CAA owning shares in companies they regulate

[AvionicsHippo]

I wanted to pick everyone's brains and gauge opinions of how we (the industry) manage airline insolvency and bankruptcy. Why we are never consulted or told before it happens, but then it just happens suddenly, and repatriation flights are leased.

I was wondering what people thought about the CAA taking ownership of companies that they regulate, and who to complain to if there are non-compliance or safety concerns during that period.


If you look into the company ATT RE MAEL Ltd that is registered at aviation house, you will see that it is owned by CAA officials in their capacity as trustees of the Air Travel Trust. This company is being used to hold the equity of another company Monarch Aircraft Engineering Ltd (MAEL) that the CAA took as part of a CVA process.

The CVA was required because Monarch Aircraft Engineering was insolvent and it could no longer operate safely to purchase tooling, equipment and spares, but it needed to be broken up and sold to allow the customers MAEL served to continue flying.

The CVA saw CAA Officials taking 14943 preference shares of MAEL, that were kept in the company ATT RE MAEL Ltd, which allowed the CAA to rank higher for dividends payments, but also for issuing winding up orders than the ordinary shares owned by Petrol Jersey Ltd (an investment vehicle for Greybull Capital.)

I do not think it is right that the CAA became shareholders in a company that they regulate, because there is a clear conflict of interest. Any complaints of non-compliance or safety issues implicate the CAA who not only have regulatory responsibility, but also the added responsibilities as shareholders of a company that ranks highest for the issue of a winding up order.

I am going to throw it out there, I think the breaking up of MAEL was not as safety oriented as it should have been. Furthermore I think it is unacceptable for a Regulator like the CAA to wind up a company without consulting employees. I expect to be screwed over by an unscrupulous airline wanting to maximise profits for shareholders, and for a collapsing airline not to be consult employees about about transfers of employment and redundancies. But I think that it is simply unethical for a regulator to behave in this manner.

If you read Monarch Aircraft Engineering Ltd Employment Tribunal judgments you will see that NDA's were used to hide how the company was being broken up and sold from employees.

Loosing a job is a stressful part of life, but there are employment rights to redundancy consultations for a reason, to soften the blow. This consultation gives you time to apply for a new job, and takes away an element of stress and pressure.

My personal view is that it is unethical to use NDA to take away employees consultation preparation time to force restructuring upon employees immediately, which may require employees to sign new contracts, or take unfavourable alternative jobs, or be made redundant with no notice. I do not think the CAA should be owning shares in a company behaving in that way, even if it is in the interest of airworthiness and keeping passengers flying. It is unethical behaviour for a regulator.

What do you guys think?

[Abrahn]

Are you referring to Connaughton and others Vs Monarch Aircraft Engineering?

​​​​To answer your question in general; an NDA, like all contracts, should be beneficial to both parties and if one party doesn't like the terms then they shouldn't sign it.

From the judge's reasoning it doesn't seem to have affected the case.

[AvionicsHippo]

Hi Abrahn,

thanks for the reply. My post was more general than the Connaughton example.
What you say about the NDA signed by a few representatives applies to everyone, hundreds of employees were made redundant at the drop of a hat. Shouldn't those being made redundant be given as much warning as possible that they might loose their jobs? How is it beneficial for employee representatives to know this ahead of time, but not to be able to tell other employees because they signed an NDA? How does the NDA benefit those that did not sign it, a collective right should not be signed away using an NDA.

in the Connaughton case, some chose not to accept the job that had been allocated
for them behind closed doors and rejected the transfers of employment. These employees found themselves unemployed with no notice, redundancy or warning, and lost £4200 each and they tried to claim at the Employment Tribinal.

Shouldn't all employees have been given an opportunity to have some sort of consultation over their careers, or be given fair warning changes were going to happen and given an option to take redundancy? The Employee Representatives and Union that signed the NDA took that option away from the other employees when they signed the NDA. How is that beneficial to everybody?

the issue I have, is why this industry generally goes pop so quickly, and administration takes place with no warning. The first thing employees know that they need to look for a new job, is when the snow plows are parked behind the aircraft. Why do we as airline employees not get consulted? Why is this the norm?

in the US, they have Chapter 11 insolvency measures where airlines continue to fly and shelter from creditors, while they make necessary changes and restructuring. The restructuring takes place with employees being engaged and informed.

