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Challenges for aviation in post-Covid rebound
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SME Times News Bureau | 06 Jul, 2021
As global aviation prepares for a post-Covid rebound, a new report from
aviation insurer Allianz Global Corporate & Specialty (AGCS)
highlights some of the unique challenges airlines and airports face in
restarting operations, ranging from "rusty" pilots to insect
infestations.
The report also identifies a number of ways in
which Covid-19 is reshaping the sector, driving long-term changes in
fleet composition, flight routes and passenger demand.
"The
grounding of worldwide fleets during the pandemic was an unprecedented
event for the aviation industry," Dave Warfel, a Regional Head of
Aviation at AGCS, told IANS over e-mail.
"Airlines have worked
tirelessly to maintain their fleets and train their crews during this
long period of inactivity and, as insurers, we take a keen interest in
working with them to understand their plans to return to service.
"Challenges
will no doubt emerge as the industry readies for takeoff again.
Although it is hard to predict in exactly what shape the aviation
industry will return, one thing is for certain – it will have changed,"
Warfel said.
In Asia Pacific, airlines have fared the worst in
the world according to latest International Air Transport Association
(IATA) data released in June.
The region experienced the steepest traffic decline for the ninth consecutive month, with capacity down 86.3 per cent.
Singapore
Airlines is facing its second consecutive annual loss amounting to a
net loss of 4.3 billion as of March 2021, largely because unlikely other
countries it does not have domestic travel.
Meanwhile, AirAsia
X, the long-haul affiliate of Malaysian Air Asia Group and Thai Airways
are in bankruptcy courts to negotiate time to restructure their debts.
The AGCS reports flags the following challenges facing global aviation:
"Rusty" pilots and the return of sightseeing flights
Earlier
this year, dozens of pilots reported making mistakes, such as taking
multiple attempts to land, to NASA's Aviation Safety Reporting System,
with many citing rustiness as a factor on returning to the skies.
In
September 2020, an Indonesian flight veered off the runway during
landing as the pilots had did not have the opportunity to fly an
aircraft in months. Airlines (and other operators) are well aware of the
potential for pilot "rustiness" and continue to take steps to manage
and mitigate these risks.
Major airlines have developed different training programs for pilots re-entering service, depending on the length of absence.
"At
a time of such unprecedented activity, it is comforting to know that
the risk management processes that made airline travel safer than any
form of travel prior to the pandemic will continue to drive an
unparalleled travel safety environment in the post Covid-19 world," says
Warfel.
However, the return of sightseeing flights in tourism
destinations could lead to an uptick in risk for smaller leisure
aircraft, including helicopters, particularly if there is an influx of
new pilots unfamiliar with the routes and terrain. There have already
been a number of fatal accidents involving sightseeing flights in recent
years
"Air rage" incidents on the rise
Unruly behaviour
of airplane passengers is increasingly a concern, particularly in the
US. In a typical year there are around 150 reports of passenger
disruption on aircraft.
By June, there had been 3,000 according
to the Federal Aviation Administration – the majority involving
passengers refusing to wear a mask. The report notes that unruly
passengers may later claim they were discriminated against by the
airline in these cases even when in the wrong – a trend insurers need to
stay on top of.
This trend, however was not a concern in Asia as
countries such as Hong Kong, Singapore and South Korea have imposed a
blanket requirement for everyone to wear masks as long as they are in
public and not only for air travel.
Perils from parked fleets
Although
a large proportion of the world's airline fleet have been, and are
still, parked during Covid-19, loss exposures do not disappear. They
change. Parked fleets are exposed to weather events.
In Asia,
the challenge lies in aircrafts being exposed to extreme weather events
particularly in countries such as Hong Kong, Japan, Taiwan and the
Philippines that are prone to strong storms. The risk lies in moving
groups of aircrafts without causing damage.
The risk of shunting
or ground incidents also increases, which can bring costly claims. There
were a number of collisions at the start of the pandemic as operators
transferred aircraft to storage facilities. More are likely when
aircraft are moved again ahead of reuse.
Aircraft in storage
typically undergo regular maintenance to ensure they are ready to
return. However, never has the industry seen so many aircraft
temporarily put out of service and the report notes that smaller
airlines may face significant challenges when reactivating fleets, given
it will be an unprecedented process.
Pilot shortage brings risks
Odd
as it may seem given the impact of Covid-19, the global aviation
industry faces a pilot shortage in the mid to long-term. The tremendous
increase in air travel pre-pandemic, annual air passenger growth in
China alone was 10 per cent plus a year from 2011, meant pilot demand
was already outstripping supply.
More than a quarter of a
million are required over the coming decade. Moreover, the pandemic has
forced many airline companies to lay off pilots as seen in Cathay
Pacific cutting 600 pilots to ease its financial burden.
