TERMS OF REFERENCE AND SCOPE OF SERVICES CONSULTANCY SERVICES (INDIVIDUAL)

K-B06.2 AVIATION ADVISER FOR THE CIVIL AVIATION DIVISION OF

1. PROGRAM BACKGROUND The Governments of the Republic of Kiribati, Samoa, , Vanuatu and Tuvalu are currently implementing the Pacific Aviation Investment Program (PAIP), supported by the World Bank. PAIP is a regional aviation program with the development objective to provide safe and secure air transport operations and environmentally sustainable and efficient airports. PAIP is currently implementing key aviation investments in five (5) Pacific Island countries: Kiribati, Samoa, Tonga, Vanuatu and Tuvalu and expects to include the Solomon Islands in future phases. PAIP was approved by the World Bank Board in December 2011 and is expected to be implemented over a five- year period, concluding in December 2016 with possibility of extension to Dec 2018. Tonga Airports Ltd is responsible for implementing PAIP, through a Technical and Fiduciary Services Unit (TFSU). PAIP is being implemented in recognition of the key place of transport in the economic and social development of each participating country and the need to strengthen the efficiency and viability of this sector. Review of the transport sectors in each country point to the need to mainstream disaster risk reduction and climate change adaptation into infrastructure planning and management. Addressing climate change by providing carbon-neutral airport facilities are part of this investment program, as are investments in alternative and sustainable and energy efficient technologies. This will help ensure that the airports are operated in an environmentally sustainable manner. Investments under PAIP fall under four main ongoing components: Component A: Aviation Infrastructure Improvements: This component will invest in the aviation infrastructure at the five project airports so that they are able to meet International Civil Aviation Organization (ICAO) standards, while preserving and extending the service life of existing airport assets. Component B: Aviation Sector Reform: This component will support aviation sector reform through the provision of support to the Civil Aviation Departments/Authorities of each country. These investments will be targeted to (i) support the strengthening of each State’s civil aviation system (through the adoption and implementation of new Civil Aviation Regulations; agreed corrective action plans following ICAO safety and security audits of each State and targeted capacity building and training of each Civil Aviation Authority (CAA); and (ii) to assist in the capacity and efficiency of the regional safety oversight agency, the Pacific Aviation Safety Office (PASO). Under this component, a study was undertaken recently to analyze and assess the revenue sharing approaches of air navigation services provision in the Nadi Flight Information Regions (FIR). Component C: Strengthening Airport Operations and Management Capacity: This component will enable to (i) assist the countries to manage and operate their airports, given domestic capacity constraints. With financing from the

1 GoA through the Pacific Regional Infrastructure Facility (PRIF), it will also undertake regional studies into: (i) aviation supply; (ii) how to sustain regional aviation infrastructure; and, (iii) managing revenue from the upper air space. These subcomponents’ statuses vary across the targeted countries for the PAIP and will greatly benefit from the proposed activity aiming at consolidating an upper space management for a regional air traffic management facility, which is fully aligned with subcomponent (iii). Component D: Program Support and Training: (i) Support to the Technical and Fiduciary Services Unit (TFSU) to implement the Program and Implementing Agent (Tonga Airports Limited) to support the project as necessary. Complementary to the activities under PAIP, the World Bank is currently assisting in the restructuring the Pacific Aviation Safety Office (PASO) under the PASO Reform Project. Established in 2004, PASO’s key mission is the provision of aviation safety and security oversight in the Pacific under a harmonized regulatory framework. As part of the reform project, PASO will leverage major benefits in terms of economies of scale from the pooling of regional experts for regulatory oversight and from facilitating the sharing of knowledge and experience across countries.

2. ASSIGNMENT BACKGROUND

Under international Standards and Recommended Practices (SARPs) promoted by the International Civil Aviation Organisation, there needs to be a clear separation between regulatory and operational function within a civil aviation system. This avoids a situation of “self-regulation” and consequent deficiencies in effective safety and security oversight.

In Kiribati both airport operator and regulator are currently organized as one entity under the Civil Aviation Division of the Ministry of Communications, Transport and Tourism Development (MCTTD). As part of the Kiribati Aviation Investment Project, MCTTD has now initiated the process of separating regulator and operator and now has approval from Cabinet to implement the proposed separation. It is anticipated that the first stage will involve a separation of functions within the Ministry between a newly created “Airports Division” and the existing Civil Aviation (regulatory) Department. To support clear separation, both departments are now two distinct divisions with clear reporting lines and dedicated budgets. It is envisioned that the two international airports in Bonriki and Cassidy (Airports Division will be managed through a management contract to support more efficient and financially sustainable airport operations. The Civil Aviation Authority will remain within the MCTTD and be operated as a small office of 4 in-house staff supported by technical expertise provided through the regional Pacific Aviation Safety Office (PASO) to perform its safety and security oversight activities and on- going surveillance.

