IC 76 Aviation Insurance

CHAPTER 1
INTRODUCTION TO AVIATION INDUSTRY AND

INSURANCE
Chapter Introduction
Aviation industry is quite diverse in its scope, from the perspective of flying
vehicles, it covers hang-gliders, parachutes, balloons, helicopters and fixed
wing aircraft. The risks involved in the aviation industry can result in
catastrophic consequences. Aviation class of insurance primarily aims at
catering to the risk management needs of the aviation industry. In the earlier
days of aviation industry, aircraft were insured in the marine department by
marine underwriters. This was because there was not sizable business to create
a separate class or department. But as the business volumes grew in this class,
it emerged as a separate class and department.
In this chapter we will learn about the history of aviation and the important
features of aviation insurance. We will also learn about the scope and diversity
of aviation insurance industry.
Learning Outcomes
A. History of Aviation
B. Features of Aviation Industry
C. Aviation Insurance Industry
IC-76 1
CHAPTER 1 HISTORY OF AVIATION
A. History of Aviation
Aviation is about conquest of air, conquest of altitude and conquest of distance.

It over time grew into conquest of the planet earth and in terms of aero-space
technology, a major step in the conquest of the universe, the ultimate human
dream. In the process, it has achieved technological breakthroughs and story of
aviation is as thrilling as, if not more than, that of conquest of lands and
conquest of seas. It contains stories of valour and victories with each milestone
in the aviation industry and history of air travel.
1. First practical airplane by Wright brothers (1905)
The beginning of controlled and powered flight for heavier than air vehicle is
widely credited to Wright Brothers, Wilbur (1867-1912) and Orville (1871-1948).
The flight in question was conducted on December 17, 1903, near Kitty Hawk,
North Carolina involving flying only 852 feet in 59 seconds.
However the first practical airplane was built by Wright Brothers in 1905 which
was their third aircraft, having built one in 1904. In the intervening period, they
improved upon the design of the aircraft and the stability and control. On
October 5, 1905, Wilbur Wright flew a distance of 24.5 miles in 59 minutes, 23.8
seconds. This was the real demonstration of a practical airplane and of viability
of air travel.
Without detracting from the credit given to and contribution made by Wright
Brothers, it needs to be appreciated that hundreds of people over centuries
were diligently applying their minds to the conundrum of controlled and
powered flight with various lessons learnt which culminated in Wright Brothers
flight.
2. DELAG - World’s First Passenger Airline (1909)
The year 1909 saw the world’s first passenger airline, DELAG (Deutsche
Luftschiffahrts - Aktiengesellschaft, or German Airship Transportation
Corporation Ltd), an offshoot of the Zeppelin Company. Incidentally, the airline
used a rigid airsh`1ip for transportation and not an aircraft. Early flights were
pleasure trips and sight-seeing flights. The passengers were also given free
flights to publicise the zeppelin industry. Heinrich Kubis was the world’s first
flight attendant employed by Delag in March, 1912.
From 1910 to 1914 till the outbreak of World War I, DELAG Zeppelins carried
over 34,000 passengers on over 1,500 flights, without a single injury. Airship
Bodensee introduced in 1919 could cover distance between Friedrichshafen and
Berlin of the 370 miles in 4-9 hours compared to the 18-24 hours it took by rail.
With washrooms and a small kitchen for light meals, Bodensee could carry up to
26 passengers.
2 IC-76 AVIATION INSURANCE

HISTORY OF AVIATION CHAPTER 1
3. Captain Alcock and Lieutenant Brown crossing of the Atlantic in Vimy IV

(1919)
Conquest in the air has quite a few parallels with conquest on the land in terms
of climbing mountain peaks. Though it may not be readily apparent, there are
quite a few parallels between conquest of Mount Everest and path-breaking
aviation endeavours in terms of weather encountered, technological
advancement, hazard involved and stories of human courage and resilience
displayed.
Captain Alcock and Lieutenant Brown, successfully made the first non-stop
crossing of the Atlantic in Vimy IV. Earlier crossings were successful with
intermediate stops. It was just after World War I. They took off from
Newfoundland on June 14, 1919, and landed June 15, 1919 in Ireland. The time
they took for crossing was sixteen hours, twenty-seven minutes.
The flight involved travelling a non-stop distance of 1,890 nautical miles of open
sea. For this accomplishment, they were presented with Daily Mail prize of
£10,000 by Winston Churchill, who was then Britain's Secretary of State. A few
days later, both men were knighted at Buckingham Palace by King George V, for
recognition of their pioneering achievement.
It was a path-breaking flight with heavy fog, dense clouds, cumulous clouds,
chilling cold encountered in the open cockpit alongside ear-splitting engine
noise. Of course, the radio transmitter had gone dead and flight controls were
getting jammed in cold weather at higher altitudes. This is apart from icing
conditions faced. Faced with snowstorm, one of the pilots had to go over to the
wings to clean the deposited ice four times during the flight.
Looking for comfort in locating the Sun and the Moon and the stars, they
conducted their flight largely at altitude between 4000-7000 feet with average
speed of 106 knots i.e. approximately 196 km/hour. With sandwiches and beer
for their meal, they had the luxury of tossing the bottle overboard in a spirit of
freedom.
Even today the basic aeronautical hazards remain the same and continue to
present themselves resulting in general aviation accidents and sometime airline
accidents. However it was some more years before aviation could be considered
a safe and reliable mode of transport with wide recognition among travelling
public.
IC-76 AVIATION INSURANCE 3

CHAPTER 1 HISTORY OF AVIATION
4. First solo non-stop flight across the Atlantic Ocean by Charles Lindbergh
(1927)
Charles Lindbergh made the first solo non-stop flight across the Atlantic Ocean
in May 1927. This changed significantly perception of safety in air travel.
The feat was 33½-hour flight from Long Island, New York to Le Bourget Field
near Paris, France during May 20–21, 1927. Next few years saw the most
dramatic jump in air passengers owing to the changed public opinion about air
travel safety. This also attracted the all important investment to the aviation
industry and saw the formation of airlines and non-scheduled operations.
Charles Lindbergh’s fame was put to good use. Guggenheim Fund for the
Promotion of Aeronautics requested Lindbergh to travel across the United
States. He visited seventy-five cities and covered a distance of 22,350 miles.
While doing this, he dropped pamphlets over towns. In enthusiastic response,
various cities prepared their airports and some airports were built just to
receive him. Lindbergh was the hero and inspired not only travellers but also
young people to take to piloting as a profession.
Later in 1930s, Lindbergh charted international air routes for new commercial
airlines flying from Canada to Asia and across the Atlantic with assistance of his
wife, Anne Morrow Lindbergh, a co-pilot and navigator.
5. First Official Airmail flight by a heavier than aircraft (1911)
India finds a place in the airmail history. The first official airmail flight by a
heavier than aircraft was authorised by the Indian government in British-built
and British-owned aircraft flown by a French pilot.
In 1910 the Humber Motor Co. of Coventry, England, sent Walter George
Windham with eight dismantled Roger Sommer biplanes and six Bleriot
monoplanes to India aboard the SS Persia. The planes were brought to India for
display at the Industrial and Agricultural Exhibition being held in Allahabad,
U.P., India. Windham at a request from the Vicar of Holy Trinity Church in
Allahabad to raise money for a student hostel came up with the idea of carrying
mail with a special postmark by air across the Ganges River to Naini. A
surcharge of 6 annas was levied and the proceeds went to the benefit of the
Oxford and Cambridge Hostel for Indian students.
The flight was conducted on Feb. 18, 1911 by 23-year-old Frenchman Henri
Pequet for the five miles distance between Allahabad and Naini at an average
height of 130 feet and a cruising speed of between 40 mph and 50 mph. It is
believed that this flight was witnessed by million bathing Hindu pilgrims during
Kumbha festival.

HISTORY OF AVIATION CHAPTER 1
6. First regularly scheduled Airmail Service (1918)
The first regularly scheduled airmail service was initiated by Austria on March
31, 1918. The service could continue only up to Oct. 15, 1918.
7. Beginning of commercial air passenger service (1914)
For the first time in the world, commercial air passenger service began in the
United States in 1914 that was conducted between St. Petersburg and Tampa,
Florida. Gradual developments in aircraft design and construction were
interrupted by the World War I. The emergence of aviation industry really
started post World War I and continued during the time till World War II.
The U.S. Congress enacted the Air Commerce Act of 1926 and established
Bureau of Aeronautics to regulate aviation operations.
In parallel, experiments in vertical and hover flight continued resulting finally

into the emergence of a viable helicopter design. Nature has always provided
adequate inspiration and dragon fly and humming bird provided the example of
possibility of hover and all direction flight, i.e. backwards, sideways and
forwards. The aerodynamics involved in helicopter flight differs from that of a
fixed wing flight.
It was the emergence of internal combustion engine that really facilitated and
propelled the development of aircraft design. As compared to earlier steam
engines, these new engine designs massively improved the power to weight
ratios making aircraft design viable. It needs to be noted that as compared to a
fixed wing aircraft, a helicopter needs more power and a helicopter needs
power in hover than in forward flight. Helicopter involves greater mechanical
and design complexity as compared to a fixed wing aircraft.
Post World War II, with diversion of aircrafts deployed for military operations to
civilian operations and emergence of jet engine technology improving air safety
really boosted the aviation industry.
Test Yourself 1
The first official airmail flight by a heavier-than-aircraft was flown in ______.
I. 190l
II. 1911
III. 1924
IV. 1927

CHAPTER 1 FEATURES OF AVIATION INDUSTRY
B. Features of Aviation Industry
The following features of aviation insurance distinguish it from other insurance

classes:
1. Aviation Industry is quite diverse in its scope
Aviation Insurance aims at addressing the risk management and insurance needs
of aviation industry.
Aviation industry is quite diverse in its scope, from the perspective of flying
vehicles, it covers hang-gliders, parachutes, balloons, helicopters and fixed
wing aircraft.
Fixed wing aircraft range from 2-seater piston-engine aircraft to wide-bodied

jet aircraft such as Boeing 747 or Airbus 380 capable carrying 550+ passengers.
Aviation industry also includes military aviation apart from the civil aviation.
Military aviation usually opts for self-insurance.
2. Operators and Service Providers in Aviation Industry
Apart from aircraft operations, other operators and service providers are part of
the aviation industry and are catered to by aviation insurance class.
These include:
a) Catering contractors,
b) Construction contractors at airports,
c) Security service providers,
d) Fuel providers,
e) Airports and air navigation service providers,
f) Maintenance repair and overhaul (MRO) organisations,
g) Lessors and financiers of aircraft,
h) Component and part suppliers to aircraft manufacturers.
3. Involves crossing national boundaries
Depending upon the size and the capacity of an aircraft, aviation operation
could involve crossing national boundaries and thus, disputes are likely to
involve international law and jurisdiction.
4. Disputes are likely to be more complex
Owing to the potential for involvement of international law and foreign

jurisdictions, disputes are likely to be more complex and by market convention,
other classes of insurance avoid writing risks involving aviation exposures.

FEATURES OF AVIATION INDUSTRY CHAPTER 1
Example
A tyre manufacturer may not be provided product liabilities cover by other

insurance classes if the tyres are to be a part of an aircraft and thus vulnerable
to litigation under aviation law.
5. Aviation hull insurance
Aviation insurance was in early days written by marine underwriters. That is

how the term ‘hull’ got transferred from marine hull to aviation hull. Aviation
hull are also predominantly written on ‘agreed value’ basis. Aircraft policy
provides for indemnification of reasonable emergency expenses necessarily
incurred by the Insured for the immediate safety of the Aircraft akin to sue and
labour Charges.
6. Elaborate checks at various intervals result in early identification of

manufacturing and design defects
Aviation industry continues to evolve in terms of aerospace technologies and

their application apart from advances in computer technology. Since the civil
aviation authorities world over are extremely cautious in certifying an aircraft
before its commercial production commences as also elaborate testing and
validation protocols, aircraft are extremely safe even if new models come into
operation.
Elaborate checks of various types at various intervals result in early

identification of manufacturing and design defects apart from assembly and
engineering processes shortcomings.
Example
In 2012, small cracks of less than two centimetres long were found on the
aircraft wings of Airbus 380.
These are further aided by extensive and extremely detailed investigation of

aviation accidents. These accident investigations result in recommendations and
changes in training modules for pilots and modifications in maintenance
procedures.
7. High risk
Depending upon the size of aircraft, the risk may assume catastrophic
proportions since an airline may be liable for loss of all lives on board which can
be, say up to 550 people for a large airliner. If an average award of USD 1 mln.
per passenger is considered, this gives potential exposure of USD 550 mln.
Airlines usually buy liability coverage in the range of USD 500 mln to USD 2,500
mln.

CHAPTER 1 FEATURES OF AVIATION INDUSTRY
Example
Catastrophic potential of aviation operations were demonstrated in the

11th September terrorist attack which changed the functioning of aviation
market to a significant extent.
8. Volatile underwriting results
It is peculiar of aviation class that there are not too many risks within each
category of risks within risk portfolio. For example there are over 22,000
aircraft in active service (The aircraft are also parked and stored when
withdrawn from service) in the world as per World Airliner Census 2014 (a
special report of Flightglobal). These include all aircraft, both turbofan and
turboprop with seating capacity of 14 or more seats used by airlines world over.
North America constitutes about a third of these aircraft. IATA represents some
260 airlines in over 117 countries in 2015 carrying over 80% of the world's air
traffic. Thus, looking at the number of insureds, the number of risks are few.
On the business aviation side, an organization tracking business jets

registrations has reckoned about 18,000 aircraft being registered across the
world in 2014. Of these, about 2/3rds are based on North America. This small
number of aircraft as also aircraft operators, relatively speaking, in comparison
to other classes affords limited applicability of law of large numbers. As a
result, aviation class presents more volatile underwriting results.
9. High level of technique and expertise
The conduct of Aviation Insurance requires a high level of technical expertise in

several different fields. Knowledge of theory and principles of aerodynamics,
aircraft design, construction and operation, aviation finance, international
aviation law and an acquaintance with national statutory laws is quite
important. Aviation insurance being international in character embraces liability
litigation in all its complexity owing to multiple jurisdictions and different
jurisdictions being at different levels of evolution in terms of standards of care.
Test Yourself 2
Which of the following statement is incorrect?
I. In the early days, aviation insurance was written by marine underwriters

II. Aviation hull insurance is predominantly written on an ‘agreed value’ basis
III. Aviation insurance disputes are likely to involve international law and
jurisdiction
IV. Civil aviation usually opts for self-insurance

AVIATION INSURANCE INDUSTRY CHAPTER 1
C. Aviation Insurance Industry
1. Aviation class of insurance
Aviation class of insurance primarily aims at catering to the risk management

needs of aviation industry. In the earlier days of aviation industry, aircraft were
insured in the marine department by marine underwriters. This was because
there was not sizable business to create a separate class or department. But as
the business volume grew in this class, it emerged as a separate class and
department. This is how the term hull from marine hull usage got transferred to
aircraft hull.
By convention, efforts are made to delineate a particular class from other

classes to avoid overlaps to the extent feasible. Aircraft, the principle source
of aviation risks being mobile, could give rise to claim in different parts of the
world. This necessitated harmonisation and unification of regulations governing
aviation liability litigation. This also led to other classes avoiding aviation
exposures in their writings. Thus,
a) Product liability coverage arising from catering company providing food

to airline passengers is written in aviation class rather than product
liability class.
b) Product liability for aircraft tyres is written in aviation class rather than
product liability department.
Broadly speaking, any activity and exposure arising from aircraft operations and
occurring at airport premises falls within the purview of aviation class.
2. Categories of Aviation industry based on aircraft usage
Aviation industry based on aircraft usage can be broadly categorised as military

aviation and civil aviation.
Diagram 1: Categories of Aviation Industry
a) Military Aviation
Military aviation usually chooses self-insurance or no insurance since these

operations are backed by the sovereign powers and backed by fiscal
CHAPTER 1 AVIATION INSURANCE INDUSTRY
revenues of the country. However, in some cases, they do take insurance for
their personnel. When they take coverage for aircraft (hull), the coverage is
provided for non-combat operations since combat operations are essentially
uninsurable. Thus, the focus of aviation class is essentially to cater to the
needs of the civil aviation rather than military aviation.

b) Civil Aviation
Aircraft ownership and operation creates exposures by way of damage to or

loss of hull or liability arising from injury and loss of or damage to property.
As far as aircraft operation is concerned, the liability arises from
i. Injury to or death of passengers and third parties (passengers are third

parties but are treated separately since they are governed by separate
legislation) and
ii. Loss of or damage to baggage, cargo and mail.
In the earlier decades of commercial aviation coming into being, there used
to be separate policies for passenger legal liability, baggage legal liability,
cargo legal liability, mail legal liability and third party legal liability.
Around 1970s, this got simplified and all legal liability coverage merged
under liability section under a single limit called combined single limit.
Combined single limit is the limit of liability that insurers are willing to bear
per occurrence for all the kinds of liabilities mentioned above. There may or
may not be any sublimit for a particular liability coverage. However, since
the limit applies per occurrence, the cover is actually unlimited since there
could be multiple occurrences in a policy period.
3. Aircraft Operations
Aircraft operations are categorised either as:
a) Airline operation or
b) General aviation operation.
Each of these is covered in detail in subsequent chapters.
4. Aerospace segment
Another segment is the aerospace segment which comprises of product

manufacturers and service providers such as
a) Airport operators,
b) Refuellers,
c) Maintenance repair and overhaul organisations and
d) Such other organisations supporting aircraft operations
These would also include providers to aviation industry of software, design and
engineering services.

5. Characteristics of Aviation Insurance Class
It would be useful to look at the characteristics of the aviation insurance class

which makes it peculiar in comparison to other classes.
a) Law of large numbers
Aviation class encompasses right from gliders and balloons to helicopters to

jumbo jets. Aircraft on the higher end of the seating capacity does present
significant exposures and can be considered catastrophic exposures.
Example
If one considers a middle sized commercial jet of say 200 seats with average
liability award of USD 2.5M per fatality say in a developed country, the liability
claim cost could easily reach USD 500M. The award for a single passenger
fatality could range above USD 6M for USA. An average medium size
commercial aircraft may have a value of say USD 40M to USD 150M. A wide-
bodied aircraft could involve value of USD 150-250M. Airbus wide-bodied
aircraft model A380-800 could cost about USD 300M while Airbus 340-600 or
Boeing B777-300 in the vicinity of USD 250M. (Wide-bodied aircraft have two
isles while narrow-bodied have one isle.) Together they constitute significant
exposures. It would be thus correct to say that airline insurance business
presents catastrophic potential..
The exposure needs to be considered alongside the number of risks available

to be able to spread the risk such that law of large number is applicable.
Example
In all, there were 25,378 commercial aircraft in the world as per the World
Airliner Census 2012 conducted by Flight International. Thus all market losses in
the airline segment needs to be necessarily shared by these 25,378 units of risk.
These in turn are owned by a few hundred airlines and thus market loss is
spread among a few hundred insureds.
This highlights the problem in that the applicability of law of large numbers
in the case of airline segment of aviation class is somewhat weak in
comparison to other classes or segment. Somewhat similar is the situation in
regard to the business or corporate aviation. This segment involves aircraft
owned by the corporate entities and are used for industrial aid purposes.
b) Insurance placement on subscription market basis
Since airlines present significant exposures with the limited scope for
spreading the risk, insurance placement for airline segment is made on
subscription market basis.

Definition
Subscription market basis means that a single risk is underwritten by a number

of underwriters, each market subscribing a percentage line of the risk on
several, not joint, basis.
Since multiple insurers are involved, co-ordination and documentation

becomes quite important which function is handled by intermediaries.
Among various underwriters, one underwriter acts as a leader who
determines the terms of cover, the policy wording and handles claims.
c) Smaller aircraft risk are written by local insurance company
Smaller aircraft risks may not require placement on a subscription market

basis. Such risks may be written by a local insurance company on 100% basis
or reinsured with just one reinsurer.
If the smaller aircraft has higher value, say a large size helicopter or a
business jet, it may require spreading the risk among a handful of
reinsurers.
In contrast, it is common to a couple of dozen underwriters participating on

an airline placement. All general aviation risks thus tend to be absorbed
within the country or surrounding region.
Airlines necessarily have to be shared across continents given the huge sum
insureds and catastrophic potential. This results in fragmented general
aviation market and unified airline market. This has implications for rating
trends in that general aviation rating tends to be geography-specific while
airline rating trends are uniform across the globe.
d) Airline placements
Airline placements are mostly combination of subscription market and

auction basis of placement.
By subscription market, it is meant that terms and conditions and wording

are agreed by the leader. However, not all following markets are offered
the price quoted by the leader. Following markets are offered terms lower
than the leader, say 5% lower or 15% lower. Following markets in turn either
accept the lower price as offered or negotiate and present a counter-offer
to the broker.
Depending upon the demand and supply situation for a given airline
insurance programme, the price is finalised with each following market.
Sometimes all following markets are offered standard terms for ease of
administration, say 10% lower than the leader.
This practice is peculiar to aviation class and is called “verticalisation” or

“vertical placement”. Thus, it is a variation on the standard subscription
market placement.
e) Aviation class is relatively reinsurer driven
In relation to other classes of business where an underwriter gets to see

hundreds of risks during the year, since the aviation industry itself presents
limited number of risks, aviation class has become specialised class of
insurance.
Unlike other classes where thanks to thousands of risks, an underwriter is

able to create a sizable portfolio of risks and protect the same through a
treaty arrangement, creating an aviation portfolio on similar lines may not
be feasible. This leads to focus on sharing of risks and aviation risks being
placed on facultative basis. Aviation class is thus relatively reinsurer driven.
f) Significant underwriter judgement in rating aviation risks
Aircraft tend to vary in terms of their:
i. Seating capacity - Say 50-600 seats,

ii. Year of manufacture - Brand new to 35 years old,
iii. Attendant technology - analog and digital controls, and
iv. Avionics
These variations also get reflected in the aircraft values. Thus, the number
of 25,378 aircraft in the world itself consists of various sub-classes of
homogenous groupings. Each sub-class thus will further reduce the
applicability of law of large numbers. This calls for significant underwriter
judgement in rating aviation risks.
g) Extensively regulated industry
As compared to other industries, Aviation industry is highly regulated world

over and thus, data quality for aircraft operations tend to be much better.
Example
It is possible to find out the number of hours flown by general aviation aircraft
in a given country or number of departures made by airline operators in a given
country. Alongside, data on airline losses are well publicised owing to
subscription market placements and thus, information quality and quantity for
airline underwriting is much better. This however changes for general aviation
since general aviation risks may not be shared extensively and thus, availability
of commercial database is quite limited.

Aviation industry is quite extensively regulated and aircraft operations are

subject to numerous controls like licensing, registration, certification,
permits, etc. World over aviation regulators impose minimum insurance
requirements for aircraft operation (akin to compulsory motor insurance).
Thus, civil aviation authorities in public interest impose certain levels of
insurance requirements.
h) Civil aviation authorities and aircraft financiers are two major forces
propelling demand for aviation insurance.
Aircraft values are quite significant in financial terms and this induces
operator of an aircraft to seek some form of financing from financial
institutions or lessors. In order that financial interests of these institutions
or lessors are protected, they impose on the operator or owner minimum
insurance requirements. This is because in the event of the claim, aircraft
may be detained or confiscated pending settlement of claims.
To safeguard against such aircraft detention as also to guard against liability

that may arise from their involvement in financing the aircraft, they would
insist on adequate level of insurance cover. Civil aviation authorities and
aircraft financiers thus are two major forces propelling demand for aviation
insurance.
i) Aviation insurance market remains concentrated in London
In the initial decades, aircraft risks were placed in London market. Even to
this date, aviation insurance market remains concentrated in London apart
from in USA and Europe.
Market terms and conditions tend to be quite standardized and subscription

market placements ensure that variation in wording and coverage is
minimal. While the wording followed in the European and international
markets are the same as those of London market, USA and Canadian market
tend to have variation in wording and coverage.
The aviation market has significantly evolved in the twenty-first century.

Capacity has increasingly been created in Australia, Asia and Middle East.
Indian market has also witnessed significant aviation capacity growth during last
decade following opening up of the insurance sector to private participation.
Indian market heavily relied in early years of twenty-first century on
reinsurance support from London and Europe for insurance large general
aviation risks. Presently almost all the risks can be absorbed in the local
market. Global airline capacity however continues to be dominated by
Americas and Europe.
North America could constitute about a third of the global aviation industry in
terms of traffic. Given high liability award environment in North America and
USA in particular, not all underwriters write USA risks. Risks from American

market are absorbed by the local capacity supported by the London and
European capacity.
6. Important organizations playing an active role in the aviation industry

worldwide
Following important organizations are playing an active role in the aviation

industry worldwide.
a) International Air Transport Association (IATA)
IATA is an international industry trade body of airlines, headquartered in

Montreal, Canada and has executive office at Geneva in Switzerland. Its
mission is to represent, lead, and serve the airline industry. IATA was
founded in 1945 by 57 founding members from 31 countries, mostly from
Europe and North America. As of 2013, it represents some 240 airlines in
118 countries. Carrying 84% of the world’s air traffic, IATA members include
the world’s leading passenger and cargo airlines. It has been statistically
observed that safety record of IATA members is distinctly superior to that of
non-IATA members.
IATA membership is open to airlines operating scheduled and non-scheduled

air services that maintain an IATA Operational Safety Audit (IOSA)
registration. Thus, compliance with safety standards under IOSA is a pre-
requisite for becoming an IATA membership. IOSA was launched in 2003.
b) International Civil Aviation Organization (ICAO)
ICAO, an agency of the United Nations, was established under Chicago

Convention 1944. Chicago convention came into effect in 1947.
c) International Union of Aerospace Insurers (IUAI)
IUAI is a body of aerospace underwriters founded in 1934. Long established

and well respected trade association for the global aerospace insurance
industry, it represents the voice of the insurance community in regard to
aviation industry matters. Its mission is to represent and serve the aviation
and space risks insurance and reinsurance industry.
Its objectives include representation of the interests of its members to

governments, and national and international institutions and associations
and creation of a positive image, in order to positively influence the
legislative and regulatory framework governing aviation and space risk
insurance and reinsurance.
It facilitates interaction among the members for dissemination of technical

and statistical information pertaining to aviation class of insurance. It aims

at creating a better understanding and conduct of aviation and space risk

insurance and reinsurance by promoting best practices.
It would appear that the association was formed while aviation industry was
still emerging, well in time for the insurance industry to meet the challenges
of significant growth of the commercial aviation sector.
Test Yourself 3
Airline placements are mostly done on _________.
I. Subscription market basis

II. Auction basis
III. Negotiations market basis
IV. Combination of subscription market and auction basis

SUMMARY CHAPTER 1
Summary
a) The first practical airplane was built by Wright Brothers in 1905.
b) The year 1909 saw the world’s first passenger airline, DELAG (Deutsche
Luftschiffahrts-Aktiengesellschaft, or German Airship Transportation
Corporation Ltd), an offshoot of the Zeppelin Company.
c) The first official airmail flight by a heavier than aircraft was flown on Feb.
18, 1911 by 23-year-old by Frenchman Henri Pequet for the five miles in
India.
d) Aviation class of insurance primarily aims at catering to the risk

management needs of aviation industry.
e) Aviation insurance was in early days written by marine underwriters. That is

how the term ‘hull’ got transferred from marine hull to aviation hull.
f) Aviation hull are predominantly written on ‘agreed value’ basis.
g) Aviation industry based on aircraft usage can be broadly categorised as

military aviation and civil aviation.
h) Military aviation usually chooses self-insurance or no insurance since these

operations are backed by the sovereign powers and backed by fiscal
revenues of the country.
i) Aircraft ownership and operation creates exposures by way of damage to or

loss of hull or liability arising from injury and loss of or damage to property.
j) Aircraft operations are categorised either as:
i. Airline operation or
ii. General aviation operation
k) Aerospace segment comprises of product manufacturers and service

providers such as
i. Airport operators,
ii. Refuellers,
iii. Maintenance repair and overhaul organisations and
iv. Such other organisations supporting aircraft operations
l) Risk potential in Aviation insurance can be catastrophic as the applicability

of law of large numbers in the case of airline segment of aviation class is
weak in comparison to other classes or segment.
IC-76 18
m) Since airlines present significant exposures with the limited scope for
spreading the risk, insurance placement for airline segment is made on
subscription market basis.
n) Smaller aircraft risks may not require placement on a subscription market

basis. Such risks may be written by a local insurance company on 100% basis
or reinsured with just one reinsurer.
o) Airline placements are mostly combination of subscription market and

auction basis of placement.
p) Aviation industry is quite extensively regulated and aircraft operations are

subject to numerous controls like licensing, registration, certification,
permits, etc.
q) Aviation insurance market is mainly concentrated in London.

PRACTICE QUESTIONS AND ANSWERS CHAPTER 1
Answer to Test Yourself
Answer 1
The correct option is II.
The first official airmail flight by a heavier-than-aircraft was flown in 1911.
Answer 2
The correct option is IV.

Military aviation usually opts for self insurance and not civil aviation. Hence the
statement is incorrect.
Answer 3
Airline placements are mostly combination of subscription market and auction

basis of placement.
Self-Examination Questions
Question 1
In which country was the first official airmail flight by a heavier-than-aircraft

flown?
I. US
II. UK
III. Austria
IV. India
Question 2
Which of the following are catered to by aviation insurance class?
I. Catering contractors
II. Fuel providers
III. Security service providers
IV. All of the above
20 IC-76
Question 3
Aviation insurance market is mainly concentrated in ____________.
I. London
II. Austria
III. Canada
IV. USA
Answers to Self-Examination Questions
Answer 1
The first official airmail flight by a heavier-than-aircraft was flown in India on

Feb. 18, 1911 by 23-year-old Frenchman Henri Pequet.
Answer 2

Catering contractors, Fuel providers, Security service providers are catered by
Aviation Insurance Class.
Answer 3
The correct option is I.

Aviation insurance market is mainly concentrated in London.
IC-60 MARINE CARGO INSURANCE PRINCIPLES AND UNDERWRITING 21

CHAPTER 2
AVIATION INSURANCE COVERS
Introduction
Whenever an aircraft is owned, operated by an entity or an entity is responsible

for an aircraft, aircraft insurance cover is sought. The most widely used cover in
aviation is AVN 1C – London Aircraft Insurance Policy.
In this chapter we will learn about the AVN 1C - London Aircraft Insurance Policy
and its standard clauses. We will also learn about other aviation insurance
covers.
Learning Outcomes
A. Aviation Operations
B. AVN 1C-London Aircraft Insurance Policy
C. Standard clauses in AVN 1C
D. LSW555D – Aviation Hull “War and allied perils” Policy
E. Other Aviation Insurance Covers

CHAPTER 2 AVIATION OPERATIONS
A. Aviation Operations
1. Aviation operations
Whenever an aircraft is owned, operated by an entity or an entity is responsible

for an aircraft, aircraft insurance cover is sought. Aviation operations tend to be
quite complex with multiple parties having their varied interests in aircraft and
its operations. Additionally, these parties could reside in different jurisdictions.
Unlike other classes of insurance where insurable interest may be readily

understood or deciphering it may not present much challenge, aviation
operations could involve complicated regulatory, financial and taxation issues.
Various parties such as owner, operator, charterer, financier, lessee, mortgagee

or pledgee all could have interest in the operation of the aircraft. Possibilities
of their being dragged into litigation in the event of a claim cannot be ruled
out. This is because the claimants usually seek the broadest array of
counterparties and also those with deepest pockets in order that the maximum
compensation is recovered.
2. Operational Control
Apart from the financial aspects, aircraft operation, owing to complexities

involved, may be supported by aircraft management companies. These
companies provide crew and maintenance and other support services.
a) An aircraft can be under fractional ownership programme
Aircraft owned by one entity could be operated under the air operator
certificate of another entity. In this context, the operational control is of
paramount importance.
The primary onus of buying insurance rests with the operator who is in
operational control of the aircraft.
In the event that any entity is found knowingly violating civil aviation
regulations, the insurance policy may not respond as envisaged.
Definition
FAA (Federal Aviation Administration, aviation regulatory authority in USA)

regulations define “operational control” as the exercise of authority over the
initiation, conduct, and termination of a flight.
While this is similar to the responsibilities of the pilot-in-command, the

operational control involves directing the pilot-in-command as well and is
more in the nature of oversight.

AVIATION OPERATIONS CHAPTER 2
Definition
FAA defines “to operate” as to use, cause to use or authorise to use aircraft,
for the purpose of air navigation including the piloting of aircraft, with or
without the right of legal control.
Further elaboration says: Operators conduct operational control by making

those decisions and performing those actions on a daily basis that are necessary
to operate flights safely and in compliance with the regulations.
Operational control functions include
i. Crew and aircraft scheduling,

ii. Accepting charter flights from the public,
iii. Reviewing weather and notices to Airmen, and
iv. Flight planning
Diagram 1: Operation control functions
Another aspect consists of developing and publishing flight control policies

and procedures for flight crews and other operations personnel to follow in
the performance of their duties. In effect, operational control is equivalent
to adequate oversight of flight operations in its myriad dimensions.
Operational control thus would involve control over maintenance, choice of

competent crew, ensuring airworthiness, crew compliance with duty – rest
stipulations – all the time maintaining control over the whereabouts and
movements of the aircraft.
Increasing outsourcing of various functions could lead to dilution of control

which may not conform to regulatory requirements.

CHAPTER 2 AVIATION OPERATIONS
b) Separation of ownership and operational control of aircraft
Operational control is possessory in nature and may need to be

differentiated from legal control. Exercise of operational control is likely to
attract regulatory responsibility including the responsibility for safe
operation. While functions can be delegated, the responsibility remains with
the operator.
It is noteworthy that the focus of regulatory effort of civil aviation

authorities is usually on aircraft operator instead of other parties related to
aircraft operation.
Some of the issues arise on account of civil aviation regulations being more
stringent for public transport as compared to private transport. This could
relate to aircraft maintenance as well as pilot qualifications. Since the same
aircraft can be alternately used for these two separate usages, there could
be non-compliance with stringent standards while aircraft is under public
transport usage.
Having attracted the focus of regulatory authorities for aircraft operation

and resultant legal liability, it is for the operator to transfer the risk to the
insurer while complying with the terms and conditions of the insurance
purchase. Operator thus will need to buy insurance that is adequate to
protect its own assets as also that of its agents, employees and executives
depending upon the legal status of the operator.
Different kinds of legal agreements such as dry lease and wet lease could
lead to separation of ownership and operational control of aircraft.
Example
Owner may take insurance for hull while the operator may take insurance of
liability.
It is important that all parties are adequately protected in every conceivable

and probable scenario without breaching any regulatory provisions. Further
important dimension is the use of hold harmless and indemnification clauses
in such agreements further shifting the responsibility.
Most widely used cover in this regard is AVN 1C – London Aircraft Insurance
Policy.

AVN 1C-LONDON AIRCRAFT INSURANCE POLICY CHAPTER 2
Test Yourself 1
In aviation insurance, the primary onus of buying insurance rests with

______________.
I. Owner of the aircraft

II. Operator who is in operational control of the aircraft
III. Charterer
IV. Financier
B. AVN 1C-London Aircraft Insurance Policy
This standard wording essentially caters to aircraft coverage for general

aviation operations in contrast to airline operations. Airline wording is
customised to suit the unique characteristics of an airline. This policy wording
has three sections:
1. Section I - Loss of or Damage to Aircraft
a) Coverage provides for
i. Repair in the event of accidental damage to aircraft or

ii. Replacement in the event of loss or disappearance of the Aircraft.
b) Reasonable emergency expenses up to 10 per cent of the amount insured

for the immediate safety of the Aircraft following damage or forced
landing are payable.
c) Accidental damage coverage excludes wear and tear, deterioration,

breakdown, defect or failure howsoever caused in any unit of the
Aircraft and the consequences thereof within such unit.
d) Damage caused by, or attributed to, the ingestion of stones, grit, dust,
sand, ice or any corrosive or abrasive material, or any other substance
which has a progressive or cumulative damage effect, is deemed to be
wear, tear, or deterioration and is excluded.
e) Damage to any unit attributable to a single recorded incident is covered.

Consequential damage / loss to aircraft is however covered. This means
that the incident needs to be recorded in the aircraft technical logbook.
This is based on the report by the flight crew as to occurrence of an
event or some observation about abnormal incident or flight parameter.
The technical log consists of record of reported or observed

malfunctions, failures, or defects in the airframe, power-plant, or
appliances on an aircraft. It also includes information concerning repairs,
replacements, adjustments or deferrals of maintenance activities.

CHAPTER 2 AVN 1C-LONDON AIRCRAFT INSURANCE POLICY
f) Consent of insurers prior to conducting repairs is required. Claim is

payable subject to deductible and betterment enjoyed as a portion of
overhaul cost.
The aircraft remains the property of the Insured without right of

abandonment unless Insurers choose otherwise.
Generally speaking, aircraft for a given model and configuration may be few in
number in view of limited number of aircraft manufactured in a batch. Finding a
good replacement aircraft would usually be a challenge since the replacement
aircraft has to be similar in various aspects such as age, condition, configuration
and owners / operators usually customize the aircraft. Thus, while replacement
option is available under the policy, it is not really practicable for insurers to
exercise it. Insurers would usually opt for settlement on agreed value basis
unless the aircraft is insured at a significantly higher agreed value.
2. Section II - Legal Liability to Third Parties (Other Than Passengers)
Coverage provides for insured’s legal liability for compensatory damages

including legal costs arising from aircraft operation. Coverage excludes liability
to passengers, crew, director or employee of the Insured or partner in the
Insured's business whilst acting in the course of his employment with or duties
for the Insured.
3. Section III - Legal Liability to Passengers
a) Coverage provides for insured’s legal liability to passengers for

compensatory damages including legal costs arising from accidental
bodily injury (fatal or otherwise). Legal liability in the form of non-
compensatory damages such as exemplary or punitive damages is not
covered. The incident should occur during the boarding or alighting or
on-board the aircraft.
Loss of or damage to baggage and personal articles of passengers is

covered provided such loss or damage has resulted from an accident to
the Aircraft.
b) Coverage excludes liability to crew, director or employee of the Insured

or partner in the Insured's business whilst acting in the course of his
employment with or duties for the Insured. However, coverage to above
excluded entities could be covered if they are not involved in operations
of the aircraft directly and would exclude liability under employment
legislation.
Since the purpose of coverage is to provide protection against legal

liability only, there is a stipulation that insured will take all measure to
limit liability to the extent permitted by law. If insured fails to do so,

the cover will be limited to the legal liability that would attach with
such measures having been taken.
c) Coverage provides for only compensatory damages and excludes

contractual liability assumed. Coverage also does not extend beyond
aircraft and boarding and alighting activities. Coverage can be based on
named pilots or based on open pilot warranty wherein any pilot with
stipulated experience can fly the aircraft.
4. Section IV - General Exclusions, Conditions Precedent, General

Conditions and Definitions
a) Policy excludes coverage when aircraft is
i. used for illegal purposes and thus excludes usage for criminal activities.
ii. used for other than agreed purposes which usually is private pleasure,
business, commercial, rental or special usages. Progressively coverage
becomes wider and thus aircraft agreed for commercial usage can be
used for business but not vice versa.
"Private pleasure" means use for private and pleasure purposes but NOT
to be used for any business or profession nor for hire or reward.
"Business" means the uses stated in Private Pleasure and use for business
or professional purposes but NOT use for hire or reward.
"Commercial" means the uses stated in Private Pleasure and Business and
use for the carriage by the Insured of passengers, baggage accompanying
passengers and cargo for hire or reward.
"Rental" means rental, lease, charter or hire by the Insured to any

person, company or organisation for Private Pleasure and Business uses
only, where the operation of the Aircraft is not under the control of the
Insured. Rental for any other purpose is NOT insured unless specifically
agreed with Insurers and such use(s) would constitute special rental
uses.
Any usage other than the above four standard categories is a special use.
Thus, instruction, aerobatics, hunting, patrol, fire-fighting, the
intentional dropping, spraying or release of anything, any form of
experimental or competitive flying, and any other use involving
abnormal hazard are special uses.
iii. used outside geographical area agreed upon with the exception of force
majeure.

CHAPTER 2 AVN 1C-LONDON AIRCRAFT INSURANCE POLICY
iv. being transported by any means of conveyance except as the result of an

Accident giving rise to a claim under the Policy.
v. being piloted by any person other than agreed except operation on

ground by any competent person.
vi. landing on or taking off or attempting to do so from a place which does

not comply with the recommendations of the manufacturer of the
Aircraft with the exception of force majeure.
vii. used with insured assuming liability or waiving rights under any
agreement (other than a passenger ticket/baggage check). Coverage is
restricted to liability that would otherwise have attached to the Insured
without such agreement. The purpose is to cover legal liability only.
viii. used to carry passengers exceeding the declared maximum number of

passengers.
ix. claims which are payable under any other policy except in respect of any
excess beyond the amount which would have been payable under such
other policy or policies had this Policy not been effected.
b) Coverage is excluded for war and allied perils and nuclear perils.
c) Conditions precedent includes
i. due diligence in avoiding or diminishing loss,
ii. compliance with air navigation and airworthiness orders,
iii. proper maintenance of technical records,
iv. immediate notice of potential claim,
v. provision of information and assistance in the event of a claim,
vi. not acting against the interests of the insurers and
vii. not admitting liability without insurer’s concurrence.
Conditions precedent are events or conditions which must occur before

performance under a contract becomes due.
d) General conditions include control over claim negotiation and

proceedings by insurers, subrogation, intimation about change in nature
of risk and cancellation and arbitration provisions. Aircraft policy cannot
be assigned without insurer agreement.

e) The limits of indemnity apply to each aircraft.
In the earlier days, aircraft were written by marine underwriters in

marine department. Thus, aviation insurance practices were greatly
influenced by marine theory and practices. In order to provide for a
clean break from marine practices and precedents, the policy mentions
that this policy is not and not be construed as a policy of marine
insurance.
The above policy is supplemented by aviation clauses which are usually

prefixed with AVN in order to create a complete policy wording.
5. Standard Deductibles
Aviation market has standard deductibles for different kinds of aircraft based on
aircraft models or weight.
a) For fixed wing aircraft, the deductible is not applicable to any form of
total loss, i.e. actual total loss, constructive total loss or arranged or
negotiated total loss.
b) For rotor wing aircraft, the deductible is applicable for all losses, partial
or total.
c) Narrow bodied turbofan (colloquially called jet) aircraft that are

commercially operated has a deductible of USD 500,000. These aircraft
usually have a diameter of 3 to 4 metres with seating arranged 2 to 6
abreast and a single aisle.
d) Wide-bodied commercial airliners have a deductible of USD 1Mln. Wide

body turbofan aircraft usually have a diameter of 5 to 7 metres with
seating arranged 7 or more abreast with twin aisle.
e) Later generation narrow bodied aircraft (also known as hybrid aircraft)

have a deductible of USD 750,000.
f) Business jets usually have a deductible of 1% of agreed value or USD

50,000. Sometimes this is brought down to USD 25,000 or USD 10,000.
g) Deductible for helicopter is 5% of agreed value and that applies to each

and every loss including total losses. For a fleet of helicopters, it is not
uncommon to grant a deductible of 2.5% of agreed value each and every
loss including total losses. Increasingly in soft market conditions,
deductible is brought down to 2.5% even for single helicopters.
An operator may find that given the size of his operation, the deductible is
quite high. In that he would need to buy hull deductible insurance separately

CHAPTER 2 STANDARD CLAUSES IN AVN 1C
which will provide coverage below the standard deductible with a much lower
deductible.
Test Yourself 2
What is the deductible applicable for wide-bodied commercial airliners as per

AVN 1C-London Aircraft Insurance Policy?
I. Deductible of USD 1 million

II. Deductible of USD 500,000
III. Deductible is applicable for all losses partial or total
IV. Deductible is not applicable to any form of total loss
C. Standard clauses in AVN 1C
AVN 1C is the basic insurance policy wording and needs to be supplemented

with the following standard clauses to create a complete policy wording. These
clauses are usually incorporated by way of endorsements.
1. LSW 617G Kiln Geographic Areas Exclusion Clause
2. AVN 38B Nuclear Risks Exclusion Clause
3. AVN 46B Noise And Pollution And Other Perils Exclusion Clause
4. AVN 48B War, Hi-Jacking And Other Perils Exclusion Clause (Aviation)
5. AVN 52E Extended Coverage Endorsement (Aviation Liabilities)
6. AVN 72 Contracts (Rights Of Third Parties) Act 1999 Exclusion Clause
7. Asbestos Exclusion Clause 2488AGM00003
8. AVN 59 Non-Aviation Liability Clause
9. AVN 2000A Date Recognition Exclusion Clause
10. AVN 2001A Date Recognition Limited Coverage Clause
11. AVN 2002A Date Recognition Limited Coverage Clause
12. AVN 60A Personal Injury Extension
13. AVN 61 Agreed Value Clause
14. AVN 6A Premium Payment Clause

STANDARD CLAUSES IN AVN 1C CHAPTER 2
15. AVN 76 Supplementary Payments Clause
16. AVN 26A Aircraft Laying-Up Returns Clause
17. AVN 19A Additions And Deletions (Combined)
18. AVN 34A Passenger Voluntary Settlement Endorsement
19. AVN 51A Extended Coverage Endorsement (Aircraft Hulls)
20. AVN 73 Liability To Pilots And Crew Clause
21. AVN 74 Pilot Indemnity Clause
22. Waiver of subrogation against aircrew
23. AVN 94 Breach of Air Navigation Regulations Clause
24. AVS 103 50/50 Provisional Claims Settlement Clause
Please refer to the annexure for detailed wording. However brief explanation
for each clause is given below.
1. LSW 617G Kiln Geographic Areas Exclusion Clause
This clause lays down the geographic scope for the aircraft operations and thus,
aircraft operations beyond the scope stipulated will be excluded from coverage.
This is revised by the market periodically in response to emerging threats and
changing geopolitical conditions. However coverage is valid for over-flight of
any excluded country where the flight is within an internationally recognised air
corridor and is performed in accordance with ICAO recommendations.
If an insured Aircraft lands in an excluded country entirely due to force

majeure, the coverage continues. Aircraft operations in excluded countries and
regions need to be agreed by insurers prior to flight.
2. AVN 38B Nuclear Risks Exclusion Clause
This clause excludes coverage from operation of the radioactive, toxic,

explosive or other hazardous properties of any explosive nuclear assembly or
nuclear component thereof, whether arising out of carriage of cargo or not.
This also excludes coverage from operation of ionising radiations or
contamination by radioactivity from, or the toxic, explosive or other hazardous
properties of, any other radioactive source whatsoever.