"In less
regulated countries, shortages can lead to pilots operating commercial
aircraft with limited qualifications and low overall flying time," says
Warfel.
"Pilot fatigue is also a known risk among existing
pilots that must be properly managed. Fortunately, there is a lot of
industry expertise and resources available to assist airlines in
building proper fatigue management systems."
Some airlines are
building their own pilot pipelines by establishing flight schools. Given
the nature of training, flying schools are prone to accidents and
claims are becoming more expensive with rising values of aircraft and
increased activity. Landing accidents are most common, but insurers have
also seen total losses.
New generation aircraft bring safety improvements but higher costs
A
number of airlines have shrunk their fleets or retired aircraft over
the past year, as the pandemic hastens a generational shift to smaller
aircraft, given the anticipated reduced number of passengers on aircraft
in the short-term future.
"Newer generation aircraft bring safety and efficiency benefits," says Axel von Frowein, a Regional Head of Aviation at AGCS.
"However, new materials such as composites, titanium and alloys are more expensive to repair, resulting in higher claims costs."
Robust performance by air cargo and trend will continue
Although
passenger travel has been devastated by the pandemic, other aviation
sectors have performed more robustly, such as cargo operators.
In
April, Asia Pacific reported its best month for international air cargo
since the pandemic began, thanks to rising business confidence,
e-commerce and congestion at sea ports, while Latin America to North
America freighter capacity grew by almost a third in May compared to the
same two week period in 2019. The report expects air cargo to continue
to perform strongly.
A Singaporean low-cost airline, Scoot has
re-configured their regular passenger cabins to allow aircrafts to carry
extra cargo, while Singapore Airlines continues to capture more
vaccination shipments as production ramps up and the demand for exports
increase. Business travel – boom or bust?
Pre-Covid-19
business travel traffic amounted to $1.5 trillion a year or around 1.7
per cent of global GDP. With many airlines dialing back expectations in
the short-term, the report asks whether those days are over.
New
ways of collaboration, such as video calls, proved to be effective and
more companies are aiming to reduce business travel to improve their
carbon footprint. Therefore, while there will be initial surge once
lockdowns end, many airlines are preparing for a long-term paradigm
shift in travelling, with business travel expected to be slow to pick
up.
However, what speaks for a possible uptick is that some areas
of business aviation have proven resilient during the pandemic.
Companies that had aircraft continued to use them while many that had
never purchased or chartered an aircraft before did so for the first
time. Many charter companies thrived.
New routes grows in Europe, Asia- Pacific
Over
1,400 new air routes are scheduled for 2021, more than double those
added in 2016, driven by Europe (over 600) and Asia Pacific (over 500),
with regional airports set to be the main beneficiaries. Growth in
China's domestic market alone has seen over 200 new routes added, almost
the same as the US.
China has one of the largest domestic
tourism markets in the world. The Ministry of Culture and Tourism
estimated there will be more than four billion trips made across China
in 2021, a market worth just over USD$500 billion. The demand for
domestic alternatives, possibly exceeding pre-pandemic levels is not
surprising, especially as China is home to 55 UNESCO World Heritage
Sites
"This development reflects the desire of some airlines to
experiment in uncertain times, particularly smaller ones," says von
Frowein.
"New routes means less congested airspace and
congestion at airports which can have a positive impact on risks such as
ground handling incidents. However, flying new routes can bring a
heightened risk environment."
Insect infestations affect instrument accuracy
There
have been a number of reports of unreliable airspeed and altitude
readings during the first flight(s) after some aircraft have left
storage. In many cases, the problem was traced back to undetected insect
nests inside the aircraft's pitot tubes, pressure-sensitive sensors
that feed data to an avionics computer. Such incidents have led to
rejected takeoffs and turn back events. Contamination risk increases if
storage procedures are not followed.
Covid-19 claims impact
The
AGCS report also notes the aviation industry has seen relatively few
claims directly related to the pandemic to date. In a small number of
liability notifications, passengers have sued airlines for
cancellations/disruptions.
"Covid-19 has not been a direct driver
of aviation claims over the past year," says Cristina Schoen, Global
Head of Aviation Claims at AGCS.
"As a result of the significant
reduction in commercial airline travel during the pandemic we saw fewer
attritional claims than we would during a typical year.
"However,
the insurance sector was not immune to larger losses during the course
of the pandemic, with different regions seeing tragic accidents,
emergency landings and hull losses to name a few. As air travel begins
to return to pre-pandemic levels we expect claims volume to rise
accordingly."
AGCS analysis of more than 46,000 aviation
insurance claims from 2016 to year-end 2020 worth more than 14.5 billion
euros ($17.3 billion) shows collision/crash incidents account for over
half the value of all claims. Other expensive causes of loss include
faulty workmanship/maintenance and machinery breakdown.
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