Surely this is what should happen when the CAA takes over a company?

[AvionicsHippo]

I posted this thread to see what everybody else's experience is when a company going into administration.

it all seems disadvantaged to work in our industry where it is rife for administrators to take over without notice, before the company pays holiday owing, redundancy, or notice pay, and force us to claim the lesser statutory redundancy, and capped pay in lieu of notice.

BALPA wrote about this in 2021 when Norwegian collapsed without paying pilots what they were owed.


Just wondering why employment right to be consulted about redundancy never works in aviation, and why we just accept it and don't ask questions.

[Hipennine]

Originally Posted by AvionicsHippo

I posted this thread to see what everybody else's experience is when a company going into administration.

it all seems disadvantaged to work in our industry where it is rife for administrators to take over without notice, before the company pays holiday owing, redundancy, or notice pay.

BALPA wrote about this in 2021 when Norwegian collapsed without paying pilots what they were owed.


Just wondering why employment right to be consulted about redundancy never works in aviation, and why we just accept it and don't ask questions.

Most of what you have described is not unique to aviation. I can't remember the wording but IIRC, UK Industrial law allows any company to effect immediate redundancies without consultation in the event of financial distress. Statutory redundancy payments must still be made, but if the company calls in administrators, the redundant employees become creditors.

[AvionicsHippo]

Originally Posted by Hipennine

Most of what you have described is not unique to aviation. I can't remember the wording but IIRC, UK Industrial law allows any company to effect immediate redundancies without consultation in the event of financial distress. Statutory redundancy payments must still be made, but if the company calls in administrators, the redundant employees become creditors.

You are absolutely right, redundancy without consultation does happen, but it is uncommon, remember the outcry with P&O.

Whist the CAA and employees were both creditors of the insolvent Monarch Aircraft Engineering Ltd, during an CVA, employees were being given misleading information and deliberately being excluded from the restructuring that was happening.

Company Directors, Administrators, HR and Employee representatives all signed Non Disclosure Agreements which excluded employees from knowing the truth about the company being broken up and the eventual redundancies.

The current legislation on collective redundancies in insolvency situations is clear. Under the Trade Union and Labour Relations Act (1992), consultations, where 20 or more employees are to be made redundant, must start as soon as there is ‘clear intention’ to do so. It is clear that by using NDA's and planning to break up and sell a company without telling employees, that there was a breach of Trade Union and Labour Relations Act (1992).

Even if there were good reasons to not consult to keep passengers flying, my point is should the CAA be behaving in a way that causes employees to be out of pocket and subject to additional unnecessary distress?

As pilots do you not think when an airline goes bust that you should be consulted about it before it happens? Statutory redundancy and pay in lieu of notice payments are capped and are far less than you would get if airlines consulted properly followed employment law.

When Norwegian UK went bust they called in administrators and did not pay the contractual 3 month notice, but instead the lower statutory pay in lieu of notice and statutory redundancy.

[AvionicsHippo]

This post has been up for a couple of days, and I am curious by the lack of engagement. I suppose as an industry we are resigned to the fact that airlines go bust suddenly and we accept it.

What I am a bit more surprised about is that no one thinks it's a problem for the CAA to own shares in a company that it regulates. Even if the CAA had no choice, because Monarch Aircraft Engineering Ltd ran out of engine oil etc, it is an extreme measure for CAA officials to become shareholders.

[OvertHawk]

Originally Posted by AvionicsHippo

This post has been up for a couple of days, and I am curious by the lack of engagement. I suppose as an industry we are resigned to the fact that airlines go bust suddenly and we accept it.

What I am a bit more surprised about is that no one thinks it's a problem for the CAA to own shares in a company that it regulates. Even if the CAA had no choice, because Monarch Aircraft Engineering Ltd ran out of engine oil etc, it is an extreme measure for CAA officials to become shareholders.

By lack of engagement do you mean nobody is telling you what you want to hear?

An extreme measure perhaps...?

But maybe a necessary one?

What's your alternative suggestion???

Who should be in charge instead?

I'm really sorry you've been screwed but that's the reality of bankruptcy.

If, as you earlier suggested, your company had entered into consultancy with its employees earlier then that would simply have resulted in it going bankrupt earlier. If a company is not still fighting to trade then it will fail.

