“Rusty” pilots, “air rage”, new routes, new generation aircraft and even insect infestations – airlines and airports will face some novel challenges as they turn their attentions toward restoring normal operations after being mothballed during the Covid‑19 pandemic.
To see the damage Covid‑19 inflicted upon the aviation industry, at one point, one simply had to look to the skies. Once crisscrossed by vapor trails, in many locations, they were largely unmarred by the telltale signs of aircraft passing.
The sudden halt imposed on aviation by the pandemic means the industry was hit faster and harder than most other sectors. At one point during the crisis, two‑thirds of the global fleet sat idle on the tarmac. Figures from the International Air Transport Association (IATA) [1] show passenger traffic, as measured by industry‑wide revenue passenger kilometers (RPKs) was down 90% in April 2020 compared to the previous year. The figures for March 2021 show an improvement. While RPKs remain 67% lower than March 2019, largely due to limited international travel, there was a strong recovery in domestic travel, led by the US.
Air passenger traffic, by region (% RPK change, 3m/3m)
The limited recovery in air passenger demand has also been driven by Asia, especially China – and Russia to a lesser extent – mainly domestically. Ongoing travel restrictions make getting traffic back to its pre-crisis level (much) more complicated.
Sources: IATA, Allianz, Euler Hermes
Sources: IATA, Allianz, Euler Hermes
The industry is slowly rebounding and at AGCS we have witnessed firsthand how the risk management, safety, in-flight and other teams of our customers tirelessly rose to meet each challenge to ensure that air travel remained safe, while facing layoffs, financial struggles and the pressures concomitant with an overnight transformation to remote working. But as more aircraft return to the skies, there has been much discussion about the hazards that may arise from such an unprecedented period, as well as some of the changes the sector will see. In this report, AGCS’ aviation team highlights some of the potential issues facing the airline industry as the Covid‑19 recovery begins.
“The global aviation industry is sophisticated with a highly-developed safety culture that has improved year after year,” says Tom Fadden, Global Head of Aviation at AGCS. “When we speak to our customers we hear that they are focused on the operational challenges posed by Covid-19 and are keen to share what they are doing with us in order to best manage and mitigate their risks. The aviation team at AGCS is focused on technical excellence and has a dedicated team of skilled experts available to assess such risks. We appreciate the open dialogue we have with our customers and all they are doing to manage risk during this difficult time.”
- Tom Fadden, Global Head of Aviation at AGCS
1. The return of rusty pilots and sightseeing flights
- Earlier this year it was reported that dozens of pilots had notified the Aviation Safety Reporting System about making mistakes after climbing back into the cockpit [2]. Operated by NASA, the US Federal Aviation Administration (FAA) watchdog system enables pilots and crew members to anonymously report mechanical glitches and human errors. Many of the pilots cited rustiness as a reason for the incidents after returning to the skies following months of lockdown.
- While there have been no reported incidents of out‑of‑practice pilots causing accidents injuring passengers, mistakes reported included: forgetting to disengage the parking brake on takeoff, taking three attempts to land the plane on a windy day, choosing the wrong runway and forgetting to turn on the anti‑icing mechanism that prevents the altitude and airspeed sensors from freezing.
2. Incidents of air rage and unruly passenger behavior on the rise
- In May 2021, an attendant on a Southwest airline flight had two teeth knocked out after an altercation with a passenger over wearing a mask. It was the latest in a spate of highly publicized incidents that moved the FAA to later issue a warning about a spike in unruly or dangerous behavior aboard passenger planes.
- In a typical year in the US, there are often no more than 150 reports of serious onboard disruption. In 2021, that number had already jumped to around 3,000 by June [3], including about 2,300 incidents involving passengers who refused to comply with the federal mandate to wear a mask while traveling.
3. The perils from parked fleets
At the peak of the first wave of the Covid‑19 crisis airlines parked around two thirds of the total global fleet. More than a year later, many are still mothballed. This unprecedented situation has resulted in a host of new challenges. Loss exposures do not just disappear when airplanes are parked. Instead, they change and can create new risk accumulations. For example, thunderstorms in Texas in May 2021 that pelted down golf ball‑sized hail sparked fears of damage among several grounded aircraft.
Covid‑19 claims impact
The aviation industry has seen few claims directly related to the pandemic to date. In a small number of liability notifications, passengers have sued airlines for cancellations or disruptions. At the same time there has been a decline in the numerous smaller slip and fall or lost baggage claims at airports because of the reduced number of passengers during the pandemic. However, a natural increase in these claims is anticipated as and when passenger traffic returns to more normal levels.
Meanwhile, large loss activity has continued from damage to parked aircraft - which can be exposed to hurricanes and hailstorms - crashes and emergency landings to name just a few examples. There have also been some tragic general aviation accidents which have hit the insurance sector. Again, it is expected that claims activity will return to more normal levels, as passenger numbers return.
