Looking back at 2023's aviation claims trends
A rise in ground-handling incidents has been one of the key challenges with post-pandemic recovery and growth.
Air traffic in 2023 has largely returned to pre-pandemic levels, according to the International Air Transport Association, which reported total passenger traffic for September 2023 was 30.1% higher when compared with September 2022.
Global traffic is now at 97.3% of pre-COVID levels, while in North America airlines saw an 18.9% traffic rise in September 2023 versus the 2022 period.
All eyes are on future growth. From a loss adjusting perspective that ultimately means more claims activity, so what have been the key developments in claims?
Ground handling
One of the key challenges with post-pandemic recovery and growth has been a rise in ground-handling incidents.
McLarens Aviation handles thousands of claims each year, and anecdotally we have seen a rise of ground handling losses, most commonly wingtip collisions, followed by airside vehicle and aircraft collisions.
Staffing and skills challenges are two factors that led to this uplift. During COVID, there was thought to have been a high percentage of staff who left the industry and sought alternative employment. There’s a skills shortage in North America and worldwide.
Aircraft are large and tricky to maneuver on the ground. Over the course of any regular year, we see almost every single part of a “virtual” aircraft perimeter being impacted at some stage.
Maneuvering aircraft requires knowledge, understanding and, crucially, practice. The limited availability of simulators and training opportunities also poses a challenge.
It’s something that airlines and airports are working hard to address, and recruitment is a key focus.
Extreme weather
Extreme weather continues to impact the U.S., which has seen its fair share of major events this year.
We’ve seen ice storms and freezing temperatures across Texas, the Midwest and across the Northeast, as well as a number of tornados and deadly storms.
By early April, CBS News reported that almost as many people had been killed by tornadoes in the first three months of 2023 as are usually in an entire year. We also saw hurricane-force winds in California back in March.
We have handled losses where a microburst destroyed a hangar at a large airport, affecting five corporate aircraft parked in and around the building. In this instance, all five aircraft were damaged beyond repair due to the impact with large structural beams from the hangar.
Damage that we deal with on a more regular basis includes dents from hail, which can vary in scale and depth, causing minor repairs to the aircraft surface due to small dents, to very expensive replacement of large fuselage skins and flight controls caused by the large number of dents and extreme depth on the skin panels.
Large thunderstorms can produce very high winds, which move aircraft from their parking chocks and cause collisions with other aircraft, ground equipment or buildings. High winds can also blow objects into an aircraft.
Storms of this nature are costly events for aviation insurers and appear to be on the rise.
Rising costs
The aviation industry is grappling with an upward trajectory in the cost of attritional claims. Our own claims data has revealed that the expense associated with aviation hull claims has surged by over 20% in recent years.
This increase is partly fueled by worldwide inflation, but technological advancements play a substantial role as well. The incorporation of novel technology, from composite materials to advanced turbofan engines, is commonplace in newer aircraft joining the global fleet. Repairing these sophisticated machines and their components often requires proprietary support from manufacturers, involving unique skills and specialized equipment, which has led to a steep rise in costs.
Recent trends in maintenance and repair, as well as changes in manufacturing economics, are likely intensifying these challenges. We are witnessing a steady climb in cases where aircraft manufacturers are being considered for repairs. As the use of composite materials becomes more prevalent, the demand for manufacturer interventions is expected to rise, with independent repair capabilities lagging behind the growing need.
In addition, the business of maintaining, repairing or replacing parts has become more lucrative for manufacturers. Some offer all-inclusive maintenance packages with aircraft purchases, leading to fixed-price repair quotes that often embed additional costs for contingencies that may rarely be invoked.
Furthermore, the move toward parts that lack repair options, necessitating replacement with new ones, is a pattern that has been accelerating and is likely to persist. Such practices contribute to the mounting insurance expenses. Loss adjusters are becoming increasingly pivotal in mitigating these escalating costs, a trend that has been gaining momentum and shows no signs of abating.
Continued growth in the drone market
The commercial use of drones has grown rapidly, and, in response, regulators are developing a clear framework for use.
Back in September, U.S. regulators granted the first licenses for unmanned commercial aircraft to fly well beyond the sight of a pilot. The move was seen by many as a significant driver for mainstream drone use.
Previously, licenses limited commercial drone flights to within a pilot’s sight, even if the drone could operate autonomously.
The move has received support from the drone industry and follows several high-profile announcements from the likes of Amazon and DHL about their plans for drone deliveries.
As commercial drone usage increases, and the technology continues to evolve, so too do the risks.
In parallel, the insurance market has evolved quickly, thanks to regular dialogue between loss adjusters, brokers and underwriters about the fast-evolving technology and emerging risks.
From loss of signal to loss of battery power, bird strikes and, of course, pilot error, as drone usage proliferates, the industry is building an ever-clearer picture of the risk profile.
For aviation loss adjusters, this is a segment of the market that is growing rapidly and, given its carbon-friendly credentials, will likely see continued growth in the coming years.
Bill Garcia is regional manager, USA, for McLarens Aviation.
Opinions expressed here are the author’s own.
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