- Pilot shortage brings risk issues
- Training – over-reliance on automation concerns
- Risks growing at flight schools
- Pilot fatigue still a significant issue
- More turbulence on the way
- Drones bring increasing challenges and disruption
- Cyber business interruption and data breach threat grows
- Accidents and incidents on the ground problematic
The 1 minute dialogue
Pilot shortage brings risk issues
According to Boeing’s 2018 Pilot & Technician Outlook, the projected demand for new pilots will number around 800,000 over the next 20 years [1]. This equates to a doubling of the current workforce and a record-high demand in the outlook’s nine-year history. An anticipated doubling of the global commercial airplane fleet, significant air travel demand and the tightening labor supply are the main factors driving this development.
In its Commercial Market Outlook 2019-2038, Boeing estimated that year-on-year traffic growth averaged 6.7% during the past 10 years, setting a pace that exceeded the long-term average of 5% [2]. Low air fares, the growth of tourism and travel relative to total consumer spending in major economies, new airline business models and a growing middle class in large emerging markets are all driving this strength in air travel growth. For example, the average increase rate of the number of air passengers in China has been higher than 10% per year since 2011, while in India, the passenger growth per year has increased by more than 20%.
To meet the demand in the commercial market with the increasing number of passengers – the International Air Transport Association suggests current numbers could double to over eight billion by 2037 [3] – Boeing estimates that the number of jet airplanes will break though the 50,000 barrier over the next two decades - double the number today.
Given the growing demand for pilots it seems there has likely never been a better time to obtain a pilot’s license. However, at the same time, there are a number of issues which are ensuring the pilot shortage problem will not be easily solved, such as the increasing cost of pilot training and additional factors such as the significant increase in the amount of flight hours required to qualify in the US. The latter rule, while obviously well-intentioned and important from a safety perspective, has also exacerbated the pilot shortage problem, as it is making it more difficult – and taking longer – for new pilots to qualify.
“We already see the effect of pilot shortages on airlines and in general aviation,” says Warfel. There is a huge demand for air crews and pilots, and this can lead to pilots flying commercial aircraft with limited experience and a low air-time. The pilot shortage is forcing operators around the world to manage the issue of less experienced crew members in the cockpit. "This is becoming a real issue for the industry. Some airlines are now establishing their own flight schools, but new pilots will still need to get the right flight experience. The concern is that we will see more pilots flying with less experience and reduced frequency of training in order to meet demand,” says Warfel.
Risks growing at flight schools
As demand for airline pilots outstrips supply, pressure on commercial flight schools is growing, with implications for the availability of instructors and aircraft. “The shortage of pilots has seen activity at flight schools increase exponentially, and this could result in an up-tick in risk,” says Dave Watkins, Regional Head of General Aviation, North America at AGCS. “These operators may have to maximize utilization of aircraft and instructors in order to keep up with demand. That is why we are now focusing our attention on better understanding potential exposures from increased activity in flight schools.” Growing demand for pilot training is driving up the value of aircraft used in flight schools, which increasingly use more sophisticated planes to train pilots.
The average insured value has increased from around $100,000 to $1mn today as airlines require pilots to be trained in more advanced aircraft. Increased demand for aircraft by flight schools has also led to a doubling of their value. "In some cases, demand is such that it is becoming impossible to find certain types of aircraft,” says Watkins. Given the nature of flight training, flying schools are prone to accidents, but claims are becoming more expensive with rising values and increased activity. Loss frequency is already high in the flight training industry – landing accidents are most common, but insurers are also seeing total losses.
“This is a space where we expect minor accidents on a regular basis, but loss frequency is rising with increased activity. In addition, as aircraft values increase in this arena, we are seeing higher repair costs and longer repair times,” says Watkins.
Pilot training standards have improved but systems can still be incorrectly operated. Photo: iStock
Training – over-reliance on automation concerns
Following a number of high-profile incidents in recent years culminating in two Boeing 737 Max 8 jets crashing within five months of each other in 2018 and 2019, questions continue to be asked about pilots’ overreliance on aircraft automation systems which can be life-threatening as technology becomes more complex.