Where coverage is not excluded, carriage of cargo shall comply with the full
International Civil Aviation Organisation “Technical Instructions for the Safe
Transport of Dangerous Goods by Air”. Coverage is restricted to incident during
policy period and claim being made within three years of the incident.
For the purpose of the above mentioned perils, threshold of permissible levels
of exposures are prescribed, which when exceeded will trigger exclusion. The
cover is subject to cancellation by Insurers giving seven days’ notice of
cancellation.

3. AVN 46B Noise And Pollution And Other Perils Exclusion Clause
This clause excludes claims due to noise (whether audible to the human ear or
not), vibration, sonic boom and any associated phenomena, pollution and
contamination of any kind whatsoever, electrical and electromagnetic
interference, interference with the use of property unless caused by or resulting
in a crash fire explosion or collision or a flight emergency causing abnormal
aircraft operation.
Even duty of the Insurers to investigate or defend claims will not apply in
relation to the above excluded claims. Thus, claims arising from normal aircraft
operation are excluded through this clause.
4. AVN 48B War, Hi-Jacking And Other Perils Exclusion Clause (Aviation)
This clause excludes claims caused by war and allied perils which are:
a) War, invasion, acts of foreign enemies, hostilities (whether war be

declared or not), civil war, rebellion, revolution, insurrection, martial
law, military or usurped power or attempts at usurpation of power.
b) Any hostile detonation of any weapon of war employing atomic or

nuclear fission and/or fusion or other like reaction or radioactive force
or matter.
c) Strikes, riots, civil commotions or labour disturbances.
d) Any act of one or more persons, whether or not agents of a sovereign

Power, for political or terrorist purposes and whether the loss or damage
resulting there from is accidental or intentional.
e) Any malicious act or act of sabotage.
f) Confiscation, nationalisation, seizure, restraint, detention,

appropriation, requisition for title or use by or under the order of any
Government (whether civil military or de facto) or public or local
authority.
g) Hi-jacking or any unlawful seizure or wrongful exercise of control of the

Aircraft or crew in Flight (including any such attempt) made by any
person(s) on board the Aircraft acting without the consent of the
Insured.
Additionally, coverage for claims arising whilst the Aircraft is outside the
control of the Insured by reason of any of the above perils is excluded.

5. AVN 52E Extended Coverage Endorsement (Aviation Liabilities)
This clause needs to be understood in the context of terrorist attack of 11th

September 2001. The terrorist attack of 11th September 2001 on World Trade
Centre (WTC) was unprecedented in scale and was beyond imagination. Most
aircraft crashes have not resulted in significant ground damage and more so,
significant number of ground fatalities. WTC attack involved over 2700 third
party fatalities on the ground. Till then, it was a practice to exclude war and
allied perils coverage under AVN 48B for hull and liability. Through AVN 52
clause, this was written back fully for liability.
Terrorist attacks of 9-11 involved severity of unimaginable proportions and

brought into focus unquantifiable third party exposure. While the maximum
passenger liability exposure can be quantifiable –about 500 passengers (seats in
a Boeing 747-400) and in case of a mid-air collision of two such large aircraft,
exposure would be double that, fatalities of over 2700 people in WTC
represented unacceptable exposure to the aviation insurance industry.
Together with high degree of uncertainty associated with terrorist strike,
insurance industry reacted in the aftermath with limited write back under AVN
52D/E of USD 50 Mln. to USD 250 Mln. as against full write back of liability limit
allowed earlier. Passenger cover continued to be written back fully. This
clause gives effect to partial write back.
The write back here involves all the sub-clauses of AVN 48B barring sub-clause
(b) which pertains to any hostile detonation of weapon of war employing atomic
or nuclear fission and/or fusion or other like reaction or radioactive force or
matter.
The coverage for limits exceeding USD 50Mln up to the combined single limit of
liability under the policy for war and allied perils third party liability coverage
needs to be bought separately. It emerged as a separate segment in the
aviation market. This standard write back is increasingly pegged at USD 150Mln
/ 250Mln /350Mln as the airline market witnesses softening rating trends.
Thus, airlines have to buy a separate policy which provides war liability
coverage with underlying at USD 50 Mln. to USD 250 Mln. as the case may be, up
to USD 2 Bln. in the above case. It resulted into creation of a separate segment
in the aviation insurance market viz Excess War Liability market and continues
to be that way even today.
Since war liability coverage was fully written back prior to 9/11, the liability
arising out the WTC incident fell on airline operators’ policies and US
government stepped in through the Air Transportation Safety and System
Stabilization Act (“ATSSSA”) by limiting the airlines’ and other aviation
defendants’ liability to the limit of insurance coverage in force apart from
welfare measures adopted by the government.

6. Asbestos Exclusion Clause 2488AGM00003
This clause seeks to exclude claims related to asbestos from normal usage
related to aircraft operations. However coverage is provided for any claim
related to asbestos if caused by or resulting in a crash fire explosion or collision
or a recorded in-flight emergency causing abnormal aircraft operation.
7. AVN 59 Non-Aviation Liability Clause
This clause aims at limiting coverage against liability arising from occurrences
involving aircraft and transportation operation.

8. Date recognition Clauses - AVN 2000A Date Recognition Exclusion Clause

AVN 2001A Date Recognition Limited Coverage Clause; AVN 2002A Date
Recognition Limited Coverage Clause
During last few years of the second millennium, there were widespread fears
about the safe and normal operation of computer and related systems during
the switch over from 1999 to 2000. This came to be known as the Y2K problem
or the Millennium bug. This was on account of data storage situations which
relied heavily on abbreviating a four-digit year to two digits. The fears were
linked to computer and other systems failing to distinguish year 2000 from 1900.
Following this, AVN 2000A Date Recognition Exclusion Clause sought to exclude
any liability from whichever source arising from Y2K failure. Later on, limited
coverage for legal liability was written back through AVN 2001A Date
Recognition Limited Coverage Clause and AVN 2002A Date Recognition Limited
Coverage Clause.
9. AVN 60A Personal Injury Extension
The clause extends the cover for legal liability to the following:
a) False arrest, restraint, detention or imprisonment.
b) Malicious prosecution.
c) Wrongful entry, eviction or other invasion of the right of private

occupancy.
d) Inadvertent discrimination with respect to withholding or refusal of

transportation except with respect to overbooking.
e) The publication or utterance of a libel or slander or of other defamatory

or disparaging material in violation of an individual's right of privacy
except by way of advertising, broadcasting or telecasting activities
conducted by or on behalf of the Insured.
f) Incidental medical malpractice error or mistake by a physician, surgeon,

nurse, medical technician or other person performing medical services
but only for or on behalf of the Insured in the provision of emergency
medical relief.
This cover extension works as per Clause AVN 59.

10. AVN 61 Agreed Value Clause
This clause stipulates that coverage for hull is on agreed value basis and
replacement provisions will not be applicable for a claim adjusted on total loss
basis. Agreed value will be payable subject to application of relevant deductible
in the event of total loss claims. Insurers may, at their discretion, take the
salvage of such aircraft, together with all appropriate documents appertaining
thereto, insured cannot abandon the aircraft for the insurers.
11. AVN 6A Premium Payment Clause
This clause provides for premium payment in instalments. However, if there is a

claim and claim amount exceeds the instalments of premium paid on this Policy
till claim occurs, the outstanding instalments of premium shall become payable
forthwith.
In the event of premium non-payment, insurers have the right to terminate the
policy by giving of at least thirty (30) days notice in writing to the broker. This
is essentially to ensure that there is no abrupt withdrawal of cover, more so
when there could be other interested parties.
12. AVN 76 Supplementary Payments Clause
This clause extends cover to any reasonable expenses incurred for the purpose
of:
a) search and rescue operations;
b) runway foaming to prevent or mitigate possible loss or damage because

of malfunction or suspected malfunction of an Aircraft;
c) attempted or actual raising, removal, disposal or destruction of the

wreck of an Aircraft; and
d) expenses for any public inquiry or inquiry by the Civil Aviation or any
other relevant authority into an Accident involving an Aircraft insured
hereunder
Usually a cap of 10% of maximum aircraft value on the fleet is stipulated for the
coverage under this clause.

13. AVN 26A Aircraft Laying-Up Returns Clause
This clause provides for returns of hull premium when the aircraft is laid up.
Subject to the suspension of Flight and Taxiing cover under the Policy and
notice to the Insurers by the Insured prior to and upon termination of the lay-
up, 75 per cent of pro rata of the difference between the annual Flight risk
premium and the annual Ground risk premium (as agreed by the Insurers) is
refundable to the insured. Aircraft laid up for maintenance, overhaul or repair
will not qualify for the refund.
Period of layup should be for at least 30 consecutive days. Any claim on the laid
up aircraft will result in withdrawal of refund of premium for laid up period.
14. AVN 19A Additions and Deletions (Combined)
This clause facilitates coverage of aircraft on fleet basis. Insured is however

required to give a notice in writing within ten days of attachment or deletion.
This clause provides for automatic coverage for additional aircraft in the
insured’s fleet of the same type and value as Aircraft already covered and of no
greater seating capacity at pro-rata premium. If the aircraft getting added are
of different type or different value or greater seating capacity, special
agreement and rating by Insurers is required prior to attachment.
Aircraft sold or disposed of shall be adjusted at pro-rata premium under the

liability section. However, aircraft sold or disposed of shall be adjusted at pro-
rata premium under hull section provided no claim has been made for such
aircraft under the Aircraft loss or physical damage Section and the policy is not
cancelled by virtue of such deletion.
However premium for each separate period of Flight risk insurance on any
Aircraft shall in no case be less than fifteen days' pro rata premium. If the
aircraft has a claim on a total loss basis, the full twelve months' hull section
premium for such aircraft shall be paid.
15. AVN 34A Passenger Voluntary Settlement Endorsement
Under this clause, in the event of an accident, insurers offer settlement to

passengers irrespective of legal liability.
Settlement is linked to the extent of injury, somewhat on the lines of personal

accident coverage, i.e. for death or for total loss of two limbs or of sight of two
eyes or one limb and of sight of one eye, permanent total disablement, etc. Per
passenger and per accident settlement limits are spelt out. It is a condition
precedent that a full legal release for all claims for damages from the injured
passenger be provided to insurers within 30 days of the offer for settlement
made by the insurers. If the offer for settlement by the insurer is not accepted,
the coverage will be as per the liability section.

This excludes liability under workers compensation, employers’ liability,

unemployment compensation or disability benefits law or any similar law. This
also excludes passenger bodily injury caused by his suicide or attempted suicide
or intentional self-injury or own criminal or felonious act or such injury whilst in
a state of insanity or intoxication.
Further bodily injury to any passenger caused by disease or natural causes, or

medical or surgical treatment (except where such treatment is rendered
necessary by bodily injury caused by Accident within the scope of this
Endorsement) is excluded.
The Carriage by Air Act governs liability arising out of carriage by aircraft of
persons, luggage or goods performed for reward or when such carriage is
performed gratuitously by an air transport undertaking. The term air transport
undertaking is not defined but would appear to include airlines and non-
scheduled operators whose main business is air transportation. This is in
contrast to business houses which own aircraft and carry their executives,
employees and guests. Liability in such instances could be governed by common
law. To avoid any acrimony over compensation and legal procedures with
corporate guests in the event of an aviation accident, it is desirable that
corporate houses buy voluntary settlement coverage of adequate limits
commensurate with the economic status of the corporate guests.
16. AVN 51A Extended Coverage Endorsement (Aircraft Hulls)
Clause AVN 48B excludes coverage against war and allied perils under 6 sub-
clauses, a to g. This clause provides partial cover by writing back coverage
excluded under sub-clauses c, e and g.
The coverage under this clause may be subject to aggregate policy limit and
levy of additional premium and can be cancelled by the Insurers giving seven
days’ notice.

17. AVN 73 Liability To Pilots And Crew Clause
The policy under the section for passengers has an exclusion for coverage for
pilots and operational crew. This clause provides for coverage for pilots and
crew however liability required to be insured under any employers' liability or
workman's compensation legislation or any similar legislation is still excluded.
18. AVN 74 Pilot Indemnity Clause
This clause extends the coverage to the pilots for indemnity for liability as if
they were insured. This however requires that pilot is authorised by the insured
to operate the aircraft and subject to terms of the policy. However the pilot
gets indemnity protection to the same extent as the insured, i.e. indemnity is
for the amount of liability had the liability been incurred by the insured.
This clause however does not provide protection to the pilot against claims from
the insured in respect of aircraft.
19. Waiver of subrogation against aircrew
It is important that wording to the effect that insurers waive their rights of
subrogation against the aircrew in respect of aircraft hull section is
incorporated. If this is not incorporated, insurers can proceed against aircrew
under subrogation for hull damage or loss claim after having paid the claim.
20. AVN 94 Breach of Air Navigation Regulations Clause
This clause seeks to protect the coverage provided to various insureds under the
policy against any act or omission which results in a breach of any air navigation
or airworthiness orders or requirements if such insured has not caused,
contributed to or knowingly condoned the said act or omission.
If any insured has caused, contributed to or knowingly condoned the said act or
omission, he will lose protection under the policy. This is to ensure that
“innocent” parties are not prejudiced by acts of other “guilty” parties.
21. AVS 103 50/50 Provisional Claims Settlement Clause
It is sometimes not possible to determine the proximate cause immediately for

a hull loss or damage and thus to determine if the hull all risk policy should
respond or the hull war policy should respond to a claim.
In such an event, where agreement is reached between the "Hull All Risks"
Insurers and the "Hull War Risks" Insurers that the Insured has a valid claim
under one or other policy and it cannot be resolved within 21 days from the
date of occurrence as to which policy is liable, each of insurers agree to
advance to the Insured 50% of such amount as may be mutually agreed between

LSW555D – AVIATION HULL “WAR AND ALLIED PERILS” POLICY CHAPTER 2
them until final settlement of the claim is agreed. This however requires that
both the policies are endorsed with this clause.
The matter will be referred to arbitration within 12 months of the advance

being made. Following arbitration, they will settle among themselves with
interest.
Test Yourself 3
Which of the following clause of AVN 1C-London Aircraft Insurance Policy aims
at limiting coverage against liability arising from occurrences involving aircraft
and transportation operation?
I. AVN 59 Non-Aviation Liability Clause

II. AVN 38B Nuclear Risks Exclusion Clause
III. AVN 46B Noise And Pollution And Other Perils Exclusion Clause
IV. AVN 48B War, Hi-Jacking And Other Perils Exclusion Clause
D. LSW555D – Aviation Hull “War and allied perils” Policy
Hull War Policy wording LSW 555D contains five sections.
1. Section 1
Under section one for loss or damage to aircraft of the Hull War policy,
coverage is provided for excluded perils under six out of seven sub-clauses of
AVN 48B. These are:
a) War, invasion, acts of foreign enemies, hostilities (whether war be declared

or not), civil war, rebellion, revolution, insurrection, martial law, military or
usurped power or attempts at usurpation of power.
b) Strikes, riots, civil commotions or labour disturbances.
c) Any act of one or more persons, whether or not agents of a sovereign power,
for political or terrorist purposes and whether the loss or damage resulting
therefrom is accidental or intentional.
d) Any malicious act or act of sabotage.
e) Confiscation, nationalization, seizure, restraint, detention, appropriation,

requisition for title or use by or under the order of any government (whether
civil, military or de facto) or public or local authority.
f) Hi-jacking or any unlawful seizure or wrongful exercise of control of the

Aircraft or crew in flight (including any attempt at such seizure or control)
made by any person or persons on board the Aircraft acting without the

CHAPTER 2 LSW555D – AVIATION HULL “WAR AND ALLIED PERILS” POLICY
consent of the Assured. For the purpose of this paragraph (f) only, an
aircraft is considered to be in flight at any time from the moment when all
its external doors are closed following embarkation until the moment when
any such door is opened for disembarkation or when the aircraft is in
motion. A rotor-wing aircraft shall be deemed to be in flight when the
rotors are in motion as a result of engine power, the momentum generated
therefrom, or autorotation.
The coverage is also provided for claims from occurrences whilst the Aircraft
is outside the control of the Assured due to any of the above perils. The
Aircraft is deemed to have been restored to the control of the Assured on
the safe return of the Aircraft to the Assured at an airfield within
geographical limits as per the Policy, and entirely suitable for the operation
of the Aircraft.
2. Section 2
Section two provides for Extortion and Hi-Jack Expenses up to a limit of 10% of
maximum agreed value on the slip per occurrence and in the aggregate. It is a
condition that 10% of such payment will remain uninsured. Coverage here is for
payment made against threats to covered Aircraft or its passengers or crew and
extra expenses incurred following perils as per clause (e) or clause (f) above.
The coverage is subject to its not being contravention of any applicable law and
any arrangement for such payment being in violation of any law.
3. Section 3
Section thee provides for exclusions which are:
a) war (declared or not) between any of the following States: the United
Kingdom, the United States of America, France, the Russian Federation, the
People’s Republic of China; however cover will continue till first landing of
flight if at the time of outbreak of such war, aircraft is in flight.
b) confiscation, nationalization, seizure, restraint, detention, appropriation,

requisition for title or use by or under the authority of the Government(s)
stated in the Schedule, or any public or local authority under its jurisdiction;
c) the emission, discharge, release or escape of any chemical, biological or

biochemical materials or the threat of same but this exclusion shall not
apply if
such materials are used or threatened to be used solely and directly in the
Hi-jacking, unlawful seizure or wrongful exercise of control of an Aircraft in
flight and then only in respect of loss of or damage to such Aircraft the
subject of a valid claim under clause (f) Section One above; or any threat

LSW555D – AVIATION HULL “WAR AND ALLIED PERILS” POLICY CHAPTER 2
against an Aircraft stated in the Schedule or its passengers or crew and then
only in respect of payments as are insured under Section Two above; OR
other than as provided for above, to loss of or damage to an Aircraft if the

use of such materials is hostile and originates solely and directly on board
such Aircraft, whether it is on the ground or in the air or external to such
Aircraft and causes physical damage to the Aircraft whilst the Aircraft’s
wheels are not in contact with the ground.
Any such emission originating external to the Aircraft that causes damage to
the Aircraft as a result of contamination without other physical damage to
the Aircraft exterior is not covered by this Policy.
d) any debt, failure to provide bond or security or any other financial cause
under court order or otherwise;
e) the repossession or attempted repossession of the Aircraft either by any title

holder, or arising out of any contractual agreement to which any Assured
protected under this Policy may be party;
f) delay, loss of use, or except as specifically provided in Section Two any

other consequential loss;
g) any use, hostile or otherwise, of radioactive contamination or matter but

this exclusion shall not apply to loss of or damage to an Aircraft if such use
is hostile and originates solely and directly;
i. on board such Aircraft, whether it is on the ground or in the air, or

ii. external to such Aircraft and causes physical damage to the Aircraft
whilst the Aircraft’s wheels are no longer in contact with the ground
Any such use originating external to the Aircraft that causes damage to the
Aircraft as a result of contamination without other physical damage to the
Aircraft exterior is not covered by this Policy.
h) any use, hostile or otherwise, of an electromagnetic pulse but this exclusion

shall not apply to loss of or damage to an Aircraft if such use originates
solely and directly on board such Aircraft, whether it is on the ground or in
the air.
i) any detonation, hostile or otherwise, of any device employing atomic or

nuclear fission and/or fusion or other like reaction, and notwithstanding (g)
and (h) above, any radioactive contamination and electromagnetic pulse
resulting directly from such detonation is also excluded by this Policy.
4. Section 4

CHAPTER 2 LSW555D – AVIATION HULL “WAR AND ALLIED PERILS” POLICY
Section four stipulates general conditions. Hull war policy broadly follows Hull
All Risks Policy. Any material Change in the nature or area of the Assured’s
operations needs to be agreed by underwriters. Compliance with provisions of
the Policy and making all reasonable efforts to comply with laws (local or
otherwise) of any country within whose jurisdiction the Aircraft may be, and to
obtain all permits necessary for the lawful operation of the Aircraft is a
condition precedent to any liability under the policy. Hull war policy follows
Hull All Risks Policy in regard to Breach of Warranty Cover, Hold Harmless
Agreements and Waivers of Subrogation.
5. Section 5
Section five provides for Cancellation Revision and Automatic Termination.

Underwriters can give 7 days’ notice to review the premium rate and
geographical limits. If revised rate / geographical limits are not acceptable to
the insured, the cover terminates. Policy is also subject to automatic review of
terms, conditions and geographical limits following any hostile detonation of
any device including any weapon of war employing atomic or nuclear fission
and/or fusion or other like reaction or radioactive force or matter wheresoever
or whensoever such detonation may occur and whether or not the insured
Aircraft may be directly affected. If revised rate / geographical limits are not
acceptable to the insured, the cover terminates.
This Policy can be cancelled by the Assured or Underwriters giving 7 days’

notice prior to the end of each period of 3 months from inception.
The policy stands cancelled automatically (with or without any notice) upon the
outbreak of war (declared or not) between any of the following States, namely,
the United Kingdom, the United States of America, France, the Russian
Federation, the People’s Republic of China. Coverage however continues for
aircraft in flight till first landing is concluded.
Hull war risk policies usually impose annual aggregate limit. This limit for
major international carriers could lie in the range of USD 600M – USD 1 Bln. This
stipulation takes care of accumulation for the underwriters but the airline
remains unprotected to that extent. In order for airlines to address the
accumulation, they would need to buy excess aggregate war risk cover.
'Confiscation by the Government of Registry' of the aircraft is usually excluded,

although this could be added back at an additional premium.

OTHER AVIATION INSURANCE COVERS CHAPTER 2
E. Other Aviation Insurance Covers
1. Ariel Airport Owners and Operators Liability Insurance Policy
The Ariel Airport Owners and Operators Liability Insurance Policy is a very
flexible set of wording which can cater to different kinds of aviation exposures.
It has three sections and they together create a very comprehensive cover.
Three sections provide coverage for premises, hangar keeper and product
liability exposures respectively.
The policy responds to legal liability of the insured for bodily injury including
death or for loss of or damage to property of others caused by accident.
a) Section 1 provides coverage for
i. bodily injury or property damage
ii. in or about the premises specified in the Schedule or at some other

place,
iii. arising from any work or activities in the connection with the business or
operations specified in the Schedule
iv. caused by the fault or negligence of the Insured or any of his employees
or
v. by any defect in the Insured’s premises, ways, works, machinery or plant

used in the Insured’s business.
The section has following exclusions:
i. Loss of or damage to property owned, rented, leased or occupied by the

insured excluding vehicles that are not the property of the Insured whilst
on the premises specified in the Schedule.
ii. Bodily injury or property damage caused by
✓ any vehicle covered by any domestic or international law

appertaining to road traffic or whilst such vehicle is on any public
highway.
✓ any Ships, Vessels, Craft or Aircraft owned, chartered, used or

operated by or on account of the Insured, excluding aircraft owned
by others which are on the ground and for which indemnity is
otherwise granted under Section 2 of this Policy, whether such
Section is insured hereunder or not.

CHAPTER 2 OTHER AVIATION INSURANCE COVERS
iii. Any Airmeet, Air Race, or Air Show, nor any stand used for the
accommodation of spectators in connection therewith.
iv. Construction or demolition of or alterations to Buildings, Runways, or

Installations by the Insured or his contractors or sub-contractors (other
than normal maintenance operations).
v. Product liability exposures excluding food or drink at the premises

specified in the Schedule.
b) Section 2 provides coverage for loss of or damage to Aircraft or Aircraft

equipment in the care, custody and control of the insured
i. not owned, rented or leased by the Insured,
ii. whilst on the ground or whilst being serviced, handled or maintained by

the Insured or any servant of the Insured.
i. Loss of or damage to robes, wearing apparel, personal effects or

merchandise of any description.
ii. Loss of or damage to Aircraft or Aircraft equipment, hired or leased by

or loaned to the Insured.
iii. Loss of or damage to any Aircraft while in flight as defined.
c) Section 3 provides coverage for bodily injury or property damage arising

out of the product liability exposures from any goods or products
(forming part of or used in conjunction with aircraft) manufactured,
constructed, repaired, serviced, sold or distributed by the Insured.
i. Damage to the property of the Insured or to property within his care,

custody or control.
ii. The cost of repairing or replacing any such defective goods or products.
iii. Loss arising out of improper or inadequate performance, design or

specification.
iv. Loss of use of any Aircraft not actually lost or damaged in an accident
giving rise to a claim hereunder.

d) The following additional exclusions apply to all sections
i. liability that can attach under workman compensation, unemployment

compensation or disability benefits law or any similar law.
ii. the cost of making good any faulty workmanship.
iii. additional liability assumed through a contract.
iv. losses due to war and allied perils.
v. liability arising out of the operation of an airfield control tower.
vi. Each section of this Policy excludes liability which is or would be covered
under any other section of the Policy, whether insured or not.
vii. Nuclear Risks Exclusion Clause.
e) General Conditions
i. Upon knowledge of a potential claim under the policy, notice in writing

shall be given to Insurers as soon as possible together with letter, claim,
writ, summons or process.
ii. The Policy may be cancelled at any time at the written request of the
Insured or may be cancelled by or on behalf of the Insurers provided 10
days notice in writing is given.
iii. The Insured shall exercise reasonable care in seeing that the ways,
implements, plant, machinery and appliances used in the Insured’s
business are substantial and sound and in proper order, and fit for the
purpose for which they are used, and that all reasonable safeguards and
precautions against accidents are provided and used.
iv. The Insured shall comply with all International and Government
Regulations and Civil Instructions.
The above coverage essentially caters to the insurance needs of the

Hangarkeepers in so far as activities are carried out on the ground. Once the
necessary repairs are conducted, test flights are conducted and hangarkeeper
needs to buy in-flight hangarkeeper’s liability coverage which is usually
provided by way of an endorsement
2. Non-owned aircraft liability insurance and liability coverage for damage

to Non-Owned Aircraft (also known as Non-Owned Hull Insurance)
It is important that all stakeholders have adequate indemnity protection

whether under provisions in the original insurance policy by way of insured or

additional insured. Otherwise, they are most likely to need a separate insurance
cover of their own.
Thus, users of aircraft need to examine if they could be held liability in the
event of a claim and if so, if they are adequately protected.
Examples
Following are some examples where entities and individuals other than owners
of aircraft can be exposed to liability though they do not own the aircraft.
a) An entity, a company or its employee chartering an aircraft with flight crew

provided.
b) A trainee pilot renting an aircraft from the aircraft owner or from a Fixed
Base Operator.
c) A student pilot taking instruction in someone else's aircraft.
d) A Certified Flight Instructor or Fixed Base Operator providing flight

instructions in a customer’s aircraft.
e) A pilot who borrows an aircraft.
f) A mechanic who is test flying a customer’s aircraft.
g) A pilot ferrying or delivering an aircraft for someone else.
h) An independent professional pilot operating someone’s aircraft on contract

basis.
It is important to know if the arrangement or operation in question exposes an

entity only to liability to third party or liability for hull damage as well. Normal
policy wording may provide protection to pilots for liability if they comply with
pilot experience stipulations on the policy. This can be by way of pilot being
approved under the policy or pilot being added as an additional insured.
However, they may not have protection in case of hull damage from the insurer.
Thus, apart from liability to passengers and third party, for hull damage,
liability coverage for damage to Non-Owned Aircraft may be required. If the
insurer waives their right of subrogation, this cover is not required.
a) Non-Owned Aircraft Liability Insurance is usually provided in non-

commercial usage. In case of a chartered aircraft, the liability exposures
are mainly contingent liabilities since the charter customer is not
directly involved with the operation of the aircraft. Cover bought will
act as a backup cover.

b) Depending upon the usage, mainly non-commercial and commercial and

profile of the passengers, one may need to ensure that adequate limits
are in place. If the benefit of insurance taken by any other entity in the
arrangement is available, one needs to ensure that those limits are
adequate and if they need contingent insurance.
c) Chief Flight Instructor may buy non-owned aircraft liability cover. He

may buy additional coverage to cover claims arising out of professional
obligations for instruction given within the 12 calendar months prior to
the date of a covered occurrence.
d) Most aircraft insurance policies restrict coverage for the insured to

aircraft mentioned in the schedule of aircraft attached to the policy.
Thus, insured using any other aircraft may not have cover under such
policy. It is important to ensure that there is adequate protection in
case any arrangements for substitute aircraft are made.
e) The coverage for non-owned aircraft can be granted under the usually
policy through AVN 54 Non-Owned Aircraft Endorsement (detailed
wording in the annexure).This provides coverage for non-owned aircraft
liability only. For an additional premium to be specified, cover under
the policy is extended to Aircraft used by the Named Insured but not so
declared. This is subject to the Insured not having interest in the Aircraft
as owner in whole or in part, not exercising any part in the servicing or
maintenance of the Aircraft and not exercising any part in the
appointment or provision of personnel for the operation of the Aircraft.
f) This extension excludes product liability exposure of the Named Insured

and liability for loss of or damage to the Aircraft or any consequential
loss arising there from. The coverage is for non-commercial usage of
aircraft. Exclusion hereunder for liability for loss of or damage to the
Aircraft or any consequential loss arising therefrom would need to be
deleted at an additional premium to get this coverage reinstated.
Customised coverage and wording:

While smaller aviation clients generally are content with the standardized
wording and coverage given their limited simple operations and standard
insurance needs, as the client grows in size and complexity of their aviation
business operations, they increasingly find that standardized wording and
coverage do not necessarily meet their needs for insurance coverage. This
together with their significant insurance purchase outlays give them significant
negotiating power with the insurers. They thus seek extension and
modifications over the standard wording and usually coverage to major
airliners, airports, refuellers and aircraft, engine and product manufacturers
tailor made keeping their specific requirements.
3. Hull Deductible Cover

This cover is granted alongside hull all risk policy and aims at providing
indemnity against deductible imposed by the hull all risk policy.
Example
If the hull all risk policy imposes a deductible of USD 1,000,000, this policy may
provide cover for USD 1,000,000 with deductible under hull deductible policy at
say USD 50,000 or USD 100,000.
Thus indemnity under hull deductible policy will be USD 950,000 and USD
900,000 respectively. While the limit of liability is applicable to each aircraft,
there is also an aggregate limit specified.
It is warranted that the Hull All Risk Policy is in full force and claim is otherwise
admissible under Hull All Risk policy. This policy follows hull all risk policy in
most respects.
a) Larger commercial aircraft tend to have deductible of USD 500,000 to

USD 1,000,000 which may be a substantial financial burden for an
aircraft operator with a few aircraft. Additionally, lessors and financiers
insist that hull deductible cover is bought ensuring that financial
condition of the operator does not impact repairs in the event of an
accident.
b) Under the cover, insurers agree to pay for, replace or repair accidental
loss of or damage to the Aircraft including reasonable emergency
expenses for the immediate safety of the Aircraft, consequent upon
damage or forced landing.
c) An immediate notice (not later than 30 days after date of a record in the
appropriate log) of any event likely to give rise to a claim under this
cover is required to be given by the insured.
d) This policy excludes claims payable under any "Breach of Warranty"

coverage under the Hull Policy. The cover excludes loss or damage due
to wear and tear, abrasion, corrosion, deterioration, erosion, fatigue,
freezing, overheating, oxidation or anything having a progressive or
cumulative damage effect. Also excluded are losses or damage due to
electric, electronic, mechanical, structural, pneumatic, hydraulic, or
control systems defect, failure or breakdown.
e) In respect of an Engine/Auxiliary Power Unit fitted to an Aircraft, loss or

damage within the Engine/Auxiliary Power Unit is only covered if caused
by fire or explosion commencing outside the Engine / Auxiliary Power
Unit which is covered by this Policy or ingestion through an air intake of
any object or material which is not part of the Engine / Auxiliary Power
Unit.

f) Damage caused by any object or material which is not part of the

Engine/Auxiliary Power Unit is covered only if the Insured can
demonstrate that all the following conditions had been met:
i. the object or material external to the Engine/Auxiliary Power Unit

entered the unit.
ii. an occurrence giving rise to damage is duly recorded in the Aircraft

logbooks
iii. such damage was detected before the Engine/Auxiliary Power Unit was
removed from the Aircraft and
iv. immediately after detection of damage, the Engine/ Auxiliary Power

Unit was removed from the Aircraft at the earliest opportunity and
dispatched for repair, and was not to be subject to further running on
the ground or in the air unless and until all damage arising out of the
said occurrence had been rectified.
4. Personal Accident Cover
This cover provides benefit following bodily Injury caused by accident. Cover is
usually bought by cockpit crew, cabin crew, ground crew, managerial staff and
even passengers.
a) Cover is usually for flying risk exposure only but can be extended to 24
hour basis. For flying risk coverage, it can be linked to seats and
occupancy rather than named individuals.
b) Cover can be extended for illness and illness means sickness or disease of
the insured person first manifesting during the policy period and causes
total disablement of the insured person within twelve months after
manifestation.
c) Cover can also be extended temporary total or partial disablement.
Definition
Temporary total disablement means disablement which entirely prevents the

insured person from attending to their business or occupation while temporary
partial disablement prevents the insured person from attending to a substantial
part of their business or occupation.
Definition

Permanent total disablement entirely prevents the insured person from

attending to any business or occupation for which they are reasonably suited by
training, education or experience and which lasts twelve months and at the end
of that period of 12 months is beyond hope of improvement.
d) Exclusions are
i. war, whether war be declared or not, hostilities or any act of war or civil
war;
ii. actual or threatened malicious use of pathogenic or poisonous biological

or chemical materials;
iii. nuclear reaction, nuclear radiation or radioactive contamination;
iv. engaging in or taking part in armed forces or operations;
v. engaging in flying of any kind other than as a passenger;
vi. suicide or attempted suicide or intentional self-injury or being in a state

of insanity;
vii. Venereal disease or Acquired Immune Deficiency Syndrome (AIDS), AIDS

Related Complex or Human Immuno-deficiency Virus (HIV);
viii. deliberate exposure to exceptional danger (except in an attempt to

save human life);
ix. criminal act;
x. being under the influence of alcohol or drugs;
xi. pregnancy or childbirth
xii. neuroses, psychoneuroses, psychopathy or psychoses, anxiety, stress,

fatigue or mental or emotional diseases or disorders
5. Loss of Licence Cover
Loss of Licence cover provides benefit to the aircrew following permanent loss
or temporary suspension of aircrew licence. These events can follow personal
injury caused by an accident or arise from illness.
a) This cover is bought by pilots and co-pilots, flight engineers and air
traffic controllers. Cover is many a time purchased by the employer
aircraft operator or association of aircrew for the group of employees or
members as a whole.

b) Benefit is linked to age and annual salary of the beneficiary. Age

indicates the likely future earning capacity of the beneficiary and thus
multiple applied to annual income decreases as the age increases. Cover
is many times restricted by the underwriters for beneficiaries falling in
the age group of 55 and above to physical injury since they are likely to
have more incidence of illnesses and thus premium could become quite
prohibitive.
c) The benefits against temporary suspension of licences usually start after

the waiting period which usually ranges from 90-180 days. Benefit is
usually 2% per month of sum insured for a maximum period of 12 months.
In case temporary suspension gets converted into permanent withdrawal
of licence, amount earlier paid as benefit is adjusted.

d) Exclusions could account for pre-existing health conditions. Other

exclusions are
i. Death,
ii. AIDS,
iii. Illness that does not manifest during the policy period,
iv. Intentional self-injury,
v. Attempted suicide (whether felonious or not) or
vi. Assault provoked by the insured,
vii. Intentional exposure to danger,
viii. Abnormal flying hazards (i.e. spraying chemicals),
ix. Armed forces,
x. Loss of licence for reasons other than as covered by the policy and war
and other perils.
Test Yourself 4
Which of the following aviation insurance cover responds to legal liability of the
insured for bodily injury including death or for loss of or damage to property of
others caused by accident?
I. Hull Deductible Cover
II. Non-Owned Hull Insurance policy
III. Ariel Airport Owners and Operators Liability Insurance Policy
IV. Personal Accident Cover

SUMMARY CHAPTER 2
Summary
a) Whenever an aircraft is owned, operated by an entity or an entity is

responsible for an aircraft, aircraft insurance cover is sought.
b) Aircraft owned by one entity could be operated under the air operator
certificate of another entity. The primary onus of buying insurance rests
with the operator who is in operational control of the aircraft.
c) Having attracted the focus of regulatory authorities for aircraft operation

and resultant legal liability, it is for the operator to transfer the risk to the
insurer while complying with the terms and conditions of the insurance
purchase Most widely used cover in this regard is AVN 1C –London Aircraft
Insurance Policy.
d) AVN 1C –London Aircraft Insurance Policy essentially caters to aircraft

coverage for general aviation operations in contrast to airline operations.
This policy wording has three sections:
i. Section I - Loss of or Damage to Aircraft

ii. Section II - Legal Liability to Third Parties (Other Than Passengers)
iii. Section III - Legal Liability to Passengers
e) Aviation market has standard deductibles for different kinds of aircraft

based on aircraft models or weight.
f) An operator may find that given the size of his operation, the deductible is
quite high. In that he would need to buy hull deductible insurance
separately which will provide coverage below the standard deductible with a
much lower deductible.
g) The Ariel Airport Owners and Operators Liability Insurance Policy responds
to legal liability of the insured for bodily injury including death or for loss of
or damage to property of others caused by accident.
h) Non-Owned Aircraft Liability Insurance is usually provided in non-commercial

usage.
i) Hull Deductible Cover is granted alongside hull all risk policy and aims at
providing indemnity against deductible imposed by the hull all risk policy.
j) Personal Accident Cover provides benefit following bodily Injury caused by

accident. Cover is usually bought by cockpit crew, cabin crew, ground crew,
managerial staff and even passengers.
k) Loss of Licence cover provides benefit to the aircrew following permanent

loss or temporary suspension of aircrew licence.

Answers to Test Yourself
Answer 1
In aviation insurance, the primary onus of buying insurance rests with the
operator who is in operational control of the aircraft.
Answer 2

As per AVN 1C-London Aircraft Insurance Policy, wide-bodied commercial
airliners have a deductible of USD 1 million.
Answer 3
AVN 59 Non-Aviation Liability Clause of AVN 1C-London Aircraft Insurance Policy

aims at limiting coverage against liability arising from occurrences involving
aircraft and transportation operation.
Answer 4
The correct option is III.
Ariel Airport Owners and Operators Liability Insurance Policy responds to legal
liability of the insured for bodily injury including death or for loss of or damage
to property of others caused by accident.

Question 1
As per AVN 1C-London Aircraft Insurance Policy, what does "Commercial" means?
I. Use for private and pleasure purposes but NOT use for any business or
profession nor for hire or reward
II. The uses stated in Private Pleasure and use for business or professional
purposes but NOT use for hire or reward
III. The uses stated in Private Pleasure and Business and use for the carriage by
the Insured of passengers, baggage accompanying passengers and cargo for
hire or reward
IV. Rental, lease, charter or hire by the Insured to any person, company or
organisation for Private Pleasure and Business uses only, where the
operation of the Aircraft is not under the control of the Insured
Question 2
What is the deductible applicable for fixed wing aircraft as per AVN 1C-London
Aircraft Insurance Policy?
I. Deductible of USD 1 million

II. Deductible of USD 500,000
III. Deductible is applicable for all losses partial or total
IV. Deductible is not applicable to any form of total loss
Question 3
Which of the following cover is granted alongside hull all risk policy and aims at
providing indemnity against deductible imposed by the hull all risk policy?
I. Ariel Airport Owners and Operators Liability Insurance Policy

II. Non-Owned Hull Insurance policy
III. Hull Deductible Cover
IV. Personal Accident Cover

CHAPTER 2 PRACTICE QUESTIONS AND ANSWERS
Answer 1
As per AVN 1C-London Aircraft Insurance Policy "Commercial" means the uses
stated in Private Pleasure and Business and use for the carriage by the Insured
of passengers, baggage accompanying passengers and cargo for hire or reward.
Answer 2
For fixed wing aircraft, the deductible is not applicable to any form of total
loss, i.e. actual total loss, constructive total loss or arranged or negotiated total
loss.
Answer 3

Hull deductible cover is granted alongside hull all risk policy and aims at
providing indemnity against deductible imposed by the hull all risk policy.

CHAPTER 3
Page 33
UNDERWRITING – GENERAL AVIATION

Chapter Introduction Formatted: Heading 1,Sub
General aviation and airlines together covers almost the entire landscape of
aviation industry as far as aircraft operations are concerned . The term
gGeneral aAviation is used for civil aircraft operation other than a cCommercial
aAir tTransport operation.
In this chapter we will study about gGeneral aAviation, in detail andits

characteristics, of General Aviation aircraft operation. In this chapter we will
also study aboutand differential hazards related to Ggeneral aAviation.
Learning Outcomes Formatted: Heading 1,Sub
A. General Aviation Formatted: Subtitle,List of

B. Characteristics of General Aviation aircraft operation
C. Differential Hazards related to General Aviation

CHAPTER 3 GENERAL AVIATION
A. General Aviation Formatted: Heading 2,LO-

Hanging: 0.63 cm
General aviation and airlines together covers almost the entire landscape of
aviation industry as far as aircraft operations are concerned. In fact, they
complement each other in meeting the transportation needs of any country.
Depending upon the level of economic development of any country, general
aviation tends to fill in the gap not met by the airline operators.
1. International Civil Aviation Organisation (ICAO’s) view of General Formatted: Font: Bold
Aviation Formatted: Numbered + L
3, … + Start at: 1 + Alignm
The term General Aviation is subject to varying interpretation and thus needs to Indent at: 1.26 cm
be elaborated upon. The term may be loosely used to denote segment involving Formatted: Indent: Left:
aircraft used for personal, private and recreational purposes. However, this
segment can be construed to extend right from gliders and balloons to piston
and turbine based small aircraft to business jets. Aviation industry landscape
can be depicted in various ways. One such classification from ICAO is as under:
Definition Formatted: Heading 1,Sub
While ICAO’s (Iinternational Civil Aviation Organizsation, a specialiszed agency Formatted: Heading 5,Line
of the United Nations) work concentrates on scheduled airlines, ICAO defines
General aviation activities as all civil aviation operations other than scheduled
air services and non-scheduled air transport operations for remuneration or hire
(Annex 6 Part II).
For statistical purposes, ICAO classifies gGeneral Aaviation activities into Formatted: Not Highlight
a) Instructional flying, Formatted: Indent: Left:

b) Business and pleasure flying, Numbered + Level: 1 + Num
at: 1 + Alignment: Left + A
Aerial work, and 1.27 cm
c)
Formatted: Indent: Left:
d) Other flying. Numbered + Level: 1 + Num
Thus, non-commercial activities are at the core of Ggeneral Aaviation segment. 1.27 cm
Generally speaking, GA is considered to mean a civil aircraft operation other Formatted: Indent: Left:
Numbered + Level: 1 + Num
than a Commercial Air Transport operation. at: 1 + Alignment: Left + A
1.27 cm
Yet another definition puts Ggeneral Aaviation operation as an aircraft Formatted: Indent: Left:
operation other than a commercial air transport operation or an aerial work Numbered + Level: 1 + Num
operation. at: 1 + Alignment: Left + A
1.27 cm
Here, Aaerial work is defined as. an aircraft operation in which an aircraft is Formatted: Heading 5,Line
used for specializsed services such as agriculture, construction, photography,
surveying, observation and patrol, search and rescue, aerial advertisement, etc.
GENERAL AVIATION CHAPTER 3
2. Insurance industry’s view of General Aviation Formatted: Font: Bold
General aviation encompasses a very broad and diverse spectrum of operations

in terms of aircraft types, purpose of operations and environment in which they
operate. More sophisticated business jets match airliners in their sophistication
in avionics and operations. Boeing and Airbus have customised some airliners to
accommodate the needs of business travellers. With emergence of mass travel
in 1960s and introduction of Boeing 747 in 1970s, the demarcation between
airliners and general aviation became more pronounced.
Insurance industry’s view of general aviation differs from that of the aviation
industry with a focus on exposure. Given the varied uses to which aircraft can
be put, as also smaller aircraft can be commercially utiliszed while larger Formatted: Not Highlight
aircraft can be used non-commercially, insurance industry tends to look at
seating capacity as a defining criterion for differentiating general aviation from
airline segment.
Thus, various underwriters tend to put the cut off for seating capacity at Formatted: Not Highlight
30 to 60 seats in order that they have a better control over underlying
exposures from the portfolio of risks. Thus, scheduled operations involving
smaller aircraft, say 20-60 seats are considered by the insurance industry as
Ggeneral Aaviation depending upon the context and underwriter’s preference.
Similarly, generally aircraft with 61 seats or more are considered as airlines

even if they are not used commercially. Ssince based on number of seats, the
exposure presented by them is quite sizable. There are few underwriters who
put the cut off at 100 seats for demarcating general aviation from airlines.
3. Aviation risks and exposures Formatted: Font: Bold

Formatted: Numbered + L
Aviation risks and aviation exposures revolve around aircraft operations. Thus 3, … + Start at: 1 + Alignm
all exposures either involve aircraft operation or supporting functions such as Indent at: 1.26 cm
Airports, Re-fuellers, Maintenance Repair and Overhaul (MRO) organizsations.
As far as aircraft operations are concerned, the range of aircraft is extremely

varied starting from gliders and balloons to jumbo jet aircraft.
Thus the variation in risk characteristics is quite significant and aviation

portfolio can be extremely heterogeneous. Variation is in terms of:
a) Size, Formatted: Indent: Left:

b) Value and capacity of aircraft, Numbered + Level: 1 + Num
c) Technology involved, 1.27 cm
d) Type of usage,
e) Competence of pilots,
f) Licensing requirements,
Regulatory oversight, and Formatted: Numbered + L
g) c, … + Start at: 1 + Alignm
Indent at: 1.27 cm

Geographical scope.

