as issues have come up and needed support, we have supported having people on siteworking with CASA here. Maybe they are looking at a certain situation and will understand thatsomething has been reported to them. We have supported that type of discussion as required. SoI guess the discussions there right now take place on an as required basis. We do not have, tomy knowledge, any schedule that says that we get together on a periodic basis.

Senator O’BRIEN—In your experience, how many countries would rely on the FAA todetermine just how serious a particular Boeing service bulletin is? In other words, where there isa mandated action by the FAA, how many countries would simply rely on that rather than maketheir own assessment?

Mr Maxey—I would not be able to venture a guess as to the number, but I can say that thenumber is very large. My experience is that, by and large—I am hesitating because I am notsure that I know of any exceptions right now—the other authorities rely on the findings of theFAA. Sometimes, some of them will make a few adjustments to it but, by and large, most ofthem rely on those findings.

Senator O’BRIEN—I take it from your answer that some would have a look at the particularbulletin—the FAA directive—and may vary it for local circumstances. That is one case. Wouldthere be other cases where they looked at a service bulletin that was not mandated by the FAAand they make their own recommendations?

Mr Maxey—That could happen. Again, the reason that I am hesitating is that I am trying tothink of an example. Right now I am unable to come up with an example of where thathappened.

Senator O’BRIEN—Could you make an inquiry and confirm that or otherwise for thecommittee?

Mr Maxey—Yes. But the main thing is that that is not the normal case—it would clearly bean exception.

Senator O’BRIEN—Thank you.



CHAIR—I would like to follow up with another couple of questions. In relation to the actualservice bulletin for the 767s that Ansett were subject to, have you got any reason to doubtwhether Ansett were operating outside the terms of that service bulletin? Were they complyingwith the suggestions or directions from Boeing?

Mr Maxey—I would not be able to address that. I am not that close to that specific situation.

CHAIR—You would have people within Boeing who would be, though, wouldn’t you? Theywould monitor that, in terms of the various operations. You would want to know about the planewhich you manufacture and put out into the skies and which you have told us is very safe—andthat is commendable. You would want to have somebody monitoring what was happening withservice bulletins and things going out, particularly when there is an incident such as the one wehave just been through here in Australia, wouldn’t you?

Mr Maxey—Again, our primary objective and role is to monitor information and use that asa basis for determining when we need to put out recommendations or instructions—that is, theservice bulletins you are referring to. We provide and disseminate all that information to theoperators. We really do not have a role as far as determining whether the operators arecomplying. Firstly, we do not have the authority to do that; and, secondly, that is between theauthority and the operator. We believe that operating that way is good, because that also isanother degree of check and balance. We rely on the authorities to work with the operators towork out the arrangements as to how they go about demonstrating that they comply and theprocesses and programs they have in place to make sure they comply. We have to defer to theauthorities on that. Again, as I said, we do not have the authority, and also having that degree ofindependence does provide an additional check and balance.

CHAIR—Would you then take this question on notice, and the same question also applies toCASA and their operations: would you supply the details of any work that your company mayhave done since this particular incident occurred in following that up? Could you ask thatquestion of your authorities? If it is sensitive information, you can give that to us in camera orconfidentially. There may be none, but I certainly believe it would be of interest to theAustralian public, the users of these aircraft. They would want to know what follow-up systemyou have to what has become a major incident here. Could you take that on notice, please?

Mr Maxey—Yes.

CHAIR—That information would be very useful for us in terms of the recommendations wemake. I also make the point that, in terms of making recommendations, we can only use whatwe have on the public record. We cannot use evidence given to us in camera; that evidence justgives us a picture. Whatever you can put on the public record is much more useful to us interms of the recommendations that this Senate committee may make.

Mr Maxey—Again, when we issue the bulletin with our compliance recommendations, thatis a recommendation. We rely on the authority issuing the airworthiness directive, et cetera, tomandate it. We assume that, once it has been mandated by the authorities, the operators workingwith their authorities would follow up and do the right thing.



CHAIR—But in this particular case, there was not a mandated authority in what you sentaround and it developed into what it became. I make no judgment one way or the other on that. Iam not an engineer or anything, but that information would be very useful to us, if it is possible.

Mr Maxey—Yes.

CHAIR—Another question which was raised previously—and you were here—related to theATSB and their recommendation that we should mandate the process of these certificates,service bulletins or mandated directions into our law. I am personally thinking about that:whether we should have a system where it goes direct from the manufacturer through the FAAwhich is identified. It is most unlikely in my view that, if the FAA said, ‘Here is anunworthiness mandate’, our authority would look at it and say, ‘No, it’s not.’ I just do not thinkthat would happen. Maybe you could go the other way. They may look at something and say,‘We think they were a bit light on,’ but the US authorities take their job very, very seriously interms of that. What is your reaction to that? You may not want to comment because it is adomestic matter for Australia, and I understand that. I would have thought the status andauthority of your service bulletins and whatever stamp the FAA may put on it should besufficient to really turn the red light on. Would you like to comment on that?

Mr Maxey—No. I think your suspicion is proper. Again my experience has been that,whatever our FAA mandates, by and large the rest of the world follows suit and tells theirpeople to go implement. I am not aware of situations where our authorities have mandatedsomething that is a safety issue and other authorities have said, ‘No, we don’t think you need todo it.’ The only exceptions you could find to that would be that sometimes our authoritiesmandate things maybe to enhance safety. It may be appropriate for, say, domestic use operators,but for other parts of the world it may or may not be appropriate yet. For example, in a highlycongested traffic area things have had to come out in mandate: we have had to put in systems inaeroplanes to alert flight crews, et cetera, to highly congested areas. Frankly, there are parts ofthe world where that is not an issue. Some of those parts of the world chose to delay that for awhile because it just was not appropriate. But that is totally separate from a discovery on anaeroplane of something that is a safety issue. Where there has been a discovery on anaeroplane—a crack, or something not meeting the needs or expectations—I am personallyunaware of authorities having said that you do not need to do it or that you can do it differently.

CHAIR—So you are saying that there are some areas where there will be local stress issueswhich will have to be dealt with on their merit in that particular arena?

Mr Maxey—Yes.

CHAIR—As there are no further questions, I thank you once again, Mr Maxey, for comingout here and for your assistance. Once again, I would say that we do really appreciate the factthat Boeing did send you out from the US.

Mr Maxey—Thank you very much.



[10.49 a.m.]

BILLS, Mr Kym Maynard, Executive Director, Australian Transport Safety Bureau

Senator O’BRIEN—Mr Chairman, the document that was tabled earlier by ATSB, notrelating to the Boeing witnesses, identifies aircraft by registration number but not operator. Canthe committee—and perhaps CASA can help us—be advised, given the nature of this inquiry,which aircraft belong to which operator? I am putting that on notice rather than asking thequestion later in the day and have someone say, ‘We have to go and check it.’ I thought I wouldgive them the opportunity to do that before this afternoon.

CHAIR—Mr Bills, can we refer that document to you and see whether you can get theoperators identified with the aeroplanes?

Mr Bills—I think you know that our normal procedure is not to identify operators, exceptwhere it is obvious. For example, the QF1 runway overrun is obvious; the 767 thing is obvious.But to make sure that there is no question of doubt, I think Mr Stray indicated that, in terms ofthe last few occurrences, four of them this year were not Ansett. I think there was an issue aboutthat. So it was the other major operator.

Senator O’BRIEN—The last four of them?

Mr Bills—Yes, other than that one that you referred to.

Senator O’BRIEN—So, apart from the 13 January report—

Mr Bills—No. I think there were five this year. Is that correct?


Mr Bills—Four of them are—

Senator O’BRIEN—January 13?

Mr Bills—One of them is the Ansett one that has had a lot of attention and the other four arenot.

Senator O’BRIEN—So 9 April is Ansett and the other four are not?

Mr Bills—That is correct.

CHAIR—Thank you.



[10.57 a.m.]

EDWARDS, Mr David George, Vice President, Line Maintenance, Ansett Australia andAir New Zealand Engineering Services

FLANAGAN, Mr Michael James, Vice President, Engineering - Strategic Projects, AnsettAustralia and Air New Zealand Engineering Services

HACKETT, Mr Robert John, Vice President, Quality Assurance, Ansett Australia and AirNew Zealand Engineering Services

HARRIS, Mr Peter Noel, Vice President, Government and International Affairs, AnsettAustralia and Air New Zealand Engineering Services

JENSEN, Captain Trevor George, Senior Vice President, Operations, Ansett Australia andAir New Zealand Engineering Services

CHAIR—I welcome representatives from Ansett. I understand that you are all familiar withparliamentary privilege, et cetera. I think most of you have been here before. I invite you tomake an opening statement.

Mr Harris—The Ansett and Air New Zealand Group thanks the committee for theopportunity to present its views on this matter. The group, as an overall position, accepts thatthere have been problems in its maintenance procedures. Accepted is our responsibility tomaintain our aircraft to the highest standards in the world, and our management of bulletins didnot meet that requirement to our own satisfaction. We believe that, as well as Ansett, theregulator and the government could draw valuable lessons from the experience. The specificarea I am referring to here is the area of public handling.

It is also important to note that there was no unsafe carriage of passengers by Ansett.Passengers in Australia were yesterday, are today and will be tomorrow carried in the safestmanner by the best pilots and crew in the best maintained aircraft in the world. The Director ofAviation Safety himself noted only a month or so ago that Ansett and Qantas were rated thesecond and third safest airlines in the world. In making this point, it might be thought that weare claiming that nothing has gone wrong. That is not so. Even an industry and an airline thatputs in the effort we do cannot get it right all the time. But we suggest that there was at the time,and remains even now, a need for some balance in the public handling of this issue. Themanagement and staff of the airline, having found errors, acted immediately to correct them andadvise the relevant parties, even knowing that the cost may be their own jobs and the economicfutures of their families. The committee might consider how many other industries, faced with asimilar level of responsibility, would have acted in this way. It certainly happens in Australianhigh capacity aviation at Ansett, and I am equally sure that the same is true of our competitors.

From my personal experience, it is hard to imagine a circumstance where a regulator with theultimate power over the life or death of a business employing tens of thousands of Australians,as CASA has, would feel the need as strongly as CASA appeared to feel to do more than talk



softly, given that it is also carrying, quite obviously, the big stick. This airline has put togetherthe complete paper trail for six 767s and has, I believe, provided the regulator with the requiredlevel of competence that all the aircraft are completely safe and appropriately maintained. Thesystems supporting the plane had been found wanting in isolated but serious ways, and thesespecific problems have been fixed. No passenger was exposed to risk. Beyond that, the systemitself can improve, and we will continue to do so. Our investment in this area is wider anddeeper than the necessarily safety oriented efforts required by the regulator. We spend betterthan $350 million annually on all maintenance and related activities.

Beyond this, in capex alone, some $15 million is now planned over the next 18 months inorder to fully address systems improvements. These changes will see a complete restructure ofaviation maintenance systems and internal audit and quality assurance processes at Ansett. Anumber of changes have already been made by agreement with CASA. A number were likely inany event as the new management of the airline put in place systems that have worked veryeffectively at Air New Zealand in recent years. These systems have contributed to thetremendous overall reputation of our engineering division and allowed our workshops andengineering to gain substantial recognition offshore, including in the US, as a centre ofexcellence. We also intend to change much of our maintenance from phased to blockmaintenance in an effort to provide better work opportunities for our skilled people, with aconsistent and predictable work flow, and a more effective use of aircraft down time.

I would like to conclude by reiterating that Ansett takes the responsibility for maintaining itsplanes and operating them safely. We do not expect that the safety regulator, CASA, can orshould relieve us of the primary burden of maintaining our aircraft to the highest standards. Weknow we can improve our systems, and we will do so continuously. Our aircraft are as safe asthe best qualified people in the world can make them. They are flown by pilots who simply willnot accept any exposure to unsafe operations for our passengers. Our systems continue toencourage action on safety grounds by our own people, even though it may threaten theirlivelihoods. We are, however, concerned that the public handling of safety issues is becomingincreasingly hyped. The risk in that is that we will lose our best primary defence against unsafeoperations. That defence is the commitment of the people who work in the airline to report,regardless of personal exposure or other damage. It is not the regulator, it is not the law and it isnot the management who are the first and best line of defence. It is the people in the system. Ipoint out that, if you accept that benchmark, the system has worked, and we would like it to staythat way.

Senator McGAURAN—Mr Harris, in your opening comments, and we all support it, yousaid that all that matters through all of this is the public’s confidence in the planes and the skiesthat they fly. A lack of public confidence, of course, reflects commercially on Ansett or on anysuch airline and, ultimately, on governments. You said that you are the second safest airline, andthat was said on television quite often during this upheaval. I thought it was the strongest publicrelations point you could make. That is what the public picked up on most of all: yes, Ansett hasbeen safe in the past and they are claiming to be the second safest airline, putting aside all theintricacies. Can you verify who dubs you the second safest airline? Under what criteria is that?By the way, who is the first? My supplementary question to you verifying that you are thesecond safest airline is this: under the criteria, would you still be so following these concerns?



Mr Harris—My recollection is that this was a survey conducted by an internationalorganisation. I must say I had not heard of the results of it until it was made public by theDirector of Aviation Safety, Mr Toller, so I am unaware of the criteria that were used by thisorganisation. In one way that, I think, is a more creditable statement. We certainly did notinfluence them, as far as I am aware, or try to put information their way to establish this. I amsure Mr Toller would know who the organisation were and I presume, since he was prepared touse them publicly, he thought they were a reasonably credible group.

As to my recollection in terms of the second half of your question as to which is the firstsafest, I was going to have a stab at this. I thought I would ask and I was told it was Air Canada.Captain Jensen says it was Air Canada, and I think we are using aircraft from them at themoment.

Senator McGAURAN—Does anyone at the desk know what the organisation was, what thecriteria were, and would you still rank No. 2 following this upheaval? No, so that really was apublic relations exercise, wasn’t it?

Mr Harris—I am not sure it was public relations.

Senator McGAURAN—It is a bit shallow if you cannot even—

Mr Harris—No, we were quoting the Director of Aviation Safety saying this, not us.

Senator McGAURAN—Wouldn’t you have found out who gave you this second safestairline award or standing?

Mr Harris—I don’t think we were intending to use it as a public relations exercise. We aremerely saying that the director, presumably on his own judgment, felt that this was a worthwhilestatement to make. We certainly thought it was but we did not influence anybody to come to theconclusion and we certainly did not want to go and research how they arrived at this.

Senator O’BRIEN—Captain Jensen, during the hearings of this committee held in July lastyear you gave us some detail on how Ansett’s internal surveillance system works. You said yourboard safety committee meets quarterly and goes through the safety health of the company. Canyou give us some more detail on how that process works?

Capt. Jensen—Certainly. I would like to make a point, if I may, that the comments I made atthe committee on 11 July were an accurate representation of the steps that we are taking todevelop and to implement the CASA system of safety in our approach to auditing, et cetera, andthe philosophy that we adopted at that time has been developed. Since we last met, since we lastappeared, there has been a change, as you know, in the company structure. The board has beenreaffirmed. Mr Bill Wilson QC is now the chairman of that.

Senator O’BRIEN—This is the board safety committee?

Capt. Jensen—Yes, it is the board safety committee. Mr Wilson QC is the chairman. Sir RonCarter, the former Chairman of the New Zealand Civil Aviation Authority, is a member. MrMichael Tan, Executive Vice-President of Singapore Airlines, is a member, as is Professor John



Rose. The other members are the President and CEO, Mr Toomey, me, and the Vice-Presidentof Safety, Security and Environment. The company secretary is, of course, a member to providesupport.

The next meeting of that committee will be in June. At that time, as the chairman has asked, itwill be a two-day meeting in which we are going to spend day 1 totally going through andbriefing him on all our systems of safety, et cetera. Day 2 will be the receipt of data. Data isprepared regularly and presented to the board on safety, and that has been ongoing. Our systemof safety has been developed since then and has matured quite a lot.

Senator O’BRIEN—Will there still be monthly meetings of the senior management safetycommittee?

Capt. Jensen—They are ongoing. We still have within the company, as I pointed outpreviously, over 50 safety committees that meet right across the board. As part of the combiningof the two companies, they are now broadening so that we get both New Zealand and Australianrepresentation. That work is going on, so those meetings continue to go on. We have anoperations review board which meets monthly and which I chair. If you would like, I can giveyou details of the terms of reference of that. That is part of our system of safety: the linchpin ofthe system of safety that takes us through. So they receive that data monthly.

Senator O’BRIEN—So you have got various layers of safety committees—

Capt. Jensen—Correct.

Senator O’BRIEN—right up to the board safety committee.