The CAD has been facing some challenges in the past due to capacity constraints in addressing deficiencies in safety and security oversight and promoting the development of air transportation. This includes addressing findings of ICAO USOAP audits, filing of differences, updates of the Civil Aviation Act, the harmonization of regulation with other island states in the

2 Pacific and development of the sector through the negotiations of air service agreements and route subsidies for the NAD-CXI route. Some of these gaps were identified in the Aviation Sector Strategy Report developed by Airbiz in 2013. In addition the Asian Development Bank undertook a review of the Kiribati Civil aviation system in 2011 under its Technical Assistance project (TA 43429) to assist developing member countries of the Pacific Aviation Safety Office to update and harmonize their legislation and regulations around those of New Zealand.

3. OBJECTIVE

The objective of this assignment is to:

(i) Support the Civil Aviation Division of Kiribati in transitioning into a separate regulatory body; (ii) Provide support to MCTTD CAD to provide more effective and efficient safety and security oversight, including its relationships with PASO and with operators; (iii) Support MCTTD in the development of its air transport sector in accordance with national aviation sector strategic goals.

4. SCOPE OF WORKS

The scope of work for this assignment includes:

(i) Support the transition of CAD into an independent entity: As approved by Cabinet, assist in the transition of CAD to a dedicated regulator. This will include among other things to support the amendment and updating of the required legislations (e.g. Civil Aviation Act) for the separation, the updating of manuals and procedures and the development of a 5-year strategy including staffing, budget and training plans. Particular consideration shall be given to Kiribati’s membership of the Pacific Aviation Safety Office (PASO). (ii) ICAO USOAP Corrective Action Plans: Liaise and work with the CAD on the rectification program for deficiencies identified in ICAO audits; (iii) FAA IASA: Assist the CAD in preparing for a new airspace audit by the Federal Aviation Administration as part of the IASA program. (iv) Harmonization of regulation with NZ Civil Aviation Rules: Support the CAD in addressing the implementation of recommendations from ADB Regulatory Technical Assistance including the filing of differences with ICAO. (v) Air Service Agreements: Liaise and work with the CAD on the finalization of a new Air Service Agreement with Fiji and provide support for the negotiations with Fiji as well as other States and the potential to pursue an Open Skies policy under the Pacific Islands Air Services Agreement(see Annex 1 for details) (vi) Cassidy International Airport Subsidy Agreement: Support CAD in the development of a proposal and the renegotiation of a new Subsidy agreement for the NAD-CXI route (see Annex 1 for details); (vii) ETOPS Agreement: Support CAD with the finalization of an ETOPS agreement for Cassidy International Airport (CXI) and appropriate

3 yearly collection and renewal mechanisms. Preparatory work for this agreement (financial model, negotiations and consultations) are currently being undertaken by MCTTD with support of the TFSU and the World Bank. (viii) Regulatory support for the introduction of new CNS equipment: Under the KAIP project new CNS equipment such as ADS-B will be introduced. This will require a number of new arrangements and regulations including e.g. transponder ownership agreements, airline consultations etc. (ix) Support the MCTTD in the management and development of the air transport sector, including management of the Aviation Fund. This will include broad advice and support across the aviation sector, including such aspects as building relationships with operators, regional associations/organisations, the prioritisation of expenditure under the Aviation Fund, and other strategic management issues affecting the aviation sector. A key responsibility of this role will be to develop a number of revenue sources to provide a sustainable financing source for the aviation sector in addition to the safety and security levy which has already been successfully implemented. These include airport service charges, CAA oversight fees, ETOPS and flight information region revenues. A Civil Aviation Special Fund and disbursement framework have already been established under the project and the Consultant will be expected to support the CAD in ensuring that the agreed disbursement framework is complied with, especially regarding the required audits. (x) Provide ongoing advice and support to the MCTTD on aviation matters, including aviation advice to support broader KAIP implementation; (xi) Professional Development and Mentoring of MCTTD Aviation Staff. The Consultant will be expected to undertake this assignment in a highly collaborative and collegial approach so as to support professional development and mentoring of CAD staff, in the delivery of this assignment. This will require the Consultant to develop different approaches under this assignment to at times, provide direction and leadership with support from the aviation team, and at other times, facilitate such leadership from the aviation team with strong support to ensure appropriate outcomes are achieved. The Consultant will be required to develop a strategy in this regard and report on this aspect in their monthly reports. Adjustments will be required depending on Client feedback and the development pace of the team.

5. DELIVERABLES

A time-based contract is expected to be signed with the Consultant.

The Consultant will be expected to provide the following formal reports during the course of this assignment:

DELIVERABLE Due Format

4 2 weeks from • Inception Report CD (1x) and hard commencement A brief report including a proposed copy (3x). of the detailed work plan and time line. assignment • Regular Monthly Reports: A brief monthly report to be submitted in soft copy via email, and include: 1 week following CD (1x) and hard  major issues / achievements; the end of each copy (3x).  recommendations for future action; month  any other issue as may be required by the Client.