Top causes of loss by value of claims
Top causes of loss by number of claims
Based on analysis of 46,038 aviation insurance industry claims worth more than €14.5bn ($17.3bn) over the past five years. Unsurprisingly, collision/crash incidents account for over half the value of all claims (52%) by value and almost a third by number (30%). This means that there have been 13,896 aviation collision/crash incidents resulting in claims over the past five years. Such incidents do not just include major crashes in the air, however. They also incorporate events like hard landings, bird strikes and runway incidents such as incursions and excursions.
Source: Allianz Global Corporate & Specialty (AGCS). Claims analyzed between the period January 2016 and December 2020. Claims total includes the share of other insurers in addition to AGCS.
Source: Allianz Global Corporate & Specialty (AGCS). Claims analyzed between the period January 2016 and December 2020. Claims total includes the share of other insurers in addition to AGCS.
4. Pilot shortage remains a major issue and brings risks
The initial response of many airlines to the pandemic involved furloughs, hiring freezes and layoffs to conserve cash. It, therefore, seems odd that the industry faces an imminent shortage of pilots, but Covid‑19 merely paused a longer‑term problem.
The tremendous increase in air travel experienced in the years before the pandemic – annual air passenger growth in China alone was 10%+ a year from 2011 – meant demand for pilots was already outstripping supply. This problem is reemerging as more aircraft return to the skies.
5. Shift to new generation of aircraft brings safety improvements but higher maintenance and repair costs
In March 2021, Lufthansa announced that it had shrunk its collective fleet by 150 aircraft during the past 12 months. In addition, the company said it was considering further retirements, notably to the remaining A380s, which had been placed into deep storage for “several years [4]” – demonstrating the impact of the Covid crisis on the sector and the extraordinary circumstances it has had to operate in.
Like Lufthansa, many airlines have retired some of their widebody long‑haul aircraft earlier than planned. KLM, for example, scrapped the last of their Boeing 747 jumbo jets last year, and Virgin Atlantic brought forward the retirement of their A340‑600.
6. Robust performance by air cargo and trend will continue
For all the tales of the devastation that Covid‑19 has wrought on the aviation sector – and particularly passenger travel – it needs to be remembered that some parts of the industry have held up or performed strongly during the pandemic.
A May 2021 study by Accenture [5], for example, noted that while the global air cargo capacity is down 9% compared to the same weeks in 2019, specific areas have grown. Latin America to North America freighter capacity grew 31% from April 19 to May 2 compared to the same weeks in 2019. In April 2021, 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.
7. What will happen with business travel?
Face‑to‑face meetings used to be seen as vital to a successful relationship‑building and to a successful business. So, millions of businesspeople regularly boarded planes to participate in meetings. This traffic amounted to $1.5trn a year – 1.7% of world gross domestic product (GDP) [6], but Covid‑19 ground that to a halt. Will business travel ever return to the same volume?
8. Network experimentation –
a jump in the number of new airline routes
Some good news for the aviation sector as we look ahead to the post Covid-19 environment is the fact that over 1,400 new air routes are scheduled to operate in 2021 [7] – more than double those added in 2016 – with regional airports set to be the main beneficiaries. This is driven by Europe (over 600), where many of these previously unserved routes link regional airports across the continent, and Asia Pacific (over 500). Growth in China’s domestic market alone has seen over 200 new routes added. The US has 235 new routes.
The development reflects the desire of some airlines to experiment in a time of uncertainty, particularly smaller ones, who have sought to seize opportunities.
9. Insect infestation affecting instrument accuracy
One unusual Covid‑19 consequence relates to the impact of having members of the insect world resident in mothballed aircraft. The European Aviation Safety Agency [8] has reported an “alarming trend” in the number of reports of unreliable airspeed and altitude readings during the first flight(s) after some planes have left storage.
[1] IATA, Air Passenger Market Analysis, April 2020 and March 2021
[2] Los Angeles Times, Airline pilots making in-flight errors say they‘re rusty because of pandemic, January 29, 2021
[3] Federal Aviation Administration, Passengers & Cargo, Unruly Passengers, June 2021
[4] Simple Flying, The Future Looks Dark for Lufthansa‘s A380 Fleet, March 4, 2021
[5] Accenture, Covid-19 Impact On Air Cargo Capacity, May 2021
[6] Project Syndicate, Why Zoom Can‘t Save The World, Ricardo Hausmann, August 10, 2020
[7] OAG, Network Experimentation: Why new airline routes in Europe are hitting an all-time high, May 23, 2021
[8] European Union Aviation Safety Agency, Pitot-Static Issues After Storage due to the Covid-19 Pandemic, August 5, 2020
Photos: Adobe Stock
Our experts
Courtesy goes also to
- Carmen Paul, an Airline Claims Manager
- David Watkins, a Regional Head of General Aviation
- Howard Hamilton, an Executive Aviation Underwriter
- John Nowicki, a General Aviation and Airline Claims Manager
- Joshua Ray, a General Aviation Team Leader
- Kevin Murphy, a Director in the Aviation Products & Major Claims Unit
Further information
Find out more about aviation safety, risk and the insurance sector in the AGCS and Embry‑Riddle Aeronautical University report:
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