GENERAL AVIATION CHAPTER 3
h)
4. Aircraft Usage Formatted: Font: Bold
Aircraft usage can be broadly categorised as transportation and non- 3, … + Start at: 1 + Alignm
transportation usages. Indent at: 1.26 cm
a) Transportation usage: Transportation would involve transporting either Formatted: Font: Bold
passengers or cargo. Formatted: Indent: Left:
b) Non transportation usage: Non-transportation could involve varied at: 1 + Alignment: Left + A
1.27 cm
usages.
Formatted: Font: Bold
Diagram 1: General aAviation operations Formatted: Indent: Left:
1.27 cm
Formatted: Not Highlight

1. GeneralAviationwouldencompasflightinstruction,businestravel,agriculturalapplication,emergencymedicalservicesandotherusages.Infact,generalaviationisdefinedbyexcludingcommercialairlneoperations.Bysomeestimates,approximately350,00+aircaftand1,30,00+pilotsareinvolvedingeneralaviationactivesworldwide.Thiscompareswithabout40,00aircaftand60,00pilotsareemployedincommercialairtansportation.
5. General Aviation Operations Formatted: Font: Bold
General Aviation would encompass flight instruction, business travel, 3, … + Start at: 1 + Alignm
agricultural application, emergency medical services and other usages. In fact, Indent at: 1.26 cm
General Aviation is defined by excluding commercial airline operations.
By some estimates, approximately 350,000+ aircraft and 1,300,000+ pilots are

involved in general aviation activities worldwide. This compares with about
40,000 aircraft and 600,000 pilots are employed in commercial air
transportation.
a) General aviation operations cover an extremely wide gamut of

aircraft usages.
Broadly speaking the usage is defined under AVN 1C London Aircraft

Insurance Policy as:
i. "PRIVATE PLEASURE"Private Pleasure: Private Pleasure means use for private and pleasure
purposes but NOT use for any business or profession nor for hire or
reward.
1.
ii. "Business: Business BUSINESS" means the uses stated in Private Pleasure and use for
business or professional purposes but NOT use for hire or reward.
2.
iii. Commercial: "COMMERCIAL"Commercial means the uses stated in Private Pleasure and
Business and use for the carriage by the Insured of passengers, baggage
accompanying passengers and cargo for hire or reward.
3.
4.iv. Rental: "RENTAL"Rental means rental, lease, charter or hire by the Insured to any
person, company or organiszation for Private Pleasure and Business uses
only, where the operation of the Aircraft is not under the control of the
Insured. Rental for any other purpose is NOT insured under this Policy
unless specifically declared to Insurers.
b) While though not defined under the policy wording, following is

another way of categorising aircraft operations:
i. Corporate Aviation: Aircraft is owned by a corporate entity and

essentially is used for its corporate objectives involving travel of its
directors, executives, employees and guests. High-performance single
engine piston aircraft, single-engine and twin-engine turboprops, and
light and very light jets have also emerged as part of corporate aviation.
ii. Fractional Ownership Operations: These aircraft are operated by a Formatted: Numbered + L
specialiszed company on behalf of two or more co-owners who share in … + Start at: 1 + Alignmen
the cost of ownership and operation. The purpose here is to create Indent at: 1.27 cm
economies of scale by pooling aircraft needs of multiple entities so that

CHARACTERISTICS OF GENERAL AVIATION AIRCRAFT OPERATION CHAPTER 3
each of them can economically utilise the aircraft which they may not
find viable on individual entity basis.
iii. Business Aviation: These include aircraft used by owners for purposes of
their own business and usually self-flown.
iv. Personal/ Private Travel: Here the aircraft are used for personal reasons
to meet personal transportation needs.
v. Recreational Flying: powered/ powerless leisure flying activities
vi. Sports: Aerobatics, Air Races, Competitions, Rallies etc.
These usages reflect significant differences in exposures.
Test Yourself 1
What is the cut- off for seating capacity involving smaller aircraft that are
considered by the insurance industry as General Aviation depending upon the
context and underwriter’s preference?
I. 10 to 40 seats
20 to 60 seats
II. 90 to 120 seats
III. 20 to 60 seats
IV. 80 to 240 seats
B. Characteristics of General Aviation aircraft operation
It is useful to consider Ggeneral aAviation aircraft operation vis-à-vis airline

operation in order to appreciate the variations in exposure to various hazards.
These differential exposures are a consequence of various factors such as:
1. Nature and size of aircraft
: General aviation aircraft tend to be smaller in size which goes with lower
Maximum Take OffTakeoff Weight and seating capacity since larger aircraft tend to be
deployed by airlines for public transport and thus will fall under the category of
airlines. Smaller aircraft tend to be simpler to operate requiring lower level of
pilot competence.
On the flip side, these aircraft tend to have lesser automation, less
tolerance to adverse weather conditions and could under peculiar circumstances Formatted: Indent: Left:
present greater workload for the pilots. Formatted: Font: Bold
2. Formatted: Numbered + L
2. Fixed wing and rotor wing aircraft 3, … + Start at: 1 + Alignm
Indent at: 0.63 cm
CHAPTER 3 CHARACTERISTICS OF GENERAL AVIATION AIRCRAFT OPERATION
: A helicopter is characterised by one or more horizontal rotors, providing lift and

propulsion. The word “helicopter” is adapted from the French hélicoptère,
coined by Gustave de Pontond’Amécourt in 1861. It is linked to the Greek words
helix/helikos (“spiral” or “turning”) and pteron (“wing”).
fixed wing aircraft and in a helicopter.

There is a fundamental difference in the way lift and thrust are
produced in a fixed wing aircraft and in a helicopter.
3.
3. Fixed wing aircraft in general are safer as compared to a rotor wing
aircraft.
In case of engine failures, while fixed wing aircraft tends to glide over a long
distance given the aerodynamic shape of aircraft, rotor wing aircraft cannot
glide. Instead rotor wing aircraft, utiliszing the inertia in the rotor blades is able
to utilisze the energy to land which is called auto-rotation.
Rotor wing pilots are trained for auto-rotation wherein engines are deliberately
switched off and pilot will land to safety using the inertial energy in the rotor
blades. Rotor wing aircraft are not as stable as fixed wing aircraft and demands
relatively more attention and thus presents greater workload for pilots.
In case of fixed wing aircraft, engine failures can create situation involving
asymmetric thrust since thrust generated on left and right sides of the aircraft
is not equal. Rotor wing aircraft lacking in gliding capabilities struggles to
remain in air with each rotation of the main rotor.
4.
4. A helicopter relies on rotating wings for the lift and thrust to remain aloft
and to move forward.
Unlike fixed wing turbo-prop or jet aircraft which would go into glide mode in
case of engine failures, helicopter cannot glide. With each rotation, the
helicopter struggles to remain in air. With failure of engine, the helicopter
starts descending which is called auto-rotation.
Pilots are trained for auto-rotation. Not all failures of engine situations however
would allow for safe auto-rotation. Failure at an altitude of about 500 feet gives
the pilot a time of about 20 seconds in autorotation before touching the ground.
Thus reaction time available to a helicopter pilot is different from that
available to a fixed-wing pilot.
5. Formatted: Indent: Left:
5. The turbo-prop aircraft are propeller-driven and thus susceptible to Formatted: Font: Bold
mechanical failures as compared to turbofan (jet) aircraft which are less Formatted: Indent: Left:
prone to mechanical failures. Numbered + Level: 1 + Num
cm
There is thus a clear case for differentiating between turbofan, turbo-
prop and helicopters. Formatted: Indent: Left:
Formatted: No bullets or

Turbo-props are known to be about four times as likely to get involved in an

accident as a turbo-fan aircraft. Similarly, the accident rates of single-engine
and twin-engine aircraft differ by a wide margin (by about half) and needs to be
considered in any premium rating exercise.
While twin-engine aircraft is more reliable, it places higher demands on the

pilots by way of handling the asymmetric thrust when one engine fails as also
greater complexity.
6.
6. Engine Type and avionics involved
: Smaller aircraft could have piston-engine, turbine-engine or turbo-fan engine.

Depending upon the size, weight, seating capacity and value, regulatory
environment might require a particular level of sophistication in avionics.
Today’s advanced business jets match airliners in various dimensions. Generally

speaking, Ggeneral Aaviation aircraft would lag in sophistication as compared to
airliners. However, General aviation aircraft, especially Technically Advanced
Aircraft (Business Jets) are as sophisticated as airline aircraft and in some cases
even more advanced.
7.
7. Turbine engines are more reliable in terms of failure rates and turbo-fans
engine are still more reliable.
Likewise, piston, turbine and turbo-fan engines create increasing higher thrust
levels resulting in more carrying capacity, in terms of maximum take off weight,
speed and range. With the increase in sophistication in engines, the entire
design and avionics of the aircraft tend to get complex and thus, present
challenges for the pilots in terms of competence and increasingly quicker
reflexes.
8.
8. Number of engines
: Single engine aircraft has no backup in the event of engine failure. Twin engine
thus affords more safety. Aircraft are designed such that it can effectively
operate with one engine inoperative, even in the crucial phase of take off when
aircraft will successfully take off with one engine failing right in the middle of
take off.
9. Formatted: Indent: Left:
9. Height at which aircraft flies Formatted: Font: Bold
: Almost all helicopters are non-pressuriszed and would fly at a height 3, … + Start at: 1 + Alignm
below 15,000 feet. Human beings on an average are known to be able to Indent at: 0.63 cm
breathe comfortably up to a height of 8,000 feet. Above this, they may feel Formatted: Indent: Left:
uncomfortable. Formatted: No bullets or

Cabin pressure is maintained at equivalent of air pressure at levels between

4500-7000 feet. Aircraft flying at low altitudes have greater probabilities of
hitting raised terrain or obstacles.
10.
10. Relationship between operator and passengers
: Unless the Ggeneral aAviation usage has commercial element to it, relationship
between operator and passengers could be diverse.
11.
11. Geographical scope
: General aAviation aircraft barring business jets tend to have smaller area of
operation and could have more familiar operating conditions unlike airlines
which may have national, regional or international routes and operation
presenting diverse operating environment. To the extent, flying area is small,
issues of linguistic barriers and cultural differences present smaller challenges
for general aviation operation.
12.
12. Number of hours the aircraft is put to use
: General Aaviation aircraft barring commercial operators tend to use aircraft for
fewer hours in comparison to an airline operator. An aircraft operated by an
airline may be flying 6-20 hours on an average per day whereas gGeneral Aaviation
aircraft could be flying as low as 50 hours to 750 hours per year. Higher usage in
general presents higher exposure.
13.
13. Level of pilot certification and competence
: Pilots start with Ggeneral Aaviation operations and gradually with experience and
further training graduate to airliner pilots. Thus, in general, GA pilots tend to
be less proficient compared to airline pilots.
General aviation pilots tend to vary greatly in terms of their competence with
certification levels of
i. (i) Student,
ii. (ii) Private,
iii. (iii) Commercial and
iv. (iv) Airline transport licensees.
Progressively, the experience of the pilots increases for the above four
licence categories. In comparison, airliners are mostly operated by pilots with
ATPL.
Night flying and operating under challenging visibility conditions may

present a hazard for general aviation operation but it is the norm for airline
operation. These challenges are overcome through the mix of pilot training and

competence, aircraft capabilities and infrastructure support apart from high

altitude flying.
General aviation pilots may have hours less than 100 to those matching airline
pilots. Airline pilots usually have thousands of hours of flying experience.
14.

14. Pilot Experience and Training
: Pilot experience can be looked at based on the following parameters:

15.
a.a) Total flying hours: – fixed wing and rotor wing
b.b) Total flying hours on single / multi – engine / piston-turbine engines
c.c) Flying hours on make and model
d.d) Hours as pilot in command
e.e) Hours on similar type of aircraft
f.f) Hours of night flying
g.g) Frequency and type of training
h.h) Recency of experience
i) Experience in carrying out special operations such as offshore flying or
slung cargo handling.
15. Re-current or refresher training
Generally pilot certification upgrades are based on hours logged. But this does
not necessarily fully reflect the proficiency of the pilots. Statistics indicate
that the lowest fatal accident rate is correlated with pilots undergoing regular
recurrent training programs. This training aims at keeping their aviation
knowledge and skills up-to-date and preparing them for unusual situations for
which they usually do not get an opportunity to practise. They are also updated
on changes in the regulations and procedures following regulatory practices and
study of accidents and incidents done by regulators and aircraft manufacturers.
Emergency procedures are an important part of the re-currency training. Not
flying regularly would also lead to deterioration in flying proficiency. Thus, re-
currency training is quite important for regular flyers as well as infrequent
flyers.
This training could be as mandated by the regulator or as per the safety

practices followed by the operator. Pilots may also themselves seek re-
currency training. It is not uncommon for underwriters to stipulate annual
refresher training for pilots, sometimes alongside some discounts in premium.
This is to incentivize the client to send pilots for re-currency training
i.
Aircraft accidents –Major Causes have been attributed to three broad categoriesof causation:
16.
Aircraft accidents have been attributed to three broad categories of causation:
a) tThe pilot,
b) The aircraft and
c) Causes external to the aircraft.
In most aviation accidents, with increasing redundancies built into aircraft

systems and higher reliability, it is the pilot and human factors which are

responsible for a majority of accidents. The pilot training thus is of paramount

importance.
It is observed that pilots really settle down with an aircraft after about 200
hours of flying on a given model of aircraft and about 1000 hours of total flying
time.
Statistically speaking, the incidence of accidents falls sharply after the pilot
achieves 200 hours on the aircraft type. As far as helicopter accidents are
concerned, various research studies attribute the accidents to pilot error in 60-
75% cases depending upon classification parameters.
16.
17. Frequency of usage
e: General Aaviation aircraft tend to use smaller aircraft more frequently over
shorter trips as compared to airliners. It has been statistically established that
for fixed wing aircraft, take-off and landing represent the most hazardous
phases of flight as compared to other phases such as taxi, climb, descent,
approach and cruise.
17.

18. Type of airports used and kKind of infrastructure available at such airports
: General aviation aircraft tend to meet diverse transportation needs and those
on the non-trunk routes which cannot be served based on economics of scale
which are essentially served by airlines.
Airports to which general aviation aircraft fly vary widely in their capabilities to
provide air navigation support and other aviation related services. Runway
construction, length, quality and conditions, rescue services and weather report
services are not at par with airports used by airlines.
18.
19. Wildlife hazard
: Aircraft colliding with birds and animals at airport surfaces or during take off or
landing is a major hazard for all kinds of aircraft. This hazard gets aggravated at
smaller airports with limited funding and which may not have been built as per
standards required for major airports catering to public transport.
Birds, animals and wild animals of various sizes and weight have been reported
to have hit aircraft. No reliable estimates for costs of bird / wild life strikes to
civil aviation industry are available. This is because reporting levels across the
world differ. However, reporting levels have improved over the years. Once
reporting is made, it is difficult to segregate the direct and indirect costs from
the incidents and accidents that these bird and wild life strikes entail.
Apart from the cost of repairs, other costs include loss of revenue, the cost of
putting passengers in hotels, delays, re-scheduling and flight cancellations
costs. Projected annual losses caused by wildlife strikes with civil aircraft in
USA as per FAA report is put at a minimum of USD 103 Mln and at a maximum of
USD 514 Mln as per Wildlife Strikes to Civil Aircraft in the United States 1990-
2013 report. Thus, the losses world over would be quite much higher.
It is noteworthy that damage to smaller aircraft from such strikes can be more
extensive in comparison to that to an airliner while being smaller in value. For
the period 1990-2013, FAA reported that 66 aircraft were destroyed or damaged
beyond repair due to wildlife strikes. The majority were small (<2,250 kg
maximum take-off mass) general aviation aircraft. General aviation airports
located in rural areas with inadequate measures against such strikes, pose
bigger challenge.The cost to the aviation industry for this is estimated at USD 1.50 Bln.
19.
20. Variability in operating environment
: Airports tend to be quite standardiszed in terms of the infrastructure and support

they provide to aircraft operation. General Aaviation operators tend to use all
kinds of airports, right from international and city to small grass strips in the
hinterland.

Smaller airports and airstrips tend to present more diverse and non-standardiszed
operating environment challenging the skills of pilots. Not all airports are
supported by air traffic control towers and navigation and weather report
services.
20.
21. Degree of oversight from regulators
: General Aaviation operators tend not to be as tightly regulated as airline

operators given that airliners operate in public domain with greater potential
for catastrophic losses in terms of property as also more importantly number of
lives being put at risk.
21.
22. Degree of sophistication of operator in his approach to safety:
General Aaviation operators in general can be considered amateurs as compared

to airliners given the size of operations, the resources devoted and competence
of personnel involved.
22.

23. Resources available at the disposal of operator
: It is here that the size of the operator matters. Larger operator has the benefit
of economies of scale and can afford creating better infrastructure as also can
benefit from taking safety initiatives which smaller operator may not find
viable.
23.
24. Fleet size
: Airline operators tend to have larger fleets. This enables the airlines to leverage
sharing of resources which may not be available to Ggeneral Aaviation operators
unless they have larger fleet.
Even Ggeneral Aaviation fleet operators tend to have fleet of diverse aircraft
makes and models vis-à-vis a low-cost airline which tends to have limited
number of makes and models or just one model of aircraft across the entire
fleet to create economies of scale. Sharing of pilots, simulators and other
resources thus may be as viable for general aviation operators.
24.
25. Hangarage
: Hangar can protect the aircraft against storms and cyclones. It can also make
theft of aircraft more difficult. Whilst commercial airlines are parked in open,
GA aircraft are many times kept in the hanger. Hangarage affords protection
from weather as also from theft
25.
26. Regulation
: Regulation is a very important underwriting consideration. Aircraft are governed

by the regulator of the country where the aircraft is registered.
While aviation industry being international in character has a significant amount

of uniformity and harmony in regulation and implementation, various countries
and their regulators may be at different stages of compliance. More important
than this is the fact that even if the regulation is uniform or broadly similar, the
rigour with which different regulators pursue their objectives vary a great deal.
For eExample
, dDeveloped countries may require installation of avionics such as Terrain

Awareness Warning System or Traffic Collision and Advisory Services for a
ssmaller aircraft in comparison to developing countries.
26. It needs to be borne in mind that it is usually the regulator who sets the tone of
safety culture in aviation industry in the country.

DIFFERENTIAL HAZARDS RELATED TO GENERAL AVIATION CHAPTER 3
Test Yourself 2
At what height does a helicopters can fly?
I. Below 10,000 feet

II. Below 15,000 feet
III. Above 15,000 feet
IV. Above 20,000 feet
C. Differential Hazards related to General Aviation
1. Mountain Flying
: Mountain flying presents additional aviation hazards owing to obstacles

presented by the terrain and changing weather conditions in terms of
temperature, winds and visibility parameters.
A pilot needs to factor in the interaction between temperature and air density
since variable air density is what provides variable lift to the aircraft.
Temperature decreases about 3.6 degree F per 1000 feet of increase in altitude.
Airports or air strips in mountainous region may vary widely in terms of

infrastructure from the usual city airports since such airports / air strips tend to
have been built despite the constraints presented by the location: .
a) There could be mountains surrounding the air strip requiring steep climb
or steep approach.
b) There could be valley at the end of the runway which requires fully
committed take off from the pilot.
c) Option of rejected take off in the event the pilot is not satisfied with the
take-off may not be available.
d) Similarly there could be obstacles requiring pilots not to reject landing,

i.e. no option to go around in case of unsatisfactory approach to the
runway.
e) There are sometimes air flows during certain times of the day which may
restrict the time available for operating aircraft safety during the day.
Due to the terrain presenting challenges, pilot needs to study the topography,
be reasonably familiar with the region and must be well informed as to
preferred or best routes, one-way airports, no-go-around airports and sloping
runways.

CHAPTER 3 DIFFERENTIAL HAZARDS RELATED TO GENERAL AVIATION
Usual procedures for landing and take-off may be modified to account for
peculiarities presented by the region and pilots need to be well versed in these
changes.
Aircraft operation may require steep climb or steep descent in view of

surrounding obstacles and this may require building in a greater margin of safety
as compared to standard operations as per aircraft flight manual.
For eExample
, aAircraft capability while taking off with one engine failing during take-off may
create significantly higher power requirement in case of an air strip requiring
steep climb. Such regions tend to post constraints on traffic patterns.
to build infrastructure in such region. Weather stations may not be available to

provide relevant information on real-time basis.
Weather in mountainous region tends to be more volatile and it is more costly
to build infrastructure in such region. Weather stations may not be available to
provide relevant information on real-time basis.
Usual procedures for landing and take-off may be modified to account for
peculiarities presented by the region and pilots need to be well versed in these
changes.
Usualproceduresforlandingandtake-offmaybemodifiedtoaccountforpeculiaritiespresentedbytheregionandpilotsneedtobewelversedinthesechanges.
highest terrain is advisable. In light of the various constraints faced, the aircraft
capability needs to be evaluated and flight planning accordingly made.
Depending upon the type of aircraft, ceiling of a few thousand feet above the
highest terrain is advisable. In light of the various constraints faced, the aircraft
capability needs to be evaluated and flight planning accordingly made.
ambulance:
2. Helicopter Emergency Medical Services (HEMS), Medevac and air Formatted: Numbered + L
ambulance: 3, … + Start at: 1 + Alignm
Indent at: 0.63 cm
Aircraft and helicopters used for medical evacuation and air ambulance
purposes present a particular set of aviation hazards. This is on account of
extremely variable sites that the helicopter may be required to operate from in
medical emergencies.
The causes of accidents faced by these operations include controlled flight into
terrain and inadvertent entry into IFR (Iinstrument Fflight Rrules conditions) from
planned VFR (Vvisual Fflight Rrules) conditions.)

In fact, inadvertent IFR conditions is a significant hazard for all general aviation
operations since general aviation aircraft tend to be relatively less weather
tolerant and less sophisticated in terms of avionics installed relative to airliners.
Faced with an IFR condition, pilot might get tempted to venture into it based on
his training, experience and confidence. If IFR conditions turn out to be more
challenging than he had bargained for, it could be catastrophic for the mission.
Such situations tend to result in lack of situation awareness and pilot
disorientation, finally resulting into a major accident.

In case of medical emergency operations, there is an added factor of the

importance of the mission. This together with commercial considerations faced
by these operators creates pressures for the pilots. It is under these
circumstances that the pilots need to stick to the basic risk management matrix
that is already in place in terms of safety margins built in.
Weather minimums formulated earlier must be adhered to despite pressures and

temptations that heroism may offer. Such operations may need to be conducted
in night hours putting further strain on the resources and capabilities of pilots.
Since medical emergencies could arise anywhere, say on a highway, the
variability in operating conditions is extremely high here. Decision to enter into
IMC (Instrument meteorological conditions) from VFR is an important decision
made by the pilots.
Conducting a rigorous pre-flight planning adhering to the risk management

processes and equipping the aircraft with Terrain Awareness Warning System
(TAWS) could greatly assist safety in such missions.
It is an important question here as to whether the operator adheres to only the

regulatory requirements or puts in place still more stringent and effective risk
management practices and processes.
Definition
Aeronautical decision making is defined as “Systematic approach to the mental

process of evaluating a given set of circumstances and determining the best
course of action” by Federal Aviation Administration.
FAA advocates 3-P model for ADM (Aeronautical Decision Making, a sub-
discipline for pilots) which involves Perceive – Process – Perform leading to
simple, practical, and systematic approach to accomplishing each task during all
phases of flight. It is important that pilots remain aware to the decision matrix
providing bases for their decision making in terms of aircraft capability,
environment, their own internal biological cues, competence and capability.
One way of looking at pilot errors is to classify them under three types:
procedure error, skill error and decision error.
a) Procedure errors
Procedure errors
Procedure errors are caused due to the lack of discipline or concentration in
following a well-defined set of steps to be followed, usually called Standard
Operating Procedures. This could also be due to cultural issues with the
operator organiszation. The solution to this is training and reinforcing safety
culture.

b) Skill errors
Skill errors are those where the pilot competence is lacking on account of
inadequate or absence of skill training to handle a particular set of
circumstances.
For eExample
, iIn a given condition of cross winds, how a pilot would need to manoeuvre
the controls such that the aircraft does not veer or skid of the runway. With
an adequate level of class room and simulator training, this source of hazard
can be managed.
Decision error Formatted: Font: Bold
ADM creates a framework to deal with the decision errors. Formatted: Indent: Left:
3. Helicopter Slung Cargo Operations
: Versatility of the helicopter makes it possible to use it for carrying cargo outside
of a helicopter. Slung cargo operations are more hazardous. Most accidents
involving slung operations of helicopters occur while picking up or laying down
slung load. Accidents are usually attributable to sling failure, improper load
preparation or air crew error. Accidents involving human error are predominant.
Some of the factors in slung accidents are
a) overloading the helicopter,

b) fatigue,
c) overlooking aircraft limitations,
d) breach of standard operating procedures,
e) slung hitting obstacles,
f) injuries from swinging of load,
g) inappropriate short or long tether lines and injury from static built up on
the helicopter cargo hook.
Pick up and drop off site preparation is also a crucial aspect since unsuitable or
ill-prepared site can contribute to accident.
One important reason for the pickup and lay down phases being more hazardous
is that these involve the helicopter in hover. A helicopter in hover is always in
dead man’s curve area hindering safe autorotation for a single engine
helicopter. It however needs to be borne in mind that the curve is relevant
essentially for single-engine helicopters since twin-engine can always fall back
upon the second engine when the first one becomes inoperative.

The height-velocity limitations are critical in the event of a single engine failure
during takeoff, landing, or other operation near the surface. The “avoid” area
of the Height-Velocity chart defines the combinations of airspeed and height
above the ground from which safe single engine landing on a smooth, level, and
firm surface cannot be assured.
4. Night Flying:
Night flying presents significantly more hazards or same hazards in more

intensity as compared to day flying for general aviation pilots, particularly those
who are not instrument rated (rated for Instrument Flight Rules). This increases
if night not moonlit and if the flying is over unlit area not inhabited or vast
expanse of water bodies. This can present significant challenge even for
experienced pilots unless the experience is of night flying as well.
More than 2/3rd of situational orientation and awareness comes from inputs
provided by eyes and when this is lost due to darkness, there is much higher
risk. Once the pilot loses situational awareness (where he is, in what aircraft
attitude) –becomes spatially disoriented, he may lose control between twenty
seconds to 3 minutes. Pilots understanding of speed, direction and movement
can get so degraded that he may not realise if the aircraft is going down or
slowing down. Darkness may lead to pilot inadvertently entering into Instrument
Meteorological Conditions.
It is important for pilot to be familiar with the terrain and airport in case of
night flying. It presents more stress and with less visual acuity, presents more
fatigue during operations. Fuel reserve carried may need to be increased to
take care of loss of situational awareness and getting lost scenarios. All risks of
day flying get more pronounced.
, e.g.Example
sSingle engine aircraft is more hazardous in night flying in the event of engine
failure since the terrain below is not recognisable.
The situational factors such as experience, familiarity, maintenance, weather,

pre-flight planning – all become far more important. Statistically, more
accidents happen at night as compared to day in aircraft operations.
Age, fatigue and smoking habits could reduce adaption to darkness. Eyes need
up to 30 minutes to adapt to darkness while a flash of light will reverse that
adaptation. The tricky part is that pilot would not know how bad he sees in the
night or how well he has adapted. Judging distance and height could be difficult
in night. Flying presents some visual and kinaesthetic illusions. Night flying
aggravates them. Even weather changes may not be all that apparent.

Absolutely moonless night with no surface lights could get further challenging
with clouds which may not be visible. With reduced visual acuity, depth
perception and runway perspective (narrow runway may give a feeling of being
quite high) get adversely affected. It can happen that the pilot feels that
landing light is oncoming when the light seen is in fact Venus low on the
horizon.
5. Aviate – navigate – communicate – manage:
In case of an emergency and increased workload when the pilot may feel
saturated, prioritiszation is the key which is summed up in aviate – navigate –
communicate - manage.
These first two assure immediate safety of the aircraft:
a) Aviate:- First thing is to keep the aircraft flying.

and
b) Navigate: -sSecond is to keep it flying considering the surroundings,
example, .g. avoiding terrain and in the desired direction. These two assure
immediate safety of the aircraft.
c) Communicate:-Thesetwoassureimmediatesafetyoftheaircraft.Oncethisisistheabovetwostepsaredone,focuson
communication to ascertain location and seeking requisite information
such as weather information or approach briefing from air traffic
controllers.
d) Manage: - Once the situation is under control, it is a matter of managing

the computer and flight management systems in the cockpit.
6. Special Usages:
It is a feature of special usage of aircraft that apart from the usual objective of
transportation, another objective is also sought to be achieved. Following are
varied special usages to which Ggeneral Aaviation aircraft are put, known as Aerial
Work:

Table 1: Special usage of General Aviation
Aerial Crane Operations (haulage, Medical Evacuations Formatted Table

slung cargo)
Aircraft Sales Demonstrations Offshore Drilling
Advertising / Banner towing flights. Power and/or Pipeline Patrol
Aerial Crop Control –dusting, seeding Rental
and spraying
Aerial Survey and Charting Research and Development Flights
Agricultural Flights (Crop Dusting) Search and Rescue
Environment Surveillance and Sight Seeing Flights
Enforcement
Exhibition—Demonstration Skydiver Hoisting
Ferry Flights/ Delivery Flights Supplies Dropping
Fire Fighting (Forest Fires etc.) Testing and / or Experimental
Fire Patrol Traffic Surveillance
Flight Demonstrations (Air Shows) Transport of large animals
Geophysical Survey TV Reporting
Glider Towing Weather Research
Instructional – pilot training
While for some usages, fixed wing or helicopter can be deployed, for some
usages such as slung cargo, only helicopters are suitable.
It is mostly another feature of such usage that the aircraft needs to fly at low
altitude to achieve the objective of such missions. These objectives may
require a pilot to fly in an unusual way,.
Example Formatted: Heading 1,Sub
e.g. sSearch and rescue might require flying in bad weather, at low altitude in Formatted: Heading 5,Line
mountainous or forest region at night. Such mission may also put pressures on
pilots’ concentration on basic flying and could compromise the safety level.
Every aircraft model is different with different performance parameters such as

take-off weight and take-off speed, stall speed, centre of gravity and
peculiarities.
To take an eExample Formatted: Heading 1,Sub
, nNumber of fuel tanks, how and when they are to be used will differ from Formatted: Heading 5,Line
aircraft to aircraft. This is so important that pilots trained in flying a particular
model of Boeing would need transition training when they migrate to a different
model of Boeing within the same family, e.g.such as Boeing 737.

bottom, middle or top of the fuselage or somewhere in between.

Wings can be placed differently on an aircraft. Wings could be aligned with the
bottom, middle or top of the fuselage or somewhere in between.
Depending upon the wing position, pilot’s view of the surroundings differs
materially. This has implications for what pilot can see.
a) High wing aircraft would block pilot’s view of traffic above him. There is
a greater propensity of high wing aircraft to collide with low wing
aircraft since both pilots would fail to see each other if high wing
aircraft is flying lower than low wing aircraft.
b) Similarly, pilot’s perception of runway differs. On a high wing aircraft,

he will feel relatively closer to ground and on a low wing, relatively
higher to the ground. This can give an impression of higher or lower
altitude as compared to the real altitude.
7. Helicopter operations Formatted: Font: Bold

Formatted: Normal, Left, N
: The advent of the helicopter in the late 1940’s extended the scope of aircraft Style: 1, 2, 3, … + Start at:
operations immensely. This was on account of capabilities of vertical take-off 0 cm + Indent at: 0.63 cm
and landing and capacity to hover. It is probably the versatility of helicopter

which is exposing it to significant hazards. During last couple of decades,
helicopter safety has made significant improvements. This is on account of
introduction of several new types of helicopters with improved crashworthiness
and implementation of the HUMS - Health and Usage Monitoring Systems.
Helicopters demand more maintenance as compared to fixed wing aircraft. This

makes their operating costs higher. They are also expensive to repair. Due to
the capacity for vertical landing and take-off, they tend to be used at poorly
prepared or unprepared sites for operation. This also brings them closer to
obstacles in relation to fixed wing aircraft. Given that most helicopters are not
pressuriszed, they fly at relatively lower altitudes increasing the hazard profile.
Helicopter training is relatively more hazardous and exposes helicopter more to
accidents.
A helicopter has a significantly more area involving moving parts as compared to

fixed wing aircraft. While in a fixed wing turbofan aircraft, engine is encased
with relatively smaller area, even a turboprop aircraft does not have very large
moving area in relation to the size of the aircraft. . Thus, an accident is more
likely to involve main or tail rotor hitting an object.
This is more likely to damage the entire helicopter and greater possibility of
total loss. Even fixed wing aircraft have significant possibilities of total loss.
Insurance market experience shows that about 70% of the claim payout goes

towards total loss claims and rest 30% towards partial loss claims. Thus, already
high propensity for total loss claims gets exacerbated in case of helicopters.
Given that helicopter operations are far more hazardous than fixed wing
aircraft, some aviation underwriters do not write helicopter risks. Those that do
write may avoid piston-powered helicopters, commercial operators and special
usages. As compared to fixed wing aircraft where the deductible is not
applicable in case of arranged total loss / constructive total loss or actual total
loss, deductible of 5% is applicable for helicopters for all kinds of losses and
2.5% if it is a fleet of helicopters.
Safety initiatives are underway with each stakeholder contributing in his own
way. Manufacturers are improving helicopter design and continuous
airworthiness and crashworthiness with more elaborate maintenance
stipulations.
8. Auto-rotation:
When power fails in a helicopter, the pilot has to use the energy in the rotor to
descend to a suitable place. Thus, mechanical failure, main rotor or tail rotor
failure, fuel starvation (running out of fuel), drive system failures or engine fire
– all will require that pilot resorts to power-off glide landing, i.e. Aautorotation.
Aircraft with heavy rotors have more energy in them vis-à-vis other helicopters
who may have relatively light weight rotors. Pilots are trained to handle
autorotation so that in case of an emergency, they can descend to safety.
Instructor switches off the power and the student practices autorotation from
various heights.
9. Helicopter – Height–velocity diagram also known as Dead man’s curve or

zone:
The height–velocity diagram or height velocity curve or deadman’s curve or

zone depicts safe/unsafe flight profile relevant to a specific helicopter model. Field Code Changed

Height Velocity Diagrams:
Bell 204B
Robinson-44 Robinson-22
Chart shows that given a particular altitude, a minimum speed must be Formatted: Pattern: Clear
achieved so that in case of power failure, the helicopter can safety land.
Conversely for a particular speed, a minimum altitude must be achieved. This

constitutes the safe area of operation for the helicopter usually not shaded in
the chart. An operation outside these constraints is likely to be quite
hazardous.
Unsafe flight profile includes speed and altitude combinations from which
recovery or autorotation is not possible.The H–V curve also shows a take-off
profile, whereby the helicopter starts take off and gains altitude and speed
avoiding the shaded unsafe flight profile.
The graph is based on the pilot response time and quantum of inertial energy in
the rotors to allow pilot to make an autorotation landing in the event of power
failure. Since twin engines are unlikely to experience dual engine failure, the
graph is relevant only for single engine helicopters.Inhelicopters. In case of an
emergency, pilot should try to move from shaded area to non-shaded areaarea
by increasing altitude or increasing speed by manipulating controls.
10. Agreed Value: Formatted: Numbered + L

3, … + Start at: 1 + Alignm
Indent at: 0.63 cm
Aircraft hull policies are on agreed value basis. This is similar to the practice in
the marine hull insurance market. This has the advantage of avoiding disputes
during the claim settlement, particularly in the event of total loss accidents
since aircraft second-hand market is not a particularly liquid market. It may be
difficult to find an aircraft of similar make and model and manufactured during
like period with similar level of usage or depreciation. Aircraft also tend to be
extensively customised in terms of interiors.
Insuring aircraft at a proper agreed value is very important since under-insuring

or over-insuring tends to benefit one of the parties to the insurance contract
depending upon partial or total loss.
a) Formatted: Font: Bold

a) When it is insured with a higher agreed value, premium outgo Formatted: Indent: Left:
increases and in case of a total loss claim, gets more than the proper Formatted: Indent: Left:
value of the aircraft thereby benefitting the insurance buyer. At the Numbered + Level: 1 + Num
same time, since threshold for constructive total loss moves up at: 1 + Alignment: Left + A
1.27 cm
substantially leading to insurers insisting on repair (otherwise would have
resulted in constructive total loss based on proper agreed value),
adversely affecting insurance buyer’s interests. In such a scenario, the
aircraft with extensive repairs would have less post-repair value owing to
significant damage history and delayed availability of the aircraft with
more time on ground for extensive repairs.
• Whenitsnsuredwithahigheragredvalue,premiumoutgoincreaseandincaseofatoalosclaim,getsmorethanthepropervalueoftheaircaftherbybenefitngtheinsurancebuyer.Athesametime,sincethresholdforconstructivetoalosmovesupsubstantialyeadingtoinsuresinsitngonrepair(otherwisewouldhaveresultedinconstructivetoalosbasedonproperagredvalue),adverselyafectinginsurancebuyer’sinterst.Insuchascenario,theaircaftwithextensiverepairswouldhavelespost-repairvalueowingtosignifcantdamagehistoryandelayedavilabiltyoftheaircaftwithmoretimeongroundforextensiverpairs.


b) Conversely, when it is insured with a lower agreed value, premium Formatted: Font: Bold
outgo decreases and in case of a total loss claim, gets less than the
proper value of the aircraft thereby benefitting the insurer. At the same
time, all losses below threshold for constructive total loss are fully
recovered by the insurance buyer though the premium paid was lesser.
This is against the interest of the insurer. However, there are increased
probabilities of repair cost crossing threshold and insurer would choose
to pay on constructive total loss basis with significant salvage at their
disposal.
Similar to the practice prevailing in marine class, older aircraft are insured only
on total loss only basis since they are quite low valued and it is possible that
spares and components for these may not be easily available.
Agreed value should ideally be determined based on aircraft valuation report so

that in the event of an aircraft loss, insurance buyer is able to replace the
aircraft easily. However it is seen that many buyers of insurance base their
agreed value on purchase value or book value which would be depreciated value
(purchase value as reduced by depreciation as per accounting practices from
year to year). Some buyers of insurance base agreed value on book value plus
modification costs incurred to, say change the passenger aircraft to cargo
aircraft.
For those aircraft, which are financed by leasing companies or banking or

financial institutions, they would often insist on a particular agreed value thus
reducing the leeway for insurance buyer to determine the agreed value. In such
instances, agreed value may even change from month to month based on the
structure of financial transaction. Agreed value may be reviewed annually but
there is a strong case for reviewing them at least every 2-3 years.
Aircraft value in the market tends to change with changes in economic

conditions, demand and supply for particular aircraft types and introduction of
new aircraft / engine models providing greater fuel and operating efficiencies.
It is an established practice that agreed value cannot be brought into question

once it is agreed at the beginning of the policy period. So underwriters tend to
look at agree value carefully. However variation of 10%-20% may not be
considered material.

11. Off-shore operations
: Like mountain flying, offshore flying presents its own additional hazards.
The term ‘offshore operations’ denotes flights in support of or in connection Formatted: Heading 5,Line
with the offshore exploitation or exploration of mineral resources (including
gas).
a) Common hazards faced Formatted: Font: Bold

Common hazards faced Numbered + Level: 1 + Num
1.27 cm
Wind speed and wind direction needs to be monitored for this kind of
operations. Helideck size, location and approach thereto are important
safety considerations. Operating during night, under conditions of poor Formatted: Indent: Left:
visibility and collision with offshore rigs are common hazards faced.
Health and usage monitoring systems (HUMS) were introduced in 1980s.

Initially developed for the larger twin-engine helicopters flown to offshore
rigs, they are becoming increasingly more affordable and more
commonplace. These systems rely on capture, recording and analysis of
parameters pertaining to various essential helicopter parts and components,
principally engine and gearbox performance. This data can be used to
anticipate technical glitches and conduct preventive maintenance as also
decide on pilot training needs. Since more helicopter accidents are
attributed to mechanical faults and maintenance issues, HUMS is
contributing in a significant way to improved safety.
HUMS analyses the vibration patterns in the main and tail gearboxes, Formatted: Indent: Left:
connected transmission shafts and rotors. By detecting minute changes in
the pattern of vibration, the presence of defects or defect as it develops
and fully manifests, such as a crack in a gear wheel, loss of a gear tooth or
excessive wear in a bearing, it has managed to reduce technical or
maintenance based accidents. This forms the basis for preventive
maintenance
Helicopter hazards at an offshore installation would include Formatted: Not Highlight
i. Excessive wind turbulence caused by adjacent structures, Formatted: Indent: Left:

ii. Adverse and rapidly changing weather conditions, Numbered + Level: 1 + Num
iii. Low cloud and poor visibility, 1.27 cm
iv. Thermal effects from turbine exhausts and hydrocarbon venting,
v. Spray from high waves,
vi. Obstructions in the approach and departure sectors depending upon
design of the helideck,
vii. Poor upkeep of helideck,
viii. Aircraft engine or cabin fire requiring emergency response,

ix. Personnel contact with rotors while on deck, birds and seagulls.
Downdraughts, wind turbulence and air temperature changes due to turbine Formatted: Indent: Left:
exhausts could lead to significant impact on helicopter performance. This
will reduce the safety margin available to pilot to recover from hazardous
situation.
Helideck are indeed designed based on minimum regulatory stipulations but

nevertheless could present peculiar hazards given the design being prepared
within the larger context of the installation.
Offshore operations are conducted 24x7x365. Thus helicopter support would

need to be provided in all weather conditions and by day and by night.
Given the special profile of hazards faced in offshore flying, pilots would
need to be given specific role oriented training.
The operations demand greater caution when conducted on mobile

installations and (floating production, storage and offloading systems) in bad
weather. Helicopter operations on mobile installations would be limited by
heave, roll and pitch limits for installations caused by waves.
Health and usage monitoring systems (HUMS) Formatted: Font: Bold
Health and usage monitoring systems (HUMS) were introduced in 1980s. Formatted: Indent: Left:
Initially developed for the larger twin-engine helicopters flown to offshore
rigs, they are becoming increasingly more affordable and more
commonplace. These systems rely on capture, recording and analysis of
parameters pertaining to various essential helicopter parts and components,
principally engine and gearbox performance.
This data can be used to anticipate technical glitches and conduct

preventive maintenance as also decide on pilot training needs. Since more
helicopter accidents are attributed to mechanical faults and maintenance
issues, HUMS is contributing in a significant way to improved safety.
HUMS analyses the vibration patterns in the main and tail gearboxes,
connected transmission shafts and rotors. By detecting minute changes in
the pattern of vibration, the presence of defects or defect as it develops
and fully manifests, such as a crack in a gear wheel, loss of a gear tooth or
excessive wear in abearing, it has managed to reduce technical or
maintenance based accidents. This forms the basis for preventive
maintenance.
) Helicopter hazards at an offshore installation would include excessive

wind turbulence caused by adjacent structures, adverse and rapidly

changing weather conditions, low cloud and poor visibility, thermal

effects from turbine exhausts and hydrocarbon venting, spray from high
waves, obstructions in the approach and departure sectors depending
upon design of the helideck, poor upkeep of helideck, aircraft engine or
cabin fire requiring emergency response, personnel contact with rotors
while on deck, birds and seagulls. Downdraughts, wind turbulence and
air temperature changes due to turbine exhausts could lead to
significant impact on helicopter performance. This will reduce the
safety margin available to pilot to recover from hazardous situation.
Helideck are indeed designed based on minimum regulatory stipulations
but nevertheless could present peculiar hazards given the design being
prepared within the larger context of the installation.
) Offshore operations are conducted 24x7x365. Thus helicopter support
would need to be provided in all weather conditions and by day and by
night. Given the special profile of hazards faced in offshore flying, pilots
would need to be given specific role oriented training.
) The operations demand greater caution when conducted on mobile
installations and (floating production, storage and offloading systems) in
bad weather.Helicopter operations on mobile installations would be
limited by heave, roll and pitch limits for installations caused by waves.
b) Helicopter Underwater Egress Safety Training with Emergency Formatted: Font: Bold
Breathing Systems (HUET and& EBS): Formatted: Numbered + L
c, … + Start at: 1 + Alignm
This has significantly improved the survivability of a helicopter accident Indent at: 1.27 cm
during offshore operations. This training imparts skills needed to escape a Formatted: Indent: Left:
submerged helicopter. This covers
i. Recognising exits, Formatted: Indent: Left:

ii. Handling harnesses, Numbered + Level: 1 + Num
iii. Escape plan and 1.27 cm
iv. Action to be taken following ditching.
These operations usually support offshore drilling operations but may Formatted: Indent: Left:
include police operations, survey, search and rescue, marine pilot transfer.
If the helicopter is flying low, the time available to pilots for taking
corrective and preventive action could be limited. Strict adherence to risk
management practices and standard operating procedures together with
crew co-ordination can help to a great extent mitigation of aviation hazards.
In the event of an accident, communication and training will make a very
significant difference to the final outcome.