I type this as someone who's been made redundant twice and been stitched with statutory minimum on both those occasions. But i accept the reality of those situations even if i don't like it.

I hope you find something else soon.

OH

[AvionicsHippo]

Originally Posted by OvertHawk

By lack of engagement do you mean nobody is telling you what you want to hear?

No absolutely not, I would love to hear from everyone and debate the issues. As a forum I know that everyone will have different views, experiences and opinions. Since airline insolvency is something that we will probably all experience at some point in our careers, we should discuss it and at least have an opinion. Bankruptcy is a sad fact of life, but aviation has its own unique challenges and there are different ways of dealing with it.

I would love to hear from anyone that has experienced how different countries manage redundancies, whilst working as a pilot or engineer.

Originally Posted by OvertHawk

An extreme measure perhaps...?

Of course it's extreme. A regulator becoming a shareholder in a company it regulates has so many issues and conflicts of interest. Who do you turn to if you have safety concerns?

ICAO recognises the need for change management within ICAO Doc 9859 Safety Management Manual, 4th Edition, 2018 Sections 8.5.6 and 9.5.5 which provide frameworks and examples for the sorts of changes that are likely to trigger formal change management requirements such as: introduction of new technology or equipment; changes in the operating environment; changes in key personnel; significant changes in staffing levels; changes in safety regulatory requirements; significant restructuring of the organization; and physical changes (new facility or base, aerodrome layout changes etc).

ICAO goes on to comment that before introducing any change in a system (operational or organisational), a detailed description of the particular change, the potential associated hazards, as well as impacts to other interfacing systems and the effectiveness of existing defences should be reviewed so that the proposed changes can be planned and executed in a structured way. In particular, new hazards and related safety risks may be inadvertently introduced into an operation even when small isolated changes occur, and no operation should take place in a changed system or operational context until all safety risks are considered.

Restructuring which includes the sale of a business, done deliberately without staff engagement, to work from a new office, with unfamiliar tooling, and procedures is not planned and executed in a structured way. I would go so far as to say I believe the implementation of change management that took place when Monarch Aircraft Engineering Ltd went into administration took unnecessary risks.

Would you like to fly an aircraft in which had been maintained by a Maintenance Repair Organisation that was not familiar with your fleet or company procedures? Or had run out of engine oil, rags and were doing maintenance tasks from memory because the company could not afford to buy printer paper? -This is the stark reality of what insolvency means on the shop floor.

Originally Posted by OvertHawk

But maybe a necessary one?

I do not think that unnecessary risks should be taken when it comes to safety.

Originally Posted by OvertHawk

What's your alternative suggestion???

Excellent question, If you read the Government's published Airline Insolvency Review conducted in 2019, on page 62 is a case study of Air Berlin. The restructuring plan and loan allowed Air Berlin to keep the fleet flying while the company was restructured and wound down. This was all done with the cooperation of staff being consulted whist booking still took place with money held in escrow accounts. Passengers remained protected, and counterintuitively this method was not only more safety oriented but also more cost effective for the taxpayer, as it is less expensive to use an existing fleet for reparations than to wet lease aircraft on a huge scale at short notice.

Originally Posted by OvertHawk

Who should be in charge instead?

I am a believer in free markets, if a regulator steps in and skews the market this can lead to all sorts of problems and conflicts of interest. is the regulator responsible for failures to consult employees?

It is my view that the company directors should remain responsible for the company under the supervision of administrators and the regulator should stay at arms length and continue to regulate independently and stay clear of conflicts of interest.

Originally Posted by OvertHawk

I'm really sorry you've been screwed but that's the reality of bankruptcy.

You live and learn, but I do not believe that this needs to be the reality of bankruptcy. Some things are safety critical, and should not be allowed to go bankrupt without a Safety Management System in place to ensure that processes and procedures are still safe and compliant.

Originally Posted by OvertHawk

If, as you earlier suggested, your company had entered into consultancy with its employees earlier then that would simply have resulted in it going bankrupt earlier. If a company is not still fighting to trade then it will fail.

I type this as someone who's been made redundant twice and been stitched with statutory minimum on both those occasions. But i accept the reality of those situations even if i don't like it.

I hope you find something else soon.

The current regulatory framework puts the needs of protecting creditors above that of protecting passengers and consulting employees. For these reason airlines will continue to cease operations suddenly without notice and pay the statutory minimum instead of consulting employees and may take unnecessary risks with safety.

