Welcome to GlobalAir.com | 888-236-4309    Please Register or Login
Aviation Articles
Home Aircraft For Sale  | Aviation Directory  |  Airport Resource  |   Blog  | My Flight Department
Aviation Articles

Aircraft Insurance Market Changes

by Darryl Abbey 1. November 2009 00:00
Share on Facebook

The winds of change continue to blow through the aviation insurance industry. While the past eight years have seen premium levels fall to record lows, momentum continues to build toward rate stabilization if not outright hardening of market pricing.

As a result of the tragic events of September 11, 2001, aviation insurance pricing shot up dramatically. Whether you were an airline, a component parts manufacturer, a charter aircraft or a pleasure and business flyer, you no doubt saw premium increases of one hundred percent or more. Although we all understood the reasons that insurance carriers implemented these price increases, we did not like them and most, if not all of us, felt that they were not warranted for the types of operations in which we were engaged.

The good news was that rates started falling within a year (depending on individual losses and types of operations) and have continued to fall since then. This was fueled in 2006 and 2007 when several new companies began underwriting aviation insurance. This increase in capacity, or supply, helped drive down rates so that aviation insurance pricing is significantly lower now than prior to 2001. However, as mentioned in my previous aviation insurance market update, it appears that times are changing and the extraordinarily low rates and premiums which most operators have enjoyed may soon be a thing of the past.

Within the past month, two carriers have announced that they are pulling out of the general aviation insurance market in the US. AXA Corporate Solutions and Travelers Aviation have both announced that they are ceasing their underwriting operations for US general aviation customers. Both of these carriers are experienced aviation insurers although the general aviation underwriting operations which are being closed had only been running since 2007. While neither of these carriers held a dominant share of the general aviation insurance market, none the less, their departure has sent ripples throughout the aviation insurance industry and fueled speculation as to whether there will be additional departures from the US aviation insurance market in the near future.

This constriction of aviation underwriting capacity in the US combined with the high level of aviation losses incurred in the first nine months of this year are spurring some underwriters to look for stabilized rates and, depending on the type of operations to be insured, significant price increases. That is not to say that prices are going up across the board for aircraft operators or manufacturers. Many operators, manufacturers and service facilities are still enjoying the benefits of competition. Even the most experienced US aviation insurers including USAIG, Global Aerospace, Chartis Aerospace (formerly AIG Aviation) and Houston Casualty will still engage in heated competition for the right customer. However, these same carriers are trying, when possible to keep premium levels flat or raise prices if they feel the market will bear this action. If additional carriers do exit the US aviation insurance market, you can bet that underwriters resolve to move their rates up will become more firm.

Having said all that, if an insurer or insurers were to decide that this is a good time to get into the general aviation market in the US and additional capacity became available, prices could drop once more. It would seem that this is a somewhat unlikely event and, given the lack of profitability professed by aviation insurance carriers, reminds us of the old saying: How do you make a small fortune in aviation? Start with a large one.

Since it is possible that there may be additional shifts in carriers and capacity, insurance buyers should look carefully at the carriers with whom they do business and the relationships they have with those carriers. Everyone needs to save money but aggressively marketing your insurance program every year is not a great strategy in the long run. A long term relationship with an insurance carrier does not insulate you from price increases but it can smooth out the spikes of price increases when the market hardens.

Remember, insurance pricing is traditionally cyclical in nature and what has gone down for many years will, eventually, come up. Be prepared.

Tags: ,

GlobalAir.com

Three Reasons Why You Should Have a Guaranteed Aircraft Maintenance Program

by David Wyndham 1. November 2009 00:00
Share on Facebook

We are working with someone who has a long range business jet. Within the next five years that aircraft's engines will need overhauls, to the tune of almost one million dollars, each! We are looking at keeping versus selling that aircraft and the budget spike for those engines in year five is huge. That aircraft's engines are not on any guaranteed maintenance programs, so the owner pays 100% of whatever the costs are. Sell the aircraft before the overhaul, and it may lose a lot of value and take longer than average to sell.

Turboprop engine overhauls can run to $250,000 and turbojet engines, up to a million. Within the engine are a number of components that will have different cycle limits. Typically they can last to the second overhaul, or perhaps even the third. These turbine wheels, blades, etc can add significantly to the cost of the heavy maintenance. More and more turbine business aircraft are heading into their twenties and will be facing these cycle-limited items' additional expenses.

What are the advantages of these guaranteed engine maintenance programs?

Budgeting for these major cost events can be difficult. In good times, reserving cash can be difficult for a company, and in today's economy, the cash may not be available. All the major turbine engine manufacturers offer some form of a engine guaranteed maintenance program (GMP). Plus there is one major third party provider of these plans that cover most popular business turbine engines.

Under a GMP, the aircraft owner pays in an hourly set-aside to the plan provider. The monies go into an escrow account. As engine maintenance expenses occur, the money is drawn out to pay for the expense.

The amount to be paid in is set by contract, and thus, a GMP offers a stable budget. Accountants love stability in budgeting. So should you. Take the hourly rate times the number of hours to be flown, and your engine budget for next year is mostly done. Yes, you have some minor line maintenance, but that is minor. There are no unplanned for costs and no surprises. An engine GMP offers a financial peace of mind.

A GMP also offers insurance against the rare, but costly unscheduled maintenance event. Most turbine engines make it to overhaul, but some do not. Even on-condition engines face similar heavy maintenance events at some time in their life. Once an engine is opened for inspection, the cycle-limited components are also subject to replacement or repair. I've heard from a few operators who went in for a $50,000 Hot Section Inspection and came out with a $150,000 repair bill. While turbine engines are reliable, when an unscheduled event occurs, they can result in significant expenses. An engine GMP provides protection against unscheduled engine maintenance costs.

An engine GMP can also be less costly than a pay-as-you go engine. Even without the unscheduled coverage, there are other plusses that come with a GMP. Engine removal, shipping, and loaner engines can all be covered by a GMP. Loaner engines alone can run several hundred dollars an hour to rent. Also, until you get a quote on your engine, the "typical average overhaul cost" is just that, an average. An engine GMP will cover those items and pay the actual overhaul cost, even if those costs are over budget.

An engine GMP will add value to your aircraft. Aircraft sale price sources such as Vref and the Aircraft Bluebook Price Digest either include the GMP in their typical selling price and subtract for engines not on a program, or the program itself is a added value. If you are selling your aircraft, and the GMP has accrued $350,000 in its account, that is value added to the aircraft in two ways:

  1. The cash value of the GMP account itself.
  2. The reduction of risk to the buyer as to the status of the engines.

Remember that long range jet's $1.8 million overhauls? Over the next five years, they will be flying about 1,500 hours, so their "accrual" would be $1,200 per hour if they are to pay for a pair of overhauls in five years.

One last possible advantage to a business is that the cost of the GMP can be a tax deductable expense. In house cash accrual accounts are not "expenses." Consult with your tax advisor, but this can be a definite advantage for the GMP.

Lastly, many financial institutions may require that the engines be on a GMP to help guarantee the value of the asset. It is common for an end of lease requirement that all major components have at least 50% of their life remaining and an adjustment (to the detriment of the lessee) is made for less than half-life remaining components such as the engines. Guess what dollar value per hour they may use in adjusting for engines nearing the overhaul at the end of a lease?

Engine guaranteed maintenance programs are a good way to insure your aircraft value, provide stable budgeting and perhaps even save money over a pay as you go engine. You'd be wise to evaluate these programs for next aircraft.

NTSB Rejects ASRP Waiver Of Sanction For DC ADIZ Incursion

by Greg Reigel 1. November 2009 00:00
Share on Facebook

The National Transportation Safety Board recently determined that an airman's incursion into the Washington, D.C. Air Defense Identification Zone ("D.C. ADIZ") was not inadvertent and, as a result, the airman was not eligible for waiver of sanction under the Aviation Safety Reporting Program ("ASRP"). In Adminstrator v. Schwarzmann, the FAA alleged that the airman violated FARs 91.139(c) (compliance with airspace NOTAM), 91.13(a) (careless and reckless) and 99.7 (compliance with ADIZ security instructions) when he operated within the D.C. ADIZ while squawking a transponder code of 1200 (applicable NOTAMs require a discrete transponder code other than 1200 must be used during operations within or egress from the D.C. ADIZ). The FAA issued an order suspending the airman's commercial pilot certificate for 30 days as a sanction for the alleged violations.

The airman appealed the order and, after a hearing before an NTSB administrative law judge ("ALJ"), the ALJ determined that the FAA had proved the violations as alleged. Although the airman had asserted an affirmative defense that his transponder malfunctioned and transmitted the wrong code, the ALJ decided that the FAA had rebutted this affirmative defense. The ALJ deferred to the FAA's choice of sanction and ordered the 30-day suspension of the airman's certificate. However, the airman then appealed the ALJ's decision to the full NTSB.

On appeal, the airman argued that the FAA was at fault for his incursion because it failed to provide a means for the airman to verify that his transponder was transmitting the correct code before taking off; that the ADIZ is a restricted area that includes aircraft sitting on the ground, and that such an inclusive definition amounts to entrapment; that because ATC cleared him for takeoff, and that he believed his transponder was transmitting the correct code he was therefore neither careless nor reckless; that he was eligible for a waiver of sanction under the ASRP; and, finally, that the FAA's actions violated his rights to equal protection and due process.

The Board rejected all of the airman's arguments. Initially, the Board observed that the airman did not cite any regulations or authority indicating that the FAA was responsible for verifying a code that a pilot is transmitting before the pilot takes off. Rather, it found that case law and the FARs provide "that pilots are the responsible parties for ensuring that their aircraft contain equipment that functions appropriately, so as to comply with all regulatory requirements."

Next, the Board held that the airman's entrapment argument was without merit since FAR 91.139(c) provides that the special requirements apply to pilots in "airspace." It went on to conclude that the finding of an operational violation under FAR 91.139(c) was per se careless and reckless in violation of FAR 91.13(a). The Board further rejected the airman's constitutional arguments since the airman received due process when the ALJ allowed him the opportunity to present and cross-examine witnesses and, with respect to equal protection, the Board does not have authority to consider issues of selective prosecution by the FAA.

With respect to the airman's argument that he was entitled to waiver of sanction under the ASRP, the Board initially noted that it imposes a strict standard with regard to the ASRP's requirements and, in order to be eligible, the violation at issue must be inadvertent and not deliberate (in addition to satisfying the other program requirements). It further observed that an airman's "exercise of poor judgment, even when the [airman] alleges that he or she believed that they chose the safest action, may amount to a deliberate action under the ASRP."

The Board reiterated the deliberate/inadvertent distinction from an earlier case that "[a]person who turns suddenly and spills a cup of coffee has acted inadvertently. On the other hand, a person who places a coffee cup precariously on the edge of a table has engaged in purposeful behavior. Even though the person may not deliberately intend the coffee to spill, the conduct is not inadvertent because it involves a purposeful choice between two acts----placing the cup on the edge of the table or balancing it so that it will not spill. Likewise, a pilot acts inadvertently when he flies at an incorrect altitude because he misreads his instruments. But his actions are not inadvertent if he engages in the same conduct because he chooses not to consult his instruments to verify his altitude."

The Board then concluded that the airman's conduct was not inadvertent. According to the Board, the airman "did not consider obtaining a ferry permit, contacting the local FSDO, or cancelling his flight in order to ensure that his transponder was functioning" and "[t]o the extent that respondent believed that his transponder may have mechanical problems, he should not have operated the aircraft with the transponder in the ADIZ until he was certain that his transponder was operating properly." Add to this the fact that the FAA had rebutted the airman's affirmative defense and the Board affirmed the ALJ's refusal to waive sanction under the ASRP.

Conclusion

This explanation of the deliberate/inadvertent distinction recited by the Board is troubling. It seems to me to be, to some extent, semantics and, in practice, will be dictated by a subjective determination of which "act" is the focus of the inquiry. I would expect the FAA's focus to be on an act that lends itself to a characterization of "deliberate", although the FAA should still need to establish a direct connection or causal link between the "act" and the "violation". Unfortunately, this opens the door to more litigation regarding this issue and reduces some of the incentive for participation in the ASRP, which certainly isn't in the interests of air safety. Not a good thing.

Tags: , , , , ,

Greg Reigel

Aircraft Survival Kits: Get Properly Equipped

by Jeremy Cox 1. November 2009 00:00
Share on Facebook

With winter rapidly approaching, isn't it time for you to make sure that you are properly equipped for the absolute worst case scenario, i.e. a forced landing?

It is very hard to believe that in this age of Global Positioning Systems, Satellite Emergency Locator Transmitters, that an aviator as skilled and as experienced as the ill-fated Steve Fossett could disappear so completely, for so long. Glenn Miller, Amelia Earhart also comes to mind when grappling with this topic. Having a suitable survival kit on board would not have helped Mr. Fossett; no-one knows about Miller and Earhart.

Regardless of the circumstances of each disappearance, unless you exclusively only fly over urban areas, the winter here in the U.S.A. anywhere north of the 35th parallel, is a killer to anyone who is unprepared and unequipped for freezing conditions. In fact, if you ditch anywhere in the seas that surround this land, at any-time of the year, including July and August, you will eventually suffer from hyperthermia, slip into a coma and perish soon thereafter, if rescuers are not close at hand to pluck you from the water. A sobering thought, but absolutely true.

Many readers of this article will probably not be willing to allow their limited payload allowance to be eaten-up by carrying a universal-world-wide survival kit that includes a full medical and surgical kit, tent, Meal Ready to Eat (MRE) provisions, stove, shark repellent, signal flares, etc. plus an inflatable life raft which can amount to a hefty dead-weight of 150 pounds or more. Instead it is practical to at least bring together a small collection of 'must-have' items that are tailored to enabling you to survive if the worst possible situation forces you down into the wilderness that you normally traverse from above.

Environments and Climates
First, let's divide the various types of terrain found in this country, into separate categories:

  • Maritime
  • Desert
  • Wilderness

Next let's discuss the Köppen 'five' climate classification system. This was first developed by the Russian climatologist Vladimir Köppen in 1884.

Class A: Tropical
Temperature of the coldest month: > 18°C. This climate is where the most water- and heat-demanding crops (for instance oil palm and rubber) are grown. The climate is also ideal for yams, cassava, maize, rice, bananas and sugarcane. Sub-classes are:
Af - No dry season, at least 60 mm of rainfall in the driest month
Am - Monsoon type. Short dry season but sufficient moisture to keep ground wet throughout the year.
Aw - Distinct dry season. One month with precipitation < 60 mm.
i - Isothermal subtype. Annual range of temperature < 5°C

Class B: Dry
Arid regions where annual evaporation exceeds annual precipitation. Even the wettest variants of this climate are characterized by a marked dry season. The climate is, therefore, mostly unsuitable for the crops that require year-round moisture. The main crops are usually millet, sorghum and groundnuts. Sunshine is usually high, which leads to high productivity where a sufficiently long rainy season or irrigation ensures a sufficient water supply: rice, sugarcane and maize are also common crops under this climate.
The two main subclasses refer to the dominant vegetation types: BS (steppe climate) and BW (desert). They are further subdivided as h subtype (subtropical desert with average temperature > 18°C), k subtype (cool dry climate of the middle latitude deserts), and k' (temperature of the warmest month < 18 °C).

Class C: Temperate
Average temperature of the coldest month < 18°C and > -3°C , and average temperature of warmest month >10°C. The main crops are the temperate cereals such as wheat, barley and Irish (white) potatoes. An important variant of this climate is the Mediterranean climate, characterized by the olive tree, and also very suitable for grapes. The main subdivisions include:
Cw - Winter dry season. At least 10 times as much precipitation in wettest month of summer as in driest month of winter
Cs - Summer dry season. At least three times as much rain in wettest month of winter as in the driest month of summer, the latter having less than 30mm precipitation.
Cf - At least 30 mm precipitation in the driest month, difference between wettest month and driest month less than for Cw and Cs
Additional qualifiers are a (hot summer, average temperature of warmest month > 22°C), b (cool summer, average temperature of warmest month < 22°C) and c (cool - short summer less than four months >10°C). Note that the "raw" temperate climate extends into what is actually BS and BW, as the "Dry" B type is superposed on the other types where only temperature is used to define the climate.

Class D: Cold
Average temperature of the warmest month > 10°C and that of coldest month < -3°C. This climate grows essentially the same crops as the temperate climate, but seasons tend to be shorter and limited at the beginning and end by frost.
This climate type comprises mainly the Df subtype (at least 30 mm of rain in the driest month, difference between wettest month and driest month less than for Cw and Cs) and Dw (winter dry season - at least 10 times as much precipitation in wettest month of summer as in driest month of winter). Other codes used are: a (hot summer, average temperature of warmest month > 22°C), b (cool summer, average temperature of warmest month < 22°C), c (cool, short summer less than four months > 10°C) and d (average temperature of coldest month < -38°C).

Class E: Polar
Average temperature of the warmest month < 10°C. No crops are grown under this climate. The two main subdivisions - ET (tundra, average temperature of warmest month > 0°C), and EF (no month with temperature > 10°C) - are sometimes qualified by d if the average temperature of coldest month < -38°C.

Your chosen kit must be tailored to the environment and climate that you will be operating within.

Survival Kit Must Haves (all-environments)
The smallest and most manageable component of any survival kit is a survival knife. A multi-tool is a decent choice, but after very little effort using a search engine on the web, it is easy to find one that features a drop point stainless steel blade with a serrated top edge. A textured hasp handle that houses a miniature survival kit which includes a multi function skinning knife, can opener, throwers, slingshot, matches, compass, sewing kit, fishing kit, band-aids, tweezers, and a signalling mirror.

Your newly acquired survival knife must also be supplemented with a sun-hat, a small nylon or dacron rope (12 feet minimum), a solar blanket, a handful of condoms (they are excellent for holding and transporting water), a roll of water purification tablets, a roll of Oxytetracycline tablets (anti-infection/diarrhoea), a snare wire, and a candle, or two.

Any items added to your kit beyond these 'must haves' are only required, based upon the terrain environment that you will be flying over.

Maritime Survival Kit
To conduct flight operations overwater, out of sight of land it would be insane to be without, at the very least a life-raft on board your aircraft that has the capacity to accommodate every soul on board the aircraft. A life preserver on its own is just wishful thinking. Smart operators also either wear or carry full-body immersion suits for everyone as a supplement to the life-raft.

Desert Survival Kit
Water, water, water; oh have I mentioned water? A solar still would be a wise addition to this kit.

Wilderness Survival Kit
You might be well served to add a firearm to this kit. This is mainly for protection against man-eating predators, but it could also be used to hunt for meat as well. Be careful of state law, though. Most law enforcement people (outside of Alaska) will arrest you if they learn that you have a firearm on board your aircraft.

Commercial Survival Kits
The following are examples of commercially available Aviation Survival Kits (thanks to bestglide.com)

The NATO Approved Aircrew Survival Kit


Water Purifying Tablets

Tinder

Water carrier condoms (2)

Flint & Striker

Fire tablets

Sewing needles

Small tin

Vinyl tape

Emergency Sleeping bag

Nylon cord

Compass

Candle

Suspender clips (shelter)

Fishing kit

Snare wire

Wire saw

Razor blade

Elastic band

Instruction sheet

Foil blanket

   

Weight: 450g (16oz)

 

Size approx: 7" x 4.5" x 2"

 

The USAF Approved Aircrew Survival Kit


Water bag

Nylon cord

Button compass

Candle

Flint & Striker

Hack saw blade

Fishing kit

Tinder

Mini multi-tool

Matches

Sewing kit

Purification tablets

Safety pins

Single edge razor

Salt sachets

Purification Straw

Signal mirror

Whistle

Snare wire

Wire saw

Grip lock bag

Pencil

Survival instructions

Extra Water bag

Vinyl Tape

Waterproof Paper

Micro Light

 
   

Includes a light-weight mini mess tin with rubber seal and roll over clasps.

 

Weight: 10oz (290g)

Size: 5.25" x 4" x 1.25"

UK Special Forces Air Service (SAS) and U.S. Army Rangers Survival Kit


Nylon windowed pouch

Flexible tubing

Air-tight re-sealable bag

Fireball Flint

Green plastic bag

Hacksaw striker

Mini-Compass

Brass snares

Mayday signal mirror

Suspender clips

Tinder cards

NATO Survival Matches

Fine cord (20m)

Stainless steel multi-tool

Sail needles

Water bag

Needle threader

Water tablets

Commando Wire Saw

Tornado whistle

Fishing kit

 
   

Weight: 13.5oz

 

The Mission Aviation Fellowship Survival Kit

 

BG Survival Kit Bag - MilSpec Materials - Made in USA
(10000 Denier Cordura w/ 3/4 oz water repellent backing, YKK Self Healing Zippers, D Rings, reinforced seams, milspec webbing and hardware)

1

   

Medical and Protection

 
   

Triple Antibiotic Ointment - Foil Packs (.5-gm)/Bag

10

Povidone/Iodine Swabs

10

Band Aids Bandages, 1"x 3", Plastic

32

Tongue Blades, 3/4" x 6", Wood

6

Gauze Roll - Stretch Kling (2"x 4.1" yds)

1

Gauze Roll - Stretch Kling (1"x 4.1" yds)

1

Adhesive Tape, Waterproof, 1" x 10 yd

1

Lip Balm - Blistex - .5 gm packets

15

Steri-strip Wound Closure (butterfly bandages)

10

Non-Aspirin Tablets, 2 tabs per pkt

25

Aspirin Tablets, 2 tabs per packet

25

Electrolyte Tablets, 2 tabs per packet

10

Gauze Pads, 4" x 4"

10

Moleskin (3 x 4)

6

Liquid Soap - Sanitizer Soap, 2-oz Bottle

1

Sun Screen - SPF 30, 1.5 gm Foil Packs

20

Triangular Bandages

2

Emergency Bandage - Civilian Version

3

Eye Irrigate Solution, 1 oz.

1

Ben's 100, 1-1/4 oz., Inspect Repellent

1

Sawyer Extractor Snake Bite Kit

1

   

Food Gathering

 
   

Water Container - Collapsible 2 Gal

1

MP1 Katadyn Water Purification Tablets, 30 tabs per pack

1

   

Warmth and Shelter

 
   

BCB Tinder Cards

18

AMK Heatsheet 2 Person Survival Blanket

1

Plastic Match Holder - Orange

1

   

Signaling Equipment -- MAF Required:

 
   

Signaling Mirror -BCB NATO Mayday Signal Mirror (2x2)
(NATO Stock #6350-99-613-9818)

1

Whistle - Orange, NATO Distress Whistle
(NATO Stock # 4220-99-120-9470)

1

Dye Marker - Orion-Water and Land w/Lanyard

1

VS-17 Signal Panel (Military Issue)
(National Stock Number (US) 8345 00 174 6865)

1

   

Required Miscellaneous Items:

 
   

Inova X1 2.0 w/1 Alkaline Battery
(compact, 1.5 miles visibility, crush proof, water resistant)

1

Brunton Nexus Star Compass w/ base plate

1

Leatherman Micra Tool - Compact Durable Multi Tool

1

Wiseman (SAS) Ultimate Survival Guide

1

So, what is your plan to survive? Please let me know your thoughts. Also remember that any input that you care to make will be of great interest to all of the readers here at Globalair.com. So don't be bashful. Go ahead and write your comments and suggestions here. Please don't forget that whatever you write here, can be seen publicly by everyone that visits this page, so please be funny, be inspired, but most importantly of all, please be nice.

Tags: , , , ,

Jeremy Cox



Archive



GlobalAir.com on Twitter