• Final Report: The report should include key progress 2 weeks after CD (1x) and hard achieved over assignment period and key completion of copy (3x). recommendations for further work the assignment required with a clearly outlined implementation plan/program. In addition, the Consultant will be expected to produce working papers or other documentation during the course of their assignment as necessary to support the Client and to achieve the objectives of the assignment. All soft copy submissions shall be in a form easily accessible by the Client in a software nominated by the Client (usually in MS Word).

6. QUALIFICATIONS

6.1. The Consultant shall have:

a) Relevant tertiary qualifications such as a bachelor's degree in Aviation Management or related field from recognized institution, or operational equivalent with a b) Minimum 10 years of experience from an aviation regulatory body. c) Demonstrated experience in the development of high-level policy documents and sector strategies as formulated within a Ministry of Transport; d) Demonstrated experience in professional development and mentoring of counterpart staff; d) Regional knowledge and experience with small Civil Aviation Authorities would be highly desirable e) Consultant must be fluent in English.

7. LEVEL OF EFFORT AND SCHEDULE

7.1. It is estimated that about 18 persons month full-time input will be required and will be delivered as a combination of home office and in-country inputs. The inputs will require three (3) months in-country, followed by one (1) month home office work. This assignment is expected to commence as soon as possible, mobilising as soon as possible, o/a April/May 2016.

5 The Consultant will be expected to approach the assignment with a high degree of collaboration with the Client, the KAIP Project Support Team, MFED, PAIP TFSU and the World Bank will be expected to approach this assignment pro-actively to ensure the Client is brought along with key decisions and directions, as well as supporting capacity-building and professional development of the MCTTD staff

6 Annex 1

Background Information Air Service Agreement and Route Subsidy Arrangement

a. Air Service Agreement

With the gradual adoption of the Pacific Islands Air Service Agreement by the Pacific Forum Countries to liberalise air transport in the region, only few countries with restrictive, bilateral ASAs such as Fiji remain.

Kiribati and Fiji have signed an ASA on 11th September 2002 in which and Ltd were nominated as the designated airlines to operate commercial scheduled air services between their respective countries. Prior to this agreement, the national carrier Air (which has been renamed to Nauru Airlines) operated a weekly service between TRW and NAN, but its service was suspended in 2005 due to outstanding lease payments. Although temporarily taken over byFiji Airways, Our Airline resumed services on its TRW-NAN route on a semi-weekly basis shortly after, facilitated by the acquisition of a B737-300 offered by . As Air Pacific’s service on this route is very well established and connected however, the resulting fare war pushed Our Airline out of the market. Monopolizing on the TRW-NAN service, Air Pacific’s fares increased rapidly and flight various schedule changes have occurred without the approval of the Ministry of Communication Transport and Tourism Development (MCTTD). This is primarily due to a lack of capability at MCTTD to monitor and regulate changes in air fares and flight schedules.

In 2010 Air Kiribati concluded a wet lease agreement with Our Airline, which allowed the latter to operate, in competition with Air Pacific, on the route TRW-NAN-TRW under Air Kiribati’s right as the designated airline of Kiribati. Fare wars kept re-occurring however, intensifying the situation.

In October 2011, Fiji’s Aeronautical Authority refused Our Airline aircraft to operate into NAN as Fiji’s Ministry of Foreign Affairs claimed that a wet leasing agreement with a foreign carrier was in breach of the ASA between the two countries. Consequently, the services of Our Airlines on the TRW-NAN-TRW route were suspended reinstating Air Pacific’s monopoly on the route and increasing air fares significantly. Subsequently, Kiribati Aeronautical Authority had two consultation meetings with the Fiji Aeronautical Authority with regards to the claims made by Fiji, but little progress has been achieved.

In 2013, a review of the Air Service Agreement by consultancy Airbiz was conducted concluding that although Our Airline was rightfully grounded due to violation of the conditions of the ASA, that the current Air Service Agreement was giving Fiji an unfair competitive advantage to maintain high fares on the NAD-TRW route.

A new Air Service Agreement has been formulated addressing some of the disadvantages of Kiribati. The ASA is still awaiting negotiations with the Government of Fiji however.

7

b. Route Subsidy for NAD – CXI Route

The Nadi-- operation currently served by Fiji Airways is an essential service in that it provides the only connection and supply line to the Line islands and offers broader benefits for tourism and freight. Reflecting the value of the service, GoK subsidises the operation through a “quasi-charter” arrangement with Fiji Airways. GoK currently pays between US$63,000 and $70,000 to Fiji Airways per round trip for the service, depending on whether it operates a B737-700 or B737-800. The cost is offset through revenue to GoK from the sale of up to 24 seats a flight and 1,000 or 2,000kgs of freight (again varying with aircraft type). A recent study by Airbiz has identified this amount of subsidy under the agreement to be excessive, given the cost of operations incurred by Fiji Airways.

8