The state of aviation insurance in Canada

by Sandy Odebunmi | skies

All aviation operations across Canada are likely to be affected whether they are a commercial or private aircraft owner, manufacturer, distributor, or maintenance organization.

A hard market is caused by a number of contributing factors that include falling investment rates, increases in fraudulent claims and larger global losses. In Canadian aviation insurance there are even more aspects to the changing market. The number of available insurers coupled with the weather, the value of the Canadian dollar, and the severity of losses all play their part.

All aviation insurers licensed to write in Canada are re-insured by global companies. A catastrophe across the world may not even make it into Canada’s news cycle, but the same re-insurers covering your operation might also be on the hook for a downed A320.

Canada is particularly susceptible to bad weather claims. A severe ice storm in Manitoba could lead to higher aircraft premiums across the country the following year.

The recent, and increasingly severe, aircraft claims have led to several insurers re-evaluating their underwriting practices and rate structure.

We are now coming off a long soft market where we had more insurers and lower rates.

As the losses accumulated over the last several years, some unprofitable insurers pulled out of the market. The remaining companies are forced to increase their rates in order cover all their claims and to regain profitability.

How does all of this affect Canadian aviation operators and aircraft owners?

For starters, you may see increases in your premiums, anywhere from five per cent to 40 per cent or higher, for large and small policies alike. You may see your deductibles increase and some fringe coverages, like lay-up and renewal credits, removed.

You might experience longer wait times to get answers back from your broker. With rates increasing, everything is being shopped and the marketplace is flooded with new requests, creating an overload on the same few underwriters.

In the absolute worst cases you may find your existing insurance companies declining to offer renewal.

Even if you are one of the lucky ones and your increase is minimal, it’s vital to work with an insurance broker who specializes in aviation. If your operation is insured with a broker just because they are your friend or they got you a good deal on your home insurance, they may not be aware of current aviation market trends and concerns.

An aviation insurance broker will have the knowledge and experience required to asses your risk. They will have a good idea of the going rates, required coverages, and the most favourable terms and conditions for you.

The best thing you can do is give your broker at least 60 days to negotiate your terms. By starting with plenty of time ahead of renewal they’ll be able to take your policy to all appropriate insurance companies and get you the best quotations.

Providing full information is imperative for large and small operators alike.

Be sure to mention any safety systems installed on your aircraft and don’t be afraid to highlight your safety management systems and what you do that’s over and above the norm.

You may also wish to pay particular attention to risk mitigating practices put into place after any claims you have experienced. It’s sometimes easy to forget what happened eight or 10 months ago, so an annual review with your broker is advantageous.

Read your policy and arm yourself with the knowledge to understand the quotations and remarks being provided to you. I am always impressed with those clients who read and ask questions.

Work with your broker to consider new methods of handling your risk. A good aviation broker can also help you calculate your self-insured retention appetite and other risk management cost saving methods. This may be the year to get creative with your insurance portfolio.

While it’s impossible to know exactly when a hard market will soften, with the increasing cost of claims we can assume it won’t be any time soon. Rates may never again be as low as they once were.

So please remember — read your policy, start your renewal early and consult with a knowledgeable aviation broker.

Financial pressure mounts to fix Boeing’s troubled jetliner

By David Koenig, Tom Krisher And Bernard Condon

THE ASSOCIATED PRESS

Boeing is facing mounting pressure to roll out a software update on its bestselling plane in time for airlines to use the jets during the peak summer travel season.

Company engineers and test pilots are working to fix anti-stall technology on the Boeing 737 Max that is suspected to have played a role in two deadly crashes in the last six months.

The Wall Street Journal reported Friday that investigators have determined that the flight-control system on an Ethiopian Airlines jet automatically activated before the aircraft plunged into the ground on March 10.

The preliminary conclusion was based on information from the aircraft’s data and voice recorders and indicates a link between that accident and an earlier Lion Air crash in Indonesia, the newspaper said. Boeing and the Federal Aviation Administration declined to comment on the report.

Also on Friday, The New York Times reported that the Ethiopian jet’s data recorder yielded evidence that a sensor incorrectly triggered the anti-stall system, called the Maneuvering Characteristics Augmentation System, or MCAS. Once activated, the MCAS forced the plane into a dive and ultimately a crash that killed everyone on board, the newspaper said.

The Max remains grounded worldwide and airlines are losing money by cancelling flights.

Southwest, the largest operator of the Max with 34 of them and another 249 on order, said this week that the grounding caused it to cancel 2,800 flights so far, or 30 per cent of all cancellations in the first quarter. It said cancelled flights, including those not related to the Max, will cost it $150 million in revenue for the quarter and cut its planned capacity growth for the entire year.

German tour operator TUI Group said 2019 profit will drop about 200 million euros ($225 million) because of the Max grounding. That forecast assumes the planes are flying again no later than mid-July.

United Airlines, which has 14 Max jets, said the grounding isn’t hurting the airline yet, but the financial pain “is expected to increase if the grounding extends into the peak summer travel season.”

Boeing is also seeing its own expenses rise, although it would not disclose how much it is costing the company to make the software fix and also train pilots how to use it.

Cowen Research analysts say a “very rough guess” is that Boeing will pay about $2 billion after insurance to fix the plane, pay crash victims’ families and compensate airlines that had to cancel flights.

Most Wall Street analysts are betting that the planes will be flying again in less than three months, while noting that it could take longer in countries that plan to conduct their own reviews of Boeing’s upgrade instead of taking the word of the U.S. regulator, the Federal Aviation Administration.

Boeing has stopped Max deliveries during the grounding, which cuts into cash flow _ Boeing gets most of its money for a plane upon delivery. Outside estimates of the cash-flow drain range from $640 million to $1.8 billion a month, but Boeing will get that money eventually unless airlines cancel orders.

It is difficult and unusual for airlines to switch an order from one aircraft manufacturer to another. Boeing and European rival Airbus form a duopoly that dominates commercial airplane sales. Airlines that considering switching from the Max to the comparable Airbus model, called the neo for new engine option, would fall to the back of a yearslong backlog line.

“We believe a wholesale cancellation is unlikely if for no other reason than the inability of Airbus to deal with the influx,” says Hunter Keay, an aviation analyst with Wolfe Research, but he adds there is “some risk” of additional cancellations, with the big Chinese market being the most serious.

If cancellations are limited to Lion Air and Ethiopian Airlines _ the two carriers involved in the crashes _ and Garuda Indonesia, which has announced plans to do so, they account for only about 300 orders. Boeing has about 4,600 unfilled Max orders, making up the bulk of a huge backlog that the company values at $490 billion.

Then there is the potential cost of lawsuits stemming from October’s crash of a Lion Air Max 8 in Indonesia and the March 10 crash of an Ethiopian Airlines Max 8 near Addis Ababa. In all, 346 people died.

Already one law firm alone has filed seven lawsuits against Boeing in federal district court in Chicago; six were filed on behalf of families of passengers on the Lion Air jet and one by the family of an Ethiopian Airlines passenger.

The lawsuits claim that the flight-control system on the plane was defective and that Boeing failed to warn airlines about it or train pilots how to respond if it caused the plane’s nose to sink. The automated MCAS system was not on previous 737s.

The tragedy-filled introduction of the Max is reminiscent of troubled early histories of other planes. In 1979, for instance, the FAA grounded the McDonnell Douglas DC-10 following accidents involving a poorly designed cargo door that could spring open during flight and a crash in Chicago _ still the deadliest aviation accident in U.S. history with 273 lives lost _ that ultimately was blamed on poor maintenance practices by American Airlines.

After changes approved by safety regulators, the three-engine DC-10 returned to the skies and sold several hundred more copies before production was stopped. The plane couldn’t compete with more efficient twin-engine models.

Boeing’s 787 “Dreamliner” was grounded by overheating batteries in 2013, but after Boeing fixed the problem it became a favourite among airlines and passengers. The same course could play out for the Max, which entered service just two years ago _ as long as there are no fresh accidents to stir passengers’ fears.

“The public has an amazingly short memory,” said Robert Mann, a former American Airlines and TWA executive. “Most of them don’t even realize the kind of airplane they are flying on.”

March Spring Break: How to avoid an airport meltdown

March Spring Break: How to avoid an airport meltdown

By Eric Foss and Manmeet Ahluwalia, CBC News

It’s been a long, cold winter in many parts of Canada, and as spring approaches, many lucky Canadians have made plans to escape to warmer climates.

March Break, which for many Canadians starts next week, is one of the busiest times of year for Canadian airports, and while frequent fliers have a pretty good sense of the do’s and don’ts of travel, many Canadian vacationers aren’t aware of the rules and new services available at international airports across the country.

March Break is one of the busiest times of year for Canadian airports. (Eric Foss/CBC)

Arriving at the airport with the wrong travel documents or items that are not approved for airline travel can quickly change a dream vacation into a stressful and frustrating experience.

So before you imagine yourself walking barefoot on a sandy beach, you might want to reacquaint yourself with some useful airport travel tips and Canadian Customs rules.

1. Before you arrive at the airport

Consider using your airline’s online check-in, which opens 24 hours before your departure. Online check-in will secure where you’re sitting – you may even have a better choice of seat if you haven’t already reserved one. As well, you can avoid long check-in lines the following day at the airport.

Screenshot your boarding pass and save it as a photo. That way, you have an image of your boarding information on your smartphone in case wi-fi is spotty or too costly to access.

Also, check to make sure your flight is still departing at the scheduled time, especially on days when the weather is in question.

If you share custody of your children and the other parent is not coming along, or if you’re travelling with children that aren’t yours, it’s recommended you carry a consent letter to provide authorization to show Canada Customs when you re-enter the country.

2. Arriving at the airport

Make sure you arrive at the airport well in advance of your flight — at least two hours before a domestic flight and three if you are going international.

Know what choices you have for parking. The closer to the airport, the more expensive it can be. If you decide to leave your car at the airport, make sure you find the right location for the duration of your trip. Public transportation is often cheaper and more reliable.

Familiarize yourself with the airport’s facilities. Toronto’s Pearson International, for example, has many restaurants, a gym facility and places of worship. Modern airports have changed dramatically in the last decade, offering many different services.

Make sure check-in bags are under weight and within size allowances. Overweight bags will incur additional charges, or you will be required to reduce the weight on site. If you decide to carry your luggage onto the plane, make sure those bags are within the airline’s baggage allowance for size and weight — every airline is different.

If you haven’t checked in online or require boarding passes, consider using the self check-in kiosks. Located near the airlines’ check-in counters, these are great time savers allowing you to view your itinerary, select seats and print boarding passes.

3. Going through security

Make sure any sharp objects — including files and scissors — are in your checked bags. See the Canadian Air Transport Security Authority site for the latest on what is allowed through security.

Be prepared to remove your shoes, belt, watch and anything that has a substantial metal content. Bins are provided to keep loose items together.

Located near the airlines’ check-in counters, self check-in kiosks are great time savers that allow travellers to view their itinerary, select seats and print boarding passes. (Eric Foss/CBC)

If you’re carrying a laptop, remove it from its case or bag and place that in a separate bin.

Keep your ID and boarding pass available to show security screeners.

Jewelry and valuable items should be removed before entering security.

4. Before you board

It’s not a bad idea to eat something before you fly. Many airlines charge for food items and the selection may not be to your liking.

5. Boarding your aircraft

Most airlines will start boarding a flight at least 30 minutes before takeoff, even earlier with some of the larger aircraft.

Delays in boarding affect all passengers and can result in a missed travel slot for the aircraft. Make sure you board when the flight is announced and listen for your row. Families with small children, as well as people with disabilities, get prioritized boarding on most flights. 

6. Finding your bags

Once you have disembarked from your plane, follow the signs to Baggage Claim. When you arrive, check the monitors to find the carousel that corresponds to your flight number.

Have your bags, entry documents and ID ready for inspection if you are coming off an international flight. Be prepared to show items that you purchased to customs officers if asked.

7. Canada Customs

A passport is the preferable piece of identification for entry into Canada. Other acceptable identification includes an enhanced driver’s license, a birth certificate with accompanying photo ID (such as a regular driver’s license), a permanent resident card, a citizenship card or a certificate of Indian status.

Souvenirs can be a fun way to remember your trip abroad, but certain goods are prohibited from entering Canada, including some food, plant and animal products. Be aware of what goods are prohibited from entering Canada by consulting the I Declare brochure.

Whether you are leaving or returning to Canada, you must declare if you are carrying more than $10,000 Cdn.

‘They’re coming:’ Flying cars may appear in urban skies by 2023

The flying cars depicted in science fiction classics such as “Blade Runner” and “The Fifth Element” have long been seen as flights of fancy, but their arrival is closer than you think.

At least a dozen companies are prototyping or testing flying cars or passenger drones, according to a Deloitte report from January.

Air taxis will number 15,000 and become a global market worth $32 billion by 2035, with aerial delivery and inspection services adding on another $42 billion, a study by Porsche Consulting predicts.

Vertical takeoff and landing craft (VTOLs) carry the promise of delivering people and goods across congested urban and suburban areas in a fraction of the time a driver would need, taking cars off the road in the process. But technological and regulatory hurdles remain. And whether aerial vehicles can substantially change commuter behaviour and emissions _ or overcome questions of safety and public perception _ is still up in the air.

Most VTOLs _ or eVTOLs if they are electric-powered _ resemble an oversize drone, sporting a halo of small rotors around a passenger pod and taking off and touching down like a helicopter. But they will be quieter, cheaper and greener than their heli-cousins, experts say.

“Instead of this deep, guttural, penetrating-through-walls sound, you have a much more acceptable sound, similar to a ceiling fan,” said Nikhil Goel, head of product at Uber Technology Inc.’s aviation team, dubbed Uber Elevate.

Uber hopes to start hauling passengers in five-seat, hybrid VTOLs above Los Angeles, Dallas-Fort Worth and a third city outside of the U.S. by 2023.

“The vehicles are real. They’re coming. I think it’s going to be faster than anybody thinks is possible,” Goel said.

He sees the first wave of aerial taxis providing a shuttle service between major airports and downtown vertiports that integrate into the mass transportation system, rather than leapfrogging from block to block _ a hub-to-hub travel option akin to a monorail.

“We are not building this product for the elite,” Goel said.

A few years after the launch of Uber Air, as it’s dubbed, the cost of an aerial trip will be the same as one on the asphalt, he said.

He calculates that an aerial taxi would cut a 90-kilometre commute between the downtowns of San Francisco and San Jose to 15 minutes, down from an hour and 40 minutes.

Uber is not alone in setting its sights on VTOLs. Chinese drone manufacturer Ehang carried out flight tests with a single-passenger drone earlier this year, according to the company’s website. German startup Volocopter has produced an air taxi prototype, taking to the skies above Dubai in 2017. And Kitty Hawk, a California-based company funded by Google founder Larry Page, produced a sleek, one-seat VTOL prototype this year.

Bell (formerly Bell Helicopter), is one of five companies Uber has teamed up with, along with Karem, Pipistrel and aerospace rivals Embraer and Boeing’s Aurora Flight Sciences.

Scott Drennan, Bell’s vice-president of innovation, sees 2025 as a more realistic commercial launch target than Uber’s goal of 2023.

Battery life is one area that needs to advance, with lithium-ion packs today lasting for between 50 and 100 kilometres on a multi-rotor electric propulsion system, he said.

Regulations are another obstacle. To avoid crowding urban skies, VTOLs could trace existing airplane takeoff and landing routes, but at a lower altitude, buzzing along at between 150 and 330 km/h.

Western aviation regulators bar out-of-sight drone operations for the most part. Discussions are ongoing with the U.S. Federal Aviation Authority and the European Aviation Safety Agency, said Drennan, who said he has also met three times with Transport Canada regarding VTOLs.

Mark Cousin, chief executive of Airbus’s A3 unit, stressed the traffic management hurdles on the horizon.

“The vehicle is the easy bit,” he said. “The real challenge lies in integrating thousands of these vehicles into an urban air mobility system within cities.”

A3 has put out an electric-powered VTOL dubbed Vahana. The autonomous prototype launched its first vertical flight in February.

Drones would typically beat other modes of transportation, such as taxis, at distances of 20 kilometres or more in congested areas, according to the Porsche study.

The report notes the technology’s limited potential, stating that it can relieve some pressure from congested urban hot spots _ “but only some.”

“If one tried to solve all traffic problems on the ground by moving into the air, the myriad take-off and landing spots would become the new choke points.”

A city with more than five million inhabitants will likely have no more than 1,000 passenger drones in operation by 2035, the study predicts. That would make a relatively small dent in ground traffic.

Uber cited Los Angeles as an appealing launch city in part because of the abundance of flat roofs there _ a long-standing fire safety regulation required helicopter landing pads atop tall buildings.

“But they’re actually not that well suited, because it’s not just a pickup and drop-off point,” said Robin Lineberger, head of aerospace and defence at Deloitte.

“It has to be a place where people come, get ready to get on the aircraft…the vehicle has to land, recharge, refuel, maybe light maintenance and inspection going on. If you think about it, it really needs to be a small, multi-function airport service area.”

Large parking lots downtown are ripe for conversion into vertiports, complete with conveyor belts, charging stations and hangars, he said.

Insurance would function in ways similar to a helicopter manufacturer or transport service, Lineberger said, with premiums hinging on the probability and severity of accidents.

However, public perception will be an issue for the foreseeable future. Fewer than half of respondents in a Deloitte global survey of 10,000 people this year were convinced that aerial passenger vehicles would be safe, with one-third undecided and one in five disagreeing.

Where are the drones? Amazon’s customers are still waiting

By David Koenig And Joseph Pisani

THE ASSOCIATED PRESS

Jeff Bezos boldly predicted five years ago that drones would be carrying Amazon packages to people’s doorsteps by now.

Amazon customers are still waiting. And it’s unclear when, if ever, this particular order by the company’s founder and CEO will arrive.

Bezos made billions of dollars by transforming the retail sector. But overcoming the regulatory hurdles and safety issues posed by drones appears to be a challenge even for the world’s wealthiest man. The result is a blown deadline on his claim to CBS’ “60 Minutes” in December 2013 that drones would be making deliveries within five years.

The day may not be far off when drones will carry medicine to people in rural or remote areas, but the marketing hype around instant delivery of consumer goods looks more and more like just that  hype. Drones have a short battery life, and privacy concerns can be a hindrance, too.

“I don’t think you will see delivery of burritos or diapers in the suburbs,” says drone analyst Colin Snow.

Drone usage has grown rapidly in some industries, but mostly outside the retail sector and direct interaction with consumers.

The government estimates that about 110,000 commercial drones are operating in U.S. airspace, and the number is expected to soar to about 450,000 in 2022. They are being used in rural areas for mining and agriculture, for inspecting power lines and pipelines, and for surveying.

Amazon says it is still pushing ahead with plans to use drones for quick deliveries, though the company is staying away from fixed timelines.

“We are committed to making our goal of delivering packages by drones in 30 minutes or less a reality,” says Amazon spokeswoman Kristen Kish. The Seattle-based online retail giant says it has drone development centres in the United States, Austria, France, Israel and the United Kingdom.

Delivery companies have been testing the use of drones to deliver emergency supplies and to cover ground quickly in less populated areas. By contrast, package deliveries would be concentrated in office parks and neighbourhoods where there are bigger issues around safety and privacy.

In May, the Trump administration approved a three-year program for private companies and local government agencies to test drones for deliveries, inspections and other tasks.

But pilot programs by major delivery companies suggest few Americans will be greeted by package-bearing drones any time soon. United Parcel Service tested launching a drone from a delivery truck that was covering a rural route in Florida. DHL Express, the German delivery company, tested the use of drones to deliver medicine from Tanzania to an island in Lake Victoria.

Frank Appel, the CEO of DHL’s parent company, Deutsche Post AG, said “over the next couple of years” drones will remain a niche vehicle and not widely used. He said a big obstacle is battery life.

“If you have to recharge them every other hour, then you need so many drones and you have to orchestrate that. So good luck with that,” he told The Associated Press.

Appel said human couriers have another big advantage over drones: They know where customers live and which doorbell to ring. “To program that in IT is not that easy and not cheap,” he said.

Analysts say it will take years for the Federal Aviation Administration to write all the rules to allow widespread drone deliveries.

Snow, the CEO of Skylogic Research, says a rule permitting operators to fly drones beyond their line of sight  so critical to deliveries is at least 10 years away. A method will be needed to let law enforcement identify drones flying over people federal officials are worried about their use by terrorists.

While the rules are being written, companies will rely on waivers from the FAA to keep experimenting and running small-scale pilot programs.

“People like DHL and the rest of them (will say), ‘Hey, we can deliver via drone this parcel package to this island,’ but that’s not the original vision that Amazon presented,” Snow says.

There is a long list of FAA rules governing drone flights. They generally can’t fly higher than 400 feet, over many federal facilities, or within five miles of an airport. Night flights are forbidden. For the delivery business, the biggest holdup is that the machines must remain within sight of the operator at all times.

In June, the National Academies of Sciences, Engineering, and Medicine said the FAA was being overly conservative in its safety standards for drones. The group said FAA’s risk-averse attitude was holding back beneficial uses, such as drones helping firefighters who are battling a fierce blaze.

Even before the criticism by the scientific panel, the FAA had begun to respond more quickly to operators’ requests for waivers from some rules, says Alan Perlman, founder of the Drone Pilot Ground School in Nashville, Tennessee. He said it is also getting easier and cheaper to buy liability insurance.

Bezos was mindful of the safety issues, telling “60 Minutes” back in 2013, “This thing can’t land on somebody’s head while they’re walking around their neighbourhood.”

That didn’t stop him from predicting that drones fed with GPS co-ordinates would be taking off and making deliveries in  “four, five years. I think so. It will work, and it will happen.”

To Perlman, the billionaire’s optimism made perfect sense.

“When you’re in his world you think more about technology than regulations, and the (drone) technology is there,” Perlman said.

World’s first research centre to improve Canadians’ air travel experience

Air transport allows thousands of Canadians to connect with families and explore other parts of the world. It is also at the core of Canada’s economic future. To remain a leader in the aerospace industry and keep air travel safe and enjoyable for all Canadians, we need to invest in leading-edge technologies.

oday, the Honourable Marc Garneau, Minister of Transport, on behalf of the Honourable Navdeep Bains, Minister of Innovation, Science and Economic Development, announced the launch of the new Centre for Air Travel Research. The new centre, managed by the National Research Council of Canada, is the world’s first and only facility to study the air travel experience from start to finish; from check-in to terminal, to security, boarding, flying, and deplaning.

All businesses involved in the air travel experience, including airlines, aircraft manufacturers, and cabin equipment and systems suppliers need the right research platforms and technologies to develop and test their solutions to real-world challenges. The Centre for Air Travel Research provides the aerospace industry with a flexible, collaborative space to develop, integrate, and evaluate aerospace technologies, systems and materials.

With expertise across a wide range of disciplines, the National Research Council supports the aerospace industry in tackling various air travel challenges. Located next to the Ottawa International Airport, this unique facility will allow companies to evaluate a passenger’s complete air travel experience to improve safety, efficiency and comfort for Canadian travellers and visitors.

Quick Facts

  • In 2017, over 140 million passengers travelled through Canadian airports.
  • Last year the aerospace industry made a significant contribution to Canada’s economy through more than 188,000 direct and indirect quality jobs and over $24.5 billion in gross domestic product.
  • The Centre for Air Travel Research has five laboratories that simulate and study a passenger’s complete air travel experience.
  • In addition to offering a realistic recreation of an airport terminal, the Centre for Air Travel Research also boasts the Flexible Cabin Laboratory, complete with an A320 aircraft cabin that allows for the study of passenger flight experience, human vibration, and more.

Quotes

“Canadians want safe, efficient, affordable, and comfortable air travel services. The National Research Council of Canada’s Centre for Air Travel Research – a research and development facility – will benefit travellers, airlines, and aircraft manufacturers from around the world.”
The Honourable Marc Garneau, Minister of Transport

“Our government is working to make sure that the Canadian aerospace industry is in the best possible position to meet customers’ needs and remain competitive. By launching the world’s first and only centre dedicated to improving customers’ air travel experience, Canada is demonstrating that it’s at the leading edge of innovation.”
The Honourable Navdeep Bains, Minister of Innovation, Science and Economic Development

“Using a holistic approach, our simulator draws from our team’s diverse knowledge base in areas like environmental controls, vibration, avionics, and human factors to help improve passenger comfort, safety and enroute efficiency. We are proud to be investing in technology platforms that will be critical for the long-term success of the aerospace industry.”
Iain Stewart, President of the National Research Council of Canada

Associated Links

SOURCE National Research Council Canada

 

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