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Tech boosts aviation safety, raises repair costs, automation concerns

Posted On: Nov. 5, 2019 10:09 AM CST


More complex technology has improved safety across the aviation industry but is driving higher values and cost of repairs and increasing concerns about pilots’ overreliance on aircraft automation systems, according to a report from Allianz Global Corporate & Specialty SE and Embry-Riddle Aeronautical University on Tuesday.

The crash of two Boeing 737 Max 8 jets within five months in 2018 and 2019 and other high-profile incidents highlight the challenges of interaction between pilots and technologically advanced systems, the report said.

“Overall, pilot training standards have changed and improved over recent decades, but systems can still fail or be incorrectly operated, albeit rarely, and there needs to be a continued focus on pilots flying with and without automation in training,” the report said.

Pilots need to be better prepared to be able to take corrective actions in the event of a technical malfunction or adverse circumstance, the report said.

The grounding of the Boeing 737 Max in the wake of the Lion Air and Ethiopian Airlines crashes is likely to result in one of the biggest airline manufacturers claims to date, the report said.

The grounding has resulted in “a large financial loss for the aircraft’s manufacturer and airlines,” with Boeing reported to have set aside nearly $5 billion to compensate airlines, several of which have had to cut routes and staff in response, the report said.

However, while the grounding is likely to result in “a large claim” for aircraft manufacturers’ insurers, the financial impact for airlines is largely uninsured, according to the report.

“Loss-of-use insurance cover has become increasingly relevant with the increased value of aircraft, and more importantly the revenue they represent to airlines,” Dave Warfel, regional head of aviation, North America at AGCS, said in the report.

“Yet, loss of revenues for grounding aircraft is largely uninsured by the airlines, which do not typically buy grounding cover,” he said.

The report’s analysis of 51,867 aviation insurance claims worth more than $16.3 billion over the past five years found that collision/crash incidents accounted for more than half the value of all claims (57%), equivalent to $9.3 billion.

Faulty workmanship/maintenance accounted for 27%, and machinery breakdown, including engine failure, for 6% of claims by value.

Foreign object damage, engine claims, ground collisions, slips and falls, groundings, misfueling incidents and a trend toward larger liability awards are some of the areas where insurers are seeing heightened loss activity, the report said.