12. Technically Advanced Aircraft:
Today’s sophisticated corporate jets are matching the commercial airliners in

their operational complexity, reliability and functionality and thus, their
demand on the skills and proficiency of pilots is much higher. More
sophisticated aircraft while offering greater safety and dependability also
simultaneously create a significant increase in information load for the pilot
which can be a source of distraction. This thus results in two crew operation
mandated by the manufacturers.
The capability of the pilots to maintain higher situational awareness as well as

skills like touch and go (for go-around after aborted landing) cannot be
overemphasiszed.
Even smaller Ggeneral Aaviation aircraft are now more sophisticated and are
labelled Technically Advanced Aircraft. These could be new designs, old
designs manufactured with upgraded avionics or old retrofitted aircraft.
These are quite different from traditional GA (General Aviation) aircraft. In

the main, pilot interfaces are computer based and they include at least the
following:
a) • IFR-certified moving map with GPS-enabled accuracy for navigation; Formatted: Indent: Left:
b) • A multi-function display which can show weather, traffic or terrain 1.27 cm
graphics, on-board weather radar, engine instrumentation, checklists,
and like;
c) • An integrated autopilot. at: 1 + Alignment: Left + A
1.27 cm, Adjust space betw
space between Asian text a
Cockpits used to be studded with analogue dials and steam gauges. In 1980s
and 1990s, cathode ray tube – TV like displays entered the cockpit. Gradually
these got replaced with liquid crystal displays. With user-friendly and enhanced
display of information through electronic displays using computational
capabilities, pilot enjoys better situational awareness. These displays are also
known as “glass cockpit”.
These have led to easing workload for the pilot simultaneously increasing
information load. These aircraft demand a basic change in the way pilots
operate since there is a greater degree of automation and pilot’s role is more of
monitoring rather than doing. Such aircraft can potentially lead to
overconfidence for the pilots. Since these aircraft are certified for single pilot
operation, the pilots may need to undergo single pilot resource management
training.
Depending upon the sample taken, studies have found that general aviation
accidents can be attributed to pilots in 60% - 80% of aircraft accidents and
importance of experience and training cannot be overemphasiszed.
Formatted: Font: 1 pt
Test Yourself 3
Which of the following pilot errors are caused due to the lack of discipline or
concentration in following a well-defined set of steps to be followed, usually
called Standard Operating Procedures?
I. Procedure errors
II. Skill errors
III. Decision errors
IV. Strategic errors Formatted: Numbered + L
III, … + Start at: 1 + Alignm
Indent at: 0.63 cm

CHAPTER 3 SUMMARY CHAPTER 3
Summary
a) General Aviation encompasses flight instruction, business travel, agricultural Formatted: Indent: Left:
application, emergency medical services and other usages. In fact, General Numbered + Level: 1 + Num
Aviation is defined by excluding commercial airline operations. 1.27 cm
b) General aviation aircraft tend to be smaller in size which goes with lower
Maximum Takeoff Weight and seating capacity since larger aircraft tend to Numbered + Level: 1 + Num
be deployed by airlines for public transport and thus will fall under the at: 1 + Alignment: Left + A
category of airlines. 1.27 cm
c) Pilots start with General Aviation operations and gradually with experience Formatted: Indent: Left:
and further training graduate to airliner pilots. Thus, in general, GA pilots Numbered + Level: 1 + Num
tend to be less proficient compared to airline pilots. at: 1 + Alignment: Left + A
1.27 cm
d) Pilot experience can be looked at based on the following parameters:
i. Total flying hours – fixed wing and rotor wing at: 1 + Alignment: Left + A
ii. Total flying hours on single/multi– engine / piston-turbine engines 1.27 cm
iii. Flying hours on make and model Formatted: Numbered + L
iv. Hours as pilot in command … + Start at: 1 + Alignmen
v. Hours on similar type of aircraft Indent at: 1.27 cm
vi. Hours of night flying
vii. Frequency and type of training
viii. Recency of experience Formatted: Numbered + L
ix. Experience in carrying out special operations such as offshore flying or … + Start at: 1 + Alignmen
Indent at: 1.27 cm, Tab sto
slung cargo handling.
… + Start at: 1 + Alignmen
e) Aircraft accidents have been attributed to three broad categories of Indent at: 1.27 cm
causation: Formatted: Indent: Left:
i. The pilot, Numbered + Level: 1 + Num
ii. The aircraft and at: 1 + Alignment: Left + A
iii. Causes external to the aircraft. 1.27 cm
f) Airports to which general aviation aircraft fly vary widely in their … + Start at: 1 + Alignmen
Indent at: 1.27 cm
capabilities to provide air navigation support and other aviation related
services. Runway construction, length, quality and conditions, rescue
services and weather report services are not at par with airports used by Formatted: Indent: Left:
airlines. at: 1 + Alignment: Left + A
1.27 cm
g) General Aviation operators tend not to be as tightly regulated as airline Formatted: Indent: Left:
operators given that airliners operate in public domain with greater
potential for catastrophic losses in terms of property as also more Numbered + Level: 1 + Num
importantly number of lives being put at risk. at: 1 + Alignment: Left + A
1.27 cm

SUMMARY CHAPTER 3
h) Aircraft are governed by the regulator of the country where the aircraft is Formatted: Indent: Left:
registered. It needs to be borne in mind that it is usually the regulator who Numbered + Level: 1 + Num
sets the tone of safety culture in aviation industry in the country. 1.27 cm
i) Some of the additional hazards that General Aviation Operations in
comparison with Aviation operations are exposed to: Formatted: Indent: Left:
i. Mountain flying Numbered + Level: 1 + Num
ii. Aircraft and helicopters used for medical evacuation and air ambulance at: 1 + Alignment: Left + A
1.27 cm
purposes
iii. Helicopter Slung Cargo Operations
iv. Night flying Formatted: Numbered + L
Indent at: 1.27 cm
j) In case of an emergency and increased workload when the pilot may feel
saturated, prioritisation is the key which is summed up in aviate – navigate –
communicate - manage. Formatted: Indent: Left:
k) One way of looking at pilot errors is to classify them under three types: Numbered + Level: 1 + Num
procedure error, skill error and decision error. at: 1 + Alignment: Left + A
1.27 cm
l) Wings can be placed differently on an aircraft. Wings could be aligned with Formatted: Font: 9 pt
the bottom, middle or top of the fuselage or somewhere in between. Formatted: Indent: Left:
Depending upon the wing position, pilot’s view of the surroundings differs Formatted: Indent: Left:
materially. Numbered + Level: 1 + Num
1.27 cm
m) High wing aircraft would block pilot’s view of traffic above him. Similarly,
pilot’s perception of runway differs. On a high wing aircraft, he will feel Formatted: Font: 9 pt
relatively closer to ground and on a low wing, relatively higher to the Formatted: Indent: Left:
ground. Formatted: Indent: Left:
n) When power fails in a helicopter, the pilot has to use the energy in the rotor
1.27 cm
to descend to a suitable place. Thus, mechanical failure, main rotor or tail
rotor failure, fuel starvation (running out of fuel), drive system failures or
engine fire – all will require that pilot resorts to power-off glide landing, i.e. Formatted: Indent: Left:
Autorotation. Formatted
o) Aircraft hull policies are on agreed value basis. This has the advantage of Formatted: Indent: Left:
avoiding disputes during the claim settlement, particularly in the event of
Formatted
total loss accidents since aircraft second-hand market is not a particularly
liquid market. Formatted: Font: 10 pt
p) Like mountain flying, offshore flying presents its own additional hazards. Formatted
The term ‘offshore operations’ denotes flights in support of or in connection Formatted: Font: 10 pt
with the offshore exploitation or exploration of mineral resources (including
gas).
Formatted
q) Today even smaller General Aviation aircraft are now more sophisticated Formatted: Font: 10 pt
and are labelled Technically Advanced Aircraft. These could be new designs, Formatted: Indent: Left:
old designs manufactured with upgraded avionics or old retrofitted aircraft. Formatted

CHAPTER 3 SUMMARY

CHAPTER 3 PRACTICE QUESTIONS AND ANSWERSPRACTICE QUESTIONS AND ANSWERS CHAPTER 3
Answer 1
The cut- off for seating capacity involving smaller aircraft is 20-60 seats, that is
considered by the insurance industry as General Aviation depending upon the
context and underwriter’s preference
Answer 2
Helicopters are non-pressurised and would fly at a height below 15,000 feet.
Answer 3
Procedure errors are caused due to the lack of discipline or concentration in

following a well-defined set of steps to be followed, usually called Standard
Operating Procedures.
Question 1
Which of the following is not an example of General Aviation operations?
I. Commercial line operations

II. Flight instruction
III. Agricultural application
IV. Emergency medical services
Question 2 Formatted: Normal, Numb

Style: 1, 2, 3, … + Start at:
In which type of aircraft operations, aircraft are operated by a specialised 0 cm + Indent at: 0.63 cm
company on behalf of two or more co-owners who share in the cost of
ownership and operation?
I. Corporate Aviation
II. Fractional Ownership Operations
III. Business Aviation

IV. Recreational flying

Question 3
Which of the following instances generally requires that a pilot resorts to

Autorotation?
I. Tail rotor failure

II. Fuel starvation
III. Engine fire
Answer 1

General Aviation is defined by excluding commercial airline operations. Hence
Option I is incorrect.
Answer 2 Formatted: Font: 11 pt

In Fractional Ownership Operations, aircraft are operated by a specialised
company on behalf of two or more co-owners who share in the cost of
ownership and operation.

Tail rotor failure, fuel starvation or engine fire – all will require that pilot
resorts to power-off glide landing, i.e. Autorotation.

CHAPTER 4
UNDERWRITING - AIRLINES
In this chapter we will learn about the Global Aviation Safety Plan introduced by
ICAO and the safety improvements in aircraft design and manufacturing in
recent decades. We will also learn about the important underwriting
considerations / aspects that an underwriter should look into while underwriting
airline risks.
Learning Outcomes
A. Aviation safety
B. Underwriting airlines

CHAPTER 4 AVIATION SAFETY
A. Aviation safety
1. Variations between general aviation operations and airlines operations
There is a need to read the previous chapter on Underwriting of General

Aviation together with this chapter to fully appreciate all the underwriting
aspects. This is because there are some similarities as well as some very
significant variations between general aviation operations and airlines
operations depending upon the size of airline operations.
a) It can happen that general aviation operation can be so scaled up that it

almost assumes dimensions of an airline irrespective of the size of
aircraft in the fleet. At the same time, an airline with just a handful of
aircraft, sometimes with just say 2-3 aircraft (a start-up operation), is in
some respects akin to a general aviation operation in that individual
aircraft can be considered for rating.
b) Broadly speaking, an important criterion of underwriting an airline

involves looking at it as a much larger and complex operation.
Example
To take an analogy, general aviation operation is like that of a shopkeeper or a

small scale industry and an airline, of a super market or an industrial complex.
c) Similarly the level of sophistication in risk handling of a GA operator

tends to be like that of an amateur while that of an airline, of a
professional.
d) Given that general aviation operations would involve smaller aircraft and
possibly little or no public transportation, regulatory oversight may not
be as stringent as that of an airline.
e) General aviation operation may generally have up to say 10 aircraft,

while airlines will have usually a large fleet of aircraft. This requires that
rating focuses on fleet rather than an individual aircraft. Thus, some of
the considerations that apply to rating of group risks come into play.

AVIATION SAFETY CHAPTER 4
Example
To take the above mentioned analogy further, the questionnaire for and cover
to a shopkeeper or small scale industry will almost be entirely standardised
while information requirement from and cover granted to a supermarket or an
industrial complex will be quite extensive. Thus, while aviation insurance
market standard questionnaire does exist for an airline operator, it serves as a
starting point and airline clients usually compile the information by way of a
detailed presentation depending upon their nature of operations which can then
be supplemented by information provided in response to questions from
underwriters.
f) Airline operations may also be relatively more dynamic as compared to

general aviation operations in terms of seasonal variations in routes and
lease and charter transactions.
g) General Aviation operation tends to differ from airline operation in size

of aircraft, degree of usage, geographical scope, aircraft value and
liability exposures involved, contractual complexities, degree of
sophistication in safety management and regulatory oversight.
2. Evolution of Aviation Safety
The evolution in aviation safety can be analysed under three distinct phases:
i. Technical era - until the late 1960s

ii. Human Factors era - from the 1970s until the 1990s
iii. Organisational era - from the 1990s to the present day
a) Technical era
The accidents and incidents during the first phase were mostly attributable
to mechanical failures. Gradually, research and technological advancements
led to improvement in this aspect and accidents attributable to this factor
reduced significantly. Metal fatigue was a serious risk factor and a few
aircraft crashes occurred due to metal fatigue.
b) Human factors era
Having been established as a safe mode of transportation during 1970s, it

was realised that technology was more reliable and more accidents and
incidents in this phase were attributable to human factor. This led to focus
on topics as such Crew Resource Management.

CHAPTER 4 AVIATION SAFETY
c) Organisational era
Gradually it was realised that while pilot error was a dominant cause of
aviation accidents, pilots acted and operated within an organisational
context and in a multi-variable environment. Rather than looking at pilot
training, proficiency and behaviour, it would make sense to look at
organisational and systemic issues such as:
i. Safety culture,
ii. Operating procedures as laid down by management,
iii. Management pressure on pilots, etc.
With further advancements, it was now possible to capture more flight data
proactively and analyse it to perceive emerging trends and safety threats so
that pilot behavior can be observed and analysed in day–to–day context.
Methodologies that emerged include:
i. Line Operations Safety Audit,

ii. Flight Data Monitoring,
iii. Flight Operations Quality Assurance etc.
3. Global Aviation Safety Plan
International Civil Aviation Organisation (ICAO) introduced the first version of

the Global Aviation Safety Plan in 1997. Second version was introduced in 2007.
The Global Aviation Safety Roadmap provides a comprehensive framework for
all stakeholders including States, regulators, aircraft and airport operators, air
traffic service providers, aircraft manufacturers, international organisations and
safety organisations. The plan has twelve focus areas and guidance was
provided under each of them under the Global Aviation Safety Plan.
a) States
i. Consistent implementation of international Standards

ii. Consistent regulatory oversight
iii. Effective errors / incidents reporting
iv. Effective incident and accident investigation
b) Regions
v. Consistent coordination of regional programmes

AVIATION SAFETY CHAPTER 4
c) Industry
vi. Effective reporting and analysis of errors and incidents

vii. Consistent use of Safety Management Systems
viii. Consistent compliance with regulatory requirements
ix. Consistent adoption of industry best practices
x. Alignment of global industry safety strategies
xi. Sufficient number of qualified personnel
xii. Effective use of technology to enhance safety
4. Safety improvements in aircraft design and manufacturing in recent

decades
Airline safety has to be considered in the larger context of the above evolution
and various global and regional safety initiatives. Apart from systemic
initiatives, some of the safety improvements in aircraft design and
manufacturing in recent decades are:
a) Cabin materials that are more fire resistant and less likely to produce
dangerous fumes when burned leading to reduced potential for choking
and resultant disorientation.
b) Passenger seats that can bear the load of 16G (16 times gravity force) as
compared to 9G earlier.
c) Evacuation requirements that include emergency lighting on or near the

cabin floor so that they can be more easily seen in a smoke-filled or poor
visibility conditions in cabin.
d) Emergency exit systems that allow a full load of passengers to evacuate

in 90 seconds or less while using exits on only one side of the aircraft.
e) Multiply redundant aircraft systems, including a flight control system

that will allow differential engine thrust to be used if flight control
surfaces are not working,
f) Main landing gear designed to break-off in a hard or crash landing in such

that the wing fuel tanks do not get punctured and catch fire.
g) Communications systems, including radios to communicate with airport

personnel and cabin public address systems, that will continue to
operate after a crash even if electrical power is no longer available from
the engines or auxiliary power unit.
Following page provides a macro-view of the safety as far as airlines are

concerned. Noteworthy are the significant improvement in safety during last
two decades as also geographical variation in accident rates.

CHAPTER 4 UNDERWRITING AIRLINES
Test Yourself 1
Which of the below statement is incorrect with regards to general aviation

operation and airlines operation?
I. The level of sophistication in risk handling of a GA operator tends to be like

that of an amateur while that of an airline, of a professional
II. Given that general aviation operations would involve smaller aircraft and
possibly little or no public transportation, regulatory oversight may be more
stringent as compared to an airline
III. General aviation operation may generally have up to say 10 aircraft, while
airlines will have usually a large fleet of aircraft.
IV. Airline operations may be relatively more dynamic as compared to general
aviation operations in terms of seasonal variations in routes and lease and
charter transactions.
B. Underwriting airlines
While each airline risk has its unique aspects, following are some of the
important aspects that an underwriter will look at which then will need to be
supplemented with information for uniqueness of the airline. It will be
instructive to look at questionnaire for airlines to look at underwriting
considerations. Best Practice Airline Questionnaire backed by the International
Union of Aerospace Insurers, body of aviation underwriters, can be found in the
appendix. The questionnaire is divided into three parts:
i. Quantitative information,
ii. Qualitative information and
iii. Other information
1. Fleet Information
a) Important considerations are:
i. The age of the fleet,
ii. Mix of turbo-prop and turbo-jet aircraft and eastern-built and western-
built aircraft (based on whether the manufacturer is based in eastern or
western hemisphere) in the fleet,
iii. Seating capacity with composition in various categories such as Economy,

Business and First Class
b) Adequacy of agreed value for older aircraft is on the same lines as that
of general aviation aircraft or marine hull.

UNDERWRITING AIRLINES CHAPTER 4
c) Availability of spares and servicing support for aircraft models that have
gone out of production needs to be considered.
d) Airlines tend to take aircraft on lease and on expiry of lease may return
aircraft depending upon traffic projections. Alternatively, they may take
additional aircraft on lease to cater to seasonal traffic or based on
charter agreement entered into with travel operators. Information about
planned fleet changes detailing aircraft type and estimated dates for
upcoming policy period are part of the underwriting information
package.
Thus, rating is based on average fleet value (average fleet value can be derived
by adding fleet value on each day of the year and dividing it by 365) for the
year based on such fleet changes projected and deposit premium is derived. At
year end, based on actual changes in fleet, premium is adjusted by way of
additional premium or refund of premium.
Important
Domicile of the owner or lessor of aircraft is important. Lessor can be made a

party to litigation in the event of a claim and if operator is found negligent,
lessor’s liability will devolve on the operator. Lessors insist on being held
harmless and fully indemnified against any event or claim arising out of aircraft
operation. It is possible that liability of lessor is determined in the jurisdiction
of the lessor. Thus, lessor and his domicile are important considerations.
2. Operations
Passenger profile in terms of numbers split between domestic and international,

load factors for domestic and international flights and on turboprop and
turbojet together with nationality mix of passengers are used to assess
passenger liability exposures. Different countries are at different levels of
economic prosperity and average award per injury or death claim in a country is
linked to this apart from the attitude of the legislation and the judicial
authorities.

Diagram 1: Number and Rate per 10 Million Flights of Scheduled Passenger

and Cargo Fatal Accidents Worldwide per Year, 1993-2012-EASA study 2013
Diagram 2: Rate of Scheduled Passenger and Cargo Fatal Accidents, per 10

Million Flights by World Region, 2003-2012

Similarly departure numbers split between domestic and international and on

turboprop and turbojet are used to assess third party liability exposures. Up to
1990s, airline rating was based on Revenue Passenger Kilometres (RPKMs) or
Revenue Passenger Miles (RPMs). This was the summation of number of
passenger seats multiplied by the distance travelled by the aircraft. Together
with load factor, it could give a reasonable idea of exposures involved.
Statistical analysis revealed that most aircraft accidents occur during take-off
and landing phase as compared to other flight phases. This effectively meant
that a 10-hour flight is not as hazardous as 10 times of a 1-hour flight. This led
to the exposure base for premium calculation being shifted from RPKM/RPM to
departures and passenger numbers.
Diagram 3: Fatal accidents and Onboard Fatalities by Phase of Flight
(Source: Boeing)

a) Taxi: The aircraft taxis to reach the runway, or it taxis to the gate, ramp
or apron having exited the runway after landing. Taxiing occurs under
aircraft’s own power.
b) Take off and initial climb: From the application of takeoff power,
through rotation prescribed power reduction, or until reaching 1000 feet
above runway elevation.
c) Climb: The pilot retracts the slats / flaps, and the aircraft climbs until it
reaches cruise altitude.
d) Cruise: The aircraft flies at a more or less constant altitude and aircraft
is generally the longest in this phase of flight in terms of time spent.
e) Descent and initial approach: The aircraft descends to get closer to its
destination airport. Air traffic control may request the aircraft to loiter
and wait its turn for the next phase.
f) Final approach and landing: The aircraft, in landing configuration and

aligned with the runway axis, approaches the runway threshold, then
lands and slows down.
In terms of the pilot capabilities and pilot workload, the difference being the
margin of safety, the situation during various phases of flight can be described
with the illustrative chart given below.
Diagram 4: Pilot capabilities and pilot work load

This is where the need for pre-flight planning and sharing of workload with co-
pilot comes into play. During take-off, climb, approach and landing phases of
flight, split second decisions are required since runway is limited in length and
width. A small error could lead to runway overrun or runway excursion.
Example
A medium size commercial jet like A320 could be approaching for landing at a
speed of 120-140 knots, i.e. 220-260 km/hour. This speed varies with the
aircraft weight, runway altitude, aircraft configuration, wind and weather
conditions. Heavier aircraft need to come in at a higher speed.
Commercial operation of an airline is further divided into scheduled and charter

and traffic split is sought for these sub-categories.
3. Code-share and interline agreements
a) Interline agreements
Interline agreements between airlines facilitate travel for passengers when

there is no direct flight and two flights with a stop-over enabling the
passenger to reach his destination is operated by two separate airlines.
Since under this agreement, each airline can issue tickets for flights
operated by the other airline, a passenger has to book a ticket with only one
airline who will issue tickets for both the legs of travel. Such bookings
ensure that there is enough time for passengers to switch over from one
flight to another. Alongside issuance of tickets, even boarding passes and
baggage handling may also be integrated enhancing passenger experience.
b) Code sharing
Code sharing affords same convenience as interline agreement with an

added complication.
Definition
Code-sharing arrangement means an arrangement in which an airline’s

designator code is used to identify a flight operated by another airline.
In practice, code-sharing reflects a marketing agreement allowing an airline

to sell - in its own name – passenger seats on flights operated by another
airline. Thus it is an agreement between two or more airlines whereby the
airline operating a given flight allows one or more other airlines to market
this flight and issue tickets for it as if they were operating the flight
themselves. While doing this, other airlines use their own designator code
and flight number for the flight.

Code share partners under this agreement would share revenues for the
seats sold under this arrangement. Thus, essentially code share partners sell
tickets for a particular flight with their respective airline and flight codes
and one of the partners operates the flight.
Code-sharing agreements may go beyond the mere code sharing and extend
to other operational aspects such as:
i. Co-ordination of the frequent flyer programmes,
ii. Route and schedule planning,
iii. Co-ordination of marketing, sales and distribution networks,
iv. Joint pricing,
v. Sharing of facilities and services at airports,
vi. Integration and development of information systems, et al
This gives wider choice to consumers by way of single ticket booking. Code
sharing provides for:
i. One ticket for anywhere to anywhere,
ii. Co-ordinated flight schedules,
iii. One level of safety,
iv. Single baggage check and
v. Seamless service
Code-share alliances help airlines in expanding their market presence or

competitive ability.
The airline selling seats is referred to as the marketing or contracting airline

and the airline providing the aircraft, crew and ground-handling support is
referred to as the operating airline.

Example
For example, WS123 is flight 123 operated by WestJet. In a code-share

agreement with Cathay Pacific, that same WestJet operated flight might also be
sold as CX456. When Cathay Pacific sells a ticket for CX456, Cathay Pacific
becomes the marketing airline and WestJet becomes the operating airline. In
case of a claim, primary liability falls on the operating airline. However,
contracting airline or marketing airline could be held jointly liable.
In sum, if a passenger is on flights under interline agreement, he will see two

separate designator codes for flights operated by two airlines for two separate
legs of the itinerary, i.e. 9W for Mumbai – Abu Dhabi by Jet Airways and EY for
Abu Dhabi – London by Etihad). But if it is under code share, he will get an
impression that both will be operated by the same airline (both flights numbers
with 9W but actual flight, say on second leg will be operated by another airline.
4. Cargo operation and aviation allied activities
If the airline has dedicated freighter aircraft, information on departures of such

freighters must be provided. If there are no freighters, cargo handled in tonnes
gives an idea of volume of cargo handled by the airline, again domestically and
internationally. For significant cargo operations, it would help to know the
nature and variety of cargo handled.
While insurance cover afforded to general aviation aircraft is restricted to the

aircraft operation that to an airline extends to all aviation operations. Thus, it
is important to identify exposures arising from activities conducted by an airline
for other operators such as Maintenance Repair and Overhaul, catering,
refuelling. To get an idea of the volume of such activities, usually revenue
projections from such activities are sought.
5. Claims history
Information about losses suffered by the client during past 10 years is usually
considered. Details include split between hull and liability claims, paid and
outstanding claims, any significant claims development during last year,
together with details of major losses, losses below the deductible, nature of
losses, i.e. operational or otherwise, subrogation proceedings and outcome
thereof.

6. Flight Data Recorders (FDR)
a) Concept of Flight Data Recorders (FDRs)
Flight data recorders popularly known as black boxes are installed nowadays
in almost all jet aircraft and most large turbine aircraft. These were
introduced in 1950s. These are bright orange or bright yellow in colour to
facilitate quick identification and are located in the tail of an aircraft so
that in the event of an accident, sustains the least impact. They are
designed to withstand significant crash impacts such that even in a violent
air crash, data can be preserved and accessed, facilitating study of the
accident.
b) Components of FDRs
Usually there are two components to it, viz. flight data recorder and cockpit
voice recorder. They could have automatically activated underwater
locating device to facilitate their location in deep water bodies.
i. Cockpit voice recorder
As the name suggests, CVR records the sounds in the cockpit as also
communication with air traffic controller and ambient sounds.
ii. Flight Data Recorder
FDR on the other hand captures critical flight parameters to provide

information for flight path and speed, attitude, engine power, configuration
and operation. It can also record flight control surface positions, flight
control inputs and autopilot status. Information for flight path and speed is
provided through the parameters such as pressure altitude, indicated
airspeed or calibrated airspeed, and each landing gear position, outside air
temperature, heading (primary flight crew reference), normal acceleration,
lateral acceleration, longitudinal acceleration (body axis), time or relative
time count, navigation data, drift angle, wind speed, wind direction,
latitude / longitude, groundspeed, radio altitude. With the advent of digital
age, second generation FDRs were introduced in the 1970s as the utility of
the recorders was recognised. Present day digital recorders capture and
record dozens of flight parameters.

c) Statutory stipulations
Statutory stipulations in this regard are imposed by the country of

registration and country of aircraft certification based usually on type of
engine, seating capacity and date of manufacture. (Country of aircraft
certification is the country which has certified that the aircraft complies
with standards laid down for aircraft design). Thus, larger aircraft and later
manufactured aircraft are required to comply with more stringent
regulations to facilitate better data analysis capabilities. These regulations
may require retrofitting old aircraft with installation of FDR. These
recorders are also installed on larger helicopters.
d) Significance of recorders
There are various types of recorders which facilitate capture of more or less
number of parameters and more comprehensive recorders are required on
large commercial aircraft. With this information, it is possible for the
accident investigation agencies to reconstruct the sequence of events
leading to the accident. Lessons are drawn as to the remedial measures in
terms of design, manufacturing, material tolerances and pilot and crew
procedures. The sequence of events is also recreated in simulators to see if
flight crew could have done things differently highlighting training needs.
Data from these recorders have facilitated more comprehensive accident

analysis and helps zero down on the causative and contributing factors for
accidents.
With the passage of time, design standards have become more stringent.
Improvements such as smoke-free material for upholstery and crash resistant
seats have consistently improved the survivability of an air accident. Most
commercial aircraft are certified for evacuation within a couple of minutes
of their stoppage in emergency. Thus, numerous accidents have happened
where just after aircraft is evacuated, it catches fire and is fully destroyed
with few or no fatalities.

7. Enhanced Ground Proximity Warning System (EGPWS)
Historically, Controlled Flight into Terrain (CFIT) was a major causal factor for
aircraft accidents. Ground Proximity Warning System (GPWS) was able to detect
terrain directly below the aircraft. However, if there is a sharp and sudden
change in terrain, GPWS does not help in avoiding collision until it could be too
late to take corrective action. It will either give false warnings during landing or
if configured, will not provide warning in case of insufficient terrain clearance
while landing. Despite this, accident rate owing to CFIT as a causal factor
reduced very significantly as per the chart below.
Diagram 5: CFIT accident rate and EGPWS
CFIT Accident rate and EGPWS (Source: ICAO)

To address this limitation of GPWS, Enhanced Ground Proximity Warning System

(EGWPS) was developed which brings together a worldwide digital terrain
database with a navigation system, possibly the Global Positioning System.
EGPWS combines the aircraft location with geographical maps to determine the
possibility of aircraft meeting with CFIT situation. The system uses aircraft
position, attitude and air speed together with terrain database to predict a
potential conflict between the aircraft’s flight path and terrain or an obstacle.
EGPWS thus will provide warning against steeply rising ground. By extending its
operation to the runway threshold, it would provide warning almost till the very
touchdown.
Enhanced Ground Proximity Warning Systems (EGPWS) are among the most
advanced and powerful Terrain Awareness and Warning Systems (TAWS) to
reduce the risk of Controlled Flight into Terrain and Approach-and-Landing
Accidents. The system provides a map of the flight path and surrounding areas
in various colours depicting low areas, potential conflict / collision areas and
obstacles higher than aircraft altitude. It provides visual and aural alerts and
instructions for the aircraft to avoid terrain, a body of water or a tall structure.
8. Traffic Alert and Collision Avoidance System (TCAS)
The Traffic Alert and Collision Avoidance System (TCAS) are developed and
installed on aircraft to avoid mid-air collision between two aircraft. The system
relies on transponders on each of the aircraft and operates independent of air
traffic controllers. For this to work, each aircraft must have TCAS. These
airborne systems on two aircraft keep surveying the surrounding airspace to
determine if any other aircraft can potentially collide with this aircraft.
TCAS systems on two aircraft communicate with each other and depending upon
the sophistication of the systems, may issue resolution advisories to the
respective pilots. Resolution advisories are advices to the pilot to carry out
instructions in order that collision is avoided.
Example
For example, if two aircraft are on collision course, respective TCAS may issue
resolution advisories to their respective pilots such that one is advised to go up
and another to go down such that safe altitude differential is created.

DGCA (Director General of Civil Aviation, national civil aviation authority) in

India requires the following aircraft to be equipped with TCAS system: an
aircraft having
a) Maximum certified take off mass of 5700 kg and above or
b) Maximum cruising speed in excess of 463 km/h (250kt) and having

maximum certified passenger seating configuration (excluding any pilot
seats) of more than 30 seats or
c) Maximum payload capacity of more than 3 tones
If it is a commercial operation, the requirement applies to aircraft with seating

capacity of 20. This is in force since 2001.
9. Windshear radar
Airbus has reported that adverse weather (other than low visibility and runway
condition) is a circumstantial factor in nearly 40 percent of approach-and-
landing accidents. Adverse wind conditions (i.e., strong cross winds, tailwind
and windshear) are involved in more than 30 percent of approach-and-landing
accidents and in 15 percent of events involving CFIT.
Definition
Windshear is defined as a sudden change of wind velocity and / or direction.
Windshear is the primary causal factor in 4 percent of approach-and-landing

accidents and is the ninth cause of fatalities. CFIT is defined as in-flight
collision or near collision with terrain, water, or obstacle without indication of
loss of control.
Windshear can be avoided through pilot preparation through weather reports

and forecast, pilot’s reports, visual observation, on-board wind component and
ground speed monitoring, on-board weather radar and on-board predictive
windshear system. While all measures rely on airport and weather reporting
system support, windshear radar on board the aircraft makes pilot self-
sufficient.
Sudden change in air speed or direction results in adverse impact on aircraft

performance. With severe change, very stability of aircraft path could be
severely affected resulting in abnormal increase or decrease in speed or
increase or decrease in angle of attack.

Example
Landmark accident due to windshear involved L1011 aircraft - Delta Airlines

Flight 191 crashing on August 2, 1985 at the Dallas / Fort Worth airport killing
137 of the 163 passengers on board. The windshear resulted in a sudden loss of
72 knots of airspeed when the aircraft was at an altitude of 800 feet resulting in
its crash short of the runway.
10. Safety Management System
A Safety Management System is a systematic approach to managing safety,

including the necessary organisational structures, accountabilities, policies and
procedures. It is a series of defined, organisation-wide processes that provide
for effective risk-based decision-making. This system is different from Quality
Assurance Systems in the organisation.
There are four major components of the SMS:
i. Safety policy and objectives,
ii. Safety risk management,
iii. Safety assurance and
iv. Safety promotion
SMS provides for standardisation, harmonisation, integration into organisational

processes and auditability of processes.
There are numerous safety initiatives world over by way of various programmes.
Following are some of the programmes in the USA.
i. Aviation Safety Action Program (ASAP)
ii. Aviation Safety Reporting Program (ASRS)
iii. Advanced Qualification Program (AQP)
iv. Line Operations Safety Audits (LOSA)
v. Flight Operations Quality Assurance (FOQA)
vi. Voluntary Disclosure Reporting Program (VDRP)
vii. Internal Evaluation Program (IEP)
viii. Aviation Safety Information Analysis and Sharing (ADIAS)

Some of these programmes are voluntary and some serve to substitute for the
mandatory standards. FAA felt that encouraging alternative standards which are
at least as stringent as the regulatory ones would provide for flexibility and
creativity.
The numerous programmes reflect the multi-dimensionality of the complex real-

life situation as also that accident happenings are multi-variable situations.
Different programmes emphasize different aspect of the situation towards the
goal of improving safety.
Factors considered include:
i. Training and retraining,
ii. Budget for training and safety function,
iii. Participation in industry initiatives and attendance at safety forums and

seminars,
iv. Importance attached to the safety function by way of quantum of

manpower, their position in the hierarchy, their reporting systems and
follow up action
An important aspect is if the airline focuses on regulatory compliance or strives

to achieve still higher standards. Overall it needs to be seen if the airline is at
the forefront of implementing best industry practices or just trying to catch up
or is oblivious of the industry practices.
11. Crew Resource Management (CRM) Program
a) History behind need for CRM
Earlier decades of aviation industry were marked by accidents attributable

to technical failures. With each decade, technical reliability of aircraft and
its systems have improved owing to significant redundancies built into the
aircraft design itself. This resulted into decreasing number of accidents
attributable to machines and correspondingly more accidents attributable to
human error. Human error has cognitive and behavioral aspects which were
the focus of pilot training.

Diagram 6: Results of CRM in Aviation
(Source: http://gomachone.com)
b) Emergence of CRM
Accident studies through the analysis of flight data recorders and cockpit
voice recorders indicated that some accidents could not be attributed to
aircraft technical malfunction or pilot skills deficiency or any other
extraneous factor. These were attributed to deficiencies in communication,
co-ordination and team work aspects leading to wrong decisions and actions
and finally to accidents.
Emergence of CRM is linked with a NASA – Industry sponsored workshop on

"Resource Management on the Flight Deck" in North America in 1979. Patrick
Ruffel-Smith's study of flight crew performance in a B747 simulator initiated
the process. CRM has emerged as a management system which endeavours
to make optimum use of all available resources - equipment, procedures and
people – through managing inter-personal aspects of flight crew.

c) CRM: Focus and its application
i. Crew Resource Management focuses on communication, co-ordination,

teamwork, threat and error management and blame free discussion of
human mistakes. Thus, it has application in aviation industry through the
entire spectrum of operations from commercial to corporate to private.
ii. It can be also applied to cabin crew and team work situations in the
context of aircraft maintenance and air traffic control operations.
iii. It aims at promoting situational awareness, problem solving and decision

making in flight operations.
iv. The principles are such that they can be applied with suitable
modifications for single pilot training in resource management.
Apart from the close co-ordination in a cockpit between the captain and co-
pilot, there could be situations for joint decision making and co-pilot may
need to challenge the opinion and action of the captain when he deems
captain’s choices risky for the safety of the aircraft and people on board. He
should be able to assert himself without commotion in the cockpit. He thus
may need to challenge an opinion of a senior and more experienced official.
With framework such as CRM, it clearly lays down the protocol for the same.
d) CRM training topics
CRM training could include topics such as:
i. Introduction and the safety culture of the organisation,
ii. Human behaviour and its limitations,
iii. Human Error and Error Management,
iv. Communication and Assertiveness,
v. Teamwork,
vi. Leadership and Followership,
vii. Situational Awareness,
viii. Decision Making,
ix. Workload and Automation,
x. Task Planning,

xi. Briefing and De-Briefing,
xii. Shifting of command to co-pilot,
xiii. Introduction to Risk Management
While it may appear that the focus of CRM is only interaction between crew,
it also addresses interaction with computers who in turn interact with
aircraft controls. CRM has gradually evolved through process of evaluation
and adaption and presently has entered its fifth generation and emphasizes
management of ubiquitous errors.
e) CRM implementation and evaluation
CRM was implemented in various airlines and its efficacy in improving safety
was evaluated by the training departments within airlines. In order to
evaluate its efficacy in the real life context, FAA funded a University of
Texas at Austin Human Factors Research Project in 1991. This involved
observation of crew in line operations. This not only helped evaluate CRM
but also created a feedback loop for CRM.
12. Line Operations Safety Audit (LOSA)
a) Concept
LOSA is a data-driven methodology to assess crew performance from

technical as well as human performance angles. Line Operations Safety
Audit (LOSA) is based on The University of Texas Threat and Error
Management (UTTEM) Model. The UTTEM Model has been incorporated into
various training programmes.
While Threat and Error Management (TEM) and CRM are the training modules
to improve safety, it is LOSA which evaluates the effectiveness of these
training modules and procedures in real life. LOSA thus will suggest
modifications required in training.
b) LOSA implementation
Line Operations Safety Audits are performed by experts by way of

observations of crew in action / on duty. Crew enjoys non-jeopardy while
being observed. What this means is that crew cannot be punished for their
observed behavior. Expert observers note and record crew behavior, errors
and best and worst procedures and these observations can form the basis for
CRM training syllabus.

c) Data collection
LOSA involves the expert observer occupying a jump-seat during normal

operations to collect data. Data collection is anonymous, confidential and
non-punitive with co-operation from crew. Identity of crew and observer is
not recorded. For this exercise, management and union come together and
agree on the framework. In order that data is systematically collected,
observer follows a threat and error checklist and limits his role to
observation rather than judging the pilot action. Data is managed securely
with active participation of pilot associations. Data is analysed and
compared with benchmarks to assess safety. Data-based targets are set and
feedback loop for pilots is created.
d) Reporting system
In regard to the incident reporting system, the philosophy adopted by an

airline is important. Non-reprisal policy involves no disciplinary action
against an employee who reports about an incident involving safety in good
faith. However this should not lead to unfair outcome. Genuine and bona
fide reporting should only enjoy such immunity. Just culture involves trust
that unintentional errors will not be punished. At the same time, reckless
and intentional errors will not go unpunished.
Safety culture hinges on values and behaviours flowing from a collective

commitment by leaders and individuals to emphasize safety over competing
goals, such as operating efficiency (in case of a go-around decision of the
pilot could lead to delay in schedules) to ensure safety of people and the
environment.
e) Training information
Training information could cover any special training such as handling of

hazardous goods, frequency of training, contents of training, training modes,
viz class room, computer-based or simulator training and English
proficiency.
Organisation’s philosophy towards rushed approaches, go arounds, taxiing

speeds, Terrain Avoidance Warning System encounters, Traffic Alert and
Collision Avoidance, fuel usage & reserves, Loss of Control training have an
important bearing on safety outcome. It is for consideration if operator
follows manufacturer, civil aviation authority of the country or some
international standard.

13. Technical dispatch rate
This is a measure of number of flights which got delayed say beyond 15 minutes
due to technical issues. This reflects on the quality of preventive maintenance
and reliability in business operation. Though not strictly related to safety, it
reflects discipline and planning in maintenance so that aircraft operate to
optimum efficiency.
14. Maintenance Providers
The quality of maintenance is an important factor for aircraft safety. Which of

the maintenance functions are performed in-house, which functions are
outsourced to which entity and the licensing and operating standards adhered to
by such entities, in-house check on and audit of outsourced functions form part
of the underwriting information.
15. Flight Operations Quality Assurance (FOQA)
These programs use flight data recorders to provide information on parameters

of flight. (It should be noted that FOQA data provide a reliable indication of
what happens but not why things happen). LOSA supplements with the
contextual information about why something happened.
16. Start-up Operations: Airline Background (including Key Personnel)
The sources of finance and investor profile, bank-financed, family or corporate

group supported, public or private limited company with concentrated or
distributed ownership can have implications about the quality of corporate
governance and thus operational safety.
Information about the senior executives of the airline, particularly CEO, CFO,
Chief Pilot, Chief Maintenance Officer, Safety Officer, Head of Safety and their
experience in the airline industry. A typical airline organisational chart may look
like the following. Depending upon the scale of operation and management
emphasis, some of the functions may get further specialised creating more
elaborate organisational chart. It is for consideration if the organisational
structure supports the scale of operations by creating adequate number of (full-
time) positions to oversee various functions.

Diagram 7: Organisational Chart
17. Flight Crew (including Training)
Information about recruitment criteria and process for flight crew together with
training and promotion processes is sought. Experience requirements in terms of
total hours, hours on the aircraft type being operated (e.g. Western Built Jet
Narrow, Hybrid & Wide bodied) and the specific make / model (e.g. 737 new
generation / A320 etc.) are considered. Details of frequency and types of
training conducted, contents thereof and organisation at which training is held
are part of underwriting information.
There are times when a country sees sudden growth in aviation industry and
there is a shortage of pilots to meet sudden growth in aircraft fleet. Such
circumstances lead to dilution of recruitment standards. In case of shortage of
captains, it may result in faster promotions and compromise of safety
considerations. Flight crew of an airline may have pilots from different
nationalities and thus, linguistic and cultural barriers to communication arise
with safety implications. Cockpit resource management (CRM) tries to address
this.

18. IATA Operational Safety Audit (IOSA)
It was reported that in 2001, over 70,000 audits are performed, costing in
excess of $3 billion worldwide which had significant overlap, both in content
and intent. The multiple audits in USA were required as a result of Federal
Aviation Administration (FAA) code-share audit guidelines which required US
airlines to audit their foreign code share partners. Satisfactory completion of
audit was a pre-requisite for code share application.
Outside of USA also, some airlines desired to audit their code share partner’s
operations from safety perspective. This created a web of audits. IOSA sought to
create a uniform global standard for safety audit. It thus managed to avoid code
share partner’s audits and provided a platform for sharing of IOSA reports
among code share partners. IOSA sought to achieve the contradictory purposes
of improving safety and reducing audit costs and burden. IATA functions as a
repository of IOSA reports and the reports are shared with other airline with the
concurrence of the auditee airline.
Similarly airlines audit the operations of the ground operators and like code
sharing situation, creates a web of audits with each ground handler audited by a
number of airlines. IATA has initiated ISAGO as a corollary to IOSA for ground
handlers with similar advantages.
IOSA complements ICAO Universal Safety Oversight Audit Programme (USOAP)

which oversees aviation safety at state level. IOSA comprises of about 900
standards and recommended practices. IOSA has got a pre-eminent position
since its implementation is more nimble that that of civil aviation authorities.
Regulatory structure put in place by civil aviation authorities have some
variation while IOSA ensures absolute uniformity and rigour.
The IATA Operational Safety Audit (IOSA) program is an internationally

recognised and accepted evaluation system designed to assess the operational
management and control systems of an airline. All IATA members are IOSA
registered and must remain IOSA compliance to maintain IATA membership.
IOSA is an extremely comprehensive framework and comprises of the following

components:
i. Organisation and Management System;
ii. Flight Operations;
iii. Operational Control and Flight Dispatch;
iv. Aircraft Engineering and Maintenance;
v. Cabin Operations;

vi. Ground Handling Operations;
vii. Cargo Operations;
viii. Security Management
IOSA standards were developed by task forces comprising of industry safety and
quality experts from world over, including airlines, regulatory agencies, and
various other entities possessing operational audit expertise.
IOSA focusses on documentation and implementation of IOSA Standards and

Recommended Practices by airlines. These standards are constantly being
updated.
IOSA affords following benefits for the aviation industry:
i. Uniform quality audit program under stewardship of IATA
ii. Continuous updating of standards to reflect regulatory revisions and best

practices
iii. Reducing audit costs and resource requirements.
iv. Accredited audit organizations and training organizations
v. Structured audit methodology based on standardized checklists
vi. Improved safety oversight with fewer accidents, injuries and resultant
costs.
19. Universal Safety Oversight Audit Programme (USOAP)
ICAO launched Universal Safety Oversight Audit Programme (USOAP) in January

1999. This involves auditing and evaluating ICAO Member State’s capability to
provide safety oversight and implementation of ICAO’s safety-related Standards
and Recommended Practices (SARPs). Thus, this entails auditing the aviation
regulatory framework in ICAO member states for their compliance. This
programme was expanded in 2005 to Comprehensive Systems Approach (CSA) to
include safety-related provisions contained in Annexes to the Chicago
Convention. The purpose is to monitor compliance and sharing information on
the safety performance of Member States to other Member States and to the
travelling public on a continual basis. USOAP identifies 8 critical areas for
compliance at state level.
i. Primary aviation legislation
ii. Specific operating regulations

iii. State civil aviation system and safety oversight functions
iv. Technical personnel qualifications and training
v. Technical guidance, tools and provision of safety-critical information
vi. Licensing, certification, authorisation and / or approval obligations
vii. Surveillance obligations
viii. Resolution of safety concerns
20. International Aviation Safety Assessment (IASA)
FAA started conducting safety assessment of a country’s aviation system rather

than a single carrier in 1992. This practice is applicable to air carriers flying into
USA. Based on a scoring system, FAA decides to conduct on-site audit of carriers
in these countries. These visits lead to FAA putting a country under category 1
or 2. Category 1 denotes ICAO standards compliance and category 2 denotes
non-conformance to ICAO standards for aviation safety. Such carriers if not
already flying to USA are not allowed to start flight operations. In case of a
downgrade, foreign carrier is subjected to freeze on operational changes and
heightened surveillance.
21. Operational Standards
This reflects the operational standards the airline has chosen for adherence,
such as FAA (Federal Aviation Administration), EASA (European Aviation Safety
Agency), IOSA (IATA Operational Safety Audit).
In view of the fact that airlines operations tend to be quite complex and
involves consideration of multiple variables, lead underwriters usually employ
rating models which will capture most of the above parameters together with a
subjective weights assigned to make it more amenable to subjective evaluation.
This will also prevent it from becoming a mere formulaic exercise detached
from reality.
Some models employ simulation based on load factors and passenger profile
together with average liability awards for different nationalities. These models
also look at emerging trends in loss occurrence on market wide and regional
basis. Since model output tends to be largely driven by underlying assumption,
the subjective aspect and experience and competence of an underwriter may
get reflected in making more valid assumptions. To achieve this, assumptions
are run on historical data to see if model output confirms to experience. This
however needs to be adjusted for emerging new realities.
Terrorist attacks of 9/11

The attack consisted of four coordinated airliner hijacking and attempting to

crash them by the Islamic terrorist group al-Qaeda on the United States on the
morning of Tuesday, September 11, 2001. The event changed the industry
perception of terrorism and risk management.
Four passenger airliners — which all departed from airports on the U.S. East
Coast bound for California—were hijacked by separate teams of al-Qaeda
terrorists with an intention to fly into buildings and use aircraft as weapons of
mass destruction. Two of the planes, American Airlines Flight 11 and United
Airlines Flight 175, were crashed into the North and South towers, respectively,
of the World Trade Center complex in New York City. Within a couple of hours,
both 110-story towers collapsed. A third plane, American Airlines Flight 77, was
crashed into the Pentagon - the headquarters of the United States Department
of Defense. The fourth plane, United Airlines Flight 93, initially was steered
toward Washington, D.C., but crashed into a field near Shanksville,
Pennsylvania, after its passengers tried to overcome the hijackers. The attacks
led to loss of about 3000 lives.
Terrorist attacks of 11th September 2001 on the World Trade Centre in the USA
were to change the aviation industry and particularly airport and airlines
operations like never before. Aviation industry became more secure following
the wakeup call of the attacks. But this came at a tremendous cost of
passenger inconvenience and significant security costs for the industry.
On September 10, 2001, US airports handled 38,047 flights. On September 12,

they handled 252 commercial flights. All international flights to and from US
airspace were grounded for three days. A week later, there were 34,743
flights. US passenger traffic, measured by revenue passenger kilometres
(number of travellers multiplied by the distance travelled) declined 5.9% in
2001 (compared to 2000) and a further 1.4% in 2002. Global passenger traffic
(tonne kilometres performed) declined by 2.7% in 2001 (see table below).
Traffic did not surpass the 2000 level until 2003.
Airlines struggled to match this decline by cutting capacity. The events of 9/11
led to medium term decline in US domestic airline demand. Passengers
increasingly resorted to alternative transport to short-haul air travel to avoid
the security hassles at airports. Aviation industry took a hit which it took years
to recover from.
The Federal Aviation Administration expanded the ICAO Prohibited Items List to
include many household items, tools and virtually any item with a point or
cutting edge. Aviation and Transportation Security Act directed FAA to publish
new standards for cockpit doors. FAA Rapid Response Team on Aircraft Security
recommended the hardening of existing cockpit doors and expediting the
design, production and installation of new doors. By March 1, 2002, US major
airlines completed installation of cockpit door modifications.