“Modern aircraft are more technologically sophisticated, which has had a significant impact on safety and efficiency, but has also raised concerns about how pilots interact with the technology,” says Van Meter.
“There have been some major accidents that highlight the challenges with interaction between pilots and technologically advanced systems– such as the 2013 Asiana Airlines crash at San Francisco airport in 2013 and now the two 737 Max incidents. Such events involve an element of human error, with an over-reliance on automated flight and the interface of pilots with complex aircraft systems often contributing factors,” Van Meter adds.
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. In particular, pilots need to be better prepared to be able to take corrective actions in event of a technical malfunction or adverse circumstance. It is also important to teach pilots about aircraft systems to improve their understanding of automation principles and work patterns. This can increase situational awareness and help avoid confusion during situations when automation fails.
Pilot fatigue still a significant issue
Largely ignored for the first 40 years of commercial jet aircraft, pilot fatigue has always posed a serious threat to the aviation industry and continues to do so. The consequences can be life-threatening, as well as producing unusual scenarios – in 2011 an Air Canada pilot caused an airplane to plummet when he became disoriented after falling asleep and mistook the planet Venus as the lights of another airplane on a collision course, injuring 14 passengers and two crew.
In a 2017 survey of more than 800 commercial airline pilots by the pilot’s union, the British Airline Pilots Association (BALPA), 55% of respondents cited fatigue as the biggest threat to flight safety, ahead of terrorism [4].
It is estimated that pilot fatigue is responsible for around 15% to 20% of human error in fatal accidents, a figure that hasn’t changed significantly since the early 1990s (for example in 1994 around 20% of reported aviation incidents were attributed to fatigue). Experts note that for pilots, being fatigued is like being drunk. Depending on the amount of sleep a pilot has had, the impairment on a pilot landing a plane at 05:00 in the morning can be the same as having a blood alcohol level of 0.08%, which is equivalent to the UK’s drink-driving limit and more than the legal limit in many other nations [5].
No one wants tired pilots on the flight deck and attempts to create an industry-wide culture that understands and prioritizes fatigue need to be stepped up. Accurate data and fatigue monitoring are of crucial importance, as are removing any potential barriers to reporting incidents and ensuring systems are working.
Organizations such as BALPA have also previously called for an industry standard for what levels of fatigue are permissable. It supports the Karolinska Sleepiness Scale, which runs from 1 (extremely alert) to 9 (extremely sleepy, fighting sleep) as a way of measuring fatigue. It would like to see no pilot rostered to the point where they will reach Karolinska 8 (sleepy, some effort to keep awake) or 9 during a duty.
Incidences of turbulence are expected to increase due to climate change. Picture: iStock
Strap yourself in – more turbulence on the way
In July 2019, at least 37 people were injured on board an Air Canada flight after the plane hit severe turbulence and had to make an emergency landing. The plane, carrying 284 passengers and crew, was travelling from Vancouver to Sydney but had to be diverted to Hawaii.
In the aviation industry, turbulence is experienced every day in flights around the world. Turbulence occurs when the air through which the aircraft is moving is disturbed, either by convective activity like thunderstorms or a large temperature gradient. The intensity of turbulence will range from light to severe and is determined by how fast the speed or direction of airflow is changing. Often, turbulence is unexpected, and pilots must be properly trained on how to handle it when it is encountered.
Since the severity of turbulence always fluctuates, light turbulence will cause the aircraft to experience slight changes in attitude or altitude. If the pilots encounter severe turbulence, the aircraft will be harder to control and have a greater variation in attitude and altitude. Extreme turbulence is the most severe form and could cause structural damage to the aircraft, which can cost as much as hundreds of millions of dollars a year. Flight path and altitude changes to avoid turbulence are estimated to cost US airlines as much as $100mn a year, and burn an additional 160 million gallons of fuel.