Capt. Jensen—Through the AOC, yes. So we have four layers. If I could take a moment, Iwill step you through it.

Senator O’BRIEN—Yes, please.

Capt. Jensen—I have a presentation here which I will table so that you can refer to that. Weacknowledge that the regulatory requirements are only part of the system of safety and that theduty of care of us as the operator is primary. That is contained in section 28BE of the act. Weacknowledge that. So our operational system of safety has a number of components where weassess and monitor the operational risk of the company through our Operations Review Board.We establish our operational standards and policies through the review board. We have a changemanagement process, which is documented. I might point out that our system of safety isactually documented and contained in a manual and has been since before Christmas. By anyairline standard, I think an airline that can document its system of safety is a bit unusual—forthe positive.

We have published our operational procedures, the ongoing procedures that we operate to. Wehave got an audit system that assures our quality systems and identifies risks and that iscompleted through our compliance and QA group. We ensure compliance through ourcompliance statements. We have got our investigations and, finally, a system of safety assurancewhere we do our compliance review.



The Operations Review Board meets monthly to assess and monitor operational risk andestablish our operational standards and policies. It also reviews and approves implementation ofproposed changes or additions to the operating policies and procedures in the company. Thefirst level of our system of safety is the actual quality and risk assessment. What they do isprovide risk assessments back to the review board and through my direct reports on other areasthat are touched by the AOC—for example, the airports group or the flight attendant group—and any conformance or compliance deficiencies.

We have an annual auditing plan, which operates across our division and goes outside ourdivision into all our regionals, whether they are owned regionals or regionals that operate on ourbehalf as code share. We carry out supplementary risk based audits and we have two fairlyhighly qualified risk gentlemen—both have PhDs—reporting directly to me in what is knownnow as the office of the SVP. We provide oversight of our external providers. We do audits ofour regionals—our code share, Star and wet leases. In fact, the Star carriers have a requirementthat we audit each other so that the rest of the Star carriers audit us and then we participate inthose audits when we audit each other. There is the QA system, our audit system forcompliance, and ongoing assessment. We also have, within Air New Zealand and commencingwithin the Ansett group, LOSA, which is line operated safety auditing, and we have the ongoingreporting.

The next layer in that is the safety investigation analysis, where our safety department willgive trend data to the ORB, which goes onto the board, and make safety recommendations.Sitting on top of that is the regulatory standards and compliance layer, which provides policyinput and identifies any compliance deficiencies. This involves a total review of the compliancestatement, which is a detailed listing—as you know—of all the regulatory requirements,nominating the accountable managers, et cetera. Through that, our system of safety assurance isa new office that since we last meet has been established. That group has total oversight toensure that all recommendations that are made are actually closed, not only internally butexternally. For example, a recent report was tabled by BASI into the accident overseas. We wentthrough that to ensure that any issues that were raised in there had been addressed by us andclosed off. Any recommendations that refer generally to the industry are contained. Forexample, there was one reference within that which loosely referred to guidance in respect ofthe tying of oxygen masks. We have picked that up and ensured that our 747 fleet has compliedwith that. That was just contained within the document. That group goes through and ensuresthat.

The closure through the safety system assurance is that annually we do a total review of ourAOC structure. Six-monthly, our audit plan is reviewed and assessed. Monthly, we carry outboth an internal and external audit and investigation finding closure. Three-monthly, we do thesafety recommendations which I have just described and seek closure. That is looking at ATSB,et cetera. We have got a three-monthly regulatory implementation review.

The additional leg that we put in, which is unnecessary in terms of regulatory requirement butwhich we consider very necessary, however, is that all data that comes from the originalmanufacturer, such as Boeing, Airbus, et cetera, is independently reviewed by our compliancegroup to ensure that nothing has fallen through the cracks. So it is a third-level check to ensurethat no documentation is lost. And, finally, on an annual basis we have a regional compliancereview statement. I have a document, System of safety—which I will table and which you can



take away—which takes you through our system of safety. You will recall that I tabled Safetyfirst: a guiding principle in July last year—that is how we have actually stepped forward. Atthat time I reported to you that our incidents were decreasing, and I have that data whichcontinues to show that our engineering safety incident rate continues to decrease, which is anindication that the system we put in place appears to work.

Senator O’BRIEN—It is interesting you say that. I note that you gave us an up-beat view ofhow your system’s audit approach was operating in July and has continued to operate. But,given recent events, including the view of CASA’s own auditors—let us forget the concept; I amtalking about how the system is being implemented or perhaps not implemented—were Ansettand Air New Zealand aware of the deficiencies and the functioning of the system that recentevents seem to have revealed?

Capt. Jensen—The incident here was a systemic problem, which you have identified, and wehave moved to correct it. I think the strength of our system comes through with the fact, whichMr Harris made in his opening statement, that people were prepared to report. We have a culturewhere people understand that. If we had known about that, quite obviously, we would havemoved earlier to correct that; you do not leave flaws within a system. The minute we becameaware if it, we advised CASA. We can go through that separately, but that is a clear indicationthat our system works. It has continued to work in a number of other incidents. No-one hasclosed down in providing information to us. We have a system that people have a level ofconfidence in and that enables us to go forward.

Senator O’BRIEN—Yet you are changing from phase maintenance to block maintenance.Would you explain that for us?

Capt. Jensen—I think that would be best answered by Dave Edwards.

Mr Edwards—Phase maintenance to block maintenance relates to our A320 and 737 fleet.When those aircraft came into use with Ansett, we put them on to a phased heavy maintenanceprogram—that is, the C check was broken up into workable chunks, so we could provide thatC check on an ongoing basis in a line maintenance environment, rather than a heavymaintenance environment.

Senator O’BRIEN—Just interrupting, does the manufacturer have a recommendationwhether you should use phase or block maintenance, or is that a matter left open to theoperator?

Mr Hackett—I am not aware that the manufacturer has a preference in that regard.

Senator O’BRIEN—Can you check that?

Mr Hackett—Yes.

Mr Edwards—As our fleet has expanded and also as we need to address the maintenance onthe aircraft, we have decided to move those aircraft back into a block maintenance environmentwithin heavy maintenance. A number of things have allowed us to do that, includingimprovement of our systems and processes within heavy maintenance, so that we can actually



provide those aircraft to the airline without any additional down time, even though we havemoved them out of the overnight environment back into a heavy maintenance project typeenvironment. That will ease the pressure on the operation in terms of trying to acquit that phasemaintenance during an overnight window. We are currently phasing that in. We have startedto—I am probably using the wrong word ‘phase’—

Senator O’BRIEN—You are phasing out phase maintenance and phasing in blockmaintenance—

Mr Edwards—We have started to introduce that concept already. It will take usapproximately 15 months to roll the fleet through that program.

Senator O’BRIEN—So essentially the difference between phase and block is that you dopart of the maintenance task on an ongoing basis overnight when the fleet is not operating. Thatwill change. You will take the aircraft out of service for the period necessary to perform themaintenance task that is appropriate for the time, rotation or whatever it is that applies to theparticular aircraft?

Mr Edwards—Yes.

Senator O’BRIEN—And that time will vary, depending on where it is in the cycle and howmany cycles it has flown, et cetera?

Mr Edwards—Correct.

Senator O’BRIEN—I understand that.

CHAIR—I want to follow up on this. I listened very carefully to what Mr Harris had to sayat the beginning. The insinuation is that Ansett was harshly treated in terms of the recentincident.

Mr Harris—No, Ansett were not harshly treated in the sense of the action taken by theregulator. That is entirely the regulator’s call, and we do not dispute the action that they took.We believe the aircraft were safe, but the regulator must satisfy themselves that the aircraft aresafe. That is the way you work within this system. So, no, we do not dispute the decision of theregulator. I was referring to the increasing trend for very substantial public exposure of aviationsafety issues in a way that, in our view, can put at risk the basic principle that people areresponsible for safe operations inside airlines. The law provides them with a framework forthat—the regulator’s oversight and audit provides a framework for that—but people areresponsible. The more that the public relations handling of this becomes driven by the intensityof comment, the more there is a risk that people will feel desperately exposed to that. That maydiscourage them from going down this path of complete exposure of problems.

As Captain Jensen said, we run a very strong, just culture and environment inside the airline.We want to encourage people to continue to do this. We will encourage people to continue to dothis, and I am sure the rest of the industry encourages people to do this too. The sole concern wehave with the handling of this, and my intention in raising it, was not the actions of the regulator



in putting aircraft on the ground if it felt it lacked enough confidence to say the aircraft cancontinue to fly—that is the regulator’s call—but the subsequent public handling of the issue.

CHAIR—I hear what you say. I am not sure that ‘harshly’ was the word I used, but certainlythey were severely treated. When the photographs of those cracks appeared in the papers, I wasinundated with people who said, ‘What the hell is an aircraft with a crack like that appearing?’ Iwill come to what you said back in July. I also asked questions in February, because the systemsproblems with Ansett were not new. As you know, they have been around for a long time. Thiscommittee has been dealing with them for some years now, and they have been raisedconsistently here. That is against a very good safety record in Australia. I acknowledge thatabsolutely, and I apply that to our total systems here. We are as good as any, if not the best, inthe world. Nonetheless we have had that happen here. I hope today we can walk out with someconcrete statements or assurances that we really do know where we are going in terms of thissafety issue for systems. Last July—and this is something I quoted to Mr Toller at estimates inFebruary—you said:

They can actually get in there and find out—

that is, CASA—

whether what we are doing to comply with the regulations is, in fact, working.

Further on you said:

Not at all; it is a fact of the business. But as we get smarter in going forward, more and more will go onto computersystems. The thing that Ansett would like to move forward to is to have our system of safety online, so that all ourdocumentation and everything will be sitting there so that CASA at any time will have total access just the same as wedo. It will be a living document, totally online, so we will eliminate paperwork ultimately through the use of Intranet andthings such as that.

I think all of us sitting at that table when you made that statement said, ‘Hooray.’

Capt. Jensen—I do not step away from it. I am pleased you have raised that.

CHAIR—You have said that and a number of other things. We have heard some repeated—not verbatim, but almost verbatim. It caused me a lot of concern in February following yourChristmas incident. What has happened to the progression of the systems? It is causing me evenmore concern now because of the most recent incident at Easter. If that had been put in place,why wasn’t this identified in terms of the problem long before it became necessary—particularly when you had a service bulletin alerting you to it—so that aircraft did not have tobe grounded? I think your whole fleet of 767s were grounded. Why did that break down?

Capt. Jensen—Let me make it clear: you are happy with the system of safety and the systemof maintenance. I know that you are because we have appeared before the committee plenty oftimes. The system of safety is going online; we are moving to do that. Our compliancestatement is online. That is what I referred to at that time. That is exactly as you read it out.

CHAIR—When is it going to happen?



Capt. Jensen—It is happening.

CHAIR—At that time you indicated to us that that should have been in place in roughly sixmonths. I do not have the exact words here but, if I remember correctly, in about six months. Itis a lot further than six months down the track now.

Capt. Jensen—Since then, you would be aware that the company was taken over by Air NewZealand. We have had a complete restructuring. The appointments of our new staff were madein December. Throughout that time, nevertheless, we have worked on our system of safety. Wehave since completed our compliance statements. In Australia it was submitted. Our AOC hasbeen renewed by CASA, both for Ansett Australia and Ansett International. That is in hardcopy, so that was verified and checked in December. Since then, I have been completely auditedby the New Zealand CAA and given a clean bill of health with our exposition statement overthere.

Our statements exist, as they must, by the law today. I am taking us online. That is being donein conjunction with our IT group so that, hopefully, by the time we get around to our nextcompliance statement, it will be there online. I am ahead of the game in this. There is norequirement for online. That is where I want to take us, that is where I am going to take us, andthat is what we are working on. We have not proceeded to it because of the merger. I aminvolved now with the compliance statement in New Zealand, which is called an expositionover there, and our compliance statement here. I want those both linked so they can both goforward. That work has gone on. I will table this letter here too, if I may, which says that Boeinghas just come through. The last paragraph says:

Boeing is confident that Ansett 767 maintenance planning database meets or exceeds the minimum schedulerequirements as defined in the 767 Maintenance Review Board, the MRB, report.

It is the kinds of things we are putting place that is doing this. Information technology takestime. I know that the merger has held me up. I acknowledge that I would like that online rightnow. It will be online, but we are totally compliant in the hard-copy paper.

CHAIR—You are putting a qualification on it now. There was no qualification last July.

Capt. Jensen—I have not stepped away from the qualification. I said I am doing it, and I amnot stepping away from that. It is a project that is under way within Ansett, and it will becompleted. The most important thing for me right now is that we have had a number ofsignificant changes. We have given an undertaking to the Director of Civil Aviation, which Isigned yesterday, on things that we will be doing. Maintenance control is now moving to myresponsibility, so I am working on those issues. That is an ongoing project. Right now the mostimportant thing is that we get the transfer of the business and maintain that continuity so that weensure the safety.

The fact is I have a compliance statement which satisfies the regulator. It is in hard copy. I amprepared to present it to the Senate. It has been signed. The AOC was signed by Mr Leaversuchand forwarded to us at Christmas time. I am totally compliant. I am moving us forward. There isno regulatory requirement for me to have an online system, but I am going to have it. I am notstepping away from the commitment I gave you.



CHAIR—I understand that. I am not saying that you are not compliant. I am taking you backto what you told us as a committee, and I am now asking you whether we can now take on goodfaith what you have told us today because what you told us last July did not happen in theprescribed time.

Capt. Jensen—With the greatest of respect, I did not give you a time frame.

CHAIR—I find it difficult for you to say to me that it was because of the takeover situationand what have you. You did not stop safety development during that period of time. You wouldnot have stopped safety development.

Capt. Jensen—With the greatest of respect, I have actually developed it. I have delivered toyou today a safety system. That system of safety was not on the table when I spoke to you lastJune or July. I did not give you a time frame. I said I was doing it, and I am doing it. Putting thisonline is not relevant at all to the 767 groundings. Our compliance statement being online hashad no relevance whatsoever. I think that is a very important point.

CHAIR—Then why was it not picked up earlier?

Capt. Jensen—The error?

CHAIR—How can you have cracks which appeared to be up to a third of an inchphotographed in the paper that somebody did not see?

Capt. Jensen—They were seen. I think that is an engineering issue, which I will pass acrossto the maintenance group if I can. The actual photographs—again, I think this is veryimportant—

CHAIR—Are those photographs actually the photographs of the problem?

Capt. Jensen—We were asked to take those photographs about 24 hours before theyappeared in the paper. We forwarded them to Canberra because we believed they were neededin Canberra. I do not know how they appeared in the paper. As to whether they are of the actualproblem, perhaps the engineering guys may like to answer.

CHAIR—Let me ask you again: are they authentic photographs?

Capt. Jensen—Yes. We believe they are the photographs that we were asked by CASA totake 24 hours before they appeared in the paper.

CHAIR—I just want to make sure somebody is not doing a job on you. So they are authenticphotographs?

Capt. Jensen—Yes.

Mr Hackett—To the best of our knowledge, they are.



CHAIR—You would have seen the photographs or the planes. Is that what it looked like?

Capt. Jensen—We believe so. A number of photographs were taken.

Mr Harris—I do not think anyone is disputing the nature of the photographs. I am certainlynot aware of anyone disputing the nature of the photographs.

CHAIR—I am just asking so that we can put it on the public record. Are you satisfied thatthey are the photographs?

Mr Harris—Yes.

Capt. Jensen—Yes.

CHAIR—I am not trying to have an argument over it. In terms of your surveillance, surelysomebody would have seen those cracks and said, ‘Hey—

Mr Harris—An online system or a paper based hard copy system does not guarantee thatsomebody cannot either (a) misinterpret or (b) miss something. You design a system with asmany fail-safes as you can to ensure that they do not do that. But we all know that you can havehuman operator error using a computer system just as readily as you can have human operatorerror using a paper based system. I think what Captain Jensen is trying to say is that we aretrying to put in a sufficient multiplicity of systems to ensure that this does not occur. Weperhaps have not met the committee’s expectations in terms of time frames for putting this inplace. It is still our intention to do it. It works quite well where it is currently in operation andavailable within our engineering workshops, and we intend to apply it more universally. AsCaptain Jensen said, we are ahead of the game in some respects here, but if we have not met thecommittee’s expectations there was certainly no intention of putting you in a position where youfelt something was going to be done immediately.

We try to focus here in terms of what we have said on our safety performance. Our safetyperformance, to the extent that it was necessary to be met through the nature of the system—whether paper based or computer—has been met. Nevertheless, there have been problemswhich we acknowledge. It is our intention to fix those problems. We have come to agreementswith CASA on what we need to do to fix those problems. I am personally not sure—it isprobably for CASA to say—whether CASA would say, ‘It’s absolutely essential that you have acomputer based system if you are going to fix those problems.’ I suspect from what CaptainJensen has said that that would not necessarily be their position. But we think that is ultimatelyhighly desirable, and we intend to put it in place.