You might accept the reality of those situations even if you don't like it, but I want to be consulted and told the truth about what is happening within a company I work. I would like to make informed decisions about my livelihood and not work
in an industry that puts remuneration of creditors ahead of safety.

[Fortissimo]

I think you are correct that a conflict of interest was generated, though you may find the ATT aspect will be used to say it was trust-based.

Try putting in an FOI request asking for any papers relating to the decision to use NDAs and whether conflicts of interest were discussed. If you get repeatedly stiff-armed, there is a Parliamentary ombudsman who can deal with it, as there is likely to have been DfT involvement too.

[Airbanda]

Presumably it is normal when an airline goes bust but with continuing operations as with MAEL that assets are vested in ATT?

If so then I don't then I don't think there is much of a regulatory conflict. ATT will operate at 'arm's length' from CAA HQ. It's fairly common for government departments and similar to own/fund such bodies and the outfits themselves are very protective of their independence.

As to the use of NDAs I don't know enough of the facts to comment.

[AvionicsHippo]

Originally Posted by Airbanda

Presumably it is normal when an airline goes bust but with continuing operations as with MAEL that assets are vested in ATT?

If so then I don't then I don't think there is much of a regulatory conflict. ATT will operate at 'arm's length' from CAA HQ. It's fairly common for government departments and similar to own/fund such bodies and the outfits themselves are very protective of their independence.

As to the use of NDAs I don't know enough of the facts to comment.

I am not sure how normal it is for the ATT to become shareholders in companies. I cannot find any other examples in the rest of the world where CAA officials have taken ownership of companies they regulate. Even if it is a trust operating at arm's length from the CAA, it raises all sorts of difficult questions.

Employees are creditors of a businesses, and as such are entitled to their contractual notice and redundancy. If a company goes into administration very quickly without warning and consulting employees, the creditors are off the hook for the redundancy and pay in lieu of notice payments which are passed onto the National Insurance Fund. Statutory redundancy and pay in lieu of notice payments from the National Insurance Fund are capped much lower than the contractual amounts owed to employees.

Those that were employed by Monarch Aircraft Engineering Ltd would have preferred to have been given warning about what was going on, and likely to happen. Employees should have been consulted about the breakup of the business and options to transfer, or work their notice whilst looking for a new job, but instead the business was broken up and sold with the ATT/CAA becoming shareholders in the space of a week.

There would have been huge financial costs associated with restructuring properly had consultations about redundancy and transfers of employment took place. Instead the restructuring took place using NDA's and without employee involvement.

Had a proper restructuring exercise taken place, there would undoubtedly have been some airlines not having sufficient engineers to continue. Thomas Cook outsourced their engineering arm to Monarch Aircraft Engineering Ltd a couple of months before MAEL went into administration. Should the CAA have allowed Thomas Cook to dump its engineers into a company that another part of the CAA, the ATT, would make bankrupt in a matter of months?

I just don't think that a regulator should become shareholders and actively wind up companies they regulate, it just allows creditors to maximise profits at the expense of employees and I do not believe a regulator should be complicit in this.

Here is a short video highlighting some of the issues:

You Tube

[70 Mustang]

my experience…

in the States and a few years ago, the three airlines I was working at, which shut down, were very simple and clean cut events. We were notified that they were shut down and our last regular paycheck that we had received before the day they shut down was all we got. The last one was in Denver, during a through stop, supposed to go to Atlanta, I think it was. Went in to get the paperwork and was told to wait. Within about an hour, details a little fuzzy since this was Oct ‘95, we ended up going back to the aircraft, getting our flight bags and headsets, shut it all down and closed the doors.

we then teamed up and removed all pilot flight bags from the crew room since we suspected the doors would be locked and no further access would be allowed. It was a sobering experience. One individual lost control and began throwing computers and other office gear against the walls to destroy as much as he could as a sort of revenge for his sudden unemployment. He was soon stopped. I was one of the ones carrying bags out, including my own. Due to the ‘assembly line’ method used, I was soon downstairs feeding the bags onto trollies that others were going to take out to their cars and then to a house to enable the absent pilots to pick them up later.

we sat at home for a few days waiting to hear if there would be some resurrection, (it had been operating under chapter 11 for quite some time. Had shut down once before for a few days, but started up again) but it’s been 28 years to the month now. I still dream about it starting up again, (typical useless emotional attachment), since it was the airline that I upgraded to captain on the B737 and very enjoyable company to work at.