“Within the coming decades, turbulence is expected to increase due to climate change and the warming planet,” says von Frowein. It’s been suggested that the North Atlantic flight passageway will see the greatest increase in turbulence. This passageway is the route many international flights use to travel between North America and Europe and any changes here can have a significant influence on aviation, since nearly 3,000 flights cross the Atlantic on an average day. According to the University of Reading in the UK, it is estimated that by 2050 to 2080, changes to the jet stream from climate change will result in an increase of clear-air turbulence of 113% over North America, and as much as 181% over the North Atlantic [6].
Drones bring increasing challenges and disruptions
The rapid growth of unmanned aerial vehicles (UAVs), or drones, is one of the biggest issues to impact the aviation industry for decades. Aerospace analysis company Teal Group anticipates a $93bn investment in commercial drone technology worldwide over the next 10 years and also expects the worldwide non-military drone market, dominated by manufacturers in China, to triple in size to $14.3bn in sales over the same period from $4.9bn in 2019, as it benefits from a gradual opening of US airspace by the FAA and increased use by commercial industries [7].
In the US alone, almost 900,000 hobbyist owners had registered their drones by the end of 2018 according to the FAA since it mandated online registration for drones in 2015. Meanwhile, the market for commercial drones – which can be used for anything from lifeguard duties to police tackling crime, to site inspections to delivering of medical supplies – is accelerating. The FAA expects growth will continue – by 2023, this market will triple in size, with an estimated 823,000 drones flying at that time [8].
Drones bring a host of potential benefits to air transportation systems in particular. For example, they can be used to undertake aerial surveys of terminal buildings or provide 3D maps of runways in order to identify and aid maintenance work – this can be much quicker and safer than using people. They can also be used to quickly detect foreign objects around airports, potentially eliminating the need to close down a runway, as well as offering support to security by identifying any threats quickly, while also acting as a visual deterrent.
However, as the number of drones flying in the skies has increased, so have the risk exposures. AGCS has already experienced a small number of claims resulting from drones falling to the ground, the majority of which have been caused by loss of battery power, often due to pilot inattention during the flight. Fortunately, no one has been hurt in these incidents.
The number of drone incidents in the US has soared from zero in February 2014 to 260 in June 2017. Reported incidents are only expected to rise as more people acquire drones, some of whom might not be versed in the rules and regulations. Source: Federal Aviation Administration, Bloomberg. Graphic: Allianz Global Corporate & Specialty
Even more serious is the fact that the number of aircraft near-misses with drones and other incidents of reckless behavior in or around airports is also increasing. Drones constitute a considerable risk to manned airplanes. Even though many weigh only a few pounds, the motors and other metallic equipment that power them can cause significant damage to aircraft engines, windshields and wings. It is estimated that even a small drone could cause as much as $10mn in physical damage alone if hitting an engine of an airplane (excluding liability costs). Commercial aircraft are at the greatest risk of an incident with a drone during take-off and landing. In the event of an incident, aircrafts could also be forced to make an emergency landing, resulting in delay or cancellation, incurring significant economic loss. For example, the number of times a drone endangered the safety of an aircraft in UK airspace rose by more than a third last year, according to the UK Airprox Board. It recorded 125 dangerously close encounters in 2018, up from 93 in 2017 and 71 in 2016. Severe disruptions occurred at Gatwick Airport, London’s second busiest, resulting in 1,000 flight cancellations or diversions and affecting 140,000 passengers, when recreational drones reportedly appeared over the airport for three days in December 2018.
Similar drone incidents with airliners or near airports occurred in late 2018 and early 2019 in Tijuana, Mexico, Newark, New York, London’s Heathrow Airport, Dubai and Singapore, to name but a few.
Estimates put the cost of Gatwick’s December drone closure in excess of $60mn [9], while airliner EasyJet confirmed it lost £15mn ($18.5mn) as a result. In the wake of the incident, Gatwick spent about £5mn ($6mn) on anti-drone equipment, which can detect and jam communications between a drone and its operator.
Although significant strides have been made around the world when it comes to introducing regulations controlling drone use over the past five years, there is still much work to be done and although most drone operators operate within these correct regulations and boundaries, the above examples show there are a growing number of exceptions to these rules.
Standards of drone regulation can also differ significantly around the world. Some countries are well regulated, whereas in others regulation can be either very light or non-existent, which can increase the risk of a dangerous incident occurring, such as a collision.
At the same time, methods of mitigating and reducing the potential threats posed by drones to airports and airlines continue to evolve, such as ‘geo-fencing’, whereby software uses the global positioning system (GPS) or radio frequency identification (RFID) to define geographical boundaries. It can then pick up those signals, process them and display them on an on-screen map. If protecting an airport, the system should emit an audible tone announcing that it has spotted a drone and airport staff can immediately see where both the drone and operator are located. However, although geo-fencing technology is a good mitigation against hobbyists that may stray into the wrong area, it can be less effective against individuals with malicious intent if they have already found out how to override it.
Data sharing and collaboration on drone safety analysis are still in the early stages of maturity while the investigation of certain near-miss drone sightings would be useful in validating the effectiveness of safety controls. Such analyses would help guide the drone industry’s ongoing safety research and design. First and foremost, careless and reckless operators need to be held accountable.
Drone insurance loss activity and the rise of BVLOS
As drone technology and reliability has improved, insured losses from drones have shown a positive trend. However, a move towards electric powered flight and more autonomous drones will bring far greater challenges.
“AGCS insures drones globally – covering both hull risks and liability for operators – and we have seen losses improve to some degree, as drones have become more reliable and battery and guidance technology has improved,” says James Van Meter, Aviation Practice Leader, North America at AGCS.
“The drone industry is on the cusp of a transformative development, with the development of electric unmanned aircraft that are able to fly beyond visual line of sight (BVLOS),” adds Axel von Frowein, Global Product Leader Aerospace at AGCS. “If drones can be safely integrated into commercial airspace, commercial drones may soon become commonplace – used for deliveries, inspections, agriculture and even urban air mobility services that can carry tourists, serve offshore oil platforms and carry out emergency evacuations.“
The Federal Aviation Administration recently granted licenses to a number of logistic companies to test drone delivery systems in the US and authorized its first BVLOS flight for a public safety agency, the Chula Vista California Police Department. Last year, Xcel Energy used a drone to inspect electric power lines in Colorado – marking the first BVLOS flight by a US utility company.
In addition to carrying cargo, small autonomous passenger drones are undergoing testing. Uber plans to test its air taxi technology in 2020, with the aim of launching commercial operations from 2023. Dubai, Singapore and China are among the states and countries embracing the technology with plans to launch passenger services in coming years – Dubai conducted its first test of a drone taxi service in 2017.
One of the world’s largest manufacturers of consumer drones recently announced that its drones will be equipped with ADS-B sensors from 2019, which will enable them to be seen and tracked by other aircraft and air traffic control.
However, BVLOS flight has some significant regulatory and safety challenges ahead. Switzerland recently suspended a medical drone delivery service after the vehicle crashed close to a pre-school. The drone service, which delivers samples to Swiss hospitals, had made over 3,000 successful flights since its launch in 2017.
“Drones have become safer as the technology has improved,” says Van Meter. “However, the regulatory landscape continues to lag behind technological advancement as we are seeing in the continued growth of the unmanned autonomous flight sector. There are now over 200 companies developing passenger-carrying aircraft. With a lot of companies investing in this technology there will be another learning curve in aviation and drone safety.”
Over 200 companies are developing passenger-carrying autonomous aircraft. Picture: iStock
Cyber business interruption and data breach threat grows
Cyber risks, including cyber-attacks, IT systems outages and data breaches, were ranked as the top future peril by aviation sector respondents in the Allianz Risk Barometer 2019, which surveys sector risk management experts, just ahead of the closely related risk of business interruption. The increased concern for cyber is not surprising, given high profile cyber incidents for airlines, airports and aerospace manufacturers in recent years.
In June 2019, European aerospace manufacturer ASCO was hit by a suspected ransomware attack, disrupting production and forcing the Belgium-based company to resort to workarounds to clear a backlog of orders. The incident followed a ransomware attack at Boeing in 2018, although that attack was quickly contained. Airports have also been targeted by disruptive cyber-attacks – last year one affected departure boards at the UK’s Bristol airport while Cleveland Hopkins International Airport in the US suffered a similar attack in April 2019.
With its reliance on IT systems for booking, ticketing and flight operations, the airline industry is particularly vulnerable to business interruption events, either from a malicious attack, human error or technical faults,” says von Frowein. A number of US airlines have suffered cancellations and long delays caused by IT system or hardware failures in recent years – according to the Government Accountability Office there were 34 IT outages affecting 11 US airlines between 2015 and 2017, 29 of which directly disrupted or cancelled flights [10].
A number of airlines have also fallen victim to some high profile data breaches in recent years. In March 2019, Cathay Pacific revealed a data breach had exposed the personal data of over nine million customers, the largest known data breach in the aviation sector to date. British Airways faces a £180mn ($230mn) fine from the UK’s data protection regulator for a 2018 data breach that affected 500,000 passengers, the largest fine proposed under the EU’s General Data Protection Regulations since they were introduced in May 2018.
Cyber is the top risk concern for the aviation sector, but as yet, these fears have not manifested themselves seriously in aviation insurance claims. Source: Allianz Risk Barometer 2019. Figures represent how often a risk was selected as a percentage of all responses for that industry sector. Responses: 86. Figures don’t add up to 100% as up to three risks could be selected.
Despite the prevalence of cyber events in the aerospace sector, AGCS has, to date, had very few cyber claims under aviation hull and liability policies. This is in large part a reflection of the coverage purchased by airlines and manufacturers to date. As coverage evolves, cyber will no-doubt shape future aviation claims.
There is an ongoing discussion and an examination of the extent to which aviation insurance coverages currently do or do not cover cyber risk. In general, aviation insurance will cover physical damage to an aircraft resulting from a cyber-attack, but losses related to data and IT system outages are typically excluded. However, specific coverages are being developed to cover such risks in the aviation sector.
While awareness of cyber risk has increased, especially among aviation manufacturers, AGCS sees varying degrees of cyber risk management maturity when undertaking risk assessments according to Warfel. “Cyber is becoming an important risk for the aviation sector – a more visible risk that all organizations now consider. However, the level of sophistication among clients differs widely. Not all companies assess and measure the level of cyber risk in their organizations and when asked about their cyber exposures, the responses vary greatly. When it comes to cyber risk management and insurance purchasing, what we see is still very much in its infancy.”
Accident and incidents on the ground problematic
While accidents in flight continue to become less frequent, ground accidents remain problematic and this issue could be exacerbated in future. According to the International Air Transport Association, 96% of the world’s 100 busiest airports will likely see infrastructure related capacity issues within the next 10 years, and 45% are already dealing with weekly delays related to airport infrastructure [11]. This airport ground congestion is not only cause for concern on the basis of delays and inconveniences, but for safety as well. When there are too many planes on the ground or within any certain area on an airport’s surface, safety margins can become too thin for comfort and air traffic control and air traffic systems ramp controllers can become overloaded and overwhelmed with traffic and an accident can occur.
It has been estimated that ramp accidents can cost airlines as much as $10bn a year in direct and indirect costs with non-compliance, with operating procedures a significant contributor to this loss tab. The Flight Safety Foundation has previously estimated that around 27,000 ramp accidents and incidents occur worldwide annually [12].
The rapid growth in air travel – the number of air passengers is expected to double to almost eight billion in the next 20 years – is also resulting in more congested airports.
Increased air travel congestion in and around airports has become a problematic issue. In many cases, airport infrastructure has not kept pace with the rapid growth in passenger and aircraft numbers. With more aircraft on the ground, servicing areas and aprons have become more congested and this is resulting in an increase in the number of collisions with other aircrafts or ground handlers.
Congested airports mean ground accidents are likely to increase further in future. Photo: iStock
Analysis of 523 loss events at 14 German airports last year by AGCS shows that damage to vehicles on the tarmac is a leading cause of insured losses. More than half of these events were due to collisions with pushback tractors, baggage trolleys, aerial work platforms or washing systems.
For example, the introduction of a new form of tow-truck (that wraps-around an aircraft’s front landing gear) has resulted in several large claims. A number of tow-trucks have caught fire while in operation, damaging aircraft – one resulted in the total loss of a Boeing 777.
Before an airport invests in new ramps, taxiways, and runways, the first question should always be, is there an alternative? It takes a large amount of effort, but reorganizing and optimizing large operations such as those at major airports can be extremely beneficial. Using a system such as the Jeppesen Total Airport and Airspace Modeler (TAAM), a 4D gate-to-gate simulation tool that accurately predicts and analyzes the impact of airspace and airport operations to find where weak areas are within a specific airport operation and implementing and trying new rules and different flows, can impact the efficiency of the operation.
In many cases, airports do not have the most logical runway-to-gate and gate-to-runway flows and this can tie up traffic on ramps and taxiways, especially those with continuous arrivals and departures. Optimizing taxiway flow around an airport in a way that makes sense for both the tenants of the airport and air traffic control, and that works with all possible runway configurations for that specific airport, is a major step to successfully moving forward. Ensuring ground traffic flow does not disrupt smooth operation of the airport is key to reducing aircraft delays and risks of aircraft incidents. Reorganizing taxiway directional flow in a way that creates “one way” taxiways around the airport has proven to be one of the best and most successful methods when running simulations on the TAAM software along with the strong avoidance of runway crossings if possible to limit the runway interference which can cause many delays on both sides.
Communication is an integral part of ramp guidance and ineffective communication can be at the heart of many ground accidents. The most frequent parts of the airplane to be hit during a ramp accident or incident are the aft cargo door, forward fuselage, and wing-mounted engines. These areas of the airplane are large, and fairly visible. Possible causes of these incidents include distractions, such as using phones while driving service vehicles, airplane noises, communicating with others, etc., to name a few. Dealing with a heavy workload or fatigue can also be contributing factors behind such incidents.
- [1] Boeing Pilot & Technician Outlook
- [2] Boeing Commercial Market Outlook 2019-2038
- [3] International Air Transport Association, IATA Forecast Predicts 8.2 Billion Air Travelers in 2037
- [4] British Airline Pilots Association, balpa.org, Pilot fatigue
- [5] BBC News, Pilot fatigue “one of the biggest threats to air safety”
- [6] CNBC, Climate change will increase the risk of severe turbulence on planes research says
- [7] Reuters, Global drone market estimated to reach $14bn over next decade
- [8] Federal Aviation Administration Forecast Fiscal Years 2019 - 2039
- [9] Fortune, Gatwick’s December drone closure costs airlines $64.5mn
- [10] US Government Accountability Office, Commercial aviation information on airline IT outages
- [11] International Air Transport Association, Airport Of The Future
- [12] The Flight Safety Foundation, Covering the ground
This article is part of the report "Aviation Risk Report 2020" which focuses on safety developments in commercial aviation around the world. It identifies a number of insurance claims trends which are impacting the industry – including the top causes of financial losses – and highlights a number of risk trends and challenges that will impact the aviation sector and insurance landscape in future.
The findings have been produced with the assistance of Embry-Riddle Aeronautical University, the world’s largest fully-accredited university specializing in aviation and aerospace.
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