CHAIR—Captain Jensen, you said you would table an agreement or something—I did notquite catch what you said—which a certain individual had signed.

Capt. Jensen—I will give you our AOC compliance statement, yes, by all means. CASAshould be able to present that to you.

Senator O’BRIEN—The matter I wanted to proceed to was: what was the process ofreporting back to Ansett followed by the CASA audit teams in this area?



Mr Harris—In other words, when they did their audits last year, and again in the course ofthis year, what did we receive back from them and when did we receive it?


Mr Hackett—We received the September audit in about October, and all responses wereback by January. We received the final report of the March audit only a matter of some weeksago, and all responses are already back with the authority.

Senator O’BRIEN—There was a written response. Presumably there were discussions in theaudit process. Formally there was an audit outcome communicated to Ansett?

Mr Hackett—In the normal protocol of these matters, we would be advised in advance thatthe audit is to be undertaken. We would be given some briefing on that, it would be scheduledand the organisation would facilitate the regulator in that activity. They would complete the on-site activity and produce a report. Normally we would be given some briefing on that and a finalopportunity to make comment before the report is finalised. We would then receive the finalreport, and attached to the report would be copies of their findings individually tracked on adocument called ‘request for corrective actions’. The findings would be in the form of a majoror a minor finding and/or an observation. We are expected to respond to each one of those in atimely manner and negotiate that with the authority. Each of those is thereafter tracked throughto completion.

Senator O’BRIEN—At the same time, Mr Harris, have the companies conducting inquiriesor investigations into their maintenance problems been completed?

Capt. Jensen—We are conducting a number of audits into some of the initial handling, thathave been dealt with and completed by our compliance group. We have a series of ongoingaudits which form part of this. As they are completed, all the recommendations that we haveactually put forward at this stage have been closed off internally, yes.

Senator O’BRIEN—‘Closed off’ meaning?

Capt. Jensen—Internally. We have identified issues, and we are satisfied with the action thathas been taken by the maintenance organisation.

Senator O’BRIEN—What action has actually been taken or is planned to be taken as a resultof that inquiry?

Capt. Jensen—First of all, one of the prime ones is the control of the system ofmaintenance—the maintenance control—which will report directly to me going forward. Thathas previously been through the maintenance controller to the maintenance providerorganisation, ANNZES. Where we had it through a service level agreement, we will bring itback under our direct control. We have put in place in there—

Senator O’BRIEN—So there was a deficiency there?



Capt. Jensen—This was one where we wanted to have direct control. We believe that wasthe appropriate way—and this was a discussion we had with CASA, and this is an agreementwith CASA. Another issue that we put in place there, as an example, was that in New Zealand,part 121.4.16 of their legislation requires all AOC holders to carry out and certify an annualmaintenance review. That is not required in Australia. We have implemented that within thecompany. Of course the first aircraft through this system are the 767s, by the nature of the workthat we have done. The process was established in New Zealand eight years ago. It requires thatthere is an annual assurance that all mandatory maintenance has been completed; allmaintenance specified in the maintenance program or the system’s maintenance has beenaccomplished within specified time periods; all defects entered into the maintenance log havebeen rectified or properly deferred; or all certification required has been properly made. It willtake us about two years to go through the 60 aircraft.

As was indicated, we have taken a long time for each of the aircraft now, but the program thatwe have is that each month there will be two A320s, two 737s, a 767 and one of the 146s inthere. We have still got them; they are still working. And we have not got rid of any yet, either.We have those, in theory, if I may use that word. The furtherest you should ever be away fromyour maintenance program is 28 days because of an aircraft going totally through a packageeach 28 days. That is an indication of the work that we have put in place. As I alluded to before,there is also the independent OEM quarterly review by the compliance and quality assurancegroup of documentation received into the company. We receive about 60,000 documents a yearso it is a fairly big task that we go through. We are currently looking at the structure. That is partof the work that we are doing—the structure of the technical department. That obviously will beticked off by CASA.

Senator O’BRIEN—At your meeting with CASA in Melbourne on 28 December youcommitted to providing the authority with a copy of the results of your internal investigationinto how the Boeing service bulletin was missed that led to the December grounding. Has thatwork been completed, and does CASA have a copy?

Mr Hackett—Yes. An internal inquiry was conducted in the period between Christmas andNew Year, and a report was provided to the authority early in January. Our feedback has beenthat the report has been accepted.

Senator O’BRIEN—The feedback from CASA?

Mr Hackett—Yes.

Senator O’BRIEN—Did a copy go to ATSB as well?

Mr Hackett—No, they never asked for it. They may be in possession from CASA but wewere never asked to provide a copy to ATSB.

Senator O’BRIEN—Is anyone under suspension, or has anyone left the organisation, as aresult of that incident?



Mr Edwards—On the SSI incident on the horizontal stabilisers, some people in our technicalservices department were relieved from their normal duties. At that time they continued to workfunctionally within the department.

Mr Hackett—If I could add to that, there was one person subject to counselling involved inthat. That was the extent of any personnel actions.

Senator O’BRIEN—Do you mean that the systematic changes that Captain Jensen wastalking about would be in addition to any of those personnel issues?

Mr Hackett—Absolutely.

Senator O’BRIEN—Is the problem exposed by the missing service bulletins in Decemberlast year the source of the failure to act on the engine mounts bulletin in a timely fashion?

Mr Edwards—The actions taken over the service bulletin incident last year and the hardlook that we were taking within our technical service department about the issue of the missedservice bulletin is actually what revealed the problem in relation to the pylons. In going throughand in trying to address the systemic issues that were found in December, we actually found thepitch load fitting or the pylon fitting problem during that internal audit of our processes.

Mr Hackett—I would add that the service bulletin that related to the Christmas eventsactually was not missed. It was received and assessed. However, at the time it was not an alertservice bulletin, and it actually had a statement on it that it was not safety related. Ansett hadpreviously been finding cracks in the same area since 1996 and reporting them, so we believedthat our existing inspection program adequately addressed that issue.

Senator O’BRIEN—Would you be able to supply the committee with a copy of the relevantbulletin?

Mr Hackett—Yes.

Senator O’BRIEN—To get the timing of the Boeing service bulletin for the engine pyloninspection clear, Captain Jensen said in the media—it was the 7.30 Report on 10 April—thatBoeing had agreed that inspections could be completed by Ansett by the end of the month, thatis, April, and Ansett was working to that timetable. When was that agreement entered into andhow was it entered into—that is, between Ansett and Boeing?

Capt. Jensen—Before I answer, I publicly corrected myself, again in the media. You may ormay not have seen that but I did correct it.

Senator O’BRIEN—No, I did not.

Capt. Jensen—I made a mistake that night. I understood that we had approached Boeing inNovember when we found it. That was not correct. It was pointed out to me after the interviewthat night, which was shown quite regularly, I think, on TV on that particular evening. At amedia conference on Saturday I corrected that quite publicly. Whether they elected to show that



I do not know, but I have corrected that. I made a mistake that was entirely my fault. The guyscan now answer as to how we dealt with it, if that is acceptable to you.


Mr Edwards—In relation to the pylon fittings, on 6 April we contacted the Boeing group—Istress ‘group’—for technical support and recommendations based on our findings on one of ouraircraft. Based on their data about slow crack growth, or slow crack propagation and the factthat the visual inspection would detect a crack that had turned towards the bore, which is similarto the photograph that you have seen, they asked us to do additional detailed visual inspectionsprior to 20 April on that particular aircraft, with the remainder of the fleet to be inspected by theend of the month.

Senator O’BRIEN—So that occurred on 6 April?

Mr Edwards—Yes, 6 April is when the contact was made with Boeing.

Senator O’BRIEN—As far as Boeing are concerned, there was no urgency about thematter—is that what you are conveying?

Mr Harris—Not necessarily—perhaps no urgency if they agreed to a relatively quicktimeframe for doing this.

Senator O’BRIEN—Urgency in the sense that inspections were what was required.

Mr Hackett—To immediately put the planes on the ground, for example, was not a requestfrom Boeing.

Mr Edwards—No. My understanding is that we made the decision on 8 April to ground thefleet until we had completed the visual inspections. We advised CASA of that. At that point, wereceived a copy of a mandatory AD to carry out any current inspections prior to flying. We flewan aircraft to Melbourne to enable that to be carried out. We did that on all aircraft except one,which was laid up in heavy maintenance at that point in time. In terms of providing an inquiry,our QA manager requested that we carry out a MEDA type investigation into the incident.MEDA—maintenance error decision aid—is a Boeing tool that we have adopted. Our qualityassurance people went through that process to find out how we got into the situation that we didget into with the pylon fittings.

Senator O’BRIEN—Can I go through the terms of the agreement that Ansett have enteredinto with CASA? There is a media release of Friday, 20 April headed ‘Ansett’s reform packageapproved’. It has a series of dot points. Firstly, is there now a final agreement in place? It saysthat CASA will be finalising this binding undertaking within the next two weeks.

Capt. Jensen—It was signed yesterday by both Dave Edwards on behalf of the ANNZESgroup and by myself on behalf of the Operations Group.

Senator O’BRIEN—Can the committee have a copy of that agreement?



Mr Harris—There is no reason why not.

Senator O’BRIEN—I suspect not if you were prepared to put out a media release aboutthe—

Capt. Jensen—We did not put a media release out. I do not think we put the media releaseout.

Senator O’BRIEN—True; you didn’t—CASA did.

Mr Harris—There is no reason not to give you a copy, Senator; you can certainly have acopy.

Senator O’BRIEN—Thank you very much for that. Captain Jensen, going back to the Julyhearings, you advised the committee that you were putting together the new engineeringstructure and that, as a result, you were going to Canberra on a regular basis to meet withCASA. Would it be fair to say that CASA scrutinised very closely the maintenance regime thatwas being developed and then put in place as part of the process of setting up ANNZES?

Capt. Jensen—Yes, I went along representing the airline. ANNZES was set up by theengineering group. We sat through those meetings together, but perhaps David might be able toexpand on that for you.

Mr Edwards—Yes. We got involved with CASA very early on in the ANNZES concept. Atthat point in time we termed the concept ‘newco’. My understanding is that meetings took placein 1999, and we wrote then to Mr Laurie Foley a summary of our newco plans on 16 August.There was a series of meetings and presentations with—

Senator O’BRIEN—That is 16 August 1999, not 2000?

Mr Edwards—Yes, 16 August 1999. There was a series of meetings that went through theactual newco phase of this, through to the formalisation of Ansett Australia and Air NewZealand Engineering Services, which was pulled together in March last year when Mr BillJacobsen was appointed as the CEO. He then appointed his senior management team. From thatpoint on we worked very closely with CASA on transition plans, again through a series ofmeetings where ANNZES business VPs had to put into place detailed business plans about howthe business was going to go forward, how to transition from the existing structures into the newstructures, and how to transition from a regulatory perspective. Again, we had very close liaisonwith CASA right through that period, and we needed to get sign-off from CASA before wecould actually hand the accountability from the existing accountable managers through to MrJacobsen. On 15 December last year, in a letter from CASA there was confirmation of theacceptance of the ANNZES management team and confirmation that the management transitionwas essentially complete.

Senator O’BRIEN—So there is specific CASA analysis and approval of the managementsystem that you put in place?



Mr Edwards—Yes. As I said, we worked very closely with CASA right through that. Allheads or VPs of the various divisions within ANNZES provided their transition plans andpresented individually to a number of forums with CASA to get that acceptance.

Senator O’BRIEN—It has been put to me that CASA micromanaged the process. Is thataccurate?

Mr Edwards—I would say that our relationship with CASA was very robust and veryprofessional right through the process.

Senator O’BRIEN—Yes, but they were very hands-on in the processes, were they not?

Mr Edwards—They were very close to what we were doing within the ANNZES transition.

Senator O’BRIEN—CASA was also required to approve your maintenance controller orcontrollers when your current AOC was approved. How many do you have and how did all ofthat happen?

Mr Edwards—If I can just answer the first part of the question, or a part of it, during theANNZES transition, part of that requirement was that the maintenance controller positionperson, which was previously our executive general manager, would actually be taken over bythe operations technical group. They had a similar transition plan that they had to present toCASA.

Capt. Jensen—The maintenance controller, from 18 December last year, reported directly tome and that is still the case. At that time we had a maintenance controller who was appointed tothe role but was due for retirement not long after. I think on the morning of the Thursday beforeEaster the new maintenance controller was appointed—Mr Berry. And we received that letter onthat Thursday morning.

Senator O’BRIEN—And CASA has a role in that?

Capt. Jensen—He is appointed by CASA, yes. He went down and did his exams andanswered questions and things like that.

Senator O’BRIEN—Who is the actual holder of the AOC and the certificate of approval?

Capt. Jensen—I am the holder of the AOC. The certificate of approval is with themaintenance organisation, with their particular maintenance documents. I will hold up a littlediagram for you, then I will table it, if you wish. Basically, how it works is that a certificate ofregistration is held—it is not in the document you have, I am sorry. Under the certificate ofregistration, we are required to have a system of maintenance which is controlled by the airline.There is an AOC and under that I have a maintenance controller.

CHAIR—I suggest we get that photocopied and then you can explain it to us.

Capt. Jensen—I can pass it over, because I can explain it without having it in front of me.



CHAIR—It will take only a couple of minutes to get it photocopied.

Capt. Jensen—The maintenance controller reports directly to me. Maybe the engineeringguys can address the system of the certificate of approval.

Mr Harris—I think that was the question. They are separately structured. Captain Jensen isthe AOC holder. The certificate of approval rests with the ANNZES organisation.

Mr Edwards—That is not quite correct—it is close. I might ask Mr Hackett to clarify that.

Mr Hackett—Both the AOC and the certificate of approval holder is Ansett. Theaccountable managers for the AOC and the certificate of approval are different. Captain Jensenhas the AOC and Mr Jacobsen has the accountable manager role for the certificate of approval.

Senator O’BRIEN—That answers the question. Can you tell me whether the allegedmanagement problems found by CASA are within your maintenance company or within thestructure that manages the AOC?

Capt. Jensen—Which management problems are you referring to?

Senator O’BRIEN—Okay; it is both, is it?

Capt. Jensen—No. I am sorry to be so unclear, but there has been no management change asa consequence of what is going on.

Senator O’BRIEN—So there were no management problems found by CASA. Is that whatyou are saying?

Capt. Jensen—We have systemic problems that we have been dealing with. They are in thesystems which we have to tidy up.

Senator O’BRIEN—And the system is relevant to your maintenance operation?

Capt. Jensen—Are you referring to the span of control issue?

Mr Harris—There has been a concern from CASA as to the degree to which substantialresponsibility beyond the ability of an individual to take complete control can rest with thatperson. There are varying solutions to that: you can split the responsibility to a number ofpeople or, alternatively, you can strengthen the supporting mechanism for those peopleadministratively. There certainly has been a concern from CASA on that and we have addressedit by providing additional administrative support. That is the part of the agreement that you willsee when we table the agreement between us and CASA. If that is the management issue thatyou were referring to, it lies on the AOC side and was dealt with in that manner with CASA’sagreement.

Senator O’BRIEN—Yes, that is the answer to the question.



CHAIR—Do you want to take us through this graph now?

Capt. Jensen—Up at the top it refers to parts 121 and 145. That is future language. Part 121,essentially, is the airline, and part 145 is the maintenance organisation, which is ANNZES.Within the airline the certificate of registration and the system of maintenance resides. We havean AOC, which is our controlling document, and key elements of that are the maintenancecontroller who controls that system of maintenance and is responsible, therefore, for thecontinued airworthiness of our fleet. He does that through a maintenance organisation—in ourcase, ANNZES. If we go to them, they hold certificates of approval to carry out the work that isrequired on our aircraft. The situation could be, for example, that we might elect to send ouraircraft to company XYZ to have the maintenance carried out. That being the case, they wouldneed to have appropriate certificates of approval to carry out that work, and we would thencontrol that work that way while it was in company XYZ, or in whichever company we sentthem to. However, we choose to keep it in-house within ANNZES.

We also have quality control within the airline, and quite obviously the maintenanceorganisation must have its own quality assurance system as well. Our quality assurance group isoversighting, again, the activities of the maintenance control organisation. That is the broadstructure. You can see the appropriate regulations are identified. That is a document, and a verygood document, produced by CASA early in the year. I think it is a very good model which laysout very simply how maintenance activity is carried out and how it is controlled andoversighted.