Processing of passports through machine-reader was enforced in USA. Use of

sky marshals grew exponentially from fewer than 100 to thousands by 2004.
Explosive detection screening for all checked baggage was introduced. Aviation
and Transportation Security Act mandated the collection/transmission of
Advanced Passenger Information for flights into the US. USD 2.50 security fee
was levied on flights originating in US.
On December 22, 2001, Richard Reid, a British-born Al Qaeda terrorist, made an

unsuccessful attempt to detonate plastic explosives hidden in his shoes while on
board a flight from Paris to Miami. This led to removal and separate screening
of shoes by passengers.
On the insurance side, on September 17 2001, all aviation insurers issued a

seven-day notice of cancellation of third party war risk insurance effective
23:59 GMT on September 17, 2001. This threatened the grounding of the entire
aviation industry. The insurance capacity returned at an additional $2 billion in
premiums for far more limited coverage. Some states made temporary
arrangements to assist airlines during the initial period. The Federal Aviation
Administration provided war risk insurance to meet US airlines’ needs.
The events of 9/11 while catastrophic in its indirect costs and implications, the
loss paid against aviation policies amounted to around USD 4 billion. AVN 52C
was subsequently replaced with AVN 52D and AVN 52E providing for limited
write back – $50 million for any one occurrence and in the annual aggregate - of
cover for an airline’s legal liability to third parties. Cover above this limit was
not available. All insurance quotes by aviation underwriters released but not
bound were withdrawn.
From October 1, 2001, special surcharge of USD 1.25 per passenger for each
departure applicable to any airline operating any one aircraft with a seating
capacity in excess of 15 passenger seats was introduced. A 10% surcharge was
levied on the composite hull and liability all-risks premium for cargo airlines.
Special charge of 0.05% based on the declared Average Fleet Values at risk for
all airlines was levied for Hull War coverage. This was levied pro rata up to the
expiry of the then existing policies and then going forward on renewal pro rata
until October 1, 2002.
Since airlines operate with various contractual stipulations and agreements

requiring higher levels of war liability cover, this would have grounded the
world’s airlines. The governments world over had to step in either to provide
insurance or guarantee.
Gradually, a number of insurers began to provide separate policies with higher

limits. Some major companies such as AIG, Allianz, Axis and Berkshire Hathaway
along with other subscribing markets as followers started providing the excess
TPLL cover. Prior to 9/11, market estimates for the 2001 premium income for
the airline business was USD 1.9 Bln for all-risk and hull war. It was estimated
that the surcharges and excess TPLL cover cost the airlines about USD 3 billion

more. Gradually separate levies got subsumed in the normal rating. Standard
write back under AVN 52E gradually increased to USD 150M-USD 250M and USD
350M over the course of years.
It is a matter of debate if terrorism risk which is unquantifiable should be

entirely commercially insurable and what the role the state should play. Some
governmental solutions and intervention measures are already operational in
many countries.
Airline insurance market dynamics: Insurance market witnesses hard and soft
cycles which are believed to be attributable more to the cost of and supply of
capital than the underlying claims costs. Aviation class represents less than half
a percentage of global insurance premium. Airline segment of aviation insurance
class would present less than 1 per cent of the global reinsurance premium.
Thus capital in other classes of property and casualty market is quite significant
and can flow in and out of aviation class creating volatility in the aviation class.
For more than two decades now, reinsurance companies domiciled in Bermuda
have entered the market in waves in response to depletion of reinsurance
capital in the global markets arising from catastrophes and resultant
opportunities. Capital entered the market through Class of 2001-2002
(reinsurers who entered the market from Bermuda following the WTC attack).
Growing convergence of capital markets and reinsurance markets have led to
excess capacity and thus softening during the second decade of current century
across most classes putting significant pressure on profitability.
Test Yourself 2
Which of the below statement is correct?
I. After the 1990s, the exposure base for premium calculation for airline rating
shifted from departures to passenger numbers
II. After the 1990s, the exposure base for premium calculation for airline rating
shifted from departures and passenger numbers to Revenue Passenger
Kilometres (RPKMs) or Revenue Passenger Miles (RPMs)
III. After the 1990s, the exposure base for premium calculation for airline rating
shifted from Revenue Passenger Kilometres (RPKMs) or Revenue Passenger
Miles (RPMs) to departures and passenger numbers
IV. None of the above

SUMMARY CHAPTER 4
Summary
a) There are some similarities as well as some very significant variations

between general aviation operations and airlines operations depending upon
the size of airline operations.
b) Broadly speaking, an important criterion of underwriting an airline involves

looking at it as a much larger and complex operation.
c) The evolution in aviation safety can be analysed under three distinct phases:
i. Technical era - until the late 1960s

ii. Human Factors era - from the 1970s until the 1990s
iii. Organisational era - from the 1990s to the present day
d) The Global Aviation Safety Roadmap provides a comprehensive framework

for all stakeholders including States, regulators, aircraft and airport
operators, air traffic service providers, aircraft manufacturers, international
organisations and safety organizations. The plan has twelve focus areas and
guidance was provided under each of them under the Global Aviation Safety
Plan.
e) Best Practice Airline Questionnaire backed by the International Union of

Aerospace Insurers, body of aviation underwriters, is divided into 3
categories: Quantitative information, Qualitative information and Other
information.
f) Passenger profile in terms of numbers split between domestic and

international, load factors for domestic and international flights and on
turboprop and turbojet together with nationality mix of passengers are used
to assess passenger liability exposures.
g) After the 1990s the exposure base for premium calculation has shifted from
RPKM/RPM to departures and passenger numbers.
h) Interline agreements between airlines facilitate travel for passengers when

there is no direct flight and two flights with a stop-over enabling the
passenger to reach his destination is operated by two separate airlines.
i) Code-sharing arrangement means an arrangement in which an airline’s

designator code is used to identify a flight operated by another airline.
j) While insurance cover afforded to general aviation aircraft is restricted to

the aircraft operation that to an airline extends to all aviation operations.

CHAPTER 4 SUMMARY
k) Under the claims history section, information about losses suffered by the
client during past 10 years is usually considered.
l) Usually there are two components to a FDR, viz. flight data recorder and
cockpit voice recorder.
m) Data from FDR recorders has facilitated more comprehensive accident

analysis and helped zero down on the causative and contributing factors for
accidents.
n) Enhanced Ground Proximity Warning System (EGWPS) brings together a

worldwide digital terrain database with a navigation system. EGPWS
combines the aircraft location with geographical maps to determine the
possibility of aircraft meeting with CFIT situation.
o) Enhanced Ground Proximity Warning Systems (EGPWS) are among the most
advanced and powerful Terrain Awareness and Warning Systems (TAWS) to
reduce the risk of Controlled Flight into Terrain and Approach-and-Landing
Accidents.
p) The Traffic Alert and Collision Avoidance System (TCAS) are developed and
installed on aircraft to avoid mid-air collision between two aircraft.
q) DGCA (Director General of Civil Aviation, national civil aviation authority) in

India requires the following aircraft to be equipped with TCAS system: an
aircraft having:
i. Maximum certified take off mass of 5700 kg and above or

ii. Maximum cruising speed in excess of 463 km/h (250kt) and having
maximum certified passenger seating configuration (excluding any pilot
seats) of more than 30 seats or
iii. Maximum payload capacity of more than 3 tonnes
r) Sudden change in air speed or direction results in adverse impact on aircraft

performance. With severe change, very stability of aircraft path could be
severely affected resulting in abnormal increase or decrease in speed or
increase or decrease in angle of attack.
s) A Safety Management System is a systematic approach to managing safety,

including the necessary organisational structures, accountabilities, policies
and procedures.
t) There are four major components of the SMS:
i. Safety policy and objectives,

ii. Safety risk management,
iii. Safety assurance and
iv. Safety promotion

SUMMARY CHAPTER 4
u) An important aspect is if the airline focuses on regulatory compliance or

strives to achieve still higher standards. Overall it needs to be seen if the
airline is at the forefront of implementing best industry practices or just
trying to catch up or is oblivious of the industry practices.
v) Crew Resource Management focuses on communication, co-ordination,

teamwork, threat and error management and blame free discussion of
human mistakes. Thus, it has application in aviation industry through the
entire spectrum of operations from commercial to corporate to private.
w) LOSA is a data-driven methodology to assess crew performance from

technical as well as human performance angles.
x) Flight Operations Quality Assurance (FOQA) programs use flight data

recorders to provide information on parameters of flight. LOSA supplements
with the contextual information about why something happened..
y) Information about recruitment criteria and process for flight crew together
with training and promotion processes is sought.
z) IATA functions as a repository of IOSA reports and the reports are shared
with other airline with the concurrence of the auditee airline. IOSA
complements ICAO Universal Safety Oversight Audit Programme (USOAP)
which oversees aviation safety at state level.
aa) Universal Safety Oversight Audit Programme (USOAP) involves auditing and
evaluating ICAO Member State’s capability to provide safety oversight and
implementation of ICAO’s safety-related Standards and Recommended
Practices (SARPs).
bb) International Aviation Safety Assessment (IASA) practice is applicable to air

carriers flying into USA. Based on a scoring system, FAA decides to conduct
on-site audit of carriers in these countries. These visits lead to FAA putting a
country under category 1 or 2.
cc) Operational Standards reflect the operational standards the airline has
chosen for adherence, such as FAA (Federal Aviation Administration), EASA
(European Aviation Safety Agency), IOSA (IATA Operational Safety Audit).

Answer 1
The correct answer is II.
Statement II is incorrect. The correct statement is given below.
Given that general aviation operations would involve smaller aircraft and
possibly little or no public transportation, regulatory oversight may not be as
stringent as that of an airline.
Answer 2
After the 1990s, the exposure base for premium calculation for airline rating
shifted from Revenue Passenger Kilometres (RPKMs) or Revenue Passenger Miles
(RPMs) to departures and passenger numbers.
Question 1
The evolution in aviation safety can be analysed under three distinct phases.
The technical era lasted _______________.
I. Until the late 1960s

II. Lasted from the 1970s until the 1990s
III. Lasted from the 1990s until 2000
IV. Lasted from 2000 to present date
Question 2
As per the DGCA which of the following aircraft have to be equipped with the
TCAS system?
I. An aircraft having maximum certified take off mass of 5700 kg and above
II. An aircraft having maximum cruising speed in excess of 463 km/h (250kt)
and having maximum certified passenger seating configuration (excluding
any pilot seats) of more than 30 seats
III. An aircraft having maximum payload capacity of more than 3 tonnes

Question 3
Which of the below is the national civil aviation authority for India?
I. DGCA (Director General of Civil Aviation)

II. FAA (Federal Aviation Administration)
III. IATA
IV. International Civil Aviation Organisation (ICAO)
Answer 1

The evolution in aviation safety can be analysed under three distinct phases.
The technical era lasted until the late 1960s.
Answer 2

As per the DGCA the following aircraft have to be equipped with the TCAS
system: an aircraft having:
a) Maximum certified take off mass of 5700 kg and above or
b) Maximum cruising speed in excess of 463 km/h (250kt) and having maximum
certified passenger seating configuration (excluding any pilot seats) of more
than 30 seats or
c) Maximum payload capacity of more than 3 tones

Answer 3
DGCA (Director General of Civil Aviation) is the national civil aviation authority
for India.

CHAPTER 5 Formatted: Font color: Au
Formatted: Heading 7,Cha
UNDERWRITING - AEROSPACE Formatted: Title,Ch-Headi
Chapter Introduction Formatted: Heading 1,Sub
In this chapter we will look at the various risks related to the aerospace
segment and the important underwriting considerations / aspects that an
underwriter should look into while underwriting aerospace risks. Formatted: Font color: Au
Learning Outcomes Formatted: Heading 1,Sub
A. Underwriting aerospace risks: Airport operations, bird strikes, refueling, Formatted: Subtitle,List of
MRO Hanging: 0.63 cm, Number
A, B, C, … + Start at: 1 + A
cm + Indent at: 1.27 cm
Formatted: Font color: Au

CHAPTER 5 UNDERWRITING AEROSPACE RISKS: AIRPORT OPERATIONS, BIRD STRIKES, REFUELING, MRO
Formatted: Font: 1 pt, Fon

A. Underwriting aerospace risks: Airport operations, bird strikes,
Formatted: Heading 2,LO-
refueling, MRO Hanging: 0.63 cm, Number
A, B, C, … + Start at: 1 + A
1. Aerospace segment cm + Indent at: 1.27 cm
Aerospace segment of aviation insurance market comprises of providers of Formatted: Font: Bold, Fo
services and support functions to the aircraft and airline operations. Distinct Formatted: Indent: Left:
from general aviation and airline segments which directly concern aircraft Numbered + Level: 1 + Num
operations, aerospace segment includes: at: 1 + Alignment: Left + A
1.27 cm
i. aAirports, Formatted: Font color: Au

ii. mManufacturers and service providers such as air traffic / navigation Formatted: Indent: Left:
service providers, Numbered + Level: 1 + Num
1.27 cm
iii. rRefuellers,
iv. cCaterers and Formatted: Indent: Left:

v. Maintenance Repair and Overhaul (MRO) and Fixed Base Operator (FBO) Numbered + Level: 1 + Num
organiszationsons 1.27 cm
Diagram 1: AerospaceMRO segment
1.27 cm
1.27 cm
. It has emerged as a distinct segment with its own capacity and profile in Formatted: Indent: Left:
terms of profitability. Given the need for underwriters to create homogenous Numbered + Level: 1 + Num
portfolio of risks, this segment includes all the support functions which however 1.27 cm
are somewhat heterogeneous in character.
+ Level: 1 + Numbering Sty
Alignment: Left + Aligned a
Formatted: Centered
Formatted
Formatted
UNDERWRITING AEROSPACE RISKS: AIRPORT OPERATIONS, BIRD STRIKES, REFUELING, MRO CHAPTER 5
Formatted
Formatted
2. Airport activities
Formatted
Airports carry out the following activities: Formatted

Formatted
i. Passenger and baggage handling Formatted
Formatted
ii. Freight and cCargo and mail handling
Formatted
Formatted
iii. Aircraft support services (ground handling)
Formatted
iv. Communication Formatted
Formatted
v. Weather reporting Formatted
Formatted
vi. Control tower / ground traffic control
Formatted
vii. Runway maintenance Formatted

Formatted
viii. Bird control and wild life management Formatted
Formatted
ix. Fire Fighting and rescue services
Formatted
x. Security and screening Formatted

Formatted
xi. Hangarage Formatted
Formatted
xii. Refuelling and storage of fuel
Formatted
xiii. Catering Formatted

Formatted
Airport here would include airfields, airstrips and all other physical facilities for Formatted
operation of aircraft. Airports tend to be quite complex systems with Formatted
significant number of personnel with varying job profiles and involvements,
Formatted
traffic and communication flows and need for co-ordinated action with possibly
Formatted
little leeway in order that efficiency is maintained at a high level. Spread out
over a very large area and usually working round the clock with people working Formatted
in shifts, risk management for an airport demands rigour and disciplined Formatted
utiliszation of resources. Formatted
Formatted
Formatted
Formatted
Formatted
Formatted
Formatted
Formatted
Formatted
Formatted
IC-76 AVIATION INSURANCE 3 Formatted
Formatted
Formatted
a) Airport and airline relationship Formatted: Font: Bold

Airport risks akin to airline risks tend to be unique in some respects. The Formatted: Font color: Au
scope of activities conducted by the airports tends to vary significantly in
their scale, variety, complexity and geographical features. This is
highlighted when it is said that “If you see one airport, you’ve seen one Formatted: Font: Not Itali
airport.” Being in the nature of mega risks with significant liability limit Formatted: Font color: Au
exposures, they may be subjected to risk survey. Apart from the usual
questionnaire, risk survey and presentation could be part of the
underwriting information. Formatted: Font color: Au
It can be said that airport operators are in seller’s market in general when
there are no airports in the vicinity and thus do not face any competitive
threat. This may lead an airport operator to think that the airlines need Numbered + Level: 1 + Num
them more than they need the airlines. This has implication for the way the at: 1 + Alignment: Left + A
business relationship is structured between an airport and an airline as also 1.27 cm
the agreement and particularly, the risk transfer provisions therein. Airport Formatted: Font color: Au
operators may devise contracts which will transfer significant amount of Formatted: Indent: Left:
risks to airlines through hold harmless and indemnification provisions in the
agreement entered into with airlines for airport usage.
The relationship between an airport and its airline clients may be formalised Formatted: Font color: Au
through an agreement spelling out mutual rights and obligations. While this Formatted: Indent: Left:
may be a desirable approach, the alternate approach could be the reliance Numbered + Level: 1 + Num
on a resolution, regulation, or tariff by the airport operator which would 1.27 cm
need to be followed by client airlines. This would stipulate all the relevant
terms and conditions of airport usage. This could be supported by some
legislation or local government intervention. This arrangement would work
within the overall legal framework of the place. Formatted
b) Airport operation sub-units Formatted: Indent: Left:
Airport operation could be divided into sub-units in order to exercise control
Formatted
and to facilitate organiszational structure that promotes risk management.
These could be:
i. fFlight operations, Formatted: Font color: Au
Formatted
ii. lLandside, airside and terminal operations, Formatted: Font color: Au
iii. pPassenger services including ticketing and lost and found, baggage
management, Formatted: Font color: Au
iv. tTraffic management including ramp and apron management, Formatted
v. sScheduling and rostering,
Formatted
vi. nNavigation,

vii. sSafety and security, Formatted: Font color: Au
viii. eEducation and training,
Formatted
ix. cCommunications, Formatted: Indent: Left:

x. bBuilding and maintenance, Formatted: Font color: Au
Formatted
xi. Aircraft Rescue and Fire Fighting,
xii. hHousekeeping.
Formatted
c) Operations manual and its implementation Formatted: Font color: Au
In order that standardiszation and harmonizsationharmonization among Formatted: Font color: Au
various tasks and activities is achieved, airports usually have operations
manual. Having formulated a manual, it is equally important to monitor its
implementation in letter and spirit. Given the size and complexity of the Formatted
operations, maintenance of manual and carrying out amendments and Formatted: Indent: Left:
conveying the same to various stakeholders are important risk management Formatted: Font color: Au
measures. Maintenance of distribution lists for recipients of airport manual Formatted
amendments is required in order that communication is effective.
Different airports need not adhere to the same level of formulation of
procedures but as the size of operations grows, in the interest of Formatted
standardiszation, procedures would need to be spelt out in more detail. The Formatted: Font color: Au
manual should also spell out the organizsational structure for respective sub- Formatted: Font: Bold
unit of the airport operations along with responsibility vested, e.g. for apron Formatted
risk management. Like any other organizsation, airport is not a static
system. Its processes and procedures undergo changes from time to time
and these need to be advised to all stakeholders. This would usually take Formatted: Indent: Left:
the form of training. Training should focus on two aspects: safe and prudent Formatted
operation and emergency operation. Formatted
Some examples of entries in the operations manual could relate to: Formatted: Font color: Au
i. dDefinition of incidents and accidents, Formatted
ii. vVehicle lanes demarcation,
Formatted
iii. sSpeed limit enforcement,
Formatted
iv. sSuitable vehicle escort policy,
v. sSafety lines demarcating areas of operations by various users of airport, Formatted
vi. sSignage including lights and convex mirror installations for blind spots, Formatted
vii. pPrudent taxi-lane configuration, Formatted
viii. aAircraft tie-down configurations / parking, Formatted
ix. mMaintenance of equipment and vehicles in proper conditions,
Formatted
x. eEffective and efficient communication among various operatives on
airport premises, Formatted
Formatted
xi. pPeriodic training to all the different personnel operating on the Formatted: Font color: Au
premises, Formatted: Font color: Au
xii. eEvaluation of personnel competency, Formatted: Font color: Au
xiii. pPeriodic management review,
xiv. rRegular periodic risk assessments and safety audits conducted,
xv. aA safety occurrence and investigation procedure for events, Formatted: Font color: Au
xvi. eEvent reporting system, Formatted: Font color: Au

xvii. fFormulation of a suitable metric, Formatted: Font color: Au
xviii. cCollaborative approach to address safety issues with suitable Formatted: Font color: Au
documentation and follow up mechanism together with escalation
procedures to top management,
xix. pPublicity of standard operating procedures for various activities,
xx. pProper marshalling procedures, Formatted: Font color: Au
xxi. aAdherence to the minimum clearance requirements, Formatted: Font color: Au
xxii. rRules and procedures for operation of vehicles and equipment, Formatted: Font color: Au
xxiii.aAudit and inspection programmes based on checklists with review and Formatted: Font color: Au
follow up procedures for findings from such programmes,
xxiv.pProcedures with regard to aircraft refuelling,
xxv.dDue attention to changes in safety procedures when construction works Formatted: Font color: Au
are underway. Formatted: Font color: Au

d) ICAO framework for safety management Formatted: Font color: Au
The International Civil Aviation Organizsation (ICAO) developed a
comprehensive framework for safety management for States, airlines and
airports and service providers, known as Doc. 9859 Safety Management Formatted: Font color: Au
Manual (SMM). Safety Management Systems (SMS) have since been required Formatted: Font color: Au
to be implemented by all ICAO member states beginning January 2010. Formatted: Font color: Au
There are various regulations formulated by ICAO in regard to aviation
operations. It needs to be ensured that these are suitably incorporated in
the operations manual and standard operating procedures and there are Formatted: Font color: Au
systems in place to ensure compliance. Formatted: Font color: Au

It is widely believed that what gets measured is what gets done, what gets Formatted: Font color: Au
managed and what can be improved. Thus safety metrics is quite important
as a starting point in any exercise in order that impact of interventions can
be evaluated. Numbered + Level: 1 + Num
1.27 cm

Formatted
Formatted
Formatted
e) Accident risks
Formatted
Accidents usually happen owing to operation of multiple factors and Formatted

corresponding failure of multiple controls. This is because of very rigorous Formatted
standards to which aviation industry operates. Some of the safety metrics Formatted
as applicable to an airport system could be for: Formatted
Formatted
i. rRunway accidents,
ii. rRunway incursions, Formatted
iii. bBird strikes, Formatted

iv. nNumber of incidents of passenger, Formatted
v. pPublic and occupational injuries and the like.. Formatted
Formatted
Runway accidents:
Formatted
Some contributing or causative factors for runway accidents could be: Formatted
Formatted
i. pPilot and vehicle driver errors, Formatted
ii. rRunway and taxiway design and maintenance, Formatted
iii. sSnow and ice conditions,
Formatted
iv. sSignage,
v. lLighting and visibility, Formatted
vi. wWildlife management, Formatted

vii. rRunway interference by airport vehicles, Formatted
viii. mMeteorological conditions, Formatted
ix. aAir traffic system errors,
Formatted
x. iIndividual operator errors and
Formatted
xi. aAircraft maintenance and mechanical issues.
Formatted
Wild life based risks: Formatted
Formatted
Airport location could play an important role in case of wild life based risks. Formatted
Location of airport near water bodies, fields, forests, or other areas of
Formatted
natural habitat may provide shelter, nesting areas, and feeding areas for
wildlife. Airports need to create hostile habitat for wildlife and birds while Formatted
complying with relevant regulations. Formatted

Formatted
Other accident causes: Formatted
Formatted
Accidents can be caused by:
Formatted
i. sSlippery surfaces, Formatted

Formatted
ii. iInadequate signage or construction barriers, Formatted
Formatted
iii. lLack of safety precautions and non-adherence to standard operating
Formatted
procedures,
Formatted
Formatted
iv. uUnsafe working conditions, Formatted: Font color: Au

Formatted
v. iInadequate safety training, or Formatted: Font color: Au
vi. dDeficient safety culture.
f) Risk mitigation factors Formatted

Constant refinement of standard operating procedures based on analysis of Formatted: Indent: Left:
incidents on an ongoing basis considering local social, economic and cultural
factors is an important element in promoting safety. Some of the factors
Formatted
that can contribute to risk mitigation include:
i. Design and signage improvements, Formatted: Font: Bold
Formatted
ii. dDeployment of technological solutions strengthening reporting systems, Formatted: Font color: Au
iii. bBetter pilot reporting and air traffic control support to pilots for better
aeronautical decision making Formatted: Font color: Au
Formatted
are some of the factors that can contribute to risk mitigation. The most Formatted: Not Highlight
important is the culture that builds adequate safety margin in all Formatted: Indent: Left:
operations.
Formatted
As regards design of the airport, geographic factors may constrain the way
an airport is designed and constructed. This might create some safety Formatted: Font color: Au
trade-offs. Visibility of all important areas of operation from control tower Formatted: Not Highlight
may not be feasible. The solution then is to build sufficient workarounds. Formatted: Indent: Left:
g) Airport scope of operations
Formatted
In case of airports, the scope of operations is quite important since different Formatted: Font color: Au
airports tend to have different scopes of activities depending upon the Formatted: Font color: Au
governmental ownership and control and level of privatiszation and level of Formatted: Indent: Left:
outsourcing. Formatted: Font: Bold
Formatted: Font: Bold, Fo
i. Outsourcing and contracting out: In case of outsourcing and
Formatted
contracting out, it becomes important to know such activities and level
of risk transfer achieved with reference to such outsourced entity or Formatted: Font color: Au
(sub) contractors. This will include information on limits of liability Formatted: Indent: Left:
required for insurance protection by (sub) contractors, adequacy of such Formatted: Font: Bold
limits, scope of such protection and checks and balances put in place to Formatted
ensure that the airport entity does indeed get the proper protection
from such insurance, if required. It is essential that such insurance
covers act as a primary insurance and take exposure before airport Formatted: Font color: Au
operator’s insurance gets triggered. Additionally, the airport may seek Formatted: Font color: Au
“hold harmless” undertaking from the (sub) contractors. Formatted: Font color: Au

ii. Description of the airfield i.e. tarmac, gravel, grass is quite important Formatted: Font: Bold, Fo
to know since these would be maintained to different levels of safety. Formatted: Indent: Left:
The aeronautical and non-aeronautical revenues taken together might Numbered + Level: 1 + Num
provide some indication of the scope of and intensity of activities. In at: 1 + Alignment: Left + A
1.27 cm
case the operator conducts numerous activities, a split of revenues
based on each important activity is useful to assess the exposure.
iii. Other exposure measures include information such as: Formatted: Font: Bold, Fo
Formatted
✓ nNumber and types of aircraft being handled with frequency (e.g.
civil - military, airlines and general aviation, narrow bodied and wide
bodied), Formatted: List Paragraph
✓ nNumber and type of passengers (scheduled, charter, general Formatted
aviation as also domestic and international), Formatted: Font color: Au
✓ tType and quantum of cargo handled
. Domestic passengers and international passengers could be subject to Formatted: Indent: Left:
different legal liability regimes. Additionally, information is sought on Formatted: Font color: Au
number and types of vehicles which operate airside and number of personnel Formatted
deployed airside. Pre-employment checks and random drug / alcohol checks Formatted: Font color: Au
among employees could be an additional safety factor.
h) Construction activity Formatted: Font color: Au

Formatted
If any construction activity is envisaged, it becomes important to know how Formatted: Font color: Au
close these are going to be carried out to aircraft operations and if it has Formatted: Font color: Au
any influence on the safety and security. Information on changes in runway
activities owing to construction can be quite important indicating the
criticality and proximity of operations. A good measure of this is if such
activities will lead to Notam’snotams. Formatted
Definition Formatted: Indent: Left:
Formatted: Heading 1,Sub
(NOTAM - a NOTice to AirMan - is a notice or advisory containing information Formatted: Font color: Au
concerning the establishment, conditions or change in any aeronautical facility, Formatted: Font color: Au
service, procedure or hazard, the timely knowledge of which is essential to
personnel and systems concerned with flight operations.) Formatted: Font: 1 pt
Formatted: Heading 5,Line
i) Cover bought by contractors and / or concessionaires Formatted: Font: Bold
Formatted
Apart from airport operators, cover may be bought by contractors and / or
Formatted: Font:
concessionaires or others working airside at airports. It would be important
to know if these entities carry motor insurance cover and / or general third
party liability cover, indemnity limits thereof and if these covers have an Formatted: Indent: Left:
exclusion for airside exposures. Important exposure measure for such Formatted: Font color: Au
entities is usually the contract value or revenues. Formatted: Font color: Au
j) Insurance for air traffic control function Formatted: Font: Bold

In case air traffic control function is handled by the airport or air traffic Numbered + Level: 1 + Num
control operator seeks insurance, it is important to know: at: 1 + Alignment: Left + A
1.27 cm
i. tTheir location,
ii. aAreas of sole responsibility and shared responsibility, Formatted: Indent: Left:
iii. iInteraction with the military infrastructure, Formatted: Font color: Au
iv. rResponsibility for search and rescue co-ordination. Formatted: Numbered + L
Adequacy of staff, maximum staff strength and level of automation are Indent at: 1.27 cm
other factors to be considered. It needs to be known if the airport is Formatted: Font color: Au
equipped with primary or secondary surveillance radars and degree of Formatted: Font color: Au
coverage and radio facilities. Uninterrupted power is quite crucial and thus Formatted: Font color: Au
information on backup power arrangement is required. Visibility from tower Formatted: Font color: Au
can affect safety. Thus it is important to know if the tower has a full view
of the manoeuvring area and of the marshalling area.
k) Airport agreements with other business entities Formatted: Font color: Au
Airports would usually enter into agreement with their business partners and Formatted: Font: Bold
other business entities. Terms of engagement by an airport with other
entities are quite crucial. It is important to understand how the risk Numbered + Level: 1 + Num
transfer takes place among all these entities through contractual provisions at: 1 + Alignment: Left + A
and which insurance covers act on a primary basis and which would get 1.27 cm
triggered on an excess basis. Airports owned by government could have Formatted: Font color: Au
immunity and thus any recourse against them would not be possible. Formatted: Indent: Left:
One important function of the airports is to provide safe and secure

environment for aircraft to operate. This requires that aircraft operations
are protected from birds, animals and wild life as also from security threats.
3. Bird Strikes: Formatted: Indent: Left:

a) Meaning of bird strike 1.27 cm
Definition Numbered + Level: 1 + Num
1.27 cm
A bird strike is usually defined as a collision between a bird and an aircraft
which is in flight or on a take- off or landing roll.
The term is often expanded to cover other wildlife strikes or ground
animals. While it may be assumed that turbofan engines suck birds like a Formatted: Font: 1 pt
huge vaccum cleaner, in reality, only birds in line with the engine get Formatted: Heading 5,Line
sucked. Formatted: Font color: Au

Example Formatted: Heading 1,Sub

On 7 September 1908, while piloting the Wright Flyer, Orville Wright
experienced what later came to be known as a bird strike. Formatted: Font color: Au
Less than four years later, on 3 April 1912, Calbraith Perry Rodgers (the first
man to fly an aircraft across the United States) became the first person to die Formatted: Heading 5,Line
as the result of a bird strike in California. His Wright Flyer struck a gull which Formatted: Font color: Au
jammed the aircraft’s controls, causing it to lose control and crash into shallow Formatted: Indent: Left:
sea water. In those days, slow speed gave pilots and birds / wildlife enough Formatted: Font: Bold
time to avoid collision.
Till now bird strikes were not considered a significant issue for rotor wing
1.27 cm
aircraft. On account of relatively low speed, visibility and high noise,
collisions with birds were usually avoided. However this has been changing
gradually with faster helicopter speeds and relative improvement in Formatted: Indent: Left:
helicopter noise levels. Formatted: Font color: Au
b) Cost of bird strikes … + Start at: 1 + Alignmen
Indent at: 1.27 cm
An ICAO circular of 2009 on Managing Wildlife Hazards to Aircraft puts the Formatted: Font color: Au
cost of aircraft collisions with birds and other wildlife to the airline industry, Formatted: Font color: Au
and ultimately the flying public at approximately USD 2 Bln annually. The Formatted: Font color: Au
costs includeBird strikes are expensive for aircraft operators and are Formatted: Font color: Au
estimated to cost commercial airlines over USD 1.2 Billion annually. The
costs include:
i. dDown-time for inspection and repair, Formatted: Font color: Au

ii. dDamage, Formatted: Font color: Au
iii. the rRescheduling of flights, Formatted: Font color: Au
iv. cCost of alternative means of transport for passengers and
v. Cost of attendant overnight accommodation
. These usually result in aborted take-offs, precautionary landings and / or Formatted: Indent: Left:
engine damage. Generally incidence of bird strikes increase as the day at: 1 + Alignment: Left + A
progresses and peters out towards the evening. It is estimated that 1.27 cm
approximately ninety per cent (90%) of bird / wildlife strikes occur on or in Formatted: Font color: Au
the immediate vicinity of airports.
c) Damage to aircraft due to bird strike
Strike may occur at any part of the aircraft but most strikes take place Indent at: 1.27 cm
involving nose, windshield, radome and engine. Bird and animal strikes can
result in:
i. wWindshield damage, Formatted: Font color: Au

ii. cCockpit crew injuries, Formatted: Font color: Au
iii. dDestruction of engines and fire, Formatted: Font color: Au
iv. sStructural damage, Formatted: Font color: Au

v. lLoss of control and crash. Formatted: Font color: Au
Extent of damage from strike is the function of bird / animal size, weight
and aircraft velocity apart from the location of strike on the aircraft body.
About 90 per cent of bird strikes are reported to occur below 3 000 feet. At Formatted: Indent: Left:
known hazardous airports, aircraft crew would climb above 3 000 feet at
best climb angle (in less time). The aircraft is also simultaneously flown at
a relatively slow speed so that in the event of a strike, damage would be
less. Similarly steeper descent can be resorted to by aircraft crew, reducing
the flying time below 3000 feet.
d) Regulatory standards Formatted: Indent: Left:
Regulatory standards are formulated to ensure the minimum tolerance of at: 1 + Alignment: Left + A
1.27 cm
aircraft to bird strikes.
Example
For example, Federal Aviation Regulations require that rotorcrafts should be Formatted: Heading 1,Sub
capable of a safe landing after a 2.2 pound (0.99 Kg) bird hit at a height of 2.5 Formatted: Font color: Au
Km. Formatted: Font: 1 pt
Formatted: Heading 5,Line
Advances in materials used for windshields have improved resistance to bird Formatted: Font color: Au
strikes. Engine designs are constantly evolving to promote better Formatted: Indent: Left:
sustenance of bird strikes.
Formatted: Font: Bold, No
As per the ICAO document on Airport Services Manual, Wildlife Control and Formatted: Font: Bold, Fo
Reduction, States are required to certify all aerodromes used for Formatted: Font color: Au
international operations, in accordance with the specifications contained Formatted: Font color: Au
within the Annex. Accordingly, aerodrome operators are required to develop Formatted: Numbered + L
an aerodrome manual which includes information on the: … + Start at: 1 + Alignmen
Indent at: 1.27 cm
i. aAerodrome site, Formatted: Font color: Au
ii. fFacilities, Formatted: Font color: Au
iii. sServices, Formatted: Font color: Au
iv. eEquipment,
v. oOperating procedures and management, including a safety management
system.
The State civil aviation authority (CAA) is required to ensure that any Formatted: Font color: Au
procedures in the airport certification manual relating to bird / wildlife Formatted: Font color: Au
control are developed and implemented as part of the aerodrome safety Formatted: Font color: Au
management system (SMS). Thus, government and the airport operator
should together work on this issue.
States should consider habitat management or the dispersal or removal of Formatted: Font color: Au
hazardous wildlife. ICAO has offered to assist States with the development Formatted: Font color: Au
of a wildlife control programme through ICAO Technical Co-operation Formatted: Font color: Au
Programme experts.
Worldwide airport operators take measures to reduce and prevent bird

strikes. It needs to be appreciated that various measures can only bring
down incidence of bird strikes but it possibly cannot be eliminated at Formatted: Font: Bold
reasonable costs. Formatted: Indent: Left:
e) Bird / wildlife strike control programme at: 1 + Alignment: Left + A
1.27 cm
Each airport operator is responsibleility for devising and implementing an Formatted: Font color: Au
effective bird / wildlife strike control programme commensurate with the Formatted: Indent: Left:
size and level of complexity of the airport. An airport operator may Formatted: Font color: Au
appoint bird / wildlife control co-ordinatorcoordinator responsible for the Formatted: Font: Bold
airport’s bird / wildlife hazard control policy.
The common law may put an obligation on an airport to provide at: 1 + Alignment: Left + A
maintenance and inspection of runways, taxiways and apron regarding 1.27 cm
presence of birds and other animals. Besides, the obligation can be imposed Formatted: Font: Bold
to undertake all necessary measures to prevent the presence of animals Formatted: Font color: Au
within operational areas in order to provide safe operation of aircraft. Formatted: Indent: Left:
Thus, in case of a claim for damage or injuries from bird strike by an aircraft
operator, an airport is likely to be the most important defendant.
Airports need to devote financial resources right from design stage and then Indent at: 1.27 cm
on a continual basis throughout the operation of the airport towards safety
management. Right from the design stage, care can be taken to minimisze
bird / animal menace. This would need to be followed up with suitable
construction, operation and maintenance of airport areas. This needs to be Formatted: Font color: Au
supplemented with suitable zoning and land usage planning. Formatted: Font color: Au
f) Measures to address bird strike risks Formatted: Font color: Au
Measures to address bird strike risks include:
i. Periodic regular inspections of runways, taxiways and other manoeuvring Formatted: Font color: Au
areas; Formatted: Font color: Au
ii. pProviding information to pilots about possible presence of birds / Formatted: Font color: Au
animals through NOTAMs;
iii. iInstallation of game cameras,
iv. rRemoval of wet lands,
v. pPerimeter patrols, Formatted: Font color: Au
vi. vVisual monitoring, Formatted: Font color: Au
vii. rRadar monitoring, Formatted: Font color: Au
viii. rRadio monitoring, Formatted: Font color: Au
ix. sSurface radars,
x. uUse of trained falcons and dogs to repel birds,
xi. aAudio, visual and chemical repellants and Formatted: Font color: Au
xii. uUsage of scaring devices Formatted: Font color: Au

are measures to address this risk. Elimination of agriculture in the vicinity Formatted: Font color: Au
of the airport, removal of trees, debris and standing water can assist a great
deal. Vegetation management is quite important measure for an airport
operator. Airport needs to constantly monitor level of grass and ensure that
it does not grow such that it induces and attracts birds and animals.
Airports need to create and sustain proper awareness among its operating
staff about the hazards of bird strike and as required need to employ
professionals such as biologists and ornithologists.
An airport should implement a bird / wildlife strike prevention programme Formatted: Font color: Au
in order to reduce the risks presented by birds and wildlife at the airport Formatted: Font color: Au
and in its vicinity. The scale and details of this programme will vary from
airport to airport. Systems and procedures need to be put in place to
ensure that information about the programme flows to the relevant
stakeholders and as required, suitable system employing statistical data and
analysis tools is put in place. Information about hazards must flow to the
aircraft personnel, if required through air traffic control functionaries.
g) ‘Duty of care’ and ‘duty to warn’ Formatted: Font: Bold

An airport operator collects landing fees from the airline under a contract. Numbered + Level: 1 + Num
In consideration, he is required to manage and offer a safe facility for at: 1 + Alignment: Left + A
1.27 cm
aircraft operation at the airport. Airport operators can be expected to meet
standards of ‘duty of care’ and ‘duty to warn’ under law. From time to
time, the courts have held airport operators liable for negligence. This Formatted: Font color: Au
however entirely depends on the evidence in regard to adequacy of systems Formatted: Indent: Left:
to meet duty of care and duty to warn in the circumstances of the case.
Airport operator may need to demonstrate reasonableness and due

diligence. Only a risk management system with adequate resources and
complexity commensurate with the size of the airport can assist an airport
to prove that there was no negligence or lack of care on the part of the
airport. If this is not done, the liability to the third parties and passengers
against an aircraft operator can be readily transferred to airport operator.
Airport operator will also attract liability for aircraft damage and resultant
costs. Apart from attachment of civil liability, invocation of criminal
liability cannot be ruled out in some jurisdictions.
An airport operator may be considered responsible for area beyond airport

boundaries within reasonable limits. Since the onus is on the airport
operator, it is important that he has requisite systems in place and is able to
convince the courts about the adequacy of such systems in general as also
with regard to a particular incident or accident. The question remains if the
responsibility of airport operator is strictly limited to the airport premises.
This is most likely to go some way towards avoiding the liability. However,

courts holding the airports to still higher standards of duty of care and duty
to warn cannot be ruled out.
Example Formatted: Font color: Au
On June 3, 1995, an Air France Concorde struck geese while landing at John F. Formatted: Heading 5,Line
Kennedy International Airport. Two of the four engines on the supersonic jet Formatted: Font color: Au
caught fire and were destroyed. The airline sued the airport operator and
parties settled out of court. It is understood that the airport failed to warn
though there was indeed a sound wildlife-management program. Quite a few Formatted: Indent: Left:
disputes get settled under non-disclosure agreements. at: 1 + Alignment: Left + A
1.27 cm, Don't keep with ne
With advances in engine design and mandated standards, it is estimated that Formatted: Font: Bold
engines will be increasingly capable of withstanding bird strikes and quite Formatted: Indent: Left:
possibly, this risk will be significantly mitigated in next couple of decades. Numbered + Level: 1 + Num
1.27 cm
4. Aircraft Refuelling:
a) Refuelling operation
A refuelling operation would involve: Formatted
i. sStorage of fuel, Formatted: Font color: Au
ii. tTransport of fuel,
iii. fFuelling, defueling and refuelling of aircraft,
iv. mManagement of fuelling systems such as hydrants, bowsers, etc. and Formatted: Font color: Au
v. mManufacturing / refining fuel as also lubricants Formatted: Font color: Au
b) Risks related to refuelling Formatted: Font color: Au
. There is the usual risk of fuel vehicles hitting aircraft and causing damage
or destruction. Apart from the apparent risk of damage or destruction of
aircraft by fire caused during or as a result of refuelling, there is also the Formatted: Font: Bold
risk of fuel contamination leading to engine failure / damage and potential Formatted
aircraft crash. Formatted: Font color: Au
The hazards involved are:
i. iIgnition of fuel vapour, Formatted: Font color: Au

ii. lLeaks and spillages arising from procedural errors, and Formatted
iii. mMechanical failure of pressuriszed fuel lines or their couplings. Formatted: Font color: Au
Electrostatic energy generated from movement of the fuel or built up on the
aircraft or vehicle surface can provide the trigger for fire. Additives are
used in the fuel to reduce this risk.
Example Formatted: Font: 1 pt

On 5 September 2001, a British Airways Boeing 777-200 was substantially Formatted: Font color: Au
damaged, and a refuelling operator killed when a fire broke out during Formatted: Font color: Au
refuelling at Denver, Colorado. The airplane's refuelling adapter ring fractured Formatted: Font color: Au
owing to abnormal angular force applied to it by the hydrant fuel truck
attachment. This was in turn due to the ground refueller failing to properly
position the hydrant fuel truck. The fracture of the adapter ring led to the
ignition of the spilled fuel and subsequent fire.
c) Fuel handling functions at airport Formatted: Heading 5,Line

Fuel handling at airport includes the following functions: Formatted: Font: Bold
•i. fuel reception and storage; Numbered + Level: 1 + Num
•ii. the assessment of fuel quality; at: 1 + Alignment: Left + A
1.27 cm
•iii. the safe delivery into an aircraft of fuel suitable for the purpose;
•iv. the taking and storing of fuel samples;
•v. the onward distribution of fuel; Formatted: Indent: Left:
•vi. 'Incident' prevention and management; Formatted: Font color: Au

•vii.preventing or minimising electrostatic discharge during the handling of Formatted: Justified, Num
fuel; Style: i, ii, iii, … + Start at:
0.63 cm + Indent at: 1.27
•viii. handling fuel during extremes of weather e.g. electric storms in
the aerodrome vicinity or in high ambient temperatures;
•ix. Aircraft Fuelling and Fuel Installation Management
•x. the actions to be taken should fuel be found to be contaminated; and
•xi. regular and periodic maintenance and cleaning of fuel installations and
equipment.
Fuel could be unfit for use in aircraft if a visual examination shows more Formatted: Indent: Left:
than a trace of sediment, globules of water or cloudiness. Samples of fuel
should be taken and tested visually as well as chemically for presence of
contamination.
Samples should be taken from fuel on delivery, whether by road tanker, Formatted: Font color: Au
pipeline, or in packages and from storage tanks periodically.
Standard operating procedures may require that fuel be sampled:

•i. immediately before receipt into the fuel installation; Formatted: Justified, Num
•ii. after receipt of fuel into the fuel installation (after settling time); Style: i, ii, iii, … + Start at:
•iii. each day before the first delivery from the fuel installation;
•iv. after prolonged heavy rainfall or snow;
•v. after de-fuelling;
•vi. after vehicle washing;
•vii.immediately prior to fuelling an aircraft.