‘Home economics’ forced me to focus on replacing the job as soon as possible and I made no effort to pursue any further legal recourse. I couldn’t afford the shoes required to chase them.

my father had been a manager in the trucking industry and advised us to not expect anything from such a pursuit.

trickle down economics at work. Those higher up the ladder grab whatever money might be flowing downhill and it never seems to get very far down that ladder.

[AvionicsHippo]

Originally Posted by 70 Mustang

in the States and a few years ago, the three airlines I was working at, which shut down, were very simple and clean cut events. We were notified that they were shut down and our last regular paycheck that we had received before the day they shut down was all we got. The last one was in Denver, during a through stop, supposed to go to Atlanta, I think it was. Went in to get the paperwork and was told to wait. Within about an hour, details a little fuzzy since this was Oct ‘95, we ended up going back to the aircraft, getting our flight bags and headsets, shut it all down and closed the doors.

we then teamed up and removed all pilot flight bags from the crew room since we suspected the doors would be locked and no further access would be allowed. It was a sobering experience. One individual lost control and began throwing computers and other office gear against the walls to destroy as much as he could as a sort of revenge for his sudden unemployment. He was soon stopped. I was one of the ones carrying bags out, including my own. Due to the ‘assembly line’ method used, I was soon downstairs feeding the bags onto trollies that others were going to take out to their cars and then to a house to enable the absent pilots to pick them up later.

we sat at home for a few days waiting to hear if there would be some resurrection, (it had been operating under chapter 11 for quite some time. Had shut down once before for a few days, but started up again) but it’s been 28 years to the month now. I still dream about it starting up again, (typical useless emotional attachment), since it was the airline that I upgraded to captain on the B737 and very enjoyable company to work at.

‘Home economics’ forced me to focus on replacing the job as soon as possible and I made no effort to pursue any further legal recourse. I couldn’t afford the shoes required to chase them.

my father had been a manager in the trucking industry and advised us to not expect anything from such a pursuit.

trickle down economics at work. Those higher up the ladder grab whatever money might be flowing downhill and it never seems to get very far down that ladder.

I think your father is right, chasing after moneys owed from those higher up the ladder seldom works. As employees we were caught up in a business dispute between Boeing and Greybull, and we will never win.

Ultimately the business arrangements between the companies and the dispute over financing aircraft purchases and potential sale of MAEL to Boeing, turned out to be a squabble over who would pay our notice period and redundancy. I am not naive, I expect to be screwed over by companies like Greybull when business deals with Boeing don't pan out. What I don't expect is for the UK CAA to facilitate deception and the screwing over of employees.

I ask the question, why did the CAA allow Thomas Cook to sell their line maintenance engineering to Monarch Aircraft Engineering Ltd in June 2018, knowing that the CAA was owed £53 million in repatriation flight debts, and that those debts were linked to Monarch Aircraft Engineering Ltd? The debts linked between the Monarch group companies would later bankrupt MAEL in December 2018. Why were employees lied to about the true nature of MAEL's finances during transfers of employment in June 2018? Why were employees not told about the CAA's financial involvement in business deals?

I totally understand that this is the way the world works when it comes to business going into administration. I just ask why the CAA have to make it easier for businesses to behave like this by becoming shareholders.

[70 Mustang]

Why?

I suspect it's not much more than human nature.

Whoever's been in charge or responsible for anything, in my experience, will do all and sundry to cover, deflect and prevent any of the related failure fall upon their shoulders. They usually search for others to blame, and appear as victims themselves. It starts in families, is learned in the schoolyard and is continued into the workplace.

All the while, they try to get as much as possible of that trickle down money into their own pockets when possible and secure any possible future promotions for themselves.

In a word, human nature. Deception/deflection is one of the major methods of survival in the entire animal kingdom, human relations, business world and military.

As far as any regulation system: only those that are familiar with said industry, could have any ability to examine, regulate and enforce any oversight. Then that ol' human nature kicks in again, to cover up their failures, and to glean all possible fruit from the often symbiotic relationship between the regulator and the 'regulatee'