Senator O’BRIEN—Mr Chair, I am happy to go on with a few more questions but you saidyou would like a go.

CHAIR—Is there a section that you will finish in the next few minutes?

Senator O’BRIEN—No.

CHAIR—Could I go to the issue of the service bulletins and follow up some of the issuesthat were raised in our discussion with Boeing. What happens when you receive a servicebulletin from Boeing?

Mr Hackett—We are on a mailing list with the various OEMs—original equipmentmanufacturers, Boeing just being one of those. The data is then flowed into our technicallibrary, registered and disseminated to the appropriate areas within the technical organisation forassessment. That assessment is conducted and determinations are made as to whether it isapplicable or not applicable. As you could probably appreciate, not all data that comes in isapplicable to our particular fleet so that assessment has to be undertaken.

CHAIR—Boeing made that point.

Mr Hackett—Yes. Having reviewed the document and determined whether it is applicable toour fleet or not, we would then make a determination for incorporation or otherwise. That hasbeen the practice in the past because service bulletins of any nature, whether they be normalservice bulletins or alert service bulletins, were not mandatory. That has been mentioned here anumber of times today. The general practice in Ansett over the years has been to adopt service



bulletins, except where they are clearly unjustified as non-technical and are therefore more of aproduct enhancement-type activity. After the determination is made they are loaded into ITenabling systems for tracking through to implementation. Once we are in those systems, thenormal practice would be, therefore, that they are called up for implementation at the prescribedtime. Job cards or work orders go down to the relevant areas in the maintenance areas forimplementation. On completion, the feedback loop goes back into the IT enabling systemswhich record the fact that that has been completed. That would be the normal process.

CHAIR—How seriously do you treat them? Are they a bulletin that, as a company, youconsider to be very important in terms of communications between the manufacturers andyourself?

Mr Hackett—In terms of importance, they rank behind airworthiness directives, which aremandated, clearly. However, they are the bread and butter of our system. They provide thevehicle for receipt of operator experience worldwide. So you do not ignore them. You do look atthem. In the context of the 767s, I think you will find that the record will show that there aretwo service bulletins that appear to be highlighted through all of this. One was pre-Christmaswhich related to what is known as the 1809.5 stabiliser bulkhead. We actually did receive thatservice bulletin in the normal course of events. We did review it, and we made a determinationin that instance that we would not conduct that inspection, and we did that on the soundtechnical basis that we had been finding those cracks since 1996 and we believed therefore thatthat would not add any further value. We also noted that that service bulletin was not an alertand that it had a statement in it, ‘not safety related’.

The second service bulletin that seems to be involved in the 767 issue is an alert servicebulletin which came in the system and was assessed in the normal course of events and wasdetermined to be applicable and to be conducted. The systemic failure in this instance was thatwe failed to implement it in accordance with our own determination and Boeing’srecommended time scale, which were one and the same. In going through this holistic reviewthat we initiated internally as a result of the Christmas function we came upon that fact and weimmediately scheduled the inspections to take place. My colleague Mr Edwards explained whathappened when we found that we had failed to implement that in accordance with our own andBoeing’s requirements.

They are the only two service bulletins that I am aware of that are at issue. You asked aquestion earlier of the Boeing representative about getting a feel for how many service bulletinswould impact on Boeing 767s, for example. The answer to that—based on our assessment,including engines, air frame and accessories—is that roughly 2,800 have come out affecting theBoeing 767s since new, but you have to review each of those for every aeroplane because therecould be differences in serial number applicability. So it effectively means about 15,000individual assessments have to take place for that to be complete on service bulletins alone.

CHAIR—And the reason for the fact that the one that you note as being the important onenot being acted upon or going outside the date was just simply a systems breakdown?

Mr Hackett—Yes.

CHAIR—And that has been corrected?



Mr Hackett—Yes.

CHAIR—What did you do to correct it?

Mr Edwards—It was the correction to the systemic issues that actually highlighted to us thatwe had missed our own mandated time frame to incorporate that service bulletin.

CHAIR—In terms of the bulletins themselves, when you get one and read it, is it easy toidentify the status or the category of the seriousness of the issue or the problem that has beenidentified?

Mr Edwards—It comes down to what I think Boeing was saying before—that there is astandard format for a service bulletin. Certainly if it is an alert service bulletin that gets ourattention straightaway, and that is the purpose of designating it as an alert service bulletin. Interms of compliance, there is normally a recommended time frame for compliance; some ofthose time frames can be quite short and some of them can be quite lengthy. You asked whetherI could recommend examples of those two ends that will give you an understanding of how thatworks.

CHAIR—Yes.

Mr Edwards—If it is a short time frame, we would apply our immediate attention toassessing its applicability to our fleet and how we can translate that applicability intoincorporating the service bulletin in our fleet.

CHAIR—A recommendation has been made by ATSB that the processing of that bemandated in Australia, whereas now it comes directly from Boeing in the US and, if it has anFAA stamp on it, it becomes an alert or a mandated bulletin—as I understand from what I heardthis morning—and you action it. Would it help in Australia and would Ansett find it useful if itwere mandated into law, or should the current arrangement be sufficient to do the job?

Mr Harris—The question you are asking relates to ATSB’s proposal that CASA turn alertservice bulletins into airworthiness directives?

CHAIR—Yes. Do you want to take that question on notice?

Capt. Jensen—Perhaps I could just make one very quick point. Alert service bulletins withinAnsett are now mandatory, so it will not matter whether we mandate it or not. That is how theyare treated on the 767. That was a corporate decision we made.

CHAIR—So you yourself have made that decision?

Capt. Jensen—We have.

CHAIR—So whether or not it became law here would not make one iota of difference toAnsett?



Capt. Jensen—Not now, because of the decision we have made.

Mr Harris—There is probably a clarity that comes from that if the regulator chooses to godown that path. But for our own internal purposes, as I think I said in the opening statement, wetake the responsibility for handling this, and that is the way we are going forward.

CHAIR—I guess what I am trying to establish is: if it is necessary, I do not have a problemwith it; but if it is just another form of red tape that will get in between the process of lookingafter things, I do not see a lot of point in it. I have not established that in my own mind yet, andI am trying to get your view about whether that would help the process and make it better orwhether our authority needs that extra legislative backing.

Senator O’BRIEN—One of the differences would be, of course, the actionability ofnon-observance of the directive, which is not the case now.

Mr Harris—That is correct.

Mr Edwards—I think the difference might exist if our own authority mandates anairworthiness directive that might not have been mandated by the country of manufacture, as inFAA or JAA.

CHAIR—This is a relatively complex issue that we need to work through. Maybe you couldgive some thought to it and come back to us in writing on this particular issue, because I think itis a very important one.

Mr Harris—We will do that.

CHAIR—Thank you.

Senator O’BRIEN—Given the recent problems, what action has been or is being taken byAnsett to ensure that the engineering managers and employees are focused on providing the bestpossible engineering support to the airline? Clearly the people are a key asset. I am interested toknow what actions you might be taking to ensure that they are able to focus on their work.

Mr Edwards—As part of the action plan we put together that was put to CASA in terms ofmoving forward, our immediate short-term plan is to go out and brief our staff as to what hashappened, how it has happened and where we are moving forward to prevent it ever happeningagain. That commences on Monday. Our vice-president in human resources and I will be goingto all engineering bases, except two, in Australia and also within New Zealand where we will beholding a number of briefs throughout each day, and at night-time so that we can catch our nightshift staff. With the two small ports that we will not be going to personally we will be holdingvideo conferences. The reason for that is that we have committed ourselves to a deadline to dothis, but when we looked at the logistics it was very difficult to achieve. So we will still begetting to those people via video.

Senator O’BRIEN—Have the recent events caused the company to rethink the establishmentof a separate engineering and maintenance organisation?



Mr Harris—No.

Senator O’BRIEN—Are you looking at ways to vary the way the two entities relate to eachother? We have discussed part of that, so is there anything more you want to add to that?

Mr Harris—It is hard to find a direct connection between the very substantial organisationalchange that has been put in place over a two-year period—and with quite a lot of exchange withthe regulator—and the specific problems that we have undoubtedly encountered. Our problemsare in the nature of the system itself allowing the possibility of people making somemisinterpretations. I do not think you could say that ANNZES itself as an organisation is insome way flawed as a result of that. We certainly do not believe that.

Senator O’BRIEN—Is engineering regarded as core partner to the airline?

Mr Harris—Yes, and recently reinforced by the CEO to that effect.

Senator O’BRIEN—Can you confirm the number of additional engineering staff that it isintended be recruited?

Mr Edwards—We have approval for 230 additional staff, I think it is, in our heavymaintenance areas. We are also looking at additional staff within our line maintenance areas,consistent with trying to improve our processes within each of those areas.

Senator O’BRIEN—Will that address, say, your need for engineering for the period runningout to about five years, or is that just an immediate need, with the future to be assessed on anongoing basis?

Mr Edwards—It is an immediate need in terms of providing delivery. The 230 staff isprimarily, as I have said, in our heavy maintenance area. That is to provide improved turn timesof aircraft that are in heavy maintenance so that we can commit to the airline to deliver anaircraft on a defined day, bearing in mind that some of these aircraft can be in a heavymaintenance visit for anything up to three months. But, along with the staff we are putting on,we are also committed to improving our processes within those areas of the business. There is abunch of ways we are doing that. Some of them are IT enabled; some of them are gettingunderstandings of benchmarking against how we do things against world best practice and howwe introduce things like critical path management and have our staff have an understanding ofthe principles behind all those sorts of things. The point I am trying to make here is that it is notjust an additional 230 people that will fix our problems or fix our processes; we need to fix theunderlying processes that are there so that we can gainfully employ these additional people.

Senator O’BRIEN—It is interesting, isn’t it, that you are going to change your processes butyou are also going to substantially increase your work force to perform the task.

Mr Edwards—Yes. Part of that too is that the airline has determined—and maybe CaptainJensen can elaborate on this—that it is going to grow its way into the future, which is a bit of achange of direction from some 12 or 18 months ago.

Senator O’BRIEN—Yes, upsizing.



Capt. Jensen—That is absolutely correct.

Senator O’BRIEN—Is there any understanding of what your future engineering staffingneeds to be, all other things being equal, in five years time? Are you going to have to continueto build over that period?

Mr Edwards—I think that is a continuous assessment on what our needs are at any particularpoint in time, in which area of the business it is, what the business activity level is, what themaintenance program requirements are and what the operational requirements are.

Senator O’BRIEN—What sort of lead time do you need as far as planning staff levels in theengineering area is concerned?

Mr Edwards—It would depend on the qualifications of the staff that we are recruiting.

Senator O’BRIEN—Say, for licensed aircraft mechanical engineers?

Mr Edwards—For licensed engineers it depends on the market availability, and that is prettytight at the moment.

Senator O’BRIEN—Yes, it is pretty tight at the moment. Not too many apprentices havebeen going through; not too many engineers have been going through.

Mr Edwards—Ansett has been committed to its apprenticeship program.

Senator O’BRIEN—I did not mean Ansett; I meant that generally there is a shortfall in thenumber of trained people coming through the system, isn’t there?

Mr Edwards—That is correct, but Ansett remains committed to its apprenticeship program.We have two apprenticeship scheme intakes this year rather than just the normal one. They arereally our future when we feed them in at the lower level and develop them through.

Senator O’BRIEN—Can we assume that the company is locked into continuing itsengineering business in Australia and maintaining the aircraft here, or is that under review?

Mr Edwards—It depends on what part of the maintenance program yet again you are talkingabout, bearing in mind that there is differentiation between line maintenance and heavymaintenance. Line maintenance generally has to be done where the aircraft operate. With heavymaintenance, our capacity to perform maintenance in this country would determine whether weneeded to take aircraft offshore. There have been some discussions very recently with theunions in relation to that—certainly in terms of our doing some of our heavier checks in NewZealand.

Mr Harris—The issue ultimately is that we cannot afford not to do them. So we do them inAustralia to the extent that we have the capacity to do them. If we have to do them offshore, wecan nevertheless do them. This is from the safety perspective.



Senator O’BRIEN—Do I correctly interpret the position to be that you are building up yourstaffing here in Australia and, to the extent that the capacity is here, it will be done here?

Mr Edwards—Yes.

Senator O’BRIEN—Is there a ‘capital investment in engineering plan’ that is relevant to thatequation?

Mr Edwards—A capital expenditure program?


Mr Edwards—We put together a capital expenditure budget obviously every year, and thereare growth scenarios considered within that capital expenditure plan.

Mr Harris—But the board has not signed off on capital expenditure arrangements for theentire airline and, in our planning cycle, that would not be anticipated for some months yet.

Senator O’BRIEN—Are you able to compartmentalise work that is able to be done inAustralia? Avionics, for example: is that able to be done here generally, or is a component donehere and some others done in New Zealand?

Mr Edwards—That is correct. Part of the concept of ANNZES was to make use of theeconomy of scale, I suppose, and centres of excellence in relation to component overhaul.Depending on where the best set of expertise, the best set of equipment for particularcomponents was, the plan was to move work between Australia and New Zealand both ways tooverhaul those components.

Senator O’BRIEN—There are a few other questions I could ask but I think I will leave itthere, Mr Chairman.

CHAIR—Thank you, Senator O’Brien. I have two final questions I would like to ask nowconcerning events that have occurred and the ongoing communication process. Firstly, are yousatisfied that, in your linkage with Boeing, the lines of communication for getting informationbackwards and forwards are working as they should?

Capt. Jensen—The answer is yes, Senator.

Mr Harris—The answer is yes and we have audit arrangements to ensure that we actuallyknow and track what we have got. So, yes, we are satisfied that we are getting what we needfrom Boeing and, yes, we have a number of mechanisms in place internally to ensure that. Wetrack what we do with that and I think the description was given quite substantially earlier.

CHAIR—Secondly, there have obviously been some tensions with CASA over the lastmonth or two, working through particular issues and what have you. I think earlier you used thewords, ‘working forward in a professional, dignified manner’. Are there any particular issues inyour working relationship with CASA that, as a committee, we should be addressing or are you



satisfied that any of the difficulties you may have had have been resolved in that professional,dignified way?

Mr Harris—We will never be happy when something as significant as occurred with usoccurs. We are not trying to pretend that there is great happiness here and that there is not angstwhen aircraft are on the ground. We believed they were safe and CASA said they could not besure—that is my potted summary of all this. But that is their job. That is CASA’s job and thereis, I believe, a very substantial level of respect between us and them. The concern that Iarticulated in the opening presentation is the one that I think needs to be addressed but perhapswhen things are less recent in people’s minds because those concerns still nevertheless rankle.People will think, ‘Were we harshly dealt with or not?’ as I think you said earlier. We respect theregulator’s right to do what the regulator needs to do to assure itself that things are safe. Wemay well believe they are safe and we have highly professional people inside the company whohave the ability to state that. CASA are nevertheless sitting external to that. They audit theprocess and everything else but if CASA go to the point of saying, ‘We need to be certain andwe want you to do this until we are certain,’ then we comply with that and we respect their rightto do so.

The public relations issue still bothers me deeply. Would it possible for the CASA board, forexample, to examine the process and say they were completely happy with how things wereplayed out? I realise in the heated atmosphere, particularly of what occurred over Easter, there isalways going to be this scope for negative PR exchanges, with us feeling harshly done by incomments they have made and them feeling that we have said things that are inappropriate orunreasonable. I guess I am trying to strip away the view of what is inappropriate orunreasonable and simply ask whether, if I were the regulator sitting there, I would becomfortable with what was done publicly both by Ansett and by CASA. Or is there not aprotocol, an arrangement or whatever that can be reached by people on both sides so that, whenthe regulator decides to pull out the big stick for reasons that necessarily relate to the regulator’srole in life, there is also some mechanism for ensuring that public comment is made in a waythat is helpful overall to aviation safety?

Perhaps I am just reflecting in my comments the natural angst of the airline over whatoccurred. Perhaps that is the case, but I would have thought if the committee were looking intothe whole process, that is at least an area the committee might want to consider. We are notsuggesting that there be some kind of heavy-handed control in this. It is much more a questionof fine judgments. Was the way in which matters were handled publicly the best way they couldbe handled publicly? It is an open question.

CHAIR—Are you saying in essence that you think that, when everything dies down and weget down the track a little bit, there needs to be some protocol on how you manage the publicrelations side of an issue such as this? It may not be you next time; it may be somebody else.

Mr Harris—That is right. It may be totally impractical. Perhaps when we examine it we willsay there is just nothing that can be done here. If there is a residual lingering concern, that is theresidual lingering concern, not the actions of the regulator per se. The regulator needs to besatisfied. That is why you have a regulator. Even if you are not happy, you have to go alongwith them. We may believe we are completely safe; they need to be satisfied as well. There aretwo sides to that coin. There is a public relations issue in the lingering concern about the



handling of these things. The linkage in my mind is to people being fearful, wondering whetherthey are going to create another one of these arrangements if they report safety breaches. We alltrain people not to do that and the system still works very well for that purpose, but that is thelingering issue.

CHAIR—Thank you, Mr Harris, Captain Jensen, Mr Edwards, Mr Hackett and Mr Flanagan,particularly for the frank way you have dealt with the issues today. I understand that it iscertainly not easy for you. If it makes you feel any better, I flew over here on Ansett and I amflying home on Qantas.

Proceedings suspended from 12.31 p.m. to 1.33 p.m.



ELDER, Mr Robert Stephen Toti, Executive Manager, Government, Industry andInternational Relations, Civil Aviation Safety Authority

FARQUHARSON, Mr Terence Lindsay, Acting Assistant Director, Aviation SafetyCompliance, Civil Aviation Safety Authority

GEMMELL, Mr Bruce, Deputy Director of Aviation Safety, Civil Aviation SafetyAuthority

ILYK, Mr Peter, General Counsel, Civil Aviation Safety Authority

LEAVERSUCH, Mr John, General Manager, Airline Operations, Civil Aviation SafetyAuthority

NAGLE, Ms Karen Ann, Risk Manager, Civil Aviation Safety Authority

SCULLY-POWER, Dr Paul, Board Chairman, Civil Aviation Safety Authority

TOLLER, Mr Michael Robert, Director of Aviation Safety, Civil Aviation SafetyAuthority

VILLIERS, Mr David, Section Head, Airframes, Civil Aviation Safety Authority

CHAIR—The committee shall resume. I recommend the officers from CASA who are here,and, particularly, the chairman of the board of CASA, Dr Scully-Power. Thank you for makingyourself available. I understand, Dr Scully-Power, that you would like to begin by making abrief policy statement, if I could put it that way.

Dr Scully-Power—Thank you, Mr Chairman.

CHAIR—For your information, there is a plane leaving here at a quarter to five so I amwalking out at a quarter to four.

Dr Scully-Power—You can rest assured, Mr Chairman: I also have a plane at about the samehour. First of all, I would like to say that I am particularly pleased to come here today and Iwant to thank you personally, Mr Chairman, for extending that kind invitation. Why I amparticularly pleased to be here today is because I think it is a unique opportunity to bring somebalance to the national debate on aviation, to bring some balance to the national debate onaviation safety, to bring some balance to all aspects of the responsibilities of the authority andthe way they interact with the airlines and to bring some balance—if I may say it—to thereporting of the aviation debate. At the end of the day, I think we have to bring balance to allour deliberations because it is the general public—the mums, the dads and the kids—who reallyhave a vested interest in aviation safety.



In bringing that balance, I thought first all that I would spend a few short minutes on the roleof the board. It is interesting to give a description of the role of the board. For background, Ialso have the honour and the privilege of serving on the board of the Australian Institute ofCompany Directors. The whole issue of the role of a board is something that is certainly verycurrent at the moment, especially in an era where, from a corporate point of view, we arelooking at the triple bottom line. What I have found, interestingly enough, is that, in discussingthe role of a board at that level in the corporate world, I can do no better than go to the CivilAviation Act 1988. I would like to read this to you from the act, because I use it quite often:

The purposes of the board are twofold (1) to decide the objectives, strategies and policies to be followed by CASA (2) toensure that CASA performs its function in a proper, efficient and effective manner.

I think that is precisely the role of the board. I think that is precisely what this board does and Iuse that, as I say, as a very good definition, even in the corporate world.

If you look at our board, the current board—except for our new member appointed only a fewweeks ago—has been in existence for just on two years. I sit on a number of boards and I canassure the members of this committee that it is one of the best boards that I have ever had todeal with. We have people on the board who have in-depth experience across the very broadfabric of aviation and I can assure you that there are no hidden agendas on that board. There isnothing untoward; there is no-one putting forward a particular agenda. In fact, as I look backover two years, it is almost remarkable that, on any issue of substance over those last two years,there has not been one issue that the board has not unanimously resolved. I think that that is anoutstanding record.

Talking about this whole concept of balance—although a phrase that has been bandiedaround—it is ‘damned if you do and damned if you don’t’. I am quite sure that members of thecommittee are well aware that, for example, after every accident investigation, there is alwaysthat group of people who say, ‘Ah, one of the reasons was the fact that we didn’t have enoughregulations. We were not prescriptive enough.’ On the other hand, there is a fairly largeconstituency in the aviation fraternity who are continually coming to the authority and saying,‘You are overprescriptive. There are too many regulations,’ and so on and so forth. We aredamned if we do and damned if we don’t.

One of the things that I take particular comfort from in relation to the board is that we havedone a number of things over those two years. I would like to spend a couple of minutes onthose, because I think it will give you an insight into the way the board operates, and at thebottom of some of the questions that will come up later is, ‘What was the role of the boardrelative to the Ansett situation?’

This board has done a number of things. First and foremost, when this board was constituted,we said that we stood for eight things, and I think that those eight things bear repeating. Firstand foremost, and the order is important, is justice—justice for all. They read:

Our Commitments

* Justice For all-consumers, providers and participants

* Rules and Regulations Fewer, simple, easier to comply with, harmonised and implemented



* Enforcement Uniform, consistent, fair and appropriate

* Education The basis for real improved safety outcomes

* Freedom For all who wish to fly responsibly in Australia

* Service Timely delivery of quality services

* Teamwork Working together for air safety

* Values Reliability, honesty, patience, even-handedness, thoroughness, professionalism, trustworthiness andobjectivity

This is at the beginning of our corporate plan, which we bring out annually in the context of athree-year plan. For the very first time, I think, this plan has real benchmarks, real goals and realachievements. In our annual report we actually judge ourselves on this. It is a document that Ireally commend to everyone in the aviation community.

CHAIR—We are wondering whether we have a copy of that, or whether you could table thatone.

Dr Scully-Power—I would be happy to do that. Seeing that this board has been in place fortwo years, the board recently took a retrospective look back and said, ‘What have we achievedin those two years?’ It turns out that we have achieved a huge number of things. We havebrought corporate governance and stability to the authority; we have instituted an industry-wideaviation forum; we have undergone a major reorganisation of the authority; we have brought incorporate plans, business plans and business principles; we have brought in system based safetyfor audits, and I am sure we will discuss that further; we have brought in a code of conduct andethics for all CASA officers, including the board; and we have very much brought in a uniformapplication of compliance. When I was made chairman, one of the overwhelming pleas, if youwill, from the aviation community was to fix the issue of non-uniform compliance throughoutthe nation.

One of the things that I am particularly proud of is that we have brought in an ombudsmanpanel. That is a group of eminent people, none of whom are known to the board, and on certainissues we can call on them to professionally come and look at it and make decisions. Everyoneis human. It is a mechanism whereby an aggrieved can have a third party look at that grievance.We have brought in things like competency based training. We have brought in special rules andregulations for remote areas. We are trying to bring in, as you are well aware, a graduatedapproach to enforcement, and on it goes. The board has spent some time very recently saying,‘What have we achieved over the last two years?’ The list of 161 one-liners are all in categories:operational standards, regulatory services, industry consultation and cooperation, international,training and exams, safety promotion, governance, management and corporate affairs. Withyour kind permission, I would like to table that list.

CHAIR—Thank you.

Dr Scully-Power—Turning now to some of the issues that you have heard already todayrelative to the board’s role in Ansett, as it turned out, the board, during the critical days, was inCanberra on a previously regularly scheduled meeting, and that was very useful. In looking



back, I can assure this committee that I believe we have operated totally in compliance withcorporate governance.

The General Manager of Airline Operations made a formal recommendation to the Directorof Aviation Safety. The Director of Aviation Safety, Mick Toller, has an enormous responsibilityto look after aviation safety for every human being in Australia. He took the decision. It was hisdecision and his decision only. He consulted fully with the board, and the board uniformlyendorsed that decision. You may well ask: why do you do that? I think the answer is very clear:if the Director of Aviation Safety gets to a position where he feels that if anything were tohappen, like an accident, and there was an inquiry, in hindsight he could not face this countryand say, ‘I allowed that to go on without doing something.’

It also adds very much directly to this whole idea of graduated response to enforcement. As itturned out, as you well know, we were able to get the outcome that the authority required, basedon safety issues alone, without going to a show cause notice. I think that was very good. I wouldlike to say that, throughout all of that, I have had several conversations with Gary Toomey, whois the CEO of Air New Zealand and Ansett. If you asked, ‘Was he professional in dealing withthe authority?’ I would have to say absolutely. Did he try to undermine us? Absolutely not. Washe first and foremost committed to aviation safety? Absolutely. I can assure you it is a goodrelationship.

In terms of the service bulletins, which of course runs to the heart of some of the issues, youmay be interested to know that the board met yesterday and deliberated—in hindsight, ofcourse—on the whole issue that we are here today to talk about. The board has indeed come upwith a number of things which we are going to implement as lessons learned. Relative to theservice bulletins, I thought I would give you the board’s view. The board’s view is that we aregoing to establish an independent review procedure to look at the whole issue of servicebulletins. This is going to be a three-tiered process. First of all, it is going to be an in-housetechnical group to review the current handling of service bulletins and to makerecommendations about future arrangements.

CHAIR—Can you clarify whether each of these is actually an independent group away fromCASA and away from the board, or will they come from within the department?

Dr Scully-Power—I think it might be clear if I run through this whole sentence and thencome back. It is going to be a three-tiered process. The first tier is going to be in-house. Ourbest technical group are going to review the whole issue of service bulletins. Secondly, theirproduct, if you will, is going to be reviewed by an expert review panel which will be externaland independent. Beyond all that, the third tier, to ensure that we go through due process, willbe a final review by a world-class expert. That is the board’s view.

In terms of system based safety and the way we do our surveillance—which I think we willget to in depth later this afternoon—I would like to make one comment from a chairman’sperspective. For most of my life I have been involved somewhat in science. If we have learnedanything in science over the last few decades, whether it be medicine, physics, astronomy oranything else, what we have learned is that when you start to understand a system then you canreally make progress.



If you look at the history of science, up until the 20th century it has been very much amethodology of looking at simple objects and trying to guess the underlying principles. It isonly basically in the 20th century that we have begun to understand that, once we get tounderstand the systems of nature, which basically are the controlling forces of nature, we get toreally understand the outcomes. I think that analogy can be applied directly to aviation safety:we must understand the systems if we are ever going to get the right safety outcomes and if weare ever going to learn from our mistakes and drive the accident rate down.

There is—and this has been discussed and I am sure it is going to be discussed later—theissue of the so-called leaked audit report. I have a copy here. I would recommend that everyoneread it because, just like most reports, there is good and there is bad. I just thought I wouldmake one point. The title is ‘Audit of the systems for managing High Capacity Air OperatorCertificates and Certificates of Approval—2001 including a review of the effectiveness ofCASA’s surveillance of Ansett Airlines’. I would then like to read, right from the same report,the audit scope. It states:

The audit cover management systems for the assessment/approval of Air Operators and Certificates of Approval with theexception of :

Air Operator Certificates:

. High Capacity regular public transport ...

It makes interesting reading. There are lots of inconsistencies here. That is not unusual at all. Inthe whole process where you need balance is to look at the outcomes of whatever the reviewsare, see whether they are logical and see whether they are defensible. The final product is whatyou should be judged on. It makes interesting reading. I recommend that you read it all.

We had an interesting discussion this morning on the role of the ATSB. I did not intend to talkabout the ATSB today, but I just want to make one comment. Senator O’Brien, I think youbrought up the issue of a class G airspace. At that time I was not the chairman of CASA. Butthat was, as you know, a hot item. Yes, all of us—CASA, BASI as it was known at the time—were involved, as you well know. On the issue of CASA working cooperatively with the thenBASI, now the ATSB, Mr Alan Stray and I had quite a number of discussions. It is very unusualfor someone on the board to take direct action like that. But in that case emotions were runninghigh, things were happening fast, and it was felt that maybe I should have a chat to Alan Stray. Idid. We got on well together. We both reviewed the MOU between the two organisations. Weboth agreed that fundamentally it was a good document. So the issue was the 19CCs. We bothagreed that, in the future, the way we would cooperate with each other was basically not toinsist on 19CCs. In fact, I said to Alan Stray at the time that, if he found that he was gettingnowhere with the authority, for whatever reason, my door was always open. In fact, I wroteAlan Stray a letter on 22 January 1999, which was right in the middle of the G class issue. I justwant to read one paragraph. It states:

In hindsight, might I respectfully suggest that any future matters such as these between our two organisations be handledon a collegiate basis between the Director of BASI and the Director of Aviation Safety, CASA, with either party resortingto legal imperatives. At the end of the day our two organizations, whatever their faults, are collectively responsible forthe safety of aviation in Australia, and we are ultimately responsible to the people of Australia to deliver precisely that,without fear or favour.



Chairman, I still believe in those words.

I thought I would also bring up and put on the public record something that has certainly beenin the press many times, and that is the issue of the Director of Aviation Safety. I hate to use thephrase but, as chairman, I guess ‘the buck stops here’. As you are well aware, there have beenthree matters that have got into the press. One is called the Brindabella incident; the second iscalled the Horn Island incident; and the third is the Moruya incident. I would just like to pointout that that is over a period of close now to two years. The board took a very strong view onthe matter, and we have gone to inordinate length to ensure that due process and corporategovernance was followed. It has therefore taken a long time to resolve the issues.

Let me tell what you the resolutions were. The finding in the Brindabella incident was thatthere had been no breach of the law. In the Horn Island case, there was a finding of technicalbreach but, when tested against Commonwealth prosecution policy, it was determined that itwas not a matter that should be referred outside of CASA. The third, the Moruya incident, wastreated very much as a matter of poor airmanship, and the director has been counselled by thearea manager of CASA. The board, as I have said, took a very strong view on this. We have notonly caused to be conducted an in-depth investigation on all three matters, but we have takenthe liberty—at expense to the crown, I might add—to get those three reviews reviewed again bya very eminent lawyer, and reviewed beyond that by an even more eminent lawyer, all of whomsupport what I have just told you.

So, where are we at? Yes, certainly the director of aviation has sinned. But certainly in myexperience with aviation matters in three countries, there is probably not an aviator today thathas not sinned. Are they mortal sins? No. Are they a hanging offence? No. As chairman, I havealso taken the step of counselling Mr Toller in relation to his role as the Director of AviationSafety, because in that role he is necessarily held to a higher standard. The board and I are fullysatisfied that the matters have been properly addressed and resolved, and that they have beenhandled in full conformance with corporate governance. So I think that puts an end to the matterand I would like to move on, because Mick Toller is a member of the board; he is doing anoutstanding job.

Aviation safety for this nation is serious enough for us not to allow chaos to take part. If youlook around on your TV screens every night, half the world is in chaos, and there is a lesson tobe learned there. If you look at the news bulletins every night, the first thing you realise is that,in those areas of the globe that are in chaos, people are worried about safety. You cannot havesafety in a chaotic situation. But there again, as I say, it is not an easy job: you are damned ifyou do and damned if you do not.

I have a wife and a family; in fact I have a rather large family. I go home to them at night andI am constantly being asked, ‘Why are you spending so much time at it?’ You have to alwaysremember that the board of CASA, with the exception of the Director of Aviation Safety, is verymuch under the corporate model. It is non-executive, it is part time. We do not get paid a lot ofmoney. As I said, my family asks, ‘Why are you spending so much time at it?’ The answer isthat right now I have the responsibility on behalf of the authority and on behalf of the nation,and that is why I spend the time at it.



In summary, I believe we are heading in the right direction in the authority. I will give you ananalogy. Over the years, I have been involved with the military. I have been involved, forexample, in the Cold War with the full carrier battle group operations. I can assure you with thefull carrier battle group operations there are a number of lessons you learn. The first is that youhave a lot of things moving in the same direction. You have the carriers, you have the escorts,you have the submarines, you have the carrier air patrol and so on and so forth. What you learnfrom that is, firstly, it is very hard to change direction instantaneously. You have to set a courseand stick to that course. Secondly, you have to have a layered defence system. No defencesystem is 100 per cent. The best way that we know in physics today is to have a layered defencesystem. It is this whole concept of a layered defence system that we are trying to institute in theauthority to ensure aviation safety for this country.

I am running out of time, but I thought I would end with a quote. It is a quote I have alwaysliked. In a sense it has been a guiding beacon to me over the years. It was made by a veryfamous man, and it goes like this: ‘It is not the critic who counts nor the man who points outhow the strong man stumbled or where the doer of deeds could have done better. The creditbelongs to the man who is actually in the arena, whose face is marred by dust and sweat andblood and who at worst, if he fails, at least fails while doing greatly so that his place shall neverbe with those whose cold and timid souls know neither victory nor defeat.’ That was TheodoreRoosevelt. I can assure members of this committee that everyone in this authority is in the arenaevery day trying to do a good job. I can also assure you that in the great debate there are a lot ofSir Humphreys on each side of that debate. I would just like to reassure the committee that I amno Sir Humphrey. To finish, I think the best way of summing it up is: we’re damned if we doand we’re damned if we don’t, but I can assure you all that we’ve got a damned good authority,a damned good executive and a damned good board. Thank you.

CHAIR—Mr Toller, do you wish to add anything? Have you got any operational things youwish to raise?

Mr Toller—There are two documents that we would like to table at this stage which mayhelp the committee in understanding some of the background to systemic auditing and ourintroduction of systemic auditing. I do not wish to talk to it, but I would like Mr Farquharson togive a quick description of what we are tabling.

Mr Farquharson—The recent hiatus of events has probably led to a public perception that insome way safety of aviation in Australia has suddenly changed: it has become less safe.Amongst the critics are those who would say, ‘If we only returned to the good old days, then wewould be so much safer.’ They also argue that the changes that CASA has introduced movingtowards a safety systems approach to surveillance has actually resulted in a reduction in thelevel of aviation safety. I point out to you that there actually is no objective evidence to supportthese claims.

Our surveillance program is based on a program called the Aviation Safety SurveillanceProgram. It is mandated under the act that we conduct surveillance. While there are manymeasures used to determine a level of safety, we should perhaps remember also that safety is notan absolute thing. We use these measures to determine our level of satisfaction as a community.The method adopted by CASA has been to use the surveillance system to gain informationthrough safety oversight to measure that level of safety. The current system was first put in



place in the early 1990s. In its original form, it was mainly a product based system based on theuse of check lists.

CASA has previously briefed the committee that the original system had a number ofshortcomings as well as a number of beneficial features, and these have been retained as wehave progressively modified the program. But the basic flaw of the original ASSP system wasits simplistic approach to the surveillance task. This flaw made it difficult for the regulator toaccurately establish the underlying level of safety in the aviation industry. Additionally, ASSPwas capable of being mismanaged—not necessarily in a malicious way, but the responsibilityfor developing the annual surveillance plans rested with individual officers and it was notadministered on a national basis. That has been changed.

Senator O’BRIEN—You mean uniform rather than national?

Mr Farquharson—No, it was not administered from a central perspective. The productbased ASSP required repeated checks of outputs of the system—any system that we chose tolook at. So we might find a flight operations inspector travelling repeatedly, sitting on the jumpseat of an aeroplane, watching flight procedures. The idea was to establish compliance at theend of that process. One measure of the product based system is the number of non-compliancesdetected. It is interesting to observe that, in a period of three years using the product basedsystem, the flying operations inspector of one particular office actually issued only four non-compliance notices to high capacity airline operators. On one hand, this could be seen as, ‘Isn’tthat wonderful? It represents a high level of compliance.’ Alternatively, we could say that wewere not actively doing what was effective in looking for the causes of non-compliance.

During that same period, and for a variety of reasons, the flying operations surveillance effortdropped from approximately 50 per cent of planned effort to about 22 per cent. This wasdeemed to be unacceptable and we resolved to make improvements in the system, so in mid-1999 we began to implement modifications to the ASSP system to transform it sector by sectorto a safety systems based approach that was centrally planned and monitored. The newapproach—and this is important—directed effort not only towards establishing compliance; italso directed effort towards establishing the capability of the operator systems to consistentlyproduce a safe outcome. This approach is based on principles articulated by Professor JamesReason and others and the management systems approach characterised by the ISO 9000 seriesof quality management standards, together with the disciplined approach required by the safetyregulator’s role.

Research has shown that the quality management approach, properly implemented andmanaged, can fundamentally improve organisational performance. An example I can give you isthe British Quality Management Association figures that show that accredited organisations inthat country have a bankruptcy rate of 0.2 per cent. Non-accredited organisations have abankruptcy rate of around 7.4 per cent. That is a significant difference.

The outcome of the new ASSP is to produce, in conjunction with industry, a better safetysystem. The application of the systems approach enables the regulator and the operator toexamine the systems involved and to establish a system, a series of robust defences, againstfailure. In addition, ASSP provides the capability to critically examine system performance todetermine whether product complies with safety regulations on a consistent basis.



Also introduced into our new system is a measure of risk assessment that allows us to directsurveillance effort to where we determine the greatest risk to be, and I draw your attention toindependent comments on the new approach. The Australian National Audit Office hasendorsed CASA’s move towards a safety systems auditing program and, similarly, the ATSB hasnoted that there are significant limitations on the ability of a product based audit approach toidentify inadequate defences and organisational deficiencies and that such an approach shouldonly be used to complement the system based approach.

In the same report the ATSB also noted that in the two years before the accident referred to inthat report, the QF1 report, CASA conducted minimal product based surveillance of Qantasflight operations and that, even if CASA had exercised a more product based surveillance inrecent years, as per the risk original ASSP systems, it was unlikely that the deficienciesidentified by the ATSB would have been discovered. The systems versus product approachmeans that you can obtain results which allow you to distinguish between a good and badproduct. If we just use a random product approach, you will see something at the end of thesystem and you may assume that the system is in good order. You may, if you see a bad product,issue a non-compliance notice. We have seen over many years that the operator then repairs thatparticular thing and we go back through the same cycle again through the next inspection andsee the same product problem. The product system does not address the capability of the systemthat underpins its production.

The developing system has allowed us as the regulator and the operator the mechanism toidentify inadequate defences within the organisation and also system deficiencies and, havingdone so, moved to eliminate them. We do not wish to return, as the regulator, or to see theoperator have these deficiencies in their system that are producing non-optimal safety outcomes.

As a direct result of the introduction of this new system, or the modifications to the system,the major airlines and some smaller operators have made fundamental changes to theirorganisations and systems. We heard part of that in the Ansett submission today. An importantelement of this approach has been a significant shift away from CASA, the regulator, beingconsidered the operator’s quality control department. We have moved to a situation where theoperator exercises responsibility to maintain a safe system.

We have tabled this report and I commend it to you. There are details there about how thesystem has evolved, the training involved, and how we intend to move forward. The system willnot produce a step change. It will take us a period to raise the standard of awareness of theindustry and for the industry to accept and take on board and implement what this systemmeans. Equally, we are training and retraining as we find issues that we need to deal withinternally. I believe that the system is a step forward and will produce a better safety outcomefor Australia.

CHAIR—I think that the question that arises out of that is: how are you carrying the industryforward with you in terms of introducing that?

Mr Farquharson—We are moving segment by segment through the industry. The initial stepwas taken with the high-capacity end, the major airlines. There has been a major program ofeducation and audit, and the audits have been collaborative. We have used the audits to train the



CASA staff and to show the industry how, by application of this method, the benefits can begained.

CHAIR—How long is it going to take you to get through it? I am not asking you to the lastminute, but is it a 12-month program, an 18-month program, a six-month program?

Mr Farquharson—In this coming financial year we will move the focus more onto the nextsegment, one that we identified as a low capacity area, and then we will move through the high-capacity charter operations, and so on, through the whole organisation. We will do that as bestour resources allow. We have a plan to deal with the low capacity airline operators in thiscoming year and if we have resources to spare then we will start to look at the high order charteroperators. To get the benefits out of the system we will not see an instantaneous change. Likeany system, it takes a period of introduction and we would expect to see, if the system is goingto produce what we believe it can, a significant benefit in three or four years.

CHAIR—Thank you. Dr Scully-Power, I think that your statement today was both importantand timely, but one of the criticisms that have come to me over recent events—or going back topre-Christmas last year—concerns the role of the board and CASA, or the director of CASAand his officers. There has been little public support forthcoming from the board for Mr Tollerand the people carrying out what at times have been difficult decisions. And it has also beendifficult for some of the airlines—and I particularly refer to Ansett and Qantas, though today’shearings are not about Qantas, but I think they think they are in the same spectrum. What isyour reaction to that criticism which has been quite widespread?

Dr Scully-Power—The role of the board, either in a government instrumentality, a statutoryauthority, or in corporate Australia, is not one of day-to-day hands-on management. It isprecisely defined in the Civil Aviation Act and I think we are following that to the letter. Indeed,that is exactly what corporate practice should have us do. Yes, I understand that there areelements that have been critical. We have this debate in the Australian Institute of CompanyDirectors all the time: what is the role of independent directors and non-executive directors andwhat is the role of the board? At the end of the day it is the chief executive—in our case, theDirector of Aviation Safety—who has to make the operational decisions. He is also double-hatted: he is a member of the board. Beyond that, again, it is in the act that the Director ofAviation Safety serves at the pleasure of the board. That is one hell of a Damocles sword tohang over his head.

Senator O’BRIEN—Mr Toller and Dr Scully-Power, we have been given a presentation ofthe achievements of CASA under the board. I think we were told there are about 160 items.What has CASA got to hide? Why has CASA gone to such extraordinary lengths to inhibitATSB’s access to officers and documents, as outlined by ATSB this morning? I am amazed atthe correspondence we received this morning, particularly under the signature of Mr Gemmell. Iam not sure whether he is the author in the sense that there has been some drafting committee orlegal assistance. What has CASA got to hide from an investigation by ATSB?

Mr Toller—If you look at the letter from Mr Gemmell of 26 April, you will see that CASAhas absolutely nothing to hide from the ATSB. However, the point that we were making wasthat we were being given demands that related to an inquiry about which we believed we knewnothing. In other words, the scope of the inquiry seems to have changed without our having



been informed about it. Before we were prepared to effectively go along with what the ATSBwanted, we wanted to know exactly what they did want. The letter to Mr Gemmell of 27 Aprilis effectively a letter to CASA requiring documents. Looking at the third dot point of thatdocument, I could make a very strong case that we would have to send about three-quarters ofthe CASA documents in existence across to the ATSB if we were to cover that requirement,which is effectively for all CASA documents anything to do with the continuing airworthinessof class A transport aircraft. What we were trying to ascertain was where the goalposts were.Before we got embroiled in any legal arguments, we were trying to ask them, as we had on the26th, what this was all about. Mr Gemmell was handling this and, as such, he can give youfurther information. But that is the basic gist to it. There was no attempt to hide anything fromthe ATSB or to stop anything going to the ATSB if we only knew what they were up to.

Senator O’BRIEN—There was no attempt to prevent anything from going to the ATSB ‘ifwe knew what they were up to’? Those were your words.

Mr Toller—We would need to know the limit. They cannot give us a blanket request foranything and everything. I will use a statement that has made in the past: they cannot go fishing.If they are holding an inquiry into a particular issue, we just need to know what that issue is andwe will cooperate fully, as I have agreed with Mr Bills and as he stated this morning. We justneed to know what it is that they are investigating. It is all laid down in the memorandum ofunderstanding for exactly that reason—so that both sides are always aware of the scope of aninvestigation.

Senator O’BRIEN—You referred me to Mr Gemmell’s letter of 26 April. It refers to MrStray’s letter of 23 April, which says:

The ATSB team investigating the circumstances surrounding the procedures for the control of continuing airworthiness ofClass A aircraft require ...

And then there are three dot points. That did not tell you in sufficient detail what the ATSBwere investigating?

Mr Toller—We have never been informed of an investigation into the circumstancessurrounding the procedures for the control of continuing airworthiness of class A aircraft. Therehas never been any formal notification of CASA of an inquiry of that nature. The letter that wegot came out of the blue, and we did not know what they were talking about. We were trying tofind out what they were talking about.

Senator O’BRIEN—They did say it was for the purposes of an investigation under this part,which is division 3.

Mr Toller—The point is that we were not aware of that investigation. If you go back to thememorandum of understanding, paragraph 5.20 basically says that, if there is going to be asystemic investigation, there will be discussions first with the authority on the scope and natureof that investigation. We were not aware of the nature of any systemic investigation into thecontinuing airworthiness of class A transport aircraft.

Senator O’BRIEN—So that was the basis of the objection?



Mr Toller—It is an issue of process rather than anything else. There are processes laid downwithin the memorandum of understanding, which we expect the ATSB to comply with. In hisresponse, Mr Gemmell effectively said, ‘We’re trying to work out what you want. When weknow what you want, we’ll help you. The people you are asking to see will in fact be availablenext Tuesday.’ So there was never any question we were trying to hide anything—far from it;we were just trying to ascertain what on earth was going on.

Senator O’BRIEN—Mr Gemmell wrote:

Your request to speak to Mr Castle and Mr Bailey cannot be considered until we have resolved the legal issues. Howeverif this resolution can be achieved, both officers will be in Canberra on Tuesday 1 May 2001.

That is an equivocal rather than an unequivocal commitment to making the officers available, ifI might say so.

Mr Toller—It is equivocal subject to the resolution of the legal issues. Do you want to talk toPeter?

Senator O’BRIEN—I am sure Mr Ilyk will have a few things to say during the course of theafternoon. Do I understand you correctly to be saying that the purpose of this exercise—theputting of the wall between CASA officers and ATSB, which I would categorise the process ofthis correspondence as achieving—was to effectively remind ATSB that they had an obligationto consult with you before investigating, particularly where the investigation involved CASA?

Mr Toller—I will let Mr Gemmell answer that one.

Mr Gemmell—I will respond by saying there are two issues that need to be considered.Firstly, there were some legal issues. They were not new legal issues—they had been around fora little while—but they had not been resolved between ATSB and CASA. It was my intention tosay, ‘We can’t have some differing legal interpretations of the law; we’ve got to get together andsort those out to make sure we get an agreement on that.’ So that was one issue that needed tobe resolved. The second issue was the scope of the inquiry. They were asking for access todocuments and people, and we wanted to know the scope of the inquiry and where they wereheaded. The description of it was different from anything we had seen before, and we wanted tohave a proper conversation about what it was all about and where they were headed.

You will see in the subsequent documents that they asked us to provide all documentsassociated with the control of continuing airworthiness of class A aircraft. With the best will inthe world, we could not have responded to that because it was an enormous number ofdocuments. Even to help with goodwill, we need some specificity about what they were afterand what we could provide.

Senator O’BRIEN—There is not a lot of goodwill in your letter of 29 April. Even withgoodwill it was going to be difficult. It was made even more difficult, if you look at your letterof 29 April.

Mr Gemmell—The letter of 29 April was sent to lay out the process we wanted to gothrough. We had to do it quickly to meet the timetable that ATSB had set down in their notices



to us. We had to resolve a few things quickly. As you can see, we set out a process whereby wewould have the people available and we would have a process to try to sort out the legal issuesthat were in contention. If they were sorted out satisfactorily, we could proceed on todiscussions, and that is what occurred. We previously laid out what we were doing to compilethe documents that they were interested in seeing.

Senator O’BRIEN—Sorry, you trailed away a bit at the end there. What was that?

Mr Gemmell—I had laid out in the letter of 26 April that we were compiling the documentsthat they were interested in seeing in Canberra.

Senator O’BRIEN—The letter that you sent on 29 April says:

CASA is unable to ascertain from the notices you have issued whether the investigation has been initiated within thescope of your lawful authority.

And:

In this latter regard, I note that section 19CB of the Act only allows you to conduct an investigation in relation to a safetydeficiency “involving an aircraft”, either in or outside Australian territory.

I am sure Mr Ilyk is going to explain that to us, but in coming to that view was there anyconsultation with the department and/or with the minister or his office about CASA’s approachto the ATSB’s request?

Mr Gemmell—In coming to the view that is expressed in that paragraph?

Senator O’BRIEN—In the letters of 29 April and of 26 April that you signed.

Mr Gemmell—The opinions expressed in that letter of 29 April are CASA’s opinions.

Senator O’BRIEN—That is not the question. Was there any discussion or consultation withthe department and/or with the minister or his office about that approach?

Mr Gemmell—In forming those opinions, no.

Senator O’BRIEN—About that approach to the ATSB’s request for access to your officesand material.

Mr Gemmell—We had advised the department and the office of the request—

Senator O’BRIEN—The minister’s office?

Mr Gemmell—Yes. We had advised the minister’s office of the notices that ATSB hadserved. We certainly did not discuss the terms of that response with them. I am trying to recallwhether we advised them, because that was done over the weekend. We may have advised themthat this was what we proposed to do—which we thought was a productive way forward to



enable people to turn up and have documents available but sort out the issues we wanted sortedout.

Senator O’BRIEN—Did you or any of the other officers at CASA actually direct CASAofficers not to deal with the ATSB in relation to its inquiry into Ansett and CASA?

Mr Gemmell—No. On the Monday morning we turned up with the people in question andwe met with ATSB and sorted out the legal issues—at least an arrangement was struck thatenabled them to proceed. They reissued the notices and then the interviews proceeded. On theactual legal issue that lay below this, a process has been agreed as to how we will sort that outover time. It is still not actually resolved and it needs to be. We do not want underlyingdisagreement over legal interpretations of what the act says.

Senator O’BRIEN—What is CASA saying—that there is a deficiency in the legislationwhich is a restriction on ATSB?

Mr Gemmell—No, it is not saying there is a deficiency in the act. It is a question of thewords of the act. The advice that the ATSB has implies that they can proceed in one way whileadvice that is available to CASA suggests differently. That needs to be sorted out so we have amutual understanding. It is a matter for the lawyers to get together and sort out a process toagree.

Senator O’BRIEN—Has CASA sought independent legal advice or is it using legal advicefrom its own counsel, Mr Ilyk?

Mr Ilyk—Both.

CHAIR—You said, ‘Both’?

Mr Ilyk—Yes, CASA’s own legal views, and one of CASA’s panel members has providedlegal advice to that effect as well.

CHAIR—As I understand it, the process you have gone through emanates from the MOU. Isthat correct?

Mr Gemmell—Part of the problem is that the process we have gone through does notparticularly emanate from the MOU. The problem we have with understanding the scope of theinquiry is that we felt we had not been properly consulted on that scope, and the MOU does saythat we should be consulted on the scope.

CHAIR—Therefore, it does come out of the memorandum of understanding. Does that applyboth ways—from ATSB and CASA?

Mr Gemmell—Yes.



Senator O’BRIEN—You have got the advice of your office, Mr Ilyk, and the advice ofexternal legal counsel on the matter. Presumably ATSB—obviously you cannot answer this ifyou do not know the answer—have their advice on the matter.

Mr Ilyk—I am not aware of what advice ATSB have got on this particular issue. It isimportant to point out that CASA does not deny, and certainly does not seek to deny, that ATSBhas very broad powers under the Air Navigation Act in relation to the production of documentsand requiring witnesses to attend for the purposes of an investigation. The basic issue that arisesis the scope of the power under section 19CB of the Air Navigation Act. That gives the Directorof Air Safety Investigation the power to conduct an investigation into a safety deficiency. Theissue that has arisen is whether it is permissible for ATSB to seek to conduct an investigationbasically into any safety deficiency, which seems to be the gist of what ATSB has been doing,or whether 19CB goes further and in fact requires that safety deficiency to be one that involvesor affects an aircraft. That is the issue.

On the basis of the notices we received, the notices seemed to go beyond what is permissibleunder 19CB; that is, any class A aircraft, which basically means you can do a safety deficiencyinvestigation into any aircraft in Australia. In our view, that is much too wide. The act says youcan conduct a safety deficiency investigation involving an aircraft, so it must be limited to that.The issue that we were trying to decide was: what are the aircraft to which this safety deficiencyinvestigation relates? At the end of the day, as Bruce has said, we came to the agreement thatthe 19CC notices would actually be narrowed down to the continued airworthiness of the Ansett767 aircraft. In that way, CASA knows what the limits of the information are that it has toprovide and what the limits of the questions are that have to be answered under compulsion oflaw under this process.

Senator O’BRIEN—I think I understand what you are saying. For example, 19CB(1)(a)refers to ‘the circumstances surrounding any accident, serious incident or incident that occursinvolving or affecting an aircraft in Australian territory’. You are suggesting in this case that itis probably not open to ATSB to investigate in generality CASA’s systems for surveillance,monitoring and regulation of aircraft generally, but only in relation to a particular aircraft.

Mr Ilyk—They can conduct investigations. The director, under 19GA, has a very broadpower to do a whole lot of things. Under that power, he does not have any powers ofcompulsion—no powers to require witnesses to attend to take oaths and no powers to requireproduction of any documents. Section 19CB is different because it imposes a whole series ofpowers upon the Director of Air Safety Investigation.

Senator O’BRIEN—Did you say GA?

Mr Ilyk—Yes, that is the provision which sets up the office of Director of Air SafetyInvestigation, and it gives him certain functions. Under those functions he could carry out somesort of administrative examination of whatever he wanted that relates to that office, but underthat provision there are, in fact, no compulsive powers. The fact is that under 19CB parliamenthas given ATSB or the Director of Air Safety Investigation very draconian powers to requireproduction of documents and attendance of witnesses, and also to require people to answerquestions under oath. CASA’s view is that—and this is not trying to be obstructionist—if those



powers are going to be used they should be used in accordance with the law and not go beyondthat law, and so it is simply requiring some sort of accountability for the use of those powers.

Senator O’BRIEN—I must say, hearing the evidence this morning, it seems remarkable tome that there be a suggestion that CASA had, at some stage at least, found it desirable that therebe such directions. Is that true?

Mr Ilyk—It is. It is actually true that there is a benefit in CASA getting 19CCs. That does notdispel the suggestion—

Senator O’BRIEN—What is the benefit?

Mr Ilyk—For a start, under the Privacy Act, CASA is bound not to release any informationrelating to personal material relating to individuals and it cannot release commercial-in-confidence material, but the Privacy Act says you can do that with impunity if you do so inaccordance with the requirement of the law. Giving a section 19CC notice for ATSB in factgives CASA that protection because it is providing that information in accordance with therequirement of the law. So that is why, in fact, there is a lot of benefit in CASA getting 19CCnotices.

Senator O’BRIEN—Except where you contest them, at least from ATSB’s point of view.

Mr Ilyk—No, that is not contesting them, it is simply saying that if these powers are to beused they should be used in accordance with the limitations placed upon the director by the AirNavigation Act. That is the law of the parliament.

Senator O’BRIEN—Mr Toller, should ATSB be inquiring into the efficiency of CASA’sregulatory system?

Mr Toller—I think the problem with that is that you have put a very broad term of referencethere. Under the memorandum of understanding and under the Air Navigation Act there arecertainly obvious things that they can be investigating, and under the MOU they should bediscussed first. I do not see the role of the ATSB as being a general auditor of CASA, becauseour auditing is effectively accomplished by the Auditor-General and the Audit Office, so therehave to be things that CASA does that are normal operational issues that are audited by theAudit Office.

Senator O’BRIEN—But surely AAO has an expertise which would not be the same asATSB’s and there would be a greater relevance in terms of safety for ATSB to be involved?

Mr Toller—Precisely, but the important thing there is that they must, in accordance with theact, be doing something to further aviation safety. In other words, they are not to be doing it asan audit of CASA, they must believe there is a deficiency that has been demonstrated and theycan come to a conclusion that will further aviation safety. All we are saying is that as anauthority, if they believe that, we need to discuss it with them in terms of what the scope ofthose inquiries should be. That is what the memorandum of understanding quite clearly says. Inparagraph 5.20 it says:



Before commencing an investigation of a safety deficiency which directly involves the operations of CASA—

which is what you are talking about—

BASI will consult with CASA and identify the perceived safety deficiency, the scope of the investigation and thepotential for mutual co-operation on the project. The parties agree that such investigations are not intended to extend toindependently auditing CASA management practices. Where there is any dispute about the purpose or conduct of such aninvestigation, the matter will be referred to the Direction of Aviation Safety CASA and the Director Air SafetyInvestigation BASI.

And this goes back to 1996, I believe—May 1996 it was signed. It is just as valid today as itwas then, and I think that paragraph sums it up perfectly. If you look at it, my response to yourquestion is exactly in accordance with the MOU.

CHAIR—What clause is that?

Mr Toller—It is 5.20.

CHAIR—I have the MOU here; I just want to know what clause it is.

Mr Toller—Sorry. The important one is 5.20.

CHAIR—And the dates are 24 May and 1 June 1996.

Mr Toller—Yes, 1996. And it is an agreement with BASI rather than with the ATSB, but inthat, the structure of the act and the regulatory structure regarding the Director of Air SafetyInvestigation under the Air Navigation Act have not changed. That is equally valid today.

CHAIR—Has any approach been made by the Bureau of Air Safety Investigation oryourselves to amend this document since then?

Mr Toller—Yes. A proposed amendment, a completely new document, is being discussed,but it will not significantly change the elements of that clause.

CHAIR—Thank you.

Senator O’BRIEN—I return to my first question: given the statement of Dr Scully-Powerthis morning, what is the problem with the safety investigation bureau looking at how efficientyou are as safety regulator, other than the fact that you have an agreement that you think theyshould not do that?

Mr Toller—No, we do not have an agreement which says we should not do it. We have anagreement which says we should discuss it beforehand, identify what the deficiency is andconsider what the scope of the investigation should be.

Senator O’BRIEN—The perceived deficiency.

Mr Toller—Yes.



CHAIR—So you are saying that, under the agreement, it should be specific and not general?

Mr Toller—Yes.

Senator O’BRIEN—So they have to identify a perceived deficiency before they can look atyour systems?

Mr Toller—And the scope of the investigation. They are not a permanent internal audit forCASA. They have significant roles that are defined in the act, which predominantly hangaround accident and incident investigation and, from those accident and incident investigations,producing recommendations which will further the cause of aviation safety. If you like, that isalmost an adjunct role, and that is why it was agreed back in 1996 that this would be the way itwould be approached. That was the process that was agreed at the time. I think that it is a totallyvalid and appropriate process.

Senator O’BRIEN—It just seems to me that, in this case, you have had a situation where amajor carrier has had a couple of significant safety problems under your surveillance. You get tothe point, I do not know whether it was brinkmanship, but it seems that there was a significantpossibility of quite severe action by CASA against Ansett. In those circumstances, given whatthis committee has heard about CASA’s own self-assessment in relation to how it had regulatedQantas, and given the evidence we had from Ansett, it seems pretty natural to me that the safetybureau might want to say, ‘In the interests of safety, perhaps we should have a look at howCASA is going.’

Mr Toller—Absolutely.

Senator O’BRIEN—I understand that you have some strong views on this, but are we reallyonly at the point where this impediment is process driven rather than driven by concern onCASA’s part that the ATSB should not be conducting some kind of fulsome investigation?

Mr Toller—No. I believe that an investigation by the ATSB into the issues surrounding theservice bulletins issues, et cetera, as announced in January, is not inappropriate. There may havebeen other ways of doing it. They could well have said to us, ‘When you’ve completed yourinvestigation, we will look at your conclusions, and if we don’t think that your conclusionsaddress the problem, we will start an investigation,’ but they elected to start an investigationback in January. The terms of reference of that investigation were fairly broad at the time. Theyincluded Ansett and Boeing. The airworthiness of 737 aircraft, I think, was the originalstatement, or something of that nature—

Senator O’BRIEN—737 or 767?

Mr Toller—and CASA, and then that had to be retracted and changed as far as Boeing wasconcerned. It was on that basis that I agreed with Mr Bills that we would fully cooperate—inother words, that we would not duplicate each other’s efforts, because there is no point induplicating each other’s efforts while we are looking into the same things—and we have noproblem with that at all.



However, the issue that arose last week, when they were asking for documents and to talk topeople, no longer referred to what we thought was an investigation into the Ansett 767s. Itsuddenly referred to an investigation into the continuing airworthiness of class A transportaircraft. Frankly, that is just about every major aircraft on the register—it starts with the 747-400s of Qantas and it comes right down to the Navajos and the Chieftains that are operated bythe small regional charter airlines, et cetera, or RPT airlines. As I have said, if we start to haveto answer questions on a scope of anything from Qantas 747-400s to the Airlink and Dubbo’sPiper Chieftain, and produce every document that we have in the authority that has anythingwhatsoever to do with that, I believe that we need to narrow the scope and understand what isgoing on and have some rigid ideas about what we are talking about, because at this stage weare talking about something that is so woolly we are talking about jelly.

Senator O’BRIEN—If I am following what you and Mr Ilyk are saying, if they had issuedyou with a ream of documents that named every aircraft type, you would not have had anygrounds for objection.

Mr Ilyk—They did not do that, Senator, so—

Senator O’BRIEN—I know that. That is what I am suggesting: that this is an argumentabout form, not substance.

Mr Ilyk—No, I think there is form and there is substance in this. The director of Air SafetyInvestigation has not been given a general power of investigation into anything, and certainlynot anything to do with aviation. The act has restrictions on power, and in order to utilise thosepowers the director must comply with the limits of the powers in section 19CV. That is all thatCASA was saying.

Senator O’BRIEN—So wherever there was an aircraft type involved in an incident, ATSBcould look at CASA’s role in relation to the regulation or the performance of CASA’s duties inrelation to the operations of that aircraft?

Mr Ilyk—That could very well be the case.

Senator O’BRIEN—The point that I was making is that, to get to the point that it appearsthat ATSB was at, they could go through their lists and tick off every aircraft type but issue youwith a ream of documents that combined them into the one exercise, and that would get over theform issue.

Mr Ilyk—No, I do not think that is correct. You cannot just add on types; there actually hasto be a safety deficiency or an accident or an incident relating to that aircraft.

Senator O’BRIEN—If there is an incident involving that aircraft type somewhere inAustralia, they are enabled, aren’t they?

Mr Ilyk—You may be able to. I am not going to speculate on whether you can or cannot atthis stage.



Senator O’BRIEN—You have taken legal advice on it; I presumed you would be full bottleon it.

Mr Ilyk—We looked at this particular issue, and that is the only issue we looked at.

Senator O’BRIEN—So there is specific advice on this particular issue? Could you clarifyfor me what the particular issue is you have taken advice on?

Mr Ilyk—The particular issue is the validity of the notices that were issued. There are severaldifficulties with them, but the main issue in relation to those notices is the scope of the powerunder 19CB(1)(b).

Senator O’BRIEN—I thought the evidence that we had taken was that this issue predated 23April. No?

Mr Ilyk—Not as far as I am aware, Senator.

Senator O’BRIEN—So all the legal advice you have been referring to is post 23 April?

Mr Ilyk—Is in relation to this specific issue.

Senator O’BRIEN—It was obtained after the letter of 23 April?

Mr Ilyk—It was obtained in relation to that letter.

Senator O’BRIEN—When was it obtained?

Mr Ilyk—It would have been the Thursday, Friday, Saturday.

Mr Toller—Was it a Friday or Thursday you started it?

Mr Ilyk—The issue first arose, as far as I was aware, on the Thursday, when Mr Gemmellshowed me a copy of the letter. I advised him that there were some problems with the way thisnotice was worded and that he should have a discussion with Mr Stray, which he did.

Senator O’BRIEN—Do you mean Thursday, 26 April?

Mr Ilyk—Yes, and our response of 26 April.

Senator O’BRIEN—So all the legal advice was obtained between 26 and 29 April initially.There may have been further advice obtained—I am not sure if you are saying that.

Mr Ilyk—I am only talking about the current issue, Senator. That is the issue that we havebeen looking at in terms of the operations of section 19CB. This issue did arise certainly tosome extent in the class G airspace and we took the same view at that time, and that matter hasnever been resolved. But the view that CASA took and the advice it got at that time arebasically similar to the advice we have provided this time.



Mr Gemmell—I would add that part of what I was trying to do was to make sure that therewas a resolution of a legal issue. The agreed interpretation of that had not been sorted out, and itneeded to be aired and sorted out.

Senator O’BRIEN—This is in your letter, Mr Gemmell—you did all the drafting?

Mr Gemmell—Which letter are you talking about?

Senator O’BRIEN—Of 29 April.

Mr Gemmell—I certainly took advice on that letter. I signed it, it is my letter; I took adviceon the preparation of it.

Senator O’BRIEN—It is a bit legalistic. I am not sure whether General Counsel or externalcounsel assisted with it.

Mr Gemmell—There was certainly assistance with that letter.

Senator O’BRIEN—From what source?

Mr Gemmell—From within CASA, General Counsel and others, and, of course, me—if Iwas any assistance.

Senator O’BRIEN—What you are suggesting, Mr Ilyk, is that the proposition that Iadvanced would require some legal examination as well. But really we are going around incircles. The issue is: should ATSB have the role that it proposed for itself in relation toexamining the broad issue of just how effective CASA is in its regulatory role for the aircraftthat carry the most people around this country?

Mr Toller—And the authority fully supports the memorandum of understanding that existsbetween us and the ATSB and believe that that it is the correct process for addressing thesesignificant issues.

Senator O’BRIEN—So if that does not clearly attribute that it is appropriate for ATSB tohave that power, then they should not have it?

Mr Toller—I do not think I am in a position to comment on that. They have that power underthe regulations of parliament under an act.

CHAIR—Surely the issue is that you have two things to work on: one is a memorandum ofunderstanding signed by both parties and, two, what is in the act and other acts like the PrivacyAct and perhaps others which I do not know about. Aren’t they the guidelines under which youhave to operate in terms of doing all these things? Surely they are the guidelines that the ATSBhas to operate under. If there is a deficiency in the memorandum of understanding then it is upto you or the ATSB people to sort it out.



Mr Toller—We do not believe there is a deficiency in this area of the memorandum ofunderstanding, and I do not think we have been led to believe that the ATSB believes there is adeficiency in this area of the memorandum of understanding.

Dr Scully-Power—I would like to make a final comment. I am a stickler for corporategovernance—corporate governance in this case is codified in the memorandum ofunderstanding and this authority sticks to that rigorously. If there are some deficiencies in that,we need to address them. I would like to remind members of the committee that, at the end ofthe day, this authority does stand. It is in writing to have a collegiate working relationship withthe ATSB because ATSB, the authority and, I might say, this committee have collectively gotthe responsibility to get good safety outcomes for this nation. Thank you.

CHAIR—Thank you. I understand what you are saying because I have been a non-executivedirector on a number of companies.

Proceedings suspended from 3.01 p.m. to 3.12 p.m.CHAIR—Mr Toller, with regard to the systems we have been looking at with Ansett and

CASA, are you satisfied now—and this follows a question from the February estimates—thatthe system operating between Ansett and CASA is of the type that we as a committee have beenseeking for a couple of years? Or do you still have more work to do?

Mr Toller—You always have more work to do, Senator. However, I believe that the movesthat have been made in the last year or 18 months regarding how we relate to the high capacityRPT operators—and this is not just Ansett—how we audit them and the expectations we haveof them as organisations are the right way to go. I believe that the system is working well now,but I equally believe that any system of that nature evolves with time and can be improved.

CHAIR—Thank you. We have had a bit of discussion today on the service bulletins and theappropriateness of them as a mechanism. You have this strange, to me anyhow, line where oncea service bulletin becomes mandated you are ‘all hands on’, but when it is a service bulletin youdo not seem to have any involvement. How are you addressing that issue? It would seem to methat there needs to be some leakage back to the regulator in terms of the service bulletin as wellas the mandated bulletin, particularly—as we talked about this morning—with the variousratings that they have on them. How are you handling that? What are the plans for the futureand are you going to take a more active role as a regulator in relation to the service bulletins?

Mr Toller—These events have shown a weakness in the current system. We are doing anumber of things at this stage with the intention of eventually resolving what the best way tohandle this in the future is. We are not leaping to a conclusion. One of the first things we did, asyou heard this morning from the Boeing testimony, was send two of our technical experts toSeattle to talk to Boeing, the manufacturer, and the FAA, as much as anything else to discusswith them the sorts of things that had happened in the two service bulletins that we were dealingwith here in Australia and to see whether there was any weakness in the system, particularly onthe FAA side in terms of their ability to make a decision at a reasonable speed, and to seewhether alert service bulletins should become airworthiness directives. It is interesting to notethat, subsequent to those meetings that we had in the States, the FAA has mandated, has madeairworthiness directives, both those two service bulletins that we had earlier mandated. Therehas almost been a reverse process here: we mandated them and they have now followed on.



We are also taking a paper to the ICAO—International Civil Aviation Organisation—airworthiness panel next week in Montreal. The panel is the senior panel that looks atairworthiness matters. We are taking a paper to that to try to get a consistency betweenmanufacturers on the terminology that is used in service bulletins. What might be called an‘alert service bulletin’ by Boeing might be called a ‘mandatory service bulletin’—even though itis not mandatory—by Airbus. There are a number of other terms used, and we believe it wouldhelp all of us as regulator authorities if there was some consistency. Boeing, as an Americanmanufacturer, does use the ATA system, as was discussed this morning, but we believe thatthere is validity in everybody going onto a consistent system worldwide.

In terms of the assessment of service bulletins and whether they should be turned intoairworthiness directives, clearly the evidence that we have heard is that Australia is very muchin line with the rest of the world. What we do is effectively what the other major nations do,which is wait for the certificating authority. That is not inappropriate because the manufacturerand the certificating authority have an immense amount of knowledge about aircraft types thatindividual authorities around the world cannot be expected to have. I believe that there are anumber of things that we should be doing in this respect, and one of them—and this is only anidea at this stage—is to set up a much closer relationship between the manufacturers and thenon-certificating authorities; in other words, the rest of the world. This can be led by a team ofAustralia, Canada and various JAA nations, for example. There were stronger than broad hintscoming out of the manufacturers as to what the manufactures believed should be turned intoairworthiness directives so that, if anything got slowed up within the American process underthe FAA, where they are required under normal process to put out an NPRM for anairworthiness directive, and yet it was an urgent issue of flight safety, it could be picked upharmoniously by the rest of the world as a significant issue and, if you like, the rest of the worldlead the States rather than the States lead the rest of the world in terms of Boeing or the DGCAin France for Airbus. That is one idea which is worthy of further discussion with most of themanufacturers.

The other issue we are discussing at the moment, which I think has some validity, is someform of annual check by the operators on each aircraft, which basically says that everything thatshould have been done on the aircraft in that year has been done. Bear in mind that an awful lotof service bulletins actually do not get done. For an awful lot of them, it just gets said, ‘Wewon’t do that,’ or ‘We don’t need to do that.’ It is interesting: when you were talking numbersthis morning, in the year 2000 we had 9,494 service bulletins and airworthiness directives.About 1,200, in round numbers, of those were airworthiness directives. So you are talking about300 service bulletins a day; that is the figure I quote for people to start to get a feel for what thenumbers are.

Senator O’BRIEN—Every day?

Mr Toller—There are 300 every working day coming to the authority. As I say, a lot of themare pretty minor things. They might be notification of a change of part number, an additionalapproved manufacturer or things like this. In terms of the important ones, I think what wewould like to be seeing is some sort of tick-off by the operators for each aircraft that the servicebulletins have been done or a brief reason why they have not done them, which we can audit.This gives us some sort of feedback on the fact that they have at least had to consider each one,that they have not missed any—which is one of the problems that we have at the moment—and



that in consideration they have got what they believe at any rate to be a valid excuse for notdoing them. Then we would audit some of those excuses to make sure they were reasonable.

Senator O’BRIEN—It sounds like a good improvement on your current system.

Mr Toller—Indeed. I believe that if we put all those things together we have a much morerobust system than has existed up until now. Those are the ideas that we are working towards.Obviously, we will respond amongst others to the ATSB recommendations as those develop.But that gives you some idea of the thinking that I have got at the moment on how best todevelop this to ensure we have got a much more robust system.

CHAIR—As that develops, could you keep us informed of what is happening? It could wellsave one hell of a lot of questions at estimates.

Mr Toller—Absolutely.

CHAIR—My final question could be to you or to Dr Scully-Power and it relates to theATSB’s bulletin with the two recommendations which were referred to this morning. You knowwhat I am talking about, so I do not have to read them out. What is your reaction to them? Iraised some questions this morning in terms of whether these recommendations were reallynecessary in the context of the authority of the FAA, which I do not think any of us woulddispute. Was it necessary to have them mandated through legislation in Australia, or is theauthority that exists through that and the reporting of Boeing sufficient? I guess I am looking atputting another layer of red tape in the process. I would like your views. Maybe you would liketo take that on notice. Dr Scully-Power might like to comment on those from a board point ofview.

Dr Scully-Power—From the board’s perspective, I think I have already made my commentsin terms of due process corporate governance. We intend to follow that. Within the spirit ofcooperation, in terms of the specific operational question you are asking, I think it is theprerogative of the director to answer that.

Mr Toller—I believe that the answer I just gave to your earlier question probably would be areasonable response to these two recommendations. What we are looking for overall is a systemwhich does not require CASA to import knowledge that it cannot be expected to have—in otherwords, total knowledge of every aircraft type—but ends up with the right result and puts arobustness into the system. I think what I have described to you just now will achieve that andtherefore will effectively accommodate the concerns of ATSB in this area. I would expect that,if we work along those lines and put something in place, it would be an adequate andreasonable—in fact, a very good—response to the ATSB recommendations.

CHAIR—If you are satisfied you covered that, we have other questions; so I will leave it atthat.

Senator O’BRIEN—Dr Scully-Power, can you confirm that the public statements made byMr Toller and Mr Gibson in relation to the Ansett matter had the full endorsement of the CASAboard?



Dr Scully-Power—I think it follows almost as a logical conclusion that, if the board followswhat is set out in the act, we obviously do not sit around and approve every media release.

Senator O’BRIEN—Not in advance, no. Perhaps I can put it a different way: does the boardhave any concerns about the public statements made by Mr Toller and Mr Gibson in relation tothe Ansett matter?

Dr Scully-Power—The board yesterday, as part of its review in terms of looking back, andlessons learned over the whole issue that we are here today to discuss, did look at that. If you donot mind me reading it, I will tell you what we resolved yesterday.

Senator O’BRIEN—I would love you to.

Dr Scully-Power—It says:

The Board considered the handling of public relations to have been satisfactory given the circumstances. Nevertheless,the Board considered there would be merit in appointing an appropriate public relations consultant to independentlyreview CASA’s public relations performance during the recent events and identify any ways in which CASA’sperformance could be further improved on an ongoing basis or in similar circumstances.

In other words, we are going to follow due process, we are going to see what the lessons learnedare, and then we will implement them.

Senator O’BRIEN—On 11 April, Mr Gibson was reported by a number of media outlets assaying:

We fielded this morning here a number of calls from the travelling public who are worried about, ‘should I fly withAnsett or should I fly at all’.

And he then said:

The last call was someone who said, ‘I did not used to be scared of flying but I am now’...

Did the board consider those comments and did the board have a view on it?

Dr Scully-Power—First of all, on behalf of the board, I certainly have not read thatcomment. That comment is entirely new to me. I will accept it for what it is, but I think part ofmy remarks this morning, certainly from the board’s perspective and indeed from theauthority’s, is that at the end of the day we are all here because we have to be concerned aboutpublic confidence in aviation safety. We have to make it accurate and non-emotive. To that end,that is precisely what we are trying to do.

Senator O’BRIEN—These comments, as I understand it, were used. They were the grab runon most, if not all, of the electronic media. ‘Passengers too scared to fly with Ansett, saysCASA,’ is the sort of grab that was being used. So presumably the board heard that, unless theywere not attuned.

Dr Scully-Power—I am certainly not aware. I, like everyone else, get the media clippings. Icertainly have not seen any headline like that.



Senator O’BRIEN—It was in the electronics, so it would not be a media clip.

Dr Scully-Power—On the other hand, I, the board and the authority cannot be responsiblefor what the media prints, as you are well aware.

Senator O’BRIEN—No, but you can be responsible for what your officers say.

Dr Scully-Power—What I am trying to do is get the sensationalism out of it. It is tooimportant to be sensationalised.

CHAIR—Senator O’Brien, can we have those comments sourced?

Senator O’BRIEN—I got them from the AAP wire of Wednesday, 11 April, and they purportto be quotes from Mr Gibson of CASA.

Dr Scully-Power—I will take it under advisement, Senator. We are, as I mentioned, going togo through the due process of looking precisely at that issue. I have just read out what the boardrecommended. We would be happy to get back with the lessons learned.

Senator O’BRIEN—So the board has not considered this matter, but generally there weresome concerns?

Dr Scully-Power—It has, to the extent that I read it out. That was how we resolved ityesterday. As I say, the right way for corporate governance is not to make policy on the run. Weare responsible for policy as a board, and we are going to do it in a timely fashion.

Senator O’BRIEN—There was some criticism of CASA, if I understood Mr Harris correctlytoday—I think it was Mr Harris—suggesting that CASA asked Ansett for photographs of cracksin the pylons. They were supplied to CASA, and the next day those photographs appeared innewspapers. I am not sure whether you were here, Dr Scully-Power—

Dr Scully-Power—I heard those comments this morning.

Senator O’BRIEN—What is your response to those comments?

Dr Scully-Power—As I say, CASA as an authority requesting evidence is an operationalmatter. The division of responsibility between the board and the director is that the board setspolicy, long-term strategy, and the director is responsible for operational matters.

Senator O’BRIEN—Mr Toller, what is your response? The handball has gone to you.

Mr Toller—I am not fully aware of the handling or the history of those pictures. I believethat they may have come from the authority. If they did, I believe that is inappropriate. I thinkthat if a decision was made in the authority to release those photographs at that time then it maywell have been one that should have been taken at a higher level. That decision might still havebeen the same, but I think it should have been one that should have been considered better.



Senator O’BRIEN—What is the process? I do not know if it was Mr Gibson or someoneunder his control, but presumably there is a reporting process between you and Mr Gibson andhis staff, if he has any.

Mr Toller—Mr Gibson has staff—not many. The normal process is that, at times like whenthere is significant media activity, he has direct access to me at all times. His normal reportingline is through Mike Smith as Assistant Director, Aviation Safety Promotion. Mike Smith getsinvolved in all the discussions that we have, when he is available.

The only comment that I would make is that we do not pretend for one minute that wenecessarily handled the press or media interests as well as we could have. We took a decisionearly on that we would not use a spin doctor, that we would not bring someone in to run thestory for us. We have a belief that we have an obligation in the public interest to make the factsof what is happening known. I do believe that at various times throughout the whole two weeksthat this was going on, which was a long time, undoubtedly the authority said some thingswhich in hindsight we probably should not have said. This was done under immense stress,immense pressure, and I am sure that that is as valid for me and some of the comments that Imade as it is for Peter Gibson and some of the comments that he made.

Senator O’BRIEN—The media side of this was initiated by CASA, wasn’t it? CASA firstwent to the media with its intentions in relation to Ansett—is that right?

Mr Toller—I think that actually the media knew about it before we had even made adecision. From my recollection, the media were ringing us up and telling us that we hadgrounded Ansett while we were still considering the matter. How they got hold of that I do notknow, but it was not obvious to us at the time anyway. Yes, we were certainly required to atleast put out an information statement, which we did as a media release and we held a pressconference at the same time.

Senator O’BRIEN—That followed a mountain of media—television and newspaper—coverage of this issue and of the wider issue of CASA’s regulatory role. When does the boardenvisage engaging a communications consultant?

Dr Scully-Power—As soon as we can follow the normal way of engaging a consultant—assoon as possible. This board does not stand around.

Senator O’BRIEN—How much does the authority currently spend on its media unit?

Mr Toller—I would have to take that one on notice. Very little I think is the answer. We havePeter Gibson plus one assistant, one other person who is looking after internal communications,so there are effectively one and a half staff looking after media plus whatever the cost oftranscripts and the like is, which gets very expensive at times like the last couple of weeks andcan be hopefully very cheap thereafter.

CHAIR—Have the answer at estimates.

Senator O’BRIEN—The reason I ask it is that you have a unit, but obviously it and thepolicies that it operates under are inadequate. Am I taking it too far in saying that?



Mr Toller—Why inadequate? Our hope is that we never have to use a media unit. If you goback to my original concept, if we are doing our job properly we can stay out of the media mostof the time. There are occasions when you get into big media blitzes, and you would like thoseto be as few as possible, obviously. We do not staff up a big media unit of half a dozen peoplejust in case.

CHAIR—Can I just ask you one question about the media? Earlier today Mr Harris, when heappeared, suggested that when everything cools down and we are back to normal, et cetera, itcould be profitable, if I can use that word, if actually a protocol was worked out between CASAand the various operators in Australia on how to handle the media in stressful periods like thosewe have just gone through. I am not necessarily asking you to answer that now, because itprobably requires a bit of thought and what have you. Could you give some thought to thatsuggestion and come back to us?

Dr Scully-Power—Certainly. I will take that on advisement and pass that on to the reviewcommittee on the media which, as I have just said, we are going to convene.

CHAIR—Thank you.

Senator O’BRIEN—I am trying to find something that will fit into the remaining fewminutes. It is not going to be easy.

CHAIR—We could always knock off early.

Senator O’BRIEN—That might be the most profitable, on the basis that, if we have notcompleted what we are going to do today, I do not think there is a lot that we could do in sixminutes.

CHAIR—That is certainly our limitation today.

Senator O’BRIEN—I would suggest that we do conclude a few minutes early today andconsider an appropriate time to reconvene.

CHAIR—Yes, we will have to discuss that. I am not saying anything at this point in time.Maybe we can handle the rest of it in estimates, but I do not know. We will need to discuss thatas a committee. That being the case, can I thank you, first of all, Dr Scully-Power, for appearingas chair of the board and on behalf of the board and you, Mr Toller, and your officers. It hasbeen a very profitable day.

Dr Scully-Power—Thank you.

Mr Toller—Thank you very much.

Committee adjourned at 3.38 p.m.

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