Under the product liability section of aircraft fuelling liability coverage, fuel Formatted: Font color: Au
contamination is covered.
d) Relevant factors to be considered by underwriter Formatted: Indent: Left:

In case an airport handles refuelling of aircraft or an entity providing such 1.27 cm, Adjust space betw
facilities at the airport seeks cover for liability arising out of such space between Asian text a
operations. Some relevant factors to look into are: Formatted: Font color: Au
i. fFormulation of standard operating procedures with regard to aircraft
refuelling,
ii. aAdherence to prescribed standard operating procedures and safety
parameters, Formatted: Numbered + L
iii. sSafety systems management, Indent at: 1.27 cm
iv. mMaintenance of refuelling vehicles in roadworthy conditions and of
equipment in compliance with the safety specifications,
v. aAdherence to safety procedures while refuelling, particularly if
refuelling is done while passengers are on-board the aircraft, Formatted: Font color: Au
vi. rReporting for fuel / oil spillages and remedial actions, Formatted: Font color: Au
vii. pPeriodic procedural and safety training of personnel, assessing and Formatted: Font color: Au
ensuring adherence Formatted: Font color: Au
1.e) Details of locations serviced:
2.i. Experience in undertaking refuelling operations Formatted: Font color: Au
3.ii.Estimated annual throughput of aviation fuel in gallons or litres for the Formatted: Font color: Au
proposed period of insurance cover and previous 3-5 years. Formatted: Font color: Au
4.iii. Quantity of Refined / Refuelled / Avgas / Jet Fuel - Gallonage /
litreage
5.iv. Aircraft split as number and types of aircraft being handled with
frequency (e.g. civil - military, airlines and general aviation, narrow Formatted: Font: Bold
bodied and wide bodied) is sought. Formatted: Justified, Inde
6.v.The scope of activities of the operator, i.e. limited to fuelling or storage Numbered + Level: 1 + Num
or refining or manufacturing is sought to be known. 1.27 cm
7.vi. Method of fuelling, i.e. a hydrant system or by bowlers / tankers
Formatted: Justified, No b
or combination thereof needs to be advised.
Formatted: Justified, Num
8.vii. The nature of contractual obligations with clients, i.e. aircraft Style: i, ii, iii, … + Start at:
operators in terms of risk transfer is quite important. 0.63 cm + Indent at: 1.27
9.viii. Involvement of dealers and agents and terms of engagement with Formatted: Normal, Numb
them in regard to hold harmless and indemnity. Style: i, ii, iii, … + Start at:
10.ix. Segregation of different fuels, labeling, separate infrastructure, 0.63 cm + Indent at: 1.27
quality assurance systems for fuel quality, routine and safety training of Formatted: Justified, Num
personnel and operations manuals are some of the critical factors Style: i, ii, iii, … + Start at:
underwriter needs to look at.
1.x.Number of personnel working airside at each location Formatted: Normal, Numb
Style: i, ii, iii, … + Start at:
2.xi. The number of vehicles involved in refuelling 0.63 cm + Indent at: 1.27
3.xii. Main fuel suppliers / customers Formatted: Justified, Num
4.xiii. Aircraft types fuelled - split into Wide body / Narrow body /
General aviation / Rotor wing civil / Military
5.xiv. Information on fuel refining operations
6.xv. Supplies to the United States / US carriers
7.xvi. Fuel storage and supply
8.xvii. Quality assurance programme for both refining and refuelling
including checks undertaken during the refining process.
9.xviii. Control over equipment and procedures Formatted: Justified, Inde
10.xix. Details of recurrent training of employees cm, Numbered + Level: 1 +
Start at: 1 + Alignment: Lef
11.xx. Compilation of Procedures manual, adherence to the same and at: 1.27 cm
audit and inspection processes.
12.xxi. Refuelling revenue Style: i, ii, iii, … + Start at:
13.xxii. Any other revenue sources 0.63 cm + Indent at: 1.27
14.xxiii. Security arrangements / procedures Formatted: Justified, Inde
15.xxiv. Responsibility for such security cm, Numbered + Level: 1 +
16.xxv. Staff vetting procedures at: 1.27 cm
17.xxvi. Terms of business with supplies / customers
18.xxvii. Liability / indemnity / insurance provisions in contracts Style: i, ii, iii, … + Start at:
19.xxviii. Sub-contract for any work and liability / indemnity / insurance 0.63 cm + Indent at: 1.27
provisions. Formatted: Justified, Inde
20.xxix. Terms of refuelling cm, Numbered + Level: 1 +
21.xxx. Whether self- service fuelling is available. Start at: 1 + Alignment: Lef
at: 1.27 cm
Contractual obligations with the fuel supplier areis quite important if the
operator is merely fuelling the aircraft. 0.63 cm + Indent at: 1.27
While it is possible that fuelling is done by a single entity, it is not
uncommon for various entities to come together in this activity. Joint
venture among oil companies, refuelling agents, airports and the airlines
may come together in a complex commercial arrangement. Storage
facilities may be shared by oil companies under a consortium. In order to
address the complexities in these relationships, contracts are formulated in
line with the Aircraft Refuelling Liability (‘Tarbox’) Indemnity Agreements.
5. Premises, Products and Hangarkeepers Insurance: Formatted: Indent: Left:

a) Growth of MRO segment 1.27 cm
With increasing focus on costs, airlines are forced to find ways to improve Numbered + Level: 1 + Num
their efficiencies and this has resulted in growth of MRO segment. They at: 1 + Alignment: Left + A
thrive on volume of business and specialisation, often capitalising on low 1.27 cm
labour and set up costs by choosing a favourable location for their Formatted: Font: Bold
operations. Airlines have tended to increasingly rely on MRO for outsourcing Formatted: Indent: Left:
their support functions to achieve better economies. Some airlines have
separated functions outsourced to MRO in a separate associate companies.
Emergence of low costs carriers have further propelled the development of
MRO segment. Some MROs have developed in low labour cost countries to
benefit from low labour costs.


b) Scope of MRO services Formatted: Font: Bold
Maintenance, Repair, and Overhaul (MRO) operations provide the technical Formatted: Indent: Left:
and maintenance support for general aviation as well as airlines. These
operations also tend to vary in the scope and complexity. A typical MRO
could be involved in some of the following activities:
1.i. Maintenance, Repair, and Overhaul (MRO) and supply of engines, Formatted: Justified, Inde
accessories, instruments, avionics, and electrical components for aircraft cm, Numbered + Level: 1 +
and helicopters at: 1.27 cm
2.ii.MRO and of Auxiliary Power Units (APUs), Helicopter Transmissions /
Power-Trains / Gear Boxes
3.iii. Supply of accessories, spare parts, and raw materials / chemicals
/ consumables for aircraft manufacturing and MRO.
Formatted: Font: Not High
4.iv. Supply and Calibration of Test Equipment (including hydraulic /
pneumatic test benches), tools (including cutting tools), and Aerospace
Ground Equipment (AGE).
Maintenance activities tend to vary in the scope and complexity. Formatted: Indent: Left:
i. The "Line maintenance" usually involves simple aircraft checks (i.e. daily Formatted: Indent: Left:
check, weekly check and ‘A’ check in certain case), rectification, simple
modifications and repairs to be performed between 2 flights.
▪ Formatted: Indent: Left:
ii. Base / Heavy Maintenance will involve checks C and D and other
structural and major repairs. C Check includes lower checks (check A,
check B and daily checks) and involves a thorough visual inspection,
components and systems, operational and functional checks and an
extensive check of individual systems and components for serviceability
and function. This would require more elaborate tooling, test
equipment, and special skill levels. 'C' checks may put the airplane out
of service for 3-5 days. 'D' check or the sStructural check involves
detailed visual and other non-destructive test inspections of the aircraft
structure including extensive disasseembly. It looks for corrosion,
structural deformation, cracking, and other signs of deterioration or
distress. Requirement for special equipment and techniques are of still
higher order as compared to C Check. This check removes the airplane
from service for 20 or more days.
▪ Formatted: No bullets or
i.iii. Workshop Manufacturing / Component Maintenance Field Code Changed
ii.iv.Aircraft Engine Maintenance
Field Code Changed

iii.v.Landing Gear Maintenance: An aircraft landing gear consist of a nose Field Code Changed
gear assembly plus two to four main gear assemblies depending on the
aircraft type. The main components of each gear assembly consist of the
inner and outer cylinders, drag braces and struts, and various hydraulic
actuation mechanisms that serve to lower and retract the gears.
Overhaul intervals for landing gears could be time and flight cycle
limited and are usually 10-12 years and 18,000-20,000 flight cycles.
iv.vi. Engine Removal & Reinstallation
v.vii. Structural and Interior Modifications
vi.viii. Full Aircraft Teardown and Reclamation
vii.ix. Avionics Installations and retro-fitting: Sometimes old aircraft are
fitted with latest avionics Formatted: Indent: Left:
viii.x. Painting Services Formatted: Indent: Left:
c) Information sought for underwriting at: 1 + Alignment: Left + A
1.27 cm
In case of other aviation service providers seeking Premises, Products Aand Formatted: Indent: Left:
Hangarkeepers Insurance, the following underwriting information is usually Formatted: Not Highlight
sought: Formatted: Indent: Left:
i. Types of aircraft, i.e. turboprop / turbofan / rotor wing, etc., Average
value, maximum value any one aircraft and maximum value all aircraft.
ii. Full details of nature of airframe / engine / other maintenance work Formatted: Not Highlight
carried out. Formatted: Indent: Left:
iii. Details of the licences and qualifications of the Assureds' engineers. Formatted: Not Highlight
iv. Experience of the firm, personnel and management for such activities.
v. Terms and conditions for conducting repairs and maintenance activities. Formatted: Not Highlight
vi. Annual revenue from spares sold to others but not fitted by the Assured. Formatted: Indent: Left:
vii. Details of test flights undertaken by the Assured, estimated number of
flying hours for the next 12 months and pilot profile for such test flights.
viii. Annual revenue from any aircraft sales whether aircraft are worked Formatted: Not Highlight
upon, or not. Formatted: Indent: Left:
d) Hangarkeepers
▪i. Average value, maximum value any one aircraft and maximum value all Formatted: Indent: Left:
aircraft in the Assured's care, custody and control? Numbered + Level: 1 + Num
1.27 cm
▪ii. Fire- fighting precautions and facilities.
▪iii. Details of contract usually signed with aircraft owners. Numbered + Level: 1 + Num
1.27 cm
1.27 cm


CHAPTER 5 APPENDIX I
A. Appendix I
Appendix I – Airport Owners / Operators Legal Liability Insurance Formatted: Centered
Questionnaire
1. Name and address of Insured and Name of

Airport(s).
2. Is the Insured the owner and/or operator of
the Airport(s)?
3. Length and breadth of runways
4. Types of aircraft using the Airport
5. Largest type of aircraft regularly using the
Airport
6. Type of landing system(s) used
7. Is the Insured responsible for any of the
following services?
a) Hangarage Formatted: Normal, Inden
b) Runways / taxiways Numbered + Level: 1 + Num
a)c) Control tower 1.27 cm, Hyphenate
b)d) Ramp and turn-around service Formatted: Normal, Inden
c)e) Refuelling and storage of fuel Numbered + Level: 1 + Num
d)f) Catering at: 1 + Alignment: Left + A
1.27 cm, Hyphenate
e)g) Baggage / freight / cargo handling
f)h) Security (including passenger and
passenger baggage searching)
g)i) Car parking
h)j) Emergency services
i)k) Bird control
j)l) Maintenance and / or checking of any
navigational / radar equipment
k)m) Other concessionaires
8. Where services are handled by
concessionaires, is full hold harmless and
indemnity given to Insured? Give minimum
liability limits demanded from concessionaires
by Insured.
9. A. Give details of construction work expected
to be undertaken at the airport during the
next twelve months including contract values
involved.
B. What limit of liability is required of
contractors?
C. Is the Insured included as an additional
insured on the contractor’s liability policy?
10. What level of Third Party Liability insurance is
required for vehicles of third parties going
airside?
APPENDIX I CHAPTER 5
11. Details of hold harmless provisions contained Formatted: Font: 1 pt

in Airport Conditions of Use, if any. Formatted Table
12. Details of any claims made against the Insured
or, if not previously insured details of any
incidents which may have given rise to a claim
had insurance been in force.
13. Is aircraft non-ownership liability cover
required? (i.e. does the insured hire or
charter aircraft – if so please provide details)

Statistics Formatted: Font: Bold
Actual last Estimate current Estimate next Formatted Table

12 months 12 months 12 months Formatted: Font: Bold
Total aircraft movements
% scheduled: Formatted: Justified
% charter: Formatted: Justified
% general aviation: Formatted: Justified
% military: Formatted: Justified
% other: Formatted: Justified
%wide bodied: Formatted: Justified
Total passenger Formatted: Font: Bold

movements: Formatted: Left
Freight tonnes:
Revenue Formatted: Font: Bold
currency: ______ Formatted: Normal, Hyphe
Landing charges: Formatted: Normal, Left, I
Tab stops: Not at 0.76 cm
Parking / Hangarage:
Formatted: Justified
Freight/apron: Formatted: Justified
Rent and concessions: Formatted: Justified
Others: Formatted: Justified
Total revenue: Formatted: Font: Bold

APPENDIX I CHAPTER 5
Runway / Taxiway Details
Length and direction of runways Formatted: Left

Formatted Table
Pavement classification number of runways and Formatted: Left
taxiways
Number of usual approach slope indicators Formatted: Left
installed and if so, on which runway(s)
Are airport markings for runways, taxiways and Formatted: Left

holding points in compliance of ICAO
recommendations?
Who is responsible for runway / taxiway Formatted: Left
marshalling area inspection?
Who is responsible for airport runways, Formatted: Left
approach and taxiway lighting?
What arrangements are there to guide aircraft Formatted: Left
to applicable stands?
Are yellow lines marked on the aircraft stands Formatted: Left
to show where ancillary equipment should be
parked?
How many vehicles are allowed into the Formatted: Font color: Bla
marshalling area? Formatted: Don't keep line
What checks are made to ensure that they are Formatted: Left
road worthy and personnel fully trained? Formatted: Left
Are such vehicles allowed within this area Formatted: Left
fitted with flashing beacons, exhaust flame
traps and two way radio communication?

Emergency Eequipment
What fire fighting equipment is provided at Formatted Table

each airport and indicate who is responsible
for ensuring safety standards are met?
Are permanent fire fighting staff resident and
are they permanently employed as firemen or
do they have other duties in addition?
Briefly outline the type of fire-fighting training
available, and the frequency of training and
practice alerts
How many ambulances are stationed at the
airport?
Is a First Aid room available and what is the
extent of the equipment provided and the
staffing arrangements?
What type of heavy lift equipment is available
in the event of a crash?
Provide details of bird control and dispersal
operations
Provide details of taxiway and runway debris
control and removal operations.

APPENDIX II CHAPTER 5
B. Appendix II Formatted: Font: 1 pt

Appendix II – Refuelling Questionnaire Formatted: Font: Bold
Formatted: Centered
Name Formatted Table

Address
Contact Name
Telephone Number
Facsimile Number
Email
Names / locations of airports serviced Formatted Table
How many of your personnel work airside at

each location?
For how long have you been undertaking

refuelling operations?
Who are your main fuel suppliers?
Who are your main customers?
What type of aircraft do you refuel?
How many aircraft do you refuel annually split Formatted Table

into
Wide body
Narrow body
General aviation
Rotor wing civil
Military
Do you refine fuel and refuel aircraft, or
refuel aircraft only?
What is your estimated gallonage / litreage
for:-
The next 12 months Formatted: Normal
Refined
Refuelled
Avgas
Jet Fuel

CHAPTER 5 APPENDIX II
The last 12 months Formatted: Font: 1 pt

Refined Formatted: Normal
Refuelled Formatted Table
Avgas
Jet Fuel
What percentage, if any, is in or supplied to
the United States / US carriers
Where is the fuel:-
Sstored?
Ccollected from?
Who is responsible for fuel storage?
By what method is refuelling carried out /
delivered to aircraft (underground / hydrant /
bowser / specify if other)?
Is any fuel supplied by:-

Sself-service (credit card sales)?
Oover the counter sales?
If refuelling is carried out by tanker how many
are operated at each location (within airport
confine only)?
Is any distinction made to trucks carrying
different fuels
How frequently are such vehicles operated?
If you operate any other vehicles airside / at
the airport(s) specify what type, for what
purpose and how many for each location.
How frequently are such vehicles operated?
Advise of any other equipment used in
support of your refuelling operations.
Describe your quality assurance programme
for both refining and refuelling including
checks undertaken during the refining
process. Is the same equipment used for the
manufacture of all types of fuel?
If you have any contracts with dealers what
checks are made on their equipment and
procedures?
Who undertakes such checks?
How do you ensure that the latest
technological systems are being used?
Is recurrency training of employees
undertaken, by whom and is there a
procedures manual?
Advise what building(s) you occupy in support
of your refuelling operation and if they are
owned or leased.

APPENDIX II CHAPTER 5
What is your refuelling revenue for

the last 12 months?
the next 12 months?
If you have any other revenue sources please
advise the revenue from each as above
Formatted: Normal
Security Formatted: Font: Bold
What security arrangements / procedures are Formatted Table

in place at each airport relating to your
refuelling operations in the protection of
persons and property?
Who is responsible for such security? If not
yourselves what control do you have over
security arrangements?
Describe your staff vetting procedures
Formatted: Normal
Contractual Formatted: Font: Bold
Do you (endeavour to) adhere to standards Formatted Table

terms of business with supplies / customers?
Provide copy
What is your contractual relationship with your
five main customers / suppliers in terms of
liability / indemnity / insurance?
Do you sub-contract any work? If yes provide
details including the contractual basis in terms
of liability / indemnity / insurance
Are there any other parties with whom you
enter into contracts containing liability /
indemnity / insurance provisions? If so provide
details of the contract party and the contract
terms.
Is refuelling carried out under the Tarbox
agreement?
If you refuel military aircraft what is the
contractual basis?
Formatted: Normal
Claims Formatted: Font: Bold
Arising from your aircraft refuelling operations Formatted Table

Provide details of any accidents / losses, or
claims made against you for the last five years
arising from the operations described above
(insured or otherwise) including amounts(s)
(being) claimed and the claimant(s).

Formatted
Formatted
CHAPTER 5 APPENDIX III
Formatted
Formatted
C. Appendix III Formatted
Formatted
- Premises, Hangar-keeper’s and Products Liability Questionnaire
Formatted
Formatted
Name and address of Insured
Period of Insurance Formatted
Premises Liability Formatted

Location of premises and brief description Formatted
Any other location where service may be Formatted
provided Formatted
Types of aircraft being serviced
Formatted
Number of employees
Formatted
Number of vehicles and brief description,
i.e. whether cars, vans, loaders, refuellers, Formatted
forklift trucks etc. and also whether these Formatted
will be operated airside: Formatted
Hangarkeepers Liability Formatted
Number of Hangars / tie downs and aircraft
Formatted
capacity
Formatted
Average number of Aircrafts inside the
Hangar Formatted
Average Number of Aircrafts outside the Formatted
Hangar Formatted
Average value any one aircraft Formatted
Maximum value any one aircraft Formatted
Average value of aircraft in any one hangar
Formatted
Maximum value of aircraft in any one hangar
Formatted
Maximum value of all aircraft in any one
hangar or on the ramp Formatted
Type of aircraft/engines worked on Formatted
Do you carry out test flights? Formatted
If so state number of flying hours and details Formatted
of pilot(s) experience including number of
Formatted
hours on type.
Formatted
Do you perform any engine-running/bench
testing? If yes, estimated number of hours? Formatted
Products Liability Formatted

Details of all types of activities performed Formatted
split between the following: Formatted
▪i. Sservice and repair Formatted
▪ii. Rrefurbishment
Formatted
▪iii. Ssale of aircraft spare parts
Formatted
▪iv. Ssale of aircraft
▪v. Engine work with type of work Formatted
Breakdown of total actual turnover for the Formatted

previous 12 months and total estimated Formatted
turnover for the forthcoming 12 months split Formatted
32 IC-76Formatted
AVIATION INSURANCE
Formatted
Formatted
APPENDIX III CHAPTER 5
as follows:
i. i ) Ccivil/military Formatted: Font color: Au
ii. ii ) Ffixed-wing/rotor-wing Formatted: Left, Indent: L
iii. iii) Ggeographically by customer base (US Numbered + Level: 1 + Num
Turnover to be shown separately) 1.27 cm
Coverage:
What Limit of Liability is required?
Formatted: Left, Indent: L
Details of standard contractual terms and Numbered + Level: 1 + Num
conditions. at: 1 + Alignment: Left + A
Include details of any hold harmless 1.27 cm
agreements or indemnities which these Formatted: Font color: Au
contracts contain. Formatted: Left, Indent: L
The details Liability & Indemnity Clauses of Numbered + Level: 1 + Num
standard Maintenance Agreement at: 1 + Alignment: Left + A
1.27 cm
Details of any claims, paid or outstanding
over the last 10 years
If not previously insured please give details Formatted: Font color: Au
of any incidents which may have given rise to Formatted: Font color: Au
a claim Formatted: Font color: Au
Any other relevant factors Formatted: Font color: Au

CHAPTER 5 APPENDIX IV
D. Appendix IV Formatted: Font: 1 pt, Fon

– Aviation Fuelling Liability Insurance Formatted: Font: Bold, Fo
Formatted: Centered
Section 1 – Premises Liability Formatted: Font color: Au
The Insurers agree to pay on behalf of the Insured all sums, less any applicable
deductible, which the Insured shall become legally liable to pay as damages for Formatted: Font color: Au
Bodily Injury and/or Property Damage caused by an Occurrence at any airport Formatted: Font color: Au
and / or heliport premises, subject to the Geographical Limits stated in Item 5 Formatted: Font color: Au
of the Schedule, arising out of the Insured’s business of storage and supply of Formatted: Font color: Au
fuel and / or lubricants and/or hydraulic fluids and/or equipment related
thereto, for use in connection with aircraft.
Exclusions Applicable To to Section 1 Formatted: Justified

This Section 1 does not cover Formatted: Font color: Au
1. 1. Bodily Injury or Property Damage caused by the use of any vehicle on the
road in such a manner as to require insurance or security under any Style: 1, 2, 3, … + Start at:
domestic or international law governing road traffic or, in the absence of 0 cm + Indent at: 0.63 cm
any applicable law, to liability arising from the use of any vehicle on the
public highway.
This exclusion does not apply in respect of any such liability arising from
Occurrences within the confines of any airport or heliport premises
(a) (a) if there is no such applicable law Formatted: Justified, Inde

cm, Numbered + Level: 2 +
(b) (b) to the liability of the Insured to pay any amount which is in at: 2.54 cm
excess of
(i) (i) any prescribed limit that is required to be insured where Formatted: Justified, Inde
insurance may be effected to comply with the law whether the cm, Numbered + Level: 2 +
Insured effects an insurance policy in respect of such liability or not Start at: 1 + Alignment: Lef
at: 2.54 cm
(ii) (ii) the limit of liability of the insurance policy effected by the
Insured in respect of such liability
whichever is the greater.
2. 2. Bodily Injury or Property Damage caused by any ships, vessels, craft or Formatted: Justified, Num
aircraft owned, chartered, used or operated by or on account of the Style: 1, 2, 3, … + Start at:
0 cm + Indent at: 0.63 cm
Insured.
3. 3. Bodily Injury or Property Damage arising out of any goods or products Formatted: Justified, Num
manufactured, constructed, altered, repaired, serviced, treated, refined, Style: 1, 2, 3, … + Start at:

APPENDIX IV CHAPTER 5
sold, supplied or distributed by the Insured after such goods or products

have ceased to be in the possession or under the control of the Insured.
4. 4. Liability arising out of the use or ownership of fuel lines, pipelines, fuel Formatted: Font: 1 pt
farms or bunkers or liability arising out of the transportation of fuels by Formatted: Justified
land, sea, pipelines or other methods of conveyance other than on airport or Formatted: Justified, Num
heliport premises. Style: 1, 2, 3, … + Start at:
Section 2 – Products Liability Formatted: Justified
The Insurers agree to pay on behalf of the Insured all sums, less any applicable Formatted: Font color: Au
deductible, which the Insured shall become legally liable to pay as damages for
Bodily Injury and/or Property Damage caused by an Occurrence arising out of
the Products Hazard.
Exclusions Applicable To to Section 2 Formatted: Font color: Au
This Section 2 does not cover Formatted: Font color: Au

1. 1. The cost of repairing or replacing any defective goods or products Formatted: Justified, Inde
manufactured, constructed, altered, repaired, serviced, treated, refined, Numbered + Level: 3 + Num
sold, supplied or distributed by the Insured or any defective part or parts at: 1 + Alignment: Left + A
3.81 cm
thereof.
Formatted: Justified, Inde
2. 2. Loss arising out of improper or inadequate performance, design or Formatted: Justified, Inde
specification but this exclusion shall be deemed not to apply to Bodily Injury Numbered + Level: 3 + Num
or Property Damage insured hereby resulting therefrom. at: 1 + Alignment: Left + A
3.81 cm
General Exclusions
This pPolicy does not cover Formatted: Font color: Au
1. 1. Bodily Injury to any person who at the time of sustaining such Bodily Formatted: Justified, Inde
Injury is engaged in the service of the Insured, or liability for which the Numbered + Level: 3 + Num
Insured or their insurer may be held liable under any employer’s liability, at: 1 + Alignment: Left + A
3.81 cm
workers’ compensation, unemployment compensation or disability benefits
law or any similar law.
2. 2. Property Damage to property owned, rented, leased, or occupied by the Formatted: Justified, Inde
Insured or in the care, custody or control of the Insured other than Property Numbered + Level: 3 + Num
Damage to: at: 1 + Alignment: Left + A
(a) Aaircraft not owned, rented or leased by the Insured, while such aircraft
are on the ground and in the care, custody or control of the Insured in
connection with the Insured’s fuelling operations
(b) Vvehicles not owned, rented or leased by the Insured, while such
vehicles are at any airport and/or heliport premises.

3. 3. The cost of making good any faulty workmanship but this exclusion shall Formatted: Justified, Inde
not apply to Bodily Injury or Property Damage arising out of such faulty Numbered + Level: 3 + Num
workmanship. 3.81 cm
4. 4. Bodily Injury or Property Damage arising out of construction of,
demolition of or alterations to buildings, runways or installations (other than Numbered + Level: 3 + Num
normal maintenance operations). at: 1 + Alignment: Left + A
3.81 cm
5. 5. Liability assumed by the Insured by agreement under any contract unless Formatted: Justified
such liability would have attached to the Insured even in the absence of Formatted: Justified, Inde
such agreement. Numbered + Level: 3 + Num
3.81 cm
6. 6. Loss of use of any aircraft which has not been physically lost or damaged
or destroyed.
7. 7. Claims excluded by the attached at: 1 + Alignment: Left + A
3.81 cm
(a) (a) War, Hi-Jacking and Other Perils Exclusion Clause (Aviation) Formatted: Justified
AVN48B
(b) (b) Noise and Pollution and Other Perils Exclusion Clause AVN46B at: 1 + Alignment: Left + A
Paragraph 1(b) of the above Clause AVN46B shall not apply to pollution 3.81 cm, Don't keep with ne
or contamination of goods or products sold or supplied by the Insured. Formatted: Justified
(c) (c) Nuclear Risks Exclusion Clause AVN38B cm, Numbered + Level: 2 +
at: 3.17 cm
(d) (d) Date Recognition Exclusion Clause AVN2000A
(e) (e) Asbestos Exclusion Clause 2488AGM00003
(f) (f) Contracts (Rights of Third Parties) Act 1999 Exclusion Clause
AVN72.
Defence, Settlement And and Supplementary Payments Formatted: Font color: Au
With respect to such coverage as is afforded under this Policy the Insurers shall Formatted: Font color: Au
1. 1. Have the right and obligation to defend at their cost and expense in the Formatted: Justified, Inde
name of and on behalf of the Insured any suit or other proceedings, even if Numbered + Level: 3 + Num
groundless, false or fraudulent, brought against the Insured. However, the at: 1 + Alignment: Left + A
3.81 cm
Insurers shall have the right to make such investigation, negotiation and
settlement of any claim or suit as they deem expedient. Furthermore, the
Insurers shall pay all expenses incurred by the Insured with the Insurers'
approval (other than the salaries of the Insured's employees and the
Insured's normal office expenses) in respect of any such suit or other
proceedings brought against the Insured.

2. 2. Pay all premiums on bonds to release attachments for an amount not in

excess of the applicable limit of liability of this Policy and all premiums on
appeal bonds required in any such defended suit, but without any obligation
to apply for or furnish any such bonds.
3. 3. Pay all costs taxed against the Insured in any such suit or proceedings
and all interest accruing after entry of judgement until the Insurers have
paid, tendered or deposited in court, such part of such judgement as does
not exceed the applicable limit of the Insurers' liability. The Insurers shall
only be liable to pay for that proportion of the said costs and interest which
the applicable limit of the Insurers' liability bears to the amount of such
judgement.
The amounts incurred under this clause, except settlements of claims and suits, Formatted: Font color: Au
are payable by the Insurers in addition to the limit of the Insurers' liability
stated in the Schedule. However with respect to any coverage which is subject
to an aggregate limit hereunder the Insurers shall not be obligated to defend
any suit nor to pay any costs or expenses after the aggregate limit of liability
under this Policy has been exhausted and in this event the Insured shall have
the right to take over control of proceedings from the Insurers.
Definitions Formatted: Font color: Au
Bodily Injury
The term “Bodily Injury” means bodily injury, sickness or disease, including Formatted: Font color: Au
death at any time resulting therefrom.
Property Damage
The term “Property Damage” means physical loss of or damage to or destruction Formatted: Font color: Au
of tangible property, including the resultant loss of use of such property.
Products Hazard
The term “Products Hazard” means the possession, use, consumption or Formatted: Font color: Au
handling of goods or products (being fuels, lubricants, hydraulic fluids and
equipment related thereto) manufactured, constructed, altered, repaired,
serviced, treated, refined, sold, supplied or distributed by the Insured but only
in respect of such goods or products which are used in connection with aircraft
and only after such goods or products have ceased to be in the possession or
under the control of the Insured.

Occurrence
The term “Occurrence” means an accident or a continued or repeated exposure Formatted: Font color: Au
to conditions occurring during the Period of Insurance which results in Bodily
Injury and/or Property Damage neither expected nor intended from the
standpoint of the Insured.
All liability arising out of such exposure to substantially the same general
conditions shall be deemed to arise from one Occurrence.
Insured
The term “Insured” means the Insured specified in Item 1 of the Schedule and Formatted: Font color: Au
shall include directors, officers and employees of the Insured whilst acting
within the scope of their duties on behalf of the Insured.
Conditions Precedent Formatted: Font color: Au
It is necessary that the Insured observes and fulfils the following conditions Formatted: Font color: Au
precedent before the Insurers have any liability to make any payments under
this Policy.
1. 1. No liability shall be admitted and no admission, arrangement, offer, Formatted: Justified, Inde
promise or payment shall be made by the Insured without the written Numbered + Level: 3 + Num
consent of Insurers who shall be entitled, if they so desire, to prosecute in at: 1 + Alignment: Left + A
cm
the name of the Insured for their own benefit any claim for indemnity or
damages or otherwise against any third party, and shall have full discretion
in the conduct of any negotiations or proceedings, and the Insured shall give
all such information and assistance as Insurers may require.
2. 2. The Insured shall at all times exercise reasonable care in seeing that the Formatted: Justified, Inde
ways, implements, plant, machinery and appliances used in the Insured’s Numbered + Level: 3 + Num
business are substantial and sound and in proper order and fit for the at: 1 + Alignment: Left + A
cm
purpose for which they are used, and that all reasonable safeguards and
precautions against Occurrences are provided and used.
3. 3. The Insured shall comply with all international and government Formatted: Justified, Inde
regulations and civil instructions. Numbered + Level: 3 + Num
cm

General Conditions
1. 1. Upon the happening of any event likely to give rise to a claim under this Formatted: Justified, Inde
Policy or upon receipt by the Insured of notice of any claim or of any other Numbered + Level: 3 + Num
subsequent proceedings, notice in writing with full particulars shall be given at: 1 + Alignment: Left + A
3.81 cm
to the Insurers as soon as possible after same shall come to the knowledge
of the Insured or the Insured’s representative. Every letter, claim, writ,
summons or process shall be forwarded to Insurers immediately on receipt
by the Insured.
2. 2. All notices as specified above shall be given by the Insured to the firm Formatted: Justified, Inde
named for the purpose in Item 8 of the Schedule. Numbered + Level: 3 + Num
3.81 cm
3. 3. If the Insured has other insurance against loss covered by this Policy, the
Insurers shall not be liable for a greater proportion of such loss than the
Limit of Liability stated in the Schedule bears to the limit of indemnity of all Formatted: Justified, Inde
valid and collectible insurance against such loss. at: 1 + Alignment: Left + A
3.81 cm
4. 4. This Policy may be cancelled at any time at the written request of the Formatted: Justified, Inde
Insured or may be cancelled by or on behalf of the Insurers provided 30 days Formatted: Justified, Inde
noticedays’ notice in writing be given. (Where 30 days noticedays’ notice is Numbered + Level: 3 + Num
contrary to law or statute then the minimum period that is permitted shall at: 1 + Alignment: Left + A
be substituted therefor). 3.81 cm
If the Policy shall be cancelled by the Insured, the Insurers shall retain the Formatted: Normal, Inden
proportion of the premium calculated in accordance with the following next
scale.
1 month on risk ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ...
... ... ... ... ... 20% annual premium
2 months on risk ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ...
... ... ... ... ... 30% annual premium
3 months on risk ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ...
... ... ... ... ... 40% annual premium
4 months on risk ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ...
... ... ... ... ... 50% annual premium
5 months on risk ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ...
... ... ... ... ... 60% annual premium
6 months on risk ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ...
... ... ... ... ... 70% annual premium
7 months on risk ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ...
... ... ... ... ... 75% annual premium
8 months on risk ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ...
... ... ... ... ... 80% annual premium
9 months on risk ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ...
... ... ... ... ... 85% annual premium
Over 9 months equivalent to annual. Formatted: Justified, Inde

If the Policy shall be cancelled by Insurers, they shall retain the premium for
the period that this Policy has been in force, calculated pro-rata. Notice of
cancellation by the Insurers shall be effective even though the Insurers make
no payment or tender of return premium.

5. 5. Should there be any material change in the circumstances or nature of

the risks which are the basis of this contract the Insured shall give
immediate notice thereof to the Insurers and no claim arising subsequent to
such change shall be recoverable hereunder unless such change has been
accepted by the Insurers.
6. 6. An Insured shall not in the presentation and furtherance of any claim: Formatted: Justified, Inde
(a) (a) Ddeliberately or recklessly conceal from Insurers any information at: 1 + Alignment: Left + A
which such Insured knows or ought to know might be material to their
consideration of any claim;
cm, Numbered + Level: 2 +
(b) (b) Pprovide to Insurers information, which such Insured knows to be Start at: 1 + Alignment: Lef
false, with respect either to any event relied upon as a cause of loss or at: 3.17 cm
as to the amount claimed; nor
(c) (c) Ootherwise use fraudulent means or devices, including

suppressing a known defence to Insurers’ liability.
In any such event the Insurers shall have the option to refuse to pay the
whole or any part of the claim to such Insured.
In the circumstances set out in sub-paragraph (b) above, Insurers shall also
have the option to:
(i) (i) Tterminate the cover provided by the Policy to such Insured with Formatted: Justified, Inde
effect from the date of the event relied upon for the claim; cm, Numbered + Level: 2 +
at: 3.17 cm
(ii) (ii) Rrecover any sums paid to such Insured in respect of losses Formatted: Justified, Inde
occurring on or after the date of the event relied upon for the claim;
and Level: 2 + Numbering Style
(iii) (iii) Rretain any and all premium paid by such Insured. Formatted: Justified, Inde
If any provision of this condition is in conflict with the law governing the Level: 2 + Numbering Style
Policy it shall be of no effect to the extent of such conflict. Alignment: Left + Aligned a
7. 7. Notwithstanding the inclusion herein of more than one Insured, whether Formatted: Justified, Inde
by endorsement or otherwise, the total liability of the Insurers in respect of Numbered + Level: 3 + Num
any or all Insureds shall not exceed the limit of liability stated in the at: 1 + Alignment: Left + A
3.81 cm
Schedule.
8. 8. This Insurance shall be governed by and construed in accordance with Formatted: Justified, Inde
the law of {Missing} and each party agrees to submit to the exclusive Numbered + Level: 3 + Num
jurisdiction of the Courts of {Missing} in any dispute arising hereunder. at: 1 + Alignment: Left + A
3.81 cm

9. 9. The coverage provided by this Policy shall not be invalidated by any Formatted: Justified, Inde
reasonable act by or on behalf of the Insured for the purpose of protecting Numbered + Level: 3 + Num
persons or property. at: 1 + Alignment: Left + A

AVN 105 22.1.09105 22.1.09 Formatted: Font color: Au


Fuelling Grounding Liability Extension Formatted: Adjust space b

Adjust space between Asian
This Policy is extended to pay on behalf of the Insured all sums which the Formatted: Right: 0 cm, A
Insured shall become legally liable to pay as damages for the loss of use of Asian text, Adjust space bet
aircraft caused by a Grounding following an Occurrence insured under Section 2

of this Policy.
The following definition is added:
The term “Grounding” means the complete and continuous withdrawal from all
flight operations at or about the same time of one or more aircraft due to the
mandatory order of any airworthiness authority because of an existing, alleged
or suspected like defect, fault or condition affecting the safe operation of two
or more aircraft and which results from an Occurrence. Any liability of the
Insured arising from such Grounding shall attach to the Period of Insurance in
which the Occurrence took place.
A Grounding shall be deemed to commence from the date on which the first
such order becomes effective and to continue until the date on which the last
such order relating to the same existing, alleged or suspected like defect, fault
or condition is withdrawn or becomes ineffective.
The definition of “Occurrence” for the purpose of this extension is deleted and
replaced with the following:
The term “Occurrence” means an accident or a continued or repeated exposure

to conditions (other than a Grounding) occurring during the Period of Insurance Level: 2 + Numbering Style
which results in Bodily Injury and/or Property Damage neither expected nor Alignment: Left + Aligned a
intended from the standpoint of the Insured. Adjust space between Latin
between Asian text and num
All liability arising out of such exposure to substantially the same general Formatted: Right: 0 cm, A
Asian text, Adjust space bet
conditions shall be deemed to arise from one Occurrence.
The insurance afforded by this extension will not apply to loss of use of any Level: 2 + Numbering Style
aircraft: Alignment: Left + Aligned a
Adjust space between Latin
(a) (a) Ooccurring during maintenance, routine overhaul or alteration, or whilst between Asian text and num
being modified for purposes other than those relating to Grounding; Formatted: Right: 0 cm, A
(b) (b) Ooccurring during the period that the Insured does not use reasonable Formatted: Indent: Left:
Level: 2 + Numbering Style
diligence to find and eliminate the cause of the loss of use; Alignment: Left + Aligned a
Adjust space between Latin
(c) (c) Ccaused by the culpable failure of the Insured to perform any obligation between Asian text and num
with respect to making available or delivering goods or products to the Formatted: Right: 0 cm, A
operator of such aircraft; Asian text, Adjust space bet
(d) (d) oOwned by, used by or in the possession of the armed services of any Alignment: Left + Aligned a
government; Adjust space between Latin
between Asian text and num
Formatted: Right: 0 cm, A

(e) (e) Iin the care, custody or control of the Insured other than aircraft Asian text, Adjust space bet
temporarily returned to the Insured for modification relating to Grounding; Formatted: Indent: Left:
(f) (f) Aafter it is designated by the manufacturer or required by the direction Adjust space between Latin
of any airworthiness authority to be removed from all flight operations due between Asian text and num
to its certificate of airworthiness being withdrawn by reason of the aircraft’s Formatted: Right: 0 cm, A
safe operational life having been reached or exceeded. Asian text, Adjust space bet
The insurance afforded by this extension shall be subject to a limit of liability of Level: 2 + Numbering Style
……………… any one Grounding and in the aggregate, which shall be included Adjust space between Latin
within, and not in addition to, the limit of liability in respect of Section 2 of this between Asian text and num
Policy. Formatted: Right: 0 cm, A
AVN 106 - 22.1.09
In common with all AICG produced AVN Clauses, this Clause is published by Formatted: Font: Not Itali
AICG,
but it is expressly non-binding and AICG makes no recommendation as to its use
in
particularParticular policies. Insurers are of course free to offer different policy Formatted: Font: Not Itali
wordings
and clauses to their policy holders.
Test Yourself 1
While underwriting an airport risk, which of the below could be part of the
underwriting information?
I. Questionnaire
II. Risk survey
III. Presentation

SUMMARY CHAPTER 5
Summary
Formatted: Font color: Bla
a) Aerospace segment of aviation insurance market comprises of providers of Formatted: Indent: Left:
services and support functions to the aircraft and airline operations. Formatted: Not Highlight
b) Airport risks akin to airline risks tend to be unique in some respects. Being in
the nature of mega risks with significant liability limit exposures, they may Formatted: Not Highlight
be subjected to risk survey. Apart from the usual questionnaire, risk survey Formatted: Not Highlight
and presentation could be part of the underwriting information.
c) Airport operation could be divided into sub-units in order to exercise control Formatted: Not Highlight
and to facilitate organisational structure that promotes risk management.
d) In order that standardisation and harmonisation among various tasks and Formatted: Not Highlight
activities is achieved, airports usually have operations manual.
e) The International Civil Aviation Organisation (ICAO) developed a Formatted: Not Highlight
comprehensive framework for safety management for States, airlines and
airports and service providers, known as Doc. 9859 Safety Management
Manual (SMM).
f) Some of the safety metrics as applicable to an airport system could be for: Formatted: Not Highlight
Runway accidents, Runway incursions, Bird strikes, Number of incidents of
passenger, Public and occupational injuries and the like. Formatted: Font color: Au
g) Airport location could play an important role in case of wild life based risks. Formatted: Not Highlight
Airports need to create hostile habitat for wildlife and birds while complying
with relevant regulations.
h) Some of the factors that can contribute to risk mitigation include: Design Formatted: Not Highlight
and signage improvements, Deployment of technological solutions Formatted: Not Highlight
strengthening reporting systems, Better pilot reporting and air traffic
control support to pilots for better aeronautical decision making. The most
important is the culture that builds adequate safety margin in all Formatted: Not Highlight
operations. Formatted: Not Highlight

i) In case of an airport that is outsourcing and contracting out, it becomes Formatted: Not Highlight
important to know such activities and level of risk transfer achieved with
reference to such outsourced entity or (sub) contractors.
j) If any construction activity is envisaged, it becomes important to know how Formatted: Not Highlight
close these are going to be carried out to aircraft operations and if it has
any influence on the safety and security.
46 IC-76 AVIATION INSURANCEIC-76 AVIATION INSURANCEIC-76 AVIATION INSURANCE 46

SUMMARY CHAPTER 5
k) NOTAM - a NOTice to AirMan - is a notice or advisory containing information Formatted: Not Highlight
concerning the establishment, conditions or change in any aeronautical
facility, service, procedure or hazard, the timely knowledge of which is
essential to personnel and systems concerned with flight operations.
l) In case air traffic control function is handled by the airport or air traffic Formatted: Not Highlight
control operator seeks insurance, it is important to know: Their location, Formatted: Not Highlight
Areas of sole responsibility and shared responsibility, Interaction with the
military infrastructure, Responsibility for search and rescue co-ordination.
m) A bird strike is usually defined as a collision between a bird and an aircraft Formatted: Not Highlight
which is in flight or on a take-off or landing roll.
n) The costs related to bird strikes include: Down-time for inspection and Formatted: Not Highlight
repair, Damage, Rescheduling of flights, Cost of alternative means of
transport for passengers and Cost of attendant overnight accommodation
o) The State civil aviation authority (CAA) is required to ensure that any Formatted: Not Highlight
procedures in the airport certification manual relating to bird / wildlife
control are developed and implemented as part of the aerodrome safety
management system (SMS).
p) There is the usual risk of fuel vehicles hitting aircraft and causing damage or Formatted: Not Highlight
destruction. Apart from the apparent risk of damage or destruction of
aircraft by fire caused during or as a result of refuelling, there is also the
risk of fuel contamination leading to engine failure / damage and potential
aircraft crash.
q) Maintenance, Repair, and Overhaul (MRO) operations provide the technical Formatted: Not Highlight
and maintenance support for general aviation as well as airlines.

Answer 1
The correct answer is IV.
While underwriting an airport risk, following could be part of the underwriting

information:
i. Questionnaire Formatted: Numbered + L

ii. Risk survey and … + Start at: 1 + Alignmen
Indent at: 0.63 cm
iii. Presentation
Question 1
_______________ is a notice or advisory containing information concerning the

establishment, conditions or change in any aeronautical facility, service,
procedure or hazard, the timely knowledge of which is essential to personnel
and systems concerned with flight operations.
I. NOTARY
II. FLOATAM
III. NOTAM
IV. GOTAM
Question 2
Formatted: Font: Not Bold
A bird strike is usually defined as a collision between a bird and an aircraft Formatted: Normal, Numb
which is __________.
I. In flight Formatted: Font: 8 pt
II. On a take-off Formatted: Font: 10 pt

III. On a landing roll Formatted: No bullets or
IV. Any of the above
Question 3
Formatted: Normal, Numb
The __________ developed a comprehensive framework for safety management 0 cm + Indent at: 0.63 cm
for States, airlines and airports and service providers, known as Doc. 9859 Formatted: Font: 8 pt
Safety Management Manual (SMM).
I. FAA
II. ICAO
III. DGCA
48 IC-76 AVIATION INSURANCEIC-76 AVIATION INSURANCE 48
IV. United Nations
Answer 1

NOTAM is a notice or advisory containing information concerning the
establishment, conditions or change in any aeronautical facility, service,
procedure or hazard, the timely knowledge of which is essential to personnel
and systems concerned with flight operations.

A bird strike is usually defined as a collision between a bird and an aircraft
which is in flight or on a take-off or landing roll.
Answer 3

The International Civil Aviation Organisation (ICAO) developed a comprehensive
framework for safety management for States, airlines and airports and service
providers, known as Doc. 9859 Safety Management Manual (SMM). Formatted: Font: 11 pt

CHAPTER 6
AVIATION LAW
In this chapter we will learn about the evolution of aviation law through various
conventions and protocols. We will also learn about various laws governing third
party liability. Towards the end of the chapter we will look at some
international bodies like IUAI, IATA and ICAO, their mission, objectives etc.
Learning Outcomes
A. Conventions and protocols governing aviation law

CHAPTER 6 CONVENTIONS AND PROTOCOLS GOVERNING AVIATION LAW
A. Conventions and protocols governing aviation law
1. History of aviation law
a) Roman times
Aviation law can possibly be traced back to Roman times. The issues relating
to right over air space are reflected in maxim "Cuiusestsolum, eiusestusque
ad coelum" (who owns the land, owns even to the skies). Air law in late 18th
century related to balloon flights. Restriction on balloon flights and
requirement of parachutes to be carried on balloons were earlier
regulations.
b) French regulation
Air law can be considered to be born with a French regulation in 1784

prohibiting the balloons to fly without previous permit. It is believed that
the first aviation liability case occurred under tort law in 1822 (much before
Wright Brothers could fly) in the United States. This involved a balloon crash
landing in a garden. The operator of the balloon was held liable for damage
to property done by the balloon as also damage done by people who tried to
rescue the balloonist.
c) First conference on air law
The first conference on Air Law was held in France in 1889. Increase in air
traffic over France had caused concern. It was agreed to prohibit launching
of projectiles and explosives from balloons or any other method of similar
nature by the contracting Powers.
d) Paris convention
Convention of Paris was held in 1919 which focused on air navigation. It

recognised total sovereignty of each contracting nation over the airspace
above its territory and provided for aircraft to transit above the territories
of contracting nations subject to the terms of the convention. Contracting
nations could determine the routes to be followed by aircraft when flying
over them. It also aimed at ensuring equality among contracting parties.

CONVENTIONS AND PROTOCOLS GOVERNING AVIATION LAW CHAPTER 6
2. Conventions and protocols governing aviation law
Aviation law comprises all of the aspects of law: criminal, administrative, civil,
and mercantile.
Evolution of international aviation law following the emergence of fixed wing

aircraft and commercial air carriers can be seen from the following conventions
and protocols:
a) The Warsaw Convention (1929)

b) The Hague Protocol (1955)
c) The Guadalajara Convention (1961)
d) The Montreal Inter-carrier Agreement (1966)
e) The Guatemala City Protocol (1971)
f) The 1975 Montreal Protocols
g) The IATA and ATA Inter-Carrier Agreements (1997)
h) The 1999 International Conference on Air Law
i) The Montreal Convention of 1999
Diagram 1: Evolution of International Aviation Law through Conventions and

Protocols

i. Adoption of convention
Various conventions are formulated at the relevant conference by various

members present and signed by them. These are then left open to all the
states for signature. Based on the required number of states (decided at the
convention, say 30 states) ratifying and adopting the convention, the
convention comes into force for the states that have signed and adopted it.
The convention then is effective among the states that are parties to the
convention. Other states then can join the convention. Other states joining
later are required to sign the relevant instrument of ratification and deposit
it with the depositary as determined by the convention. Convention then
becomes applicable to the state so depositing the instrument after pre-
determined number of days, say 60 or 90 days.
ii. Denouncing of convention
Similarly any state can denounce the convention by notifying the depositary
and such denunciation becomes effective after pre-determined number of
days, say 90 or 180 days, as per convention.
Chicago Convention appreciated the immense contribution that international

civil aviation could make towards friendship and understanding among the
nations and peoples of the world, it also recognised the need for avoiding
friction and promoting co-operation between nations and peoples. With the
objective of developing international civil aviation in a safe and orderly
manner with equality of opportunity and sound and economic operation, the
Chicago Convention agreed on various regulations and arrangements.
i. Aircraft Act
ii. Aircraft Rules
iii. The Carriage by Air Act, 1972
iv. Notification regarding application of the Carriage by Air Act, 1972, to
carriage by air which is not international . . .
v. The Carriage by Air (Amendment) Act, 2009
vi. The Anti-Hijacking Act, 1982
vii. The Suppression of Unlawful Acts Against Safety of Civil Aviation Act,
1982
It needs to be borne in mind that various international conventions, through

their goal of achieving uniformity in liability legal systems across countries
in regard to international air travel accidents for passengers, baggage and
cargo, in a very significant measure have contributed to litigation certainty
and better claim estimates and thus finally contributing to providing a
better handle on insurance rating.

a) The Warsaw Convention 1929
The Warsaw Convention came into being when the airline industry was in its
infancy and needed protection from significant passenger liability awards in
order to survive and grow. It was a result of two international conferences,
i. The first held in Paris in 1925 and
ii. The second in Warsaw in 1929 and four years of work by the interim
Committee International Technique d'Experts Juridique Aeriens formed
at the Paris Conference
The Convention had two primary goals:
i. Harmonising procedures for dealing with claims arising from

international air transport and
ii. To limit air carrier liability from accidents such that airlines could
survive and grow their air transport operations
The Warsaw Convention was signed at Warsaw in 1929 and came into force
in 1933. It comprises of 41 articles under five chapters. There used to be
quite huge variations in liability assumed by and imposed on air carriers
arising out of airline accidents. Some carriers then used to exclude liability
in the tickets.
The convention recognized the advantage of uniformly regulating the

conditions of international transportation by air and of the liability of the
carrier. It covers air carrier liability arising out of an accident in regards to
passengers, baggage and cargo. While it created a presumption of air carrier
liability, in order that fledgling air carrier industry was financially protected
from high liability awards, it simultaneously substantially limited the
liability. The convention created an exclusive remedy arising out of airline
accidents. It facilitated the functioning of air carrier industry with uniform
rules and helped avoid conflict of law problems since international air travel
created jurisdictional issues.
This Convention applies to all international carriage of persons, luggage or

goods performed for reward and gratuitous carriage by aircraft performed
by an air transport undertaking, even if performed by a state or a legally
constituted public body. The convention does not apply to carriage
performed under the terms of any international postal Convention. This was
to ensure that there was no conflict with international postal convention.

International carriage here means any carriage in which:
i. The place of departure and the place of destination (irrespective of a

break in the carriage or a trans-shipment) are situated within the
territories of two signatory countries to the convention or
ii. Within the territory of a single signatory country with a stopping place
outside that signatory country. For the convention to be applicable, the
travel has to be international as per this definition. The following
examples will clarify the application:
(a) If Country A and Country B, both are signatories to the convention, a

flight originating in either countries and terminating in the other
country will be international travel.
(b) A flight originating in a Country P (signatory to the convention) and

terminating in Country P with an agreed stopping place in Country Q
(irrespective of the signatory status of Country Q) will be
international travel.
(c) A flight originating in a Country X (not a signatory to the convention)

and terminating in Country X with an agreed stopping place in
Country Y (irrespective of the signatory status of Country Y) will not
be international travel.
Thus a return flight from signatory country is an international travel

and a return flight from non-signatory country is not international
travel.
(d) A flight originating in Country P (signatory to the convention) and

terminating in Country P with no agreed stopping place outside
Country P will not be international travel since it then becomes a
domestic travel.
Since international travel routinely involved change of flights and carriers,

the convention disregarded carriage performed by several successive air
carriers if the parties to the contract of carriage regarded it as a single
operation irrespective of number of contracts or tickets. Successive carrier
thus was deemed to be contracting carrier for the part of carriage he
undertook.

Convention imposed an obligation on the carrier to issue a passenger ticket

and a luggage ticket for checked-in luggage with stipulated particulars and a
statement that the carriage is subject to the rules relating to liability
established by this Convention. Carrier by not delivering the relevant ticket
would not be entitled to avail of liability limiting provisions of the
convention, convention being applicable otherwise. Similarly air
consignment note should carry the statement mentioning the applicability of
this convention failing which the carrier would not be entitled to avail of
liability limiting provisions of the convention, convention being applicable
otherwise.
Article 17 of the convention imposed liability on the carrier for damage

sustained in the event of the death or wounding of a passenger or any other
bodily injury suffered by a passenger, if the accident which caused the
damage so sustained took place on board the aircraft or in the course of
embarking or disembarking. Similarly, the carrier is liable for damage
sustained through loss of or of damage to any registered luggage or any
goods, if the occurrence which caused the damage took place during the
carriage by air. Liability is also imposed for delay of passengers, baggage
and cargo.
Liability attaches to the air carrier on international travel due to death,

wounding or any other bodily injury from an accident while on board the
aircraft or during embarkation or disembarkation. The carrier has:
i. Best effort defence (Article 20), i.e. he and his agents took all
necessary measures to avoid the damage or that it was impossible to
take such measures and
ii. Contributory negligence defence (Article 21), i.e. if the damage was
caused by or contributed to by the negligence of the injured person.
Thus, willful misconduct of the carrier will expose him to unlimited
liability award.
i. Liability per passenger is limited to the sum of 125,000 francs with

option for the air carrier to agree to any higher amount.
ii. For registered luggage and of goods, the liability is limited to a sum of
250 francs per kilogram, unless a special declaration of the value is
made.
iii. For hand baggage, the liability is limited to 5,000 francs per passenger.
Any limitation of liability lower than that stipulated by the convention is

void and limits under convention will prevail.

An action for damages must be brought either before the Court having
jurisdiction where the carrier:
i. Is ordinarily resident, or
ii. Has his principal place of business, or
iii. Has an establishment by which the contract has been made or
iv. Before the Court having jurisdiction at the place of destination. This
action must be brought within two years for death or injury claim, three
days for loss of or damage to luggage, seven days for loss of or damage
to cargo and fourteen days for delay.
In case of carriage by multiple carriers, the actual carrier at the time of

personal injury will be responsible. For luggage and cargo, each carrier will
be jointly and severally liable.
b) Hague Protocol 1955
The protocol sought to fine-tune the provisions of the Warsaw Convention

and made the following changes:
In line with evolution of liability attribution, willful misconduct was

replaced with an act or omission of the carrier done with intent to cause
damage or recklessly and with knowledge that damage would probably
result.
Liability per passenger was revised to the sum of 250,000 francs (approx.
USD 16,600) with option for the air carrier to agree to any higher amount.
Period for bringing action was revised from three days to seven days for loss
of or damage to luggage, from seven days to fourteen days for loss of or
damage to cargo and from fourteen days to twenty-one days for delay.
While damage to cargo was to be assessed with reference to only damaged

packages based on weight out of the whole consignment under Warsaw
Convention, Hague Protocol recognised that damaged packages could affect
the usefulness of non-damaged packages when the entire consignment is
intended to put to use together. Thus, liability could be determined with
reference to entire consignment, if the circumstances so warrant. Protocol
also provided for awarding of litigation expenses.
c) Guadalajara Supplementary Convention 1961
It was later realised that the Warsaw Convention did not contain particular
rules relating to international carriage by air performed by a person who is
not a party to the agreement for carriage, this party being actual carrier. It
needs to be noted that successive carrier is different from actual carrier.
Successive carrier is one who along with other parties considered the
international travel as single operation.

If an actual carrier performs the whole or part of carriage, he too will be

governed by the Warsaw Convention, the contracting carrier for the whole
of the carriage and actual carrier solely for the carriage which he performs.
Thus claimant can bring action for damage during carriage by actual carrier
against either contracting carrier or actual carrier or both. In such
situations, the carrier facing action can require the other carrier to be
joined in proceedings.
Any agreement for a higher liability limit or waiver by contracting carrier

does not bind actual carrier unless he also agrees.
d) The Montreal Inter-carrier Agreement 1966
There was dissatisfaction in the USA with low levels of liability limits under
the Warsaw Convention and amended Hague Protocol 1955 and USA issued a
notice to denounce Warsaw Convention in 1965. Before the denunciation
could become effective, USA government reached a private agreement with
major international air carriers whereby the air carriers agreed to increase
the limit to USD 75,000 per passenger against proven damages and to waive
the defence of “all necessary measures” under Article 20 of the Warsaw
Convention. These changes were incorporated in the tickets by carriers. This
however only applied to travel to or from USA.
e) Guatemala City Protocol 1971
This Protocol held air carriers strictly liable for up to 1,500,000 francs
(US$100,000) of proven damages in the event of passenger death or injury,
but this amount was an unbreakable limit on liability per passenger under
the protocol. However, the Guatemala City Protocol expressly granted the
States the right to create supplementary compensation system without in
any way imposing additional financial or administrative burden on carriers
apart from that under the convention and protocol. Effectively this allowed
supplementary compensation system based on contributions from all
passengers.
f) Additional Montreal Protocols 1975
In 1975, four Additional Protocols were signed at Montreal known as:
i. Additional Protocol No. 1, 1975 (MP1);

ii. Additional Protocol No. 2, 1975 (MP2);
iii. Additional Protocol No. 3, 1975 (MP3) and
iv. Additional Protocol No. 4, 1975 (MP4)
Additional Protocols 1 and 2 related to the conversion from a gold standard

to the Special Drawing Rights (an artificial ‘basket’ currency developed by
the International Monetary Fund) for purposes of calculating all monetary
limits on liability under the Warsaw Convention and the Hague Protocol.

Provisions of the Guatemala City Protocol were incorporated into Additional

Protocol No. 3 to amend the Hague Protocol providing for supplementary
compensation system.
Additional Protocol 4 adopted electronic records (air waybills) for cargo

consignments and modernised the cargo liability regime.
Article 18 of MP4 expressly provides for the exceptions to carrier liability

against inherent defect, quality or vice of cargo, defective packing, an act
of war or an armed conflict and an act of public authority. MP4 recognises
the common law doctrine of comparative fault of all parties to a dispute for
determining the degree of culpability for each party.
MP4 abolished the concept of "Willful Misconduct" for overriding the Warsaw
Convention limit of USD 20 per kilo and replaced it with 17 Special Drawing
Rights (SDRs1) per kilo of damaged goods. It also modifies the rules
regarding the obligation of a claimant to produce evidence making them
fair.
With passage of time, the limits were found to be inadequate. In 1992,

major Japanese air carriers agreed to waive any cap on liability limit and
absolute liability of Japanese carriers up to SDR 100,000.
g) IATA Inter-Carrier Agreement 1995
The limits under the Warsaw Convention remained unchanged since 1955
under Hague Protocol. In 1995, members of the IATA entered into IATA
Inter-carrier Agreement and in 1996 entered into Measures to Implement
IATA Inter-carrier Agreement. These effectively led to global uniformity in
approach to air carrier liability, waiver of defenses up to SDR 100,000 and
no cap on liability for compensatory damages. This agreement gave primacy
to the compensatory damages as awarded by the domicile of the passenger.
h) Montreal Convention 1999
Montreal Convention 1999 aims at replacing the Warsaw Convention 1929

and various amendments to it, collectively known as Warsaw System.
Various amendments and protocols were variously adopted by different
1
An SDR is a unit of the International Monetary Fund and is linked to a basket of currencies. It fluctuates daily along with
the international currencies in the basket on daily basis. The currency value of the SDR is determined by summing the
values in U.S. dollars, based on market exchange rates, of a basket of major currencies (the U.S. dollar, Euro, Japanese yen,
and pound sterling). The SDR currency value is calculated daily (except on IMF holidays or whenever the IMF is closed for
business) and the valuation basket is reviewed and adjusted every five years. The IMF decides on changes in the relative
weights of the currencies in the Special Drawing Rights (SDR) basket based on the share of each currency in world exports
of goods and services and international reserves. In August 2013, the value of 1 SDR is approximately USD 1.50.

countries and thus, disparities arose when different countries were at

different stages of ratification of these amendments. Some countries
skipped some amendments and ratified the later amendments while not
adopting the former ones creating gaps. It was thus found desirable to
comprehensively review the international aviation liability regime and
Montreal Convention was formulated in 1999 which came into effect on 4th
November 2003.
Warsaw Convention did immensely contribute to lay down significant

uniformity and voluminous case law to harmonise international aviation law.
But with various advancements in technology and practices, need for
consolidation was felt. Montreal Convention consists of 7 chapters and 57
articles. While the focus of Warsaw Convention was to protect the fledgling
aviation industry, the focus of Montreal Convention is on ensuring protection
of the interests of consumers in international carriage by air.
As of May 2015, European Union and 111 other countries ratified the
Montreal Convention. India was the 91st country to ratify the Montreal
Convention and it became effective from 1st July 2009. The adoption of
Montreal Convention took place by way of enactment of The Carriage by Air
(Amendment) Act, 2009.
This Convention applies, like Warsaw Convention, to all international

carriage of persons, luggage or goods performed for reward and gratuitous
carriage by aircraft performed by an air transport undertaking, even if
performed by a state or a legally constituted public body. The convention
does not apply to the carriage of postal items. The liability for mail is
subject to ‘the rules applicable to the relationship between the carriers and
the postal administrations’.
The convention thus essentially applies to international commercial

operations. Non-commercial operations involving usage such as private,
pleasure and business does not fall under the purview of the convention. At
present, there is no law in India which stipulates minimum liability insurance
requirements on the part of non-commercial aircraft operators. Commercial
operators buy coverage in line with the conventions and as required under
leasing and financing agreements, whichever is more comprehensive and
extensive
Definition of “international carriage” is identical to that of Warsaw

Convention. The convention recognizes the use of electronic means for
storage of passenger ticket information and air way bill and adoption of
alternative means for storage in place of paper tickets / air way bill.
Carriers are required to give notice of applicability of the convention in the
document of travel. However, omission to give notice does not impact the
applicability of convention or limitation of liability.
i. Article 17

Article 17 of the convention imposing liability on the carrier for death or

bodily injury suffered by a passenger is similar to that of Warsaw
Convention. The carrier is liable for damage sustained in case of death or
bodily injury of a passenger upon condition only that the accident which
caused the death or injury took place on board the aircraft or in the course
of any of the operations of embarking or disembarking. Similarly carrier is
liable if loss or damage to baggage happened while baggage was in the
charge of the carrier. The carrier would not be if and to the extent that the
damage resulted from the inherent defect, quality or vice of the baggage.
Accident is not defined under the Warsaw Convention or Montreal

Convention. One thus needs to look at various court judgments to
understand what an accident under these conventions is. Generally, the
courts have held an accident to be unusual or unexpected event external to
the passenger. The event should not be such as would be usual or expected
feature of air travel.
The issue came up before U.S. district court for the district of Puerto Rico in
the case of García Ramos v. Transmeridian Airlines. A lady passenger was
injured when a male passenger near the window seat attempted to exit the
row of seats and fell onto her fracturing her arm. The court observed that
the damage had been caused by an “unusual or unexpected event external
to the passenger”. At the same time, the court remarked that since the
accident was not caused by an abnormality in the aircraft’s operation, the
claim could not proceed. However any object falling from overhead bins
would be held to be accidents since such falling is related to aircraft
operation. It would be for consideration if airlines followed the best
practice of warning the passengers while opening he overhead bins and if a
passenger contributed to the injury sustained by him. If however, a
passenger opens the bin and falling object injures fellow passenger while
such action is not supervised by cabin crew, the liability would most likely
fall on the airline.
In Rafailov v El Al Israel Airlines, the court ruled that a passenger’s slip-and-

fall on a plastic blanket bag was not an accident since “[a]fter four hours in
flight, it would seem customary to encounter a certain amount of refuse on
an airplane floor, including blanket bags discarded by passengers who had
removed the bag’s contents in order to use the blanket.”
In Wipranik v. Air Canada, it was ruled that a “jolt” from a passenger in the
seat ahead of the plaintiff’s seat, which caused the tray table to shake and
tea to spill on the plaintiff, did constitute an “accident” since it may be
common for an airline seat to shake when its occupant moves around, it is
not common for beverages placed on the tray table behind that seat to be so
jolted by the movement that they fall onto another passenger. The tray’s
failure to securely hold the beverage is unexpected.

Cabin crew’s failure to extend assistance would be considered an accident.

In Olympic Airways v. Husain, Husain, an asthmatic passenger died after a
stewardess refused to move his seat away from the smoking section on an
international flight. This was after the passenger explained his health
problems and repeatedly asked for change of seat away from smoking
section. It was ruled that the airline’s rejection of an explicit request for
assistance is an unusual or unexpected event and thus constituted an
accident.
The accident could occur on board the aircraft or in the course of any of the
operations of embarking or disembarking to trigger a liability claim under
the convention. In case of an airline, the process of embarking can
potentially begin well before the time of reaching the ladder or aerobridge
and process of disembarking would end much after moving away from the
aircraft, both depending upon the facts and circumstances of each case.
Thus, coverage granted to an airline operator is much broader than that
offered to a general aviation operator.
Similarly embarking and disembarking is not defined. However whether the

passenger is involved in embarking or disembarking can be decided based on
the nature of activity the passenger is involved in, the degree of control
exercised by the airline on passenger movements, imminence of embarking /
disembarking activity and passenger’s proximity to the terminal gate.
It is well established that if a passenger had a claim under article 17 against

the carrier, there is no concurrent common law remedy. This is because
article 24(2) declares that in the cases covered by article 17 any action of
damages, however founded, can only be brought subject to the conditions
and limits set by the Convention.
This leads to the conclusion that if there is no claim under Article 17 from
damage from international carriage by air due to the fault of the airline,
there is no remedy outside the convention.
It is widely believed and accepted that where there is a wrong, there must
be a remedy. This forms the foundation for much of the common law.
However, any system of law may not be able to compensate persons for all
losses in whatever circumstances. There are infinite varieties in
circumstances and not all of them can be covered by the law. The carrier
loses the freedom to contract out of liabilities under the convention and in
the bargain gets the well-defined situations where he is liable
ii. Article 18
Article 18 is concerned with the carrier’s liability for destruction or loss of

or damage to registered baggage or cargo. Article 19 provides for damage
caused by delay. Article 20 provides: “The carrier is not liable if he proves
that he and his servants or agents have taken all necessary measures to

avoid the damage or that it was impossible for him or them to take such
measures.” This is an important defense for airline operator
iii. Article 21
As per Article 21, a carrier cannot exclude or limit liability for compensation
for death or injury of passengers up to 100,000 SDRs. For compensation
higher than 100,000 SDRs, the carrier has the defence that he was not
negligent and took all necessary measures to avoid damage. Availability of
defence to carrier above 100,000 SDRs is not available if there is an act or
omission by the carrier done with intent to cause damage or recklessly and
with knowledge that damage would probably result.
iv. Article 22
As per Article 22, liability for damage caused by delay in the carriage of
persons is limited to 4,150 SDRs for each passenger. For destruction, loss,
damage or delay of baggage, it is limited to 1000 SDRs for each passenger
unless the passenger had made a special declaration. For destruction, loss,
damage or delay of cargo, it is limited to 17 SDRs per kilogramme unless the
consignor had made a special declaration.
Passenger can enforce his rights against carrier in respect of lost baggage if
baggage is not delivered in twenty-one days or carrier admits loss of
baggage. The carrier is liable for damage due to delay in the carriage by air
of passengers, baggage or cargo. However he retains best effort defence.
Period for bringing action is the same as that of Hague Protocol, viz. seven
days for loss of or damage to checked baggage, fourteen days for loss of or
damage to cargo and twenty-one days for delay. Limitation period for
bringing an action under the convention is two years.
On December 26, 2008, Narayanan boarded a British Airways flight from Los
Angeles, California, to Bangalore, India, with an intermediate stop in
London, England. Narayanan suffered from an advanced-stage lung disease
and required supplemental oxygen during the flight. With advance
intimation to the airline, airline had assured Narayanan that he would have
access to his supplemental oxygen. However, during the flight from Los
Angeles to London, he was denied access to this oxygen. In London,
Narayanan had sought medical attention and was cleared to continue onto
Bangalore. He underwent further medical treatment in India and the United
States later on. However, his health continued to deteriorate and, on June
11, 2009, Narayanan died. His heirs complained that the denial of oxygen
aboard the flight hastened his death. The action was filed on March 7, 2011
which was more than two years from the date of the flight’s arrival, but
within two years of Narayanan’s death. It was ruled that the claim was
time-barred though the claim which had not yet accrued at the time that
the Convention’s two-year limitations period was triggered. The verdict was
upheld on appeal with a dissenting opinion.

v. Article 24
Article 24 provides for automatic revision of liability limits every five years
based on review of inflation factor if such review indicates that inflation
factor is more than 10%. Following the first review of limits of liability
conducted by ICAO in accordance with Article 24, the revised limits,
effective as of 30 December 2009, are:
(a) 19 SDRs per kilograms in the case of destruction, loss, damage or delay
in relation to the carriage of cargo
(b) 1,131 SDRs for each passenger in case of destruction, loss, damage or
delay with respect to baggage
(c) 4,694 SDRs for each passenger in relation to damage caused by delay in
the carriage of persons
(d) 113,100 SDRs for each passenger for damage sustained in case of death
or bodily injury of a passenger (for the first tier)
In 2014, ICAO conducted its second five-year review of the liability limits.
At the review, since the inflation factor was determined to be below the
threshold stipulated to trigger an adjustment, the limits of liability has been
kept at the level mentioned above for the next five years
Carrier is required to make advance payment in case of passenger death or

injury claim as per national law without delay to meet the immediate
economic needs of such persons. Such advance payments do not constitute
recognition of liability.
Any limitation of liability lower than that stipulated by the convention is

void and limits under convention will prevail. Any provision in the contract
of carriage or any special agreements which defeat the provisions of this
Convention shall be null and void. Under Article 25, a carrier can agree to
higher limits of liability under contract of carriage than those provided
under the Convention or no limits
vi. Article 29
As per Article 29, all claims in regard to passengers, baggage and cargo
under contract or in tort or otherwise shall be subject to this Convention.
There is no provision for recovery of punitive, exemplary or any other non-
compensatory damages under this convention. The convention thus only
provides for recovery of compensatory damages and provides limits
whatever the cause of action.

Montreal Convention continues with the four jurisdictions, viz. before the
Court having jurisdiction where the carrier:
(a) Is domiciled, or
(b) Has his principal place of business, or
(c) Has an establishment by which the contract has been made or
(d) Before the Court having jurisdiction at the place of destination
However for claims arising from the death or injury of a passenger, fifth
jurisdiction is made available, viz. the territory of a signatory nation in
which the passenger has his or her principal and permanent residence and to
or from which the carrier operates services for the carriage of passengers by
air, either himself or through another carrier and in which the carrier
conducts its business from premises leased or owned by the carrier or by
another carrier with which it has an agreement. It is noteworthy that the
nationality of passenger is not material.
vii. Article 35
As per Article 35, the right to damages shall be extinguished if an action is

not brought within a period of two years, reckoned from the date of arrival
at the destination, or from the date on which the aircraft ought to have
arrived, or from the date on which the carriage stopped.
viii. Article 36
Article 36 deals with cases of successive carriage. In the case of carriage to

be performed by various successive carriers, each carrier is subject to the
provisions of the Convention. In the case of successive carriage, the
passenger or any person entitled to compensation in respect of him or her
can take action only against the carrier which performed the carriage during
which the accident or the delay occurred unless the first carrier has
assumed liability for the whole journey by express agreement. As regards
baggage or cargo, the passenger or consignor will have a right of action
against the first carrier, and the passenger or consignee who is entitled to
delivery will have a right of action against the last carrier, and further, each
may take action against the carrier which performed the carriage during
which the destruction, loss, damage or delay took place. These carriers will
be jointly and severally liable to the passenger or to the consignor or
consignee.
ix. Article 40
Under Article 40, if the carrier performing the carriage (actual carrier) is
different from the carrier who contracted to perform the carriage

(contracting carrier), both the contracting carrier and the actual carrier
shall be subject to the provisions of the Convention, the former for the
whole of the carriage contemplated in the contract and the latter solely for
the carriage which it performs
x. Article 50
Article 50 of the Montreal Convention requires parties to ensure that air

carriers are adequately insured to cover liability under that Convention.
Montreal Convention provides for exclusion of international carriage by air
by the state for non-commercial purposes in respect to its functions and
duties as a sovereign State from the purview of this convention as per
Article 57(a) and most countries who have ratified the convention have
availed of this exclusionary provision.
In different disputes and court cases, it has come up for discussion if

Warsaw Convention and Montreal Convention provide the exclusive cause of
action and sole remedy for a passenger who claims against the carrier for
loss, injury and damage sustained in the course of, or arising out of,
international carriage by air.
In line with the express purpose of international convention and pertinent

legislation derived therefrom of harmonizing the legal exposures and
compensation for aviation accidents, these legal remedies are the sole and
exclusive in nature and no remedy under tort or common law would be
available as far as airlines are concerned. To the extent legislation
pertaining to domestic travel is based on Montreal Convention, again it
should provide a sole and exclusive remedy to the passengers.
In Sidhu and Others (Miss Kiran Sidhu, Miss Harjinder Sidhu and Mr. Ravinder
Sidhu) vs British Airways Plc and Judith Helen Abnett (known as Sykes) vs British
Airways Plc, [1997] A.C. 430, on appeal it was held that convention offers sole
and exclusive remedy for a passenger on an international carriage by air.
These passengers were travelling on a scheduled international flight BA149

from London Heathrow for Kuala Lumpur (via Kuwait and Chennai) on 1
August 1990. The flight landed in Kuwait for refuelling on 2 August 1990.
This was about five hours after Iraqi forces had invaded Kuwait in the Gulf
War. The passengers had disembarked into the transit lounge at the airport
terminal and the airport was attacked by Iraqis and taken over by Iraqi
soldiers. All the passengers and crew were taken prisoner by the Iraqis. They
were detained and later taken to Baghdad, resulting in a month long
captivity. They were later on released and returned to the United Kingdom.
The Sidhus claimed damages for their captivity which lasted about a month
and for personal injury under common law and based their claim on airline’s
negligence since the flight landed in Kuwait after the beginning of Gulf
War. It was well known that relations between Iraq and Kuwait had been

deteriorating for some days prior to the departure of the flight from
Heathrow and airline knew or ought to have known about hostilities and
thus erred in ignoring the risk involved in landing at Kuwait.
Mrs. Judith Helen Abnett, made claim under Article 19 of the Convention for
damage occasioned by delay. She made claim for damages against physical
and psychological injuries comprising stress and anxiety and bodily injury by
way of loss of weight and eczema, basing her remedy entirely on negligence
at common law. She also claimed damage due to psychology injury in
captivity and stress and pain from separation from her family. She claimed
at common law for breach of an implied condition of the contract for
reasonable care for her safety. The claim was made after two years of the
return. It was held that the right to damages, if any, was extinguished by
Article 29 of the Convention two years after 2 August 1990 as per
convention.
In both the cases, the claimants made no claim against the airline under
Article 17 of the Convention. It is believed that claimants did not claim
under Article 17 since they believed that there was “no accident” and there
was no “bodily injury”.
The respondents submitted that the Convention provided the exclusive

remedy in respect of claims for damages arising out of international carriage
by air of persons and baggage for reward.
It was held that the Convention excluded recourse to any common law
remedy by a passenger who suffered injury in the course of or arising out of
an international flight.

3. Law governing Third Party Liability
i. Rome Convention 1933

ii. Brussels Insurance Protocol 1938
iii. Rome Convention 1952
iv. Montreal Protocol 1978
v. General Risks Convention 2009
vi. Unlawful Interference Convention 2009
2009 Convention on Compensation for Damage caused by Aircraft to Third

Parties
This convention modernises the Convention on Damage Caused by Foreign

Aircraft to Third Parties on the Surface (Rome Convention 1952) and the
Montreal Protocol 1978. This convention covers events other than “acts of
unlawful interference” which are offences as per the Convention for the
Suppression of Unlawful Seizure of Aircraft, (Hague Convention 1970), or the
Convention for the Suppression of Unlawful Acts against the Safety of Civil
Aviation, (Montreal Convention 1971).
It addresses compensation for damage to third parties resulting from events

involving an aircraft in flight with the objective of balancing the interests of the
third party victims and the aviation industry. This convention is the sole and
exclusive remedy for such compensation. This convention only applies to an
international flight but does not apply to State aircraft including military,
customs and police aircraft. If the damage is the direct consequence of aircraft
involved in armed conflict or civil disturbance, liability will not attach to the
operator. Liability is limited to compensatory damages and punitive, exemplary
or any other non-compensatory damages are not recoverable.
Definition
Operator here means the person who was making use of the aircraft at the time
the damage was caused. However if control of the navigation of the aircraft is
retained by another person, that person shall be considered the operator.
Third party here means a person other than the operator, passenger or
consignor or consignee of cargo.

States parties shall require their operators or other operators who operates into
their territories to maintain insurance or guarantee covering their liability under
this Convention. The operator liability for damage for each event shall not
exceed:
1 Aircraft having a maximum mass of 500

750,000 SDRs
kilogrammes (kgs) or less;
2 Aircraft having a maximum mass of more than 500
1,500,000 SDRs
kgs but up to 1,000 kgs;
3 Aircraft having a maximum mass of more than
3,000,000 SDRs
1,000 kgs but up to 2,700 kgs;
7,000,000 SDRs
18,000,000 SDRs
80,000,000 SDRs
150,000,000 SDRs
300,000,000 SDRs
50,000 kgs but up to 200,000 kgs;
500,000,000 SDRs
200,000 kgs but up to 500,000 kgs;
700,000,000 SDRs
500,000 kgs
i. If an event involves two or more aircraft operated by the same operator,

the limit of liability in respect of the aircraft with the highest maximum
mass shall apply.
ii. Where two or more aircraft have been involved in an event causing
damage, the operators of those aircraft are jointly and severally liable
for any damage suffered by a third party.
iii. If two or more operators are so liable, the recourse between them shall
depend on their respective limits of liability and their contribution to the
damage.
The owner, lessor or financier retaining title or holding security of an aircraft is

excluded from any liability hereon. Period of limitation is two years from the
date of event causing damage.
Damages due to death, bodily injury and mental injury are compensable.
Damages due to mental injury shall be compensable only if caused by a
recognizable psychiatric illness resulting either from bodily injury or from direct
exposure to the likelihood of imminent death or bodily injury. The limits of
liability apply if the operator proves that the damage was not due to its
negligence or other wrongful act or omission.
It is an important feature of international aviation liability regime that

compensation is available only for bodily injury and not for personal injury.
Thus, the injury has to have a physical aspect to it. Mere psychological injury,
however severe, is most likely to fall outside the ambit of the conventions as
interpreted by the courts
Operator will need to make advance payments if required by the law of the
State where the damage occurred. If damages to be paid exceed the amounts
available, claims in respect of death, bodily injury and mental injury shall first
be paid. The remainder, if any, shall be awarded proportionately among the
claims in respect of other damage.
Action for compensation may be brought only before the courts of the state
party in whose territory the damage occurred or where two states are involved,
the state parties in whose territories aircraft was in or about to leave when the
event occurred. Judgments entered by a competent court shall be enforceable
in any other State Party as applicable. However such enforcement may be
refused:
i. If it would be manifestly contrary to public policy in the State Party

where recognition or enforcement is sought; or
ii. If the defendant was not served with proper notice of the proceedings to
enable him to prepare and submit a defence; or
iii. The judgment was obtained by fraud of any of the parties or
iv. It pertains to a cause of action already decided earlier or
v. Judgment involves exemplary or punitive damages or
vi. Person seeking to enforce judgment does not have the right vested in
him to enforce it
4. Regulation in European Union
Through Council Regulation (EEC) No 889/2002 of May 2002, Montreal

Convention was adopted in European Union.
a) Accordingly, there are no financial limits to the liability for passenger

injury or death. For damages up to 100,000SDRs (approximate amount in
local currency), the air carrier cannot contest claims for compensation.
Above that amount, the air carrier can defend itself against a claim by
proving that it was not negligent or otherwise at fault.
b) In case of passenger and baggage delay, the air carrier is liable for
damage unless it took all reasonable measures to avoid the damage or it

was impossible to take such measures. The liability for passenger delay is
limited to 4,150SDRs and for baggage delay, it is limited to 1000 SDRs.
The air carrier is liable for destruction, loss or damage to baggage up to
1,000 SDRs. In the case of checked baggage, it is liable even if not at
fault, unless the baggage was defective. In the case of unchecked
baggage, the carrier is liable only if at fault.
c) If a passenger is killed or injured, the air carrier must make an advance

payment to cover immediate economic needs, within 15 days. In the
event of death, this advance payment shall be at least 16,000 SDRs.
Council Regulation (EEC) No 2407/92 of July 1992 required air carriers to be

insured to cover liability in case of accidents, in particular in respect of
passengers, baggage, cargo, mail and third parties, albeit without specifying
minimum amounts and conditions of insurance.
The European Union issued Regulation EC No 785/2004 on insurance

requirements for air carriers and aircraft operators in order to foster consumer
protection. No distinction between national and international air transport has
been made. To ensure level playing field, the same requirements apply to
operators of third countries. This would apply to air carriers and aircraft
operators (excluding state aircraft) flying within, into, out of, or over the
territory of a Member State, including its territorial waters.
‘MTOM’ means the Maximum Take-Off Mass, which corresponds to a certified

amount specific to all aircraft types, as stated in the certificate of airworthiness
of the aircraft.
Air carriers and aircraft operators are required to be insured in respect of

passengers, baggage, cargo and third parties. The insured risks shall include
acts of war, terrorism, hijacking, acts of sabotage, unlawful seizure of aircraft
and civil commotion.
a) For liability in respect of passengers, the minimum insurance cover shall

be 250000 SDRs per passenger.
b) However, in respect of non-commercial operations by aircraft with a

MTOM of 2,700 kg or less, Member States may set a lower level of
minimum insurance cover subject to a minimum of 100000 SDRs per
passenger.
c) For liability in respect of baggage, the minimum insurance cover shall be

1000 SDRs per passenger in commercial operations.
d) For liability in respect of cargo, the minimum insurance cover shall be 17

SDRs per kilogram in commercial operations.

The above will apply only to aircraft landing in or taking off from member
states. Those merely overflying flights over the territory of the Member States
carried out by non-Community air carriers and by aircraft operators will be
subject to minimum insurance coverage for third party liability.
The minimum insurance requirement in respect of liability for third parties per
accident, for each and every aircraft, shall be:
Category MTOM (kg) Minimum insurance - SDR

1 < 500 750,000
2 < 1,000 1,500,000
3 < 2,700 3,000,000
4 < 6,000 7,000,000
5 < 12,000 18,000,000
6 < 25,000 80,000,000
7 < 50,000 150,000,000
8 < 200,000 300,000,000
9 < 500,000 500,000,000
10 500,000 or more 700,000,000
‘SDR’ means a Special Drawing Right as defined by the International Monetary

Fund.
War and Terrorism Coverage: This Regulation shall not apply, in so far as the
insurance obligations relating to the risks of war and terrorism are concerned,
to:
i. State aircraft,
ii. Model aircraft with an MTOM of less than 20 kg,
iii. Foot-launched flying machines (including powered para-gliders and hang

gliders),
iv. Captive balloons,
v. Kites,
vi. Parachutes (including parascending parachutes),
vii. Aircraft, including gliders, with a MTOM of less than 500 kg, and
viii. Micro-lights, which are used for non-commercial purposes, or are used
for local flight instruction which does not entail the crossing of
international borders.

If at any time insurance cover for damage to third parties due to risks of war or
terrorism is not available on a per-accident basis, such air carrier or aircraft
operator may insure such risks on an aggregate basis.
Under EU regulation 285/2010, minimum liability coverage requirement in

commercial operations in respect of baggage was revised to 1,131 SDRs (till
then 1,000 SDRs) per passenger and in respect of cargo, to 19 SDRs (till then 17
SDRs) per kilogram.
5. Air Carrier Liability Regime as applicable to Domestic Air Travel in India
Indian adopted the Montreal Convention but such adoption has the applicability
only to the international travel as mentioned above. There is no obligation on
any country to adopt Montreal Convention rules for domestic travel. However,
In order to harmonize the rules as also to provide more protection to the
domestic air travellers, India has also adopted the Montreal Convention to the
domestic travel but with different limits of liability.
Following changes were made by a notification dt 17th January, 2014 to the

third schedule to the Carriage by Air Act, 1972 which applies to all carriage by
air not being international carriage by air. This essentially covers domestic air
travel, i.e. place of departure and destination are both situated within India
without any agreed stopping place outside India. Thus, if domestic flight lands
in a foreign country due to emergency, it will not become an international
travel.
These rules do not apply to:
a) to carriage by air in any aircraft belonging to, or exclusively employed

for, the purposes of the armed forces of the Union;
b) to carriage by air, performed by the Government, whether Central or
State;
c) to carriage of mails;
d) to carriage by air of persons performed for the purpose of training of
such persons;
e) to carriage by aircraft belonging to or operated by the Civil Aviation
Training Centre of the Government of India or a Club, whose main
purpose is to impart training in flying or gliding, whether such aircraft is
engaged in carrying persons for the purposes of training or otherwise;
f) to carriage of cargo or persons performed for the purpose of dropping
goods from an aircraft;
g) to carriage of employees of the carrier when they are carried for the
purpose of performing any duties assigned to them by the carrier on the
aircraft.”
The air carrier cannot exclude liability up to INR 2,000,000 to the passenger.
This corresponds to SDR 100,000 for international travel.

The carrier cannot be held liable for an amount exceeding INR 2,000,000 if he
proves that the damage or injury was not due to the negligence of or other
wrongful act or omission of the carrier or its servants and agents. This also
applies if the damage or injury was solely due to the negligence of or other
wrongful act or omission of the third party.
Limit of liability for delay has been stipulated at INR 80,000 per passenger. This
corresponds to SDR 4,150 under the Montreal Convention.
Similarly limit of liability for loss or damage to baggage has been stipulated at
INR 20,000 per passenger. This corresponds to SDR 1,000 under the Montreal
Convention.
Similarly limit of liability for loss, damage or delay of cargo has been stipulated
at INR 350 per kilogramme. This corresponds to SDR 17 under the Montreal
Convention.
These limits will not be applicable if damage or delay can be attributed to act
or omission of the carrier or its agent or servant done with an intent to cause
damage or recklessely and knowledge that damage would probably result. It is
further required that such agent or servant acted within the scope of the
employment.
The limits as given above are subject to review by the Central Government at
the interval of every five years based on cost of inflation index as notified by
the Central Government
6. The IATA and ATA Inter-Carrier Agreements (1997)
Efforts at the government level to modernise the liability regime for passengers
did not meet with success and the Department of Transportation took the
initiative with assistance from the IATA and the Air Transport Association (ATA)
to reach voluntary agreements. Through these agreements, carriers waived the
passenger liability limits as per the Warsaw Convention and its related
instruments. This initiative met with significant success with most international
carriers having been a party to this agreement.
7. Forum Shopping
It is almost in the very nature of an aviation accident that various stakeholders

such as passengers, aircraft operators, travel agents, aircraft / component
manufacturers of the aircraft in question, maintenance organizations, lessors,
aircraft registering civil aviation authority, crash site and victims come from
geographically diverse areas leaving open a broad choice for claimants in regard
to the judicial forum. There can be additional parties owing to leases,
subleases and interline and code share agreements among airlines.
In an accident where many parties are involved or potentially can be dragged

into litigation, based on the respective parties’ domicile, litigation can be

potentially initiated in different legal jurisdictions. It is usually the purpose of

the claimant to bring a lawsuit in the most favourable jurisdiction, i.e.
claimant-friendly jurisdiction. Thus, in aviation accidents, effort is made by
the claimants to involve US jurisdiction based on domicile of aircraft
manufacturer or aircraft component supplier owing to its being perceived as
claimant-friendly. All potential parties are made respondents to the claim and
thus, favourable judgement against multiple parties including the one with
“deep pockets” is achievable. (Deep pockets refer to the possession of
abundant financial resources.) This effort by the claimant to choose the most
favourable jurisdictional forum is called “forum shopping”.
Common law doctrine of joint and several liability is resulting into claimant
having the choice to involve multiple defendants and this would give the
claimant choice to include a defendant with the deep pockets. This doctrine
has been criticized in general for resulting into higher claim awards and
resultant higher premium and at times restricted supply of insurance. This
doctrine results into misallocation of burden of indemnity among the defendants
vis-à-vis the degree of blame shared by the defendant. Thus a party with only
marginal negligence could end up paying the claimant substantially owing to
their having greater resources at their command.
An extreme example of the unjust results is the Disney case though unrelated to
aviation. Aloysia Wood of Fort Lauderdale sued Disney in 1971 for USD 1.5
million following injury to her back and neck in a collision at Disney`s Grand
Prix Raceway ride. A jury awarded $75,000, saying her then-fiance was 85
percent at fault for running into her car with his; she was 14 percent at fault;
and Disney was only 1 percent at fault. Against this, since her fiancé had no
insurance and no money to pay damages, and because of the this doctrine,
Disney was ordered to pay her USD 64,500, or 86 percent of the judgment, with
14 percent taken out for her own degree of negligence. Lawyers representing
Disney contended that the doctrine not be applied where the claimant is more
at fault than the defendant. Law subsequently got amended in Florida, USA.
Such a legal position would result into many claimants not receiving full
compensation. However, defendants will not have to pay more than their fair
share of damages.
However forum shopping, a potential aggravating factor for insurance industry

has been somewhat addressed in case of aviation accidents involving
international travel (as explained above) owing to the limited choice granted
under Warsaw System to the claimant, allowing only four fora to choose from
and Montreal Convention allowing one additional legal forum, known as fifth
jurisdiction. It is also addressed in that most stakeholders involved with
aviation industry tend to be quite aware of their risk exposures and take
measures to mitigate it and insure it.
Under Warsaw System, an action for damages must be brought, at the option of
the plaintiff, in the territory of one of the States Parties, either before the
courts (i) of the domicile of the carrier or (ii) of the carrier’s principal place of

business or (iii) of the carrier’s place of business through which the contract has
been made or (iv) at the place of destination. In each case, the country must
be a party to the Convention. Fifth jurisdiction is allowed under Montreal
Convention which is the courts at the passenger's principal /permanent place of
residence at the time of accident and to or from which the carrier operates
services and has a place of business, either on its own, or through a commercial
agreement. The fifth jurisdiction is thus aimed at reducing the hardships of
passengers in this increasingly globalised commercial environment.
It needs to be highlighted that international conventions govern the liability

regime vis-à-vis aircraft operators and air transport undertaking. Any action
against manufacturers of aircraft or aircraft component or any other party
under tort remains subject to forum shopping.
8. Forum Non-Conveniens:
While forum shopping is the tool in the hands of the claimants, the doctrine of
forum non conveniens is the defence available to bring the litigation back to the
appropriate forum. Practicality and economics of of conducting litigation (ease
of collecting and evaluating evidence and witnesses), principles of public policy
(judicial system is usually funded by public and if litigation gets “imported”, tax
payers unduly suffer), imperatives of justice and fairness and balancing public
good and private good require that the litigation is brought to the most suitable
forum. Defendants have to demonstrate before the forum approached by the
claimants that a more convenient forum is available to the claimant based on
easier accessibility to evidence, victims, witnesses and defendants.
The legal doctrine of forum non conveniens allows a court to transfer a case to
a foreign country where it believes it would be more convenient for the parties
to litigate given the circumstances of the case.
On 3 January 2004, Flash Airlines flight 604 - Boeing 737-300, a charter flight
crashed into the Red Sea shortly after takeoff from Sharm el-Sheikh
International Airport destined for Paris, killing all 135 passengers, mostly French
tourists, and all 13 crew members. There was no agreement on the cause of
the loss.
Suit was brought against airline as well as ILFC, the lessor of the aircraft to
Flash Airways, and the Boeing Company, which manufactured the aircraft. The
lease agreement stipulated that lessee and lessor hereby irrevocably waive any
objection...to the laying of the venue of any suit, action or proceeding arising
out of or related to the lease . . . and hereby further irrevocably waive any
claim that any such suit, action or proceeding brought in any such court has
been brought in an inconvenient forum. Claimants pointed out this clause. The
court decided that the lease did not deal with either party‘s liability to the
passengers, nor were passengers third party beneficiaries to the contract. Since
Flash Airlines could not be sued in the United States under the Warsaw

Convention, the California court considered France as a more suitable forum

and dismissed action under the doctrine of forum non conveniens.
One of the defenses available against aviation liability is foreign sovereign

immunity. Below is one such instance.
Butler was piloting the plane in Florida and the plane crashed. The crash was a
result of defects in the aircraft. The Butler sued the aircraft company Sukhoi.
The Sukhoi design Bureau being a subject of the Russian federation invoked
immunity under Foreign Sovereign Immunity Act. The lower court granted a
judgment to pay damages to the Butlers in the amount of $3,592,500 plus post-
judgment interest. SDB went in for an appeal to the US Court of Appeals
asserted its immunity under FSIA and asked for dismissal of the case and the
Butlers refuting the issue.
It is possible that private contractors when engaged by government enjoy the

immunity when the immunity is extended to them.
Another important defense available against aviation liability, particularly from
aviation product manufacturers’ point of view, is statute of repose. A "Statute
of Repose" (SOR) is somewhat akin to expiry date for the aircraft and
components.
The federal General Aviation Revitalization Act (GARA) of USA which became
law in 1995 sets an 18-year limit of statute of repose. Product liability claim
against planes and plane parts that are older than 18 years old thus cannot be
made. The SOR covers not only the airplane and its parts but also the
maintenance manuals and service bulletins. With each update of a manual,
counting of 18 year period recommences irrespective of the life of the
component as far as faulty instruction in the manual is concerned. It is
important to keep in mind that different states have different laws in this
regard.
Test Yourself 1
The Warsaw Convention 1929 had which of the below primary goal/s?
I. Harmonising procedures for dealing with claims arising from international air
transport
II. To limit air carrier liability from accidents such that airlines could survive
and grow their air transport operations
III. Both of the above
IV. None of the above

SUMMARY CHAPTER 6
Summary
a) History of aviation law: Roman times: The issues relating to right over air
space are reflected in maxim "Cuiusestsolum, eiusestusque ad coelum" (who
owns the land, owns even to the skies).
b) The first conference on Air Law was held in France in 1889. Convention of
Paris was held in 1919 which focused on air navigation.
c) The Warsaw Convention 1919 had two primary goals:
i. Harmonising procedures for dealing with claims arising from

international air transport and
ii. To limit air carrier liability from accidents such that airlines could
survive and grow their air transport operations
d) Warsaw Convention 1929 comprises of 41 articles under five chapters. It

covers air carrier liability arising out of an accident in regards to passengers,
baggage and cargo.
e) Hague Protocol 1955: In line with evolution of liability attribution, willful

misconduct was replaced with an act or omission of the carrier done with
intent to cause damage or recklessly and with knowledge that damage would
probably result..
f) Guadalajara Supplementary Convention 1961: If an actual carrier performs

the whole or part of carriage, he too will be governed by the Warsaw
Convention, the contracting carrier for the whole of the carriage and actual
carrier solely for the carriage which he performs.
g) Guatemala City Protocol 1971: This Protocol held air carriers strictly liable
for up to 1,500,000 francs (US$100,000) of proven damages in the event of
passenger death or injury, but this amount was an unbreakable limit on
liability per passenger under the protocol.
h) IATA Inter-Carrier Agreement 1995: It effectively led to global uniformity in

approach to air carrier liability, waiver of defenses up to SDR 100,000 and
no cap on liability for compensatory damages. This agreement gave primacy
to the compensatory damages as awarded by the domicile of the passenger.
i) Montreal Convention 1999: It consists of 7 chapters and 57 articles. The

focus of Montreal Convention is on ensuring protection of the interests of
consumers in international carriage by air.
j) 2009 Convention on Compensation for Damage caused by Aircraft to Third

Parties: It addresses compensation for damage to third parties resulting
from events involving an aircraft in flight with the objective of balancing the
interests of the third party victims and the aviation industry.
CHAPTER 6 SUMMARY
k) Regulation in European Union: There are no financial limits to the liability

for passenger injury or death. For damages up to 100,000 SDRs (approximate
amount in local currency), the air carrier cannot contest claims for
compensation.
l) International Union of Aerospace Insurers (IUAI): Its objectives include

representation of the interests of its members to governments, and national
and international institutions and associations and creation of a positive
image, in order to positively influence the legislative and regulatory
framework governing aviation and space risk insurance and reinsurance.
m) International Air Transport Association (IATA): Its mission is to represent,

lead, and serve the airline industry. Compliance with safety standards under
IOSA is a pre-requisite for becoming an IATA membership.
n) International Civil Aviation Organization (ICAO): It is an agency of the United

Nations, established under Chicago Convention 1944.

Answer 1
The correct answer is III.
The Warsaw Convention 1929 had two primary goals:
i. Harmonising procedures for dealing with claims arising from international air
transport and
ii. To limit air carrier liability from accidents such that airlines could survive
and grow their air transport operations
Question 1
As per the Montreal Convention 1999, which of the below statement is correct
with regards to Article 17?
I. It is concerned with the carrier’s liability for death or injury suffered by a

passenger
II. It is concerned with the carrier’s liability for destruction or loss of or
damage to registered baggage or cargo.
III. It provides for damage caused by delay.
IV. It provides: “The carrier is not liable if he proves that he and his servants or
agents have taken all necessary measures to avoid the damage or that it was
impossible for him or them to take such measures.”
Question 2

commercial operations in respect of baggage was revised __________.
I. From 529 SDRs to 1000 SDRs

II. From 923 SDRs to 1500 SDRs
III. From 1000 SDRs to 1131 SDRs
IV. From 1500 SDRs to 1763 SDRs

Question 3
The Montreal Convention 1999, Article 24 provides for automatic revision of

liability limits ________ based on review of inflation factor if such review
indicates that inflation factor is more than 10%.
I. Every year
II. Every five years
III. Every three years
IV. Every 18 months
Answer 1
As per the Montreal Convention 1999, Article 17 is concerned with the carrier’s
liability for death or injury suffered by a passenger.
Answer 2

commercial operations in respect of baggage was revised from 1000 SDRs to
1131 SDRs.
Answer 3

The Montreal Convention 1999, Article 24 provides for automatic revision of
liability limits every five years based on review of inflation factor if such review
indicates that inflation factor is more than 10%.

CHAPTER 7
AVIATION CLAIMS
Aviation safety has improved over the decades and has reached record levels in
recent years. However measuring a construct such as safety poses its own
challenges.
In this chapter we will study about aviation safety, ICAO document on Aircraft
Accident and Incident Investigation, ICAO document on Category of Accidents,
50/50 Provisional Claims Settlement Clause – AVS 103, IUAI issued document on
Best Practice for the Disposal of Aircraft Scrap and Salvageable Parts by Aviation
Insurers. Towards the end of the chapter we will also study about claim
documents that need to be submitted by the insured for claim processing.
Learning Outcomes
A. Aviation claims

CHAPTER 7 AVIATION CLAIMS
A. Aviation Claims
1. Aviation Safety
Aviation safety has improved over the decades and has reached record levels in
recent years. However measuring a construct such as safety poses its own
challenges.
A period of no accidents may be due to sheer luck rather than actual high safety
standards and culture of safety awareness. At the same time, despite best of
efforts and safety awareness culture, a confluence of circumstances might lead
to accidents. Thus, occurrence or non-occurrence of accidents may not
necessarily reflect underlying level of safety. This is particularly true for an
entity such as an airline which will have limited exposure by way of traffic
volumes and applicability of law of large numbers would be limited. However,
for the global safety metrics, accident and incident statistics might present a
reliable picture owing to the very significant exposures eliminating chance
factor.
Safety at its basic can be measured through the number of accidents and
composition of fatal and non-fatal accidents.
Diagram 1: Number of accidents and composition of fatal and non-fatal

accidents
Source: ICAO Safety Report 2014
This metric however needs to be adjusted for changes in traffic volume and
number of fatalities. Usual metric adjusting for changes in traffic volume thus
is the number of accidents per million departures. The below chart depicts this:

AVIATION CLAIMS CHAPTER 7
Diagram 2: Global Accident Rate (Accidents per million departures)
It needs to be noted that not all accidents result in fatalities. Survivability of

aviation accidents has improved over the decades. One important metric thus is
number of fatalities in a year in commercial scheduled operations.
Diagram 3: Number of fatalities in a year in commercial scheduled operations

The continual improvement in safety can be attributed to the
a) Heavily regulated nature of the aviation industry worldwide,
b) Sophistication of the technology involved,
c) Attitude of the manufacturers for the aviation industry towards safety,
d) Highly competitive nature of the aviation industry,
e) Governmental pressures and
f) Advancements in control of human factors
Credit also goes to the international co-operation for improving safety through
sharing of information and investigation.
2. ICAO on Aircraft Accident and Incident Investigation
Pilots are extensively trained on full flight simulators which mimic to a great
extent real life scenarios utilising high resolution imaging and sophisticated
displays. Accidents are usually investigated in great depth through state of the
art techniques. Accident scenarios are recreated in simulators and pilot
competence is evaluated. Training modules for pilots undergo changes based on
accident investigation.
In order that metric used is accurate and consistent and useful for comparison
over time, it needs to be properly defined. ICAO (Annexure) 13 deals with
Aircraft Accident and Incident Investigation. This ensures that investigation
practices worldwide are uniform. There under terms accident and incident are
defined as under:
a) Accident
An occurrence associated with the operation of an aircraft which takes place

between the time any person boards the aircraft with the intention of flight
until such time as all such persons have disembarked, in which:
i. a person is fatally or seriously injured as a result of: being in the

aircraft, or direct contact with any part of the aircraft, including parts
which have become detached from the aircraft, or direct exposure to
jet blast, except when the injuries are from natural causes, self-inflicted
or inflicted by other persons, or when the injuries are to stowaways
hiding outside the areas normally available to the passengers and crew;
or

ii. the aircraft sustains damage or structural failure which adversely affects
the structural strength, performance or flight characteristics of the
aircraft, and would normally require major repair or replacement of the
affected component, except for engine failure or damage, when the
damage is limited to the engine, its cowlings or accessories; or for
damage limited to propellers, wing tips, antennas, tires, brakes, fairings,
small dents or puncture holes in the aircraft skin; or
iii. the aircraft is missing or is completely inaccessible
Note 1: For statistical uniformity only, an injury resulting in death within

thirty days of the date of the accident is classified as a fatal injury by ICAO.
Note 2: An aircraft is considered to be missing when the official search has
been terminated and the wreckage has not been located.
b) Incident
An occurrence, other than an accident, associated with the operation of an

aircraft which affects or could affect the safety of operation.
3. ICAO on Category of Accidents
Having defined the scope of investigation for the purpose of measuring safety, it
is equally important to categorise accidents so that category presenting
greatest hazard can be systematically tackled. ICAO Common Taxonomy Team
(CICTT) occurrence categories are as per annexure 1 to this chapter.
a) Aircraft operate in different circumstances and different phases of flight

and can result into various types of accidents. Most common types of
accidents are related to runway such as
i. Runway excursion or incursion,

ii. Overshooting,
iii. Undershooting and
iv. Tail strike
b) Aircraft may also experience hot start or hung start.
i. Hot start
A hot start occurs when temperature limitations are exceeded during

starting the engine, possibly damaging the engine.
Definition
Hot Start means the start of a turbine engine abandoned because of an over
temperature indication.

This can be attributed to improper pilot procedure by way of introducing

fuel before reaching the proper motoring rpm, a failure of the fuel
controller or fuel nozzles, the wind inhibiting exhaust flow at the back of
the engine or a weak battery causing the electric starter to fail after light-
off.
ii. Hung start
Definition
A hung start occurs when the engine starts but doesn’t accelerate to idle
speed.
It involves the starting of an engine which automatically or under manual

control, is arrested after ignition but before self-sustaining speed is
reached.
In both the cases, the engine should be shut down and damage to the engine
may have occurred. Normally such claims are covered. This is subject to the
damage resulting from a single recorded incident and relevant entry being
made in the log book at the time of the incident.
If the underwriter wishes to exclude such claims, Engine Endorsement AVN

56 (annexure 2) is endorsed on the policy. This can happen only on less
sophisticated engines. This is avoided by modern engines controlled by
computer systems such as FADEC -Full Authority Digital Engine Control with
an electronic engine controller or engine control unit.
4. 50/50 Provisional Claims Settlement Clause – AVS 103
Text of this clause is given in Annexure 3. When the Insured has both hull
insurance and hull war insurance in place with this clause endorsed on both the
covers and it is not ascertainable to attribute the claim to one or the other
policy within 21 days from the date of occurrence but the claim is otherwise
covered under one or the other policy, each of the underwriters will advance,
without prejudice, 50% of such amount. Based on final determination of the
coverage, the underwriters will settle the claim among themselves.

5. Scrap disposal
It is important that each aircraft part is duly marked and proper documentation
in regard to its usage and status is maintained. In the absence of this, parts with
doubtful history circulate in the market and this has the potential to
compromise safety. IUAI issued a document on Best Practice for the Disposal of
Aircraft Scrap and Salvageable Parts by Aviation Insurers in 2001.
a) It advises that scrap should not be returned to the stream of commerce.

Any technical data attached to the scrapped equipment should be
stamped, marked, documented, and if appropriate, returned to the
aircraft manufacturer. Scrap parts and any other hazardous material
should be physically destroyed in the presence of the surveyor/loss
adjuster or his agent.
b) Salvageable parts should be sold only to a reputable buyer. Auctions

should be organised on a sealed bid basis. Parts should be sold to the
highest bidder.
c) Technical data / maintenance records should indicate that the part was
subject to an aircraft accident. The aircraft data plate should invariably
be returned to the original manufacturer.
d) Manufacturers should be encouraged to have a “Buy back” policy for

salvageable parts. Agree in advance with manufacturers a standard
salvage value for serviceable equipment (depending on the number of
performed cycles, for example). Agreement of potential parties to a
litigation, including the owner and potential and actual claimants,
should be sought before disposal of salvage or scrap.
6. Claims Documentation
Claim submission usually contains the following documents:
a) Copy of the policy / slip.
b) Claim bill and Claim form duly filled up
c) Statement of Pilots on circumstances of incident.
d) Copy of Pilot Defect Report.
e) Copy of incident report as submitted to Civil Aviation Authority.
f) Copy of Quality Control Function report for the damages to aircraft.
g) Copy of passenger manifest and cargo / load trim sheet.

h) Copies of passenger tickets and airway bills.
i) Details of injuries to crew / passengers, if any.
j) Post mortem reports.
k) Repair estimates of the aircraft as per the repairers. cost of parts and
labour charges (contracted and in-house be mentioned separately with
detailed working.
l) Final repair bills with proof of payments to repairer.
Aircraft
a) Copy of certificate of registration
b) Certificate of airworthiness
c) Flight release certificate.
d) Copy of airframe, Engine and Propeller log books.
e) Copy of the lifed components record sheet.
f) Details of the last maintenance inspection carried out on the Engines /

Aircraft.
g) Copy of the snag register /PDR /technical logs for the last One month.
Pilots
a) Copy of licences, proficiency checks and medical certificates.
b) Logbook for flying Experience (PIC & Co-pilot) -Total hours flown on all
types, on type, Day -Night, and during last 30 days, 7 days and 24 hrs.
c) Weather report of the area/airport at the time of accident.

For the operation
a) If it was a charter flight copies of AOC.
b) If it was a training flight copies of
i. Authorisation Sheet
ii. ATO Certificate
iii. Depending on the nature of the claim insurance company might insist on
reviewing the student pilot’s training file OR lease agreement between
the rental pilot and the Insured.
iv. Weight and balance sheet + flight planning sheet if it was a cross country
flight or rental flight
Case Laws
International conventions are adopted by different countries but the Courts in

different countries may interpret the same text differently. Court may look
beyond the written words to the convention’s history, the negotiations, and the
practical construction adopted by the parties to put the written words in the
context in which they were formulated. This is required in order to understand
the shared intent of the parties to the convention.
Some of the cases which set the tone for the subsequent litigation and
interpretation are mentioned below:
1. Eastern Airlines, Inc. V. Floyd Et Al
On May 5, 1983, an Eastern Airlines flight from Miami, bound for the Bahamas
faced engine issues. One of the plane's three jet engines lost oil pressure. The
flight crew shut down the failing engine and began to return to Miami. Soon the
other two engines also failed. The plane began losing altitude rapidly, and the
passengers were informed that the plane would be ditched in the Atlantic
Ocean. After some descent, the crew managed to restart an engine and land the
plane safely at Miami International Airport.
Passengers filed separate complaints seeking damages solely for mental distress
arising out of the incident. Airline conceded that the engine failure and
subsequent events were an "accident" under Article 17 of the Convention, but
argued that there was no bodily injury as per Article 17.
The District Court consolidated the proceedings and ruled that Article 17 of the
Warsaw Convention does not allow recovery for mental anguish alone. The Court
of Appeals reversed the decision holding that the phrase "lesion corporelle" in
the authentic French text of Article 17 encompasses purely emotional distress.
It was held by the Supreme Court that Article 17 does not allow recovery for
purely mental injuries and the relevant Article 17 phrase, "lesion corporelle,"
should be translated as "bodily injury" - a narrow meaning excluding purely
mental injuries. The narrow interpretation is consistent with the objective of
the convention to afford protection to the then nascent aviation industry.
This was concluded after examination of dictionary meanings, relevant legal

texts and the translation of the term in different languages in the context of
situation prevailing in 1929. Many countries did not recognize recovery for
mental injuries on stand-alone basis at the time. It is interesting to note that
the Hague Protocol of 1955, the Montreal Agreement of 1966, and the
Guatemala City Protocol of 1971 all included some reference to "personal
injury," rather than "bodily injury."
Interestingly, the Supreme Court of Israel opined that more liberal

interpretation is called for to the term to include purely psychic injuries.
General interpretation is that mental or psychic injuries together with physical
injury or physical manifestation of injury would fall within the scope of Article
17.
For an airline to bear the liability under the convention, three conditions need
to be satisfied:
a) there has to be an accident,

b) the passenger should suffer bodily injury due to the accident and
c) the accident took place on board the aircraft or in the course of
operations of embarking or disembarking
2. El Al Israel Airlines Vs Tsui Yuan Tseng
The case involved plaintiff passenger Ms Tsui Yuan Tseng being subjected to an
intrusive security search at the airport in New York before she boarded an El Al
Israel Airlines May 22, 1993 flight to Tel Aviv.
As per the standard El Al pre-boarding procedures, a security guard questioned

Tseng about her destination and travel plans. The guard considered Tseng’s
responses “illogical,” and ranked her as a “high risk” passenger.
Tseng was taken to a private security room where her baggage and person were
searched for explosives and detonating devices. She had to remove her shoes,
jacket, and sweater. A female security guard then searched Tseng’s body
outside her clothes by hand and with an electronic security wand. After 15
minutes search, she was cleared.
Tseng claimed that she “was really sick and very upset” and was “emotionally
traumatised and disturbed” during her month-long trip in Israel and she had to
undergo medical and psychiatric treatment for the lingering effects of the body
search.

She sought tort damages from El Al for psychic or psychosomatic injuries, but no
“bodily injury”. Both parties agreed that the event did not quality as an
“accident” within the meaning of the Warsaw Convention as also that there was
no bodily injury. She alleged assault and false imprisonment.
Article 17 of the Convention established the conditions of liability for personal

injury to passengers: “The carrier shall be liable for damage sustained in the
event of the death or wounding of a passenger or any other bodily injury
suffered by a passenger, if the accident which caused the damage so sustained
took place on board the aircraft or in the course of any of the operations of
embarking or disembarking.”
The question arose as to the exclusivity of the remedy for the episode-in-suit
under the convention. When there is no accident as per the convention, does it
then preclude all liability under any other national or local law?
It was held that if in the absence of accident and bodily injury, there cannot be
any remedy outside of the convention. While this position is interpreted with
reference to Warsaw Convention, it also continues to guide legal interpretation
in regard to Montreal Convention since Montreal Convention aimed at
consolidating Warsaw Convention and various amendments thereto.
It was clarified that recourse to local law would undermine the uniform
regulation of international air carrier liability and thus defeat the very purpose
of such international conventions.
In Eastern Airlines, Inc.vs Floyd,it was held that mental or psychic injuries
unaccompanied by physical injuries are not compensable under Article 17 of the
Convention.
The Court of Appeals reversed the judgement on the ground that the
Convention does not provide protection to airline’s operating procedures
involving assault and false imprisonment. Since the Article 24 of the Convention
states that the action for damages can be brought for cases covered by Article
17 subject to provisions of the Convention, it implies that other cases can be
litigated under other law.
The Supreme Court of USA opined that the provisions of the Convention should
be interpreted consistent with the shared expectations of the contracting
parties.
The Court observed that the treaty’s preamble “recognised the advantage of
regulating in a uniform manner the conditions of … the liability of the carrier.”

Since the convention creates a comprehensive scheme of liability rules with

emphasis on uniformity, applicability of local laws would lead to air carriers
being exposed to the distinct, non-uniform liability rules of the individual
signatory nations, possibly without financial limits.
3. Kathleen Robertson V. American Airlines
Kathleen Robertson sued American Airlines for damages resulting from burns she
sustained on a flight from Denver to Chicago, which was a domestic flight but
one leg of the international itinerary.
If that flight qualifies as “international transportation” within the meaning of

the Warsaw Convention, Convention's statute of limitations would apply. If it
qualifies as a domestic flight, local law as applicable would apply. In this it
amounted to period of limitation of three years and two years respectively.
On August 7, 1998, Robertson through a travel agent booked a round-trip flight

between Denver and London on British Airways (BA), departing on September 2
and returning on September 8.
Three days later, Robertson booked a round-trip flight from Washington, D.C. to
Denver, via Chicago, on American Airlines (AA), domestic legs, outward leg on
August 29 and inward leg on September 8. Later, Robertson used Gateway
Travel to book an alternative route home: A one-way ticket on AA from London
to Washington, via New York, leaving and arriving on September 10.
As scheduled, Robertson flew from Washington to Denver and then on to

London. Robertson had rescheduled earlier return flights from September 8 to
September 10, the same date for which she had the alternative ticket.
Robertson did not utilise the alternative booking and chose London – Denver
(BA) and Denver– Chicago-Washington (AA). After the 3-hour layover in Denver,
she boarded the AA flight to Washington via Chicago. During this flight, she
asked a flight attendant to get a “gel pack” to treat a sore back. The attendant
returned with an air-sickness bag containing the gel pack and dry ice instead of
ordinary ice. When Robertson put the bag on her back, she suffered third-
degree burns.
Robertson sued the airline just as 3 years from the date of occurrence were to
expire. The airline contended that the Warsaw Convention applied since the
claim arose during international transportation and under the convention, two-
year statute of limitations barred the claim. Robertson claimed that the action
was under three-year statute of limitations of the District of Columbia.

Article 1(2) of the Convention defines “international transportation” as “any

transportation in which, according to the contract made by the parties, the
place of departure and the place of destination, whether or not there be a
break in the transportation, are situated within the territories of two High
Contracting Parties.”
Article 1(3) further provides that:” Transportation to be performed by several

successive air carriers shall be deemed, for the purposes of this convention, to
be one undivided transportation, if it has been regarded by the parties as a
single operation, whether it has been agreed upon under the form of a single
contract or of a series of contracts, and it shall not lose its international
character merely because one contract or a series of contracts is to be
performed entirely within a territory subject to the sovereignty of the same
High Contracting Party.”
Thus, a domestic leg of an international itinerary will be international

transportation irrespective of number of carriers involved and irrespective of
number of contracts” if it has been “regarded by the parties” as part of “a
single operation.”
Given the duration of layover, it can be reasonably concluded that at least

Roberson regarded the entire itinerary a single operation.
While there was time interval between booking of international leg and
domestic leg, it is of no importance since multiple carriers and multiple
contracts can be involved with no effect on this being an international travel
under the Convention.
As regards American Airlines regarding this as a single operation, American did

have a record of alternate ticket via New York. Since Robertson finally travelled
Denver-Chicago-Washington, the airline may not have known she was travelling
internationally that day. However knowledge of the travel operator Noting that
other district “courts have held that a travel agent's knowledge of a plaintiff's
travel intentions is imputed to the carrier,” the district court resolved the issue
by applying the same rule. Because Robertson's appellate briefs do not dispute
it, we apply the imputation rule as well.
Robertson concedes that a travel agency, Gateway Travel, made the

reservations for all of the BA and AA flights up to and including those on
September 8(as well as for the London-New York-Washington AA flight
scheduled for September 10). Appellant's Br. at 3. Although Robertson does not
concede that she also used Gateway to change the September 8 tickets to
September 10, she does not dispute that Gateway knew of the change, Oral Arg.
Tape at 14:45-18:15, and does not assert that she or anyone other than
Gateway made the change-a fact that presumably would be within her personal
knowledge.

Moreover, both BA's and AA's internal Passenger Name Records (PNRs) for
Robertson's September 10 flights contain references to “Gateway Travel
Nancy.” J.A. 326, 328. Accordingly, because the only evidence in the record
confirms that American (through Gateway) knew of the London-Denver leg of
Robertson's trip, we concur in the district court's conclusion that there is no
genuine dispute that the airline “was aware of (her) international flight plans.”
Robertson, 277 F.Supp.2d at 99.4
The district court concluded that the flight-which was one leg of a trip that
began in London and ended in Washington the same day-did so qualify.
Test Yourself 1
_____________ occurs when temperature limitations are exceeded during

I. Hot start
II. Hung start
III. Scrap start
IV. Autorotation

SUMMARY CHAPTER 7
Summary
a) Aviation safety has improved over the decades and has reached record levels
in recent years. However measuring safety poses its own challenges. For the
global safety metrics, accident and incident statistics present a reliable
picture owing to the very significant exposures eliminating chance factor.
b) The continual improvement in safety can be attributed to the
i. Heavily regulated nature of the aviation industry worldwide,

ii. Sophistication of the technology involved,
iii. Attitude of the manufacturers for the aviation industry towards safety,
iv. Highly competitive nature of the aviation industry,
v. Governmental pressures and
vi. Advancements in control of human factors
c) Aircraft operate in different circumstances and different phases of flight and

can result into various types of accidents. Most common types of accidents
are related to runway such as
i. Runway excursion or incursion,

ii. Overshooting,
iii. Undershooting and
iv. Tail strike
d) Aircraft may also experience hot start or hung start.
i. A hot start occurs when temperature limitations are exceeded during

ii. A hung start occurs when the engine starts but doesn’t accelerate to idle
speed
e) In both the cases (hot start and hung start), the engine should be shut down
and damage to the engine may have occurred. Normally such claims are
covered.
f) IUAI issued a document on Best Practice for the Disposal of Aircraft Scrap
and Salvageable Parts by Aviation Insurers in 2001. It advises that scrap
should not be returned to the stream of commerce.

CHAPTER 7 SUMMARY
g) Claim submission usually contains the following documents:
i. Copy of the policy / slip.

ii. Claim bill and Claim form duly filled up
iii. Statement of Pilots on circumstances of incident.
iv. Copy of Pilot Defect Report.
v. Copy of incident report as submitted to Civil Aviation Authority.
vi. Copy of Quality Control Function report for the damages to aircraft.
vii. Copy of passenger manifest and cargo / load trim sheet.
viii. Copies of passenger tickets and airway bills.
ix. Details of injuries to crew / passengers, if any.
x. Post mortem reports.
xi. Repair estimates of the aircraft as per the repairers, cost of parts and
labour charges (contracted and in-house be mentioned separately with
detailed working
xii. Final repair bills with proof of payments to repairer

Answer 1
Hot start occurs when temperature limitations are exceeded during starting the
engine, possibly damaging the engine.
Question 1
_____________ occurs when the engine starts but doesn’t accelerate to idle
speed.
I. Hot start
II. Hung start
III. Scrap Start
IV. Autorotation
Question 2
As per the Best Practice for the Disposal of Aircraft Scrap and Salvageable Parts
by Aviation Insurers in 2001, document issued by IUAI, scrap parts and any other
hazardous material should be physically destroyed in the presence of the
____________.
I. Insurer
II. Insured
III. Manufacturer
IV. Surveyor / loss adjuster
Question 3
Which of the following statement is incorrect with regard to Best Practice for
the Disposal of Aircraft Scrap and Salvageable Parts by Aviation Insurers in 2001,
document issued by IUAI?
I. Salvageable parts should be sold only to a reputable buyer.

II. Auctions should be organised on a sealed bid basis.
III. Parts should be sold to the highest bidder
IV. Scrap should be returned to the stream of commerce

Answer 1
Hung start occurs when the engine starts but doesn’t accelerate to idle speed.
Answer 2

As per the Best Practice for the Disposal of Aircraft Scrap and Salvageable Parts
by Aviation Insurers in 2001, scrap parts and any other hazardous material
should be physically destroyed in the presence of the Surveyor/Loss Adjuster.
Answer 3

As per Best Practice for the Disposal of Aircraft Scrap and Salvageable Parts by
Aviation Insurers in 2001, document issued by IUAI, scrap should not be returned
to the stream of commerce. Hence statement IV is incorrect.

ANNEXURES CHAPTER 7
Annexures
Annexure 1
Accident Categories

CHAPTER 7 ANNEXURES
Annexure 2
Engine Endorsement
Any claim in respect of an Engine is restricted to loss or damage caused by

theft, lightning, flood, outbreak of fire external to the Engine or by sudden and
unexpected impact with a foreign object requiring immediate withdrawal of the
Engine from service.
As used herein ‘‘Engine’’ means an engine for propulsion or auxiliary power

complete with all parts necessary for test cell running.
Subject otherwise to all terms and conditions of the Policy.
AVN 56 10.12.80
Annexure 3
50/50 Provisional Claims Settlement Clause
Whereas the Insured has in full force and effect
a) A "Hull All Risks" policy which inter alia contains the War Hijacking and
Other Perils Exclusion Clause (AVN48B) / the Common North American
Airline War Exclusion Clause, and
b) A "Hull War Risks" policy which inter alia covers certain of the risks
excluded by AVN48B / the Common North American Airline War Exclusion
Clause in A) above.
It is hereby understood and agreed that
in the event of loss of or damage to an aircraft identified on the schedule of

aircraft forming part of this policy and where agreement is reached between
the "Hull All Risks" Insurers and the "Hull War Risks" Insurers that the Insured has
a valid claim under one or other policy where nevertheless it cannot be resolved
within 21 days from the date of occurrence as to which policy is liable, each of
the aforementioned groups of insurers agree, WITHOUT PREJUDICE to their
liability, to advance to the Insured 50% of such amount as may be mutually
agreed between them until such time as final settlement of the claim is agreed.

ANNEXURES CHAPTER 7
Provided always that
i. the 'Hull All Risks" and "Hull War Risks" placing slips are identically
endorsed with this provisional claims settlement clause
ii. within 12 months of the advance being made all Insurers specified in (i)
above agree to refer the matter to arbitration in London in accordance
with the Statutory provision for arbitration for the time being in force;
iii. once the arbitration decision has been conveyed to the parties
concerned, the "Hull All Risks" Insurers or the "Hull War Risks" Insurers as
the case may be shall repay the amount advanced by the other group of
Insurers together with interest for the period concerned which is to be
calculated using the London Clearing Bank's Base Rate
iv. if the "Hull All Risks" and "Hull War Risks" policies contain differing
amounts payable, the advance will not exceed the lesser of the amounts
involved. In the event of Co-insurance or risks involving uninsured
proportion(s), the appropriate adjustment will be made.
AVS 103 12.10.83

CHAPTER 8
AVIATION FINANCE
Finance is the lifeblood of any industry, more so for a capital intensive industry.
Airline sector as a segment of aviation industry is quite dynamic. This dynamism
is achieved through flexibility in the airline business model. The flexibility is
derived from the various financing options available to the operator to get an
aircraft for operation.
In this chapter we will study in detail about the dynamics of aviation finance,
types of insurance cover offered under aviation industry, measures undertaken
to avoid over insurance and double insurance. We will also look into the
regulatory aspects with regard to leasing an aircraft and protection available to
financers.
Learning Outcomes
A. Aviation Finance

CHAPTER 8 AVIATION FINANCE
A. Aviation Finance
1. Introduction
Finance is the lifeblood of any industry, more so for a capital intensive industry.
Airline sector as a segment of aviation industry is quite dynamic. This dynamism
is achieved through flexibility in the airline business model. The flexibility is
derived from the various financing options available to the operator to get an
aircraft for operation.
Leasing is a very common mode of aircraft acquisition. Even aircraft engines are
acquired on lease and leasing of engines is a very common practice among
aircraft operators, particularly airlines. Airlines can have seasonal operations as
also charter operations. This requires that their fleet composition and strength
has the requisite flexibility. Purchase of a new aircraft from the manufacturer
may entail waiting time. Buying aircraft instead of leasing aircraft would also
require higher capital to operate an airline. Tax considerations also play a role
in the airlines’ decision of buying versus leasing.
The nature of financing transaction and underlying documentation together with

applicability of relevant national and international legislation throws up
complexities in the aircraft financing. The complexity can range from a loan
from a single lender to syndication of loan, special purpose vehicles and
involvement of multiple agencies.
With the evolution of airlines as a dominant source of transportation during last

five decades, specialist aircraft operating leasing companies Financiers need to
protect themselves adequately against the risk of loss of the aircraft and
potential liability to passengers or third parties. The insurance industry needs to
recognise and accommodate the legitimate needs of the financiers/ lessors in
the aviation finance and leasing transactions.
Definition
A lessor leases an aircraft under a lease to an operator which acquires the

aircraft for use without the obligation to pay off the full cost of ownership.
Definition
The lessee operator will be usually responsible for the operation, use and
maintenance and insurance of the aircraft whilst it is in his control and for the
return of the aircraft with the engines and all attendant records in a prescribed
condition and at a location specified subject to any tests or inspections as may
be stipulated in the lease agreement.

AVIATION FINANCE CHAPTER 8
2. Types of Lease
Diagram 1: Types of lease
Leasing can take different forms with variations in terms and conditions of the
lease agreement. There are three main types of leases:
a) ACMI (Aircraft, Crew, Maintenance, and Insurance), or the wet lease;

b) Dry lease; and
c) Damp lease
a) ACMI or wet lease
In case of ACMI, as the abbreviation suggests, the lessor (the entity leasing
out the aircraft) provides the crew, including pilots, engineers and flight
attendants, to the lessee (the entity taking the aircraft on lease).
The costs towards crew compensation, maintenance and insurance are borne
by the lessor and these costs are factored into the lease rental. However,
costs other than these such as fuel, parking, landing, navigation, etc are
borne by the lessee.
While leasing provides flexibility vis-à-vis purchase of an aircraft, lease

rentals are fixed costs and thus impose some inflexibility. Lease rentals
could be linked to the flying hours subject to minimum guaranteed block
hours (aircraft hours are based on “block-to-block” time (i.e. from the
moment the aircraft is pushed back from the gate or starts taxiing from its
parking stand for take-off to the moment it comes to a final stop at a gate
or parking stand after landing; also known as block time) agreed under the
lease.
Wet lease is akin to charter in that lessee or entity taking the aircraft on
charter is relieved of the need to take care of maintenance, insurance and
crew. Wet lease tends to be for a shorter duration. Airlines resort to wet
lease during startup phase as also to test feasibility of new routes. Wet lease
allows airlines to quickly adjust to changes in demand. The aircraft will

operate under the air operator certificate of the lessor.
b) Dry lease
A dry lease would involve just transferring an aircraft for operation without
any support like maintenance, crew or insurance. A typical dry lease may
run for two years or more. The lessee has to acquire an Air Operators
Certificate and register the Aircraft.
Dry lease is of two types:
i. Operating lease:
In case of an operating lease, an aircraft is leased out for a short period of

time compared to its total life. A new aircraft may have a life of about 20-
25 years and operating lease would typically run for up to 7-8 years. On
expiry of the lease period, the lessee returns the aircraft to the lessor and
the transaction ends.
ii. Finance lease
In contrast, a finance lease can be for a longer period and the lessee has a
right to purchase the aircraft on the expiry of the lease period. The term of
the lease can be over 75% of the aircraft usable life.
c) Damp lease
Damp lease is quite similar to wet lease but without the crew. Also known as
AMI, crew is provided for by lessee. Lessor would provide maintenance and
insurance of the aircraft. With crew provided by the lessee, passengers may
not easily recognise the underlying lease transaction. In this case, the crew
of the lessee have to undergo safety and Emergency Procedures training.
The above leases are essentially from the point of view of airlines and
commercial operators. However, increasingly corporates realise that they on
their own are not able to put aircraft to optimum utilisation and thus, seek
to increase the annual utilisation of their aircraft by allowing other entities
the right to use the aircraft.
3. Arrangements other than leasing
Arrangements similar to leases usually for a shorter duration are entered into
among corporates and business aviation entities in order to optimise aircraft
usage. Usage of an aircraft by sister companies, subsidiary companies and
business associates would not lead to any significant change in exposure as long
as operational control remains with the insured entity. This thus may not have
any impact on the coverage and premium considerations. However on the other

hand, if any other corporate entity is allowed to utilise their own pilots with
change in operational control, the information may need to be reviewed by the
underwriters since this may lead to change in exposures and resultant change in
terms and premium.
a) Interchange agreement
Interchange agreement is an arrangement whereby a person “leases” his

airplane to another person in exchange for equal time, when needed, on the
other person’s airplane, and no charge is made, except for the difference
between the cost of owning, operating and maintaining the two airplanes.
b) Time-sharing agreement
Time-sharing agreement is an arrangement whereby a person “leases” his

airplane with flight crew to another person, and no charge is made for the
flights conducted under that arrangement other than fuel, oil, crew travel
expenses (example - food and lodging), hangar, insurance for the specific
flight, landing fees, in-flight food, etc. Mostly, operational control does not
get transferred in such cases.
In all such arrangements, it is important to ensure that all the stakeholders

have adequate insurance coverage against direct loss from accidents as also
from indirect claims from other stakeholders arising from accidents.
Important considerations for an underwriter are the
i. changes in degree of usage (hours),

ii. type of usage (non-commercial),
iii. operational control,
iv. scope of cover and
v. pilot experience
In case the regulatory stance for such arrangements results in changes in

obligations for standard and duties of care of the insured, liability exposures
could vary and this needs to be factored in by the underwriter. Underwriters
for the most part focus on underwriting the operator rather than the owner.
4. Case of leased engines
Following an accident or damage to an engine or even when an engine is under

routine maintenance, sometimes a leased engine is installed on the aircraft to
facilitate continued operation of an aircraft. When a leased engine replaces
another engine, it can create complications in the event of a claim where
engine is damaged. This is because the lessor of the engine would like to be
compensated for the full value of the engine as per the engine lease agreement
in case of total loss of engine. To take care of such a situation, a stipulation on
the following lines is usually inserted in the policy:

“When leased engines/components are installed on the aircraft insured

hereunder, the agreed value of such aircraft shall be automatically increased,
at pro-rata additional premium, by the amount required to be insured under
the lease agreement in respect of such engines / components for the period
that such leased engines/components are installed. This is subject to maximum
agreed value not being exceeded and the benefit of the salvage of the removed
engine/component to insurers in the event of the aircraft claim being
adjustable on the basis of a total loss. However, the foregoing increase in
agreed value shall not be taken into account when applying the constructive
total loss clause hereon.”
It needs to be ensured that maximum agreed value is not exceeded despite

installation of a leased engine to ensure that underwriters who have based their
participation line on maximum agreed value do not exceed their pre-
determined exposure taken at the time of writing the policy at inception. Also
the increase in agreed value should not result in higher threshold for
determining the constructive total loss amount. Without this provision,
determination of constructive total loss would get distorted. It is to be noted
that in the event of the total loss, underwriters will pay for the aircraft agreed
value as enhanced by the value of leased engine pursuant to the above
endorsement and owners of leased engine get their declared value of engine as
compensation. Underwriters will take the removed engine as salvage. This
ensures that financial interest in leased engine is protected at lessor stipulated
value.
5. Insurance cover
Lessor would like to ensure that his assets are duly protected. An aircraft
operation will typically require
a) Hull insurance,
b) Liability insurance,
c) Hull war insurance,
d) Liability war insurance (to the extent liability insurance does not provide
adequate war liability write back insurance) and
e) Deductible insurance
In case of a claim, claimant whether a passenger or cargo owner or a third

party, in order to ensure that he is adequately compensated and at the earliest,
may seek to make multiple parties defendants. In such a scenario, lessor and
lessee both being made respondents to an action by a claimant is not
uncommon. If each party seeks adequate insurance, it can lead to over
insurance and double insurance.
However to safeguard the interests of all the parties, each party needs their
own insurance coverage. To sort out the matter of over-insurance and double
insurance, suitable modifications are usually carried out in the contract of
insurance by way of insurance being provided on primary or secondary basis.

a) Dry lease Agreement
Dry lease puts the onus of putting insurance in place on the lessee. He will
arrange for all the different types of coverage required. As far as liability
coverage is concerned, the lessor will need to be made an additional insured
in the policy of the lessee. For hull damage coverage, lessor would like to
have waiver of subrogation. In order that payment to lessor is facilitated in
the event of a major claim, loss payee clause is sometimes inserted in the
insurance coverage. Lessor is made loss payee thus facilitating direct
payment to the lessor. This avoids payment to lessee who in turn would
otherwise be expected to make payment to the lessor. Once the payment is
made to the lessee, the onward payment to the lessor could be jeopardised
by the financial conditions of the lessee.
In order that lessor’s interests are protected in the event of breach of

warranty, sometimes breach of warranty endorsement is passed in order
that lessor’s interests are not jeopardised by the lessee breaching warranty.
This is however subject to lessor not having knowingly contributed to the
breach.
b) Wet lease Agreement
Under a wet lease agreement, lessor retains the operational control of the
aircraft. He also charges the lessee for insurance. Thus, onus of arranging
for all insurance is on the lessor. He thus has to contractually “hold
harmless” the lessee from the legal liability arising from aircraft operation
when under lease. This is however subject to exclusion of lessee’s willful
misconduct or gross negligence.
6. Aircraft purchase Agreements
Aircraft purchase demands significant resource commitment by a corporate

when the corporate chooses to own one. In order that all the benefits of aircraft
ownