The aviation industry is expecting an all-time high in passenger numbers this year, but insurance claims show it is still suffering the consequences of the pandemic.
Mass layoffs in the industry during the pandemic have led to “a noticeable rise in ground-handling claims at large airports worldwide, including towing, fuelling, catering, and wheelchair services related to commercial aircraft operations, as well as vehicle collisions on the tarmac.”
This is according to an analysis by multinational insurer Allianz of more than 30 000 aviation insurance claims over the past five year.
“Pandemic-related lay-offs have resulted in new hires and less experienced employees in some cases, contributing to these claims.”
The analysed claims were valued at US$15.1 billion (R278 billion).
The most expensive claims came from collisions, crashes, hard landings and bird strikes, which accounted for 63% of the value of all aviation-related insurance claims over the past five years, and 33% by number.
Claims originating in faulty workmanship or defective product is the second top cause of claims by value and frequency, and natural disasters, including those caused by turbulence, ranked third.
Higher labour costs, the rising cost of aircraft parts and inflation have led to “a significant increase in aircraft repair costs”.
“The shift to next-generation aircraft continues to impact claims, especially when it comes to engine disassembly and repair costs. Claims costs related to certain aircraft spare parts have increased by 10% to 15% over the last few years, which has resulted in a greater number of aircraft being deemed Constructive Total Losses (CTLs) than in the past.”
The sector is also suffering significant supply chain challenges.
“Delivery times for mechanical and avionic components are challenging and unpredictable for all involved: insured clients, maintenance, repair and overhaul operations, and insurers, driving up the cost of claims. Maintenance and repair capacity resources are dwindling across the UK, Europe, and the US.”
The report also flags “the growing shortage of aircraft mechanics”, which “may impact future claims activity”.
“An obvious concern is that the shortfall ultimately leads to an accident, despite the systems of checks and balances in place in the industry. It may take longer to complete repairs if vendors lack manpower, or efficiency. Further, if a mechanic does not have the ability to repair a part, it will need to be replaced with a new one, which typically is more costly.”
Allianz also flagged GPS spoofing and jamming amidst rising geopolitical tensions, saying there were on average 40% more of these incidents in the first quarter of 2024 than in 2023.
“Examples include false GPS signals which have tricked aircraft flight management systems into indicating that the aircraft is many miles off-track. To date, most reported spoofing attacks have come from Eastern Europe and the Middle East, as well as up through the Black Sea region. Incidents have escalated since the onset of Russia’s invasion of Ukraine. However, operators should be cognisant of the potential for spoofing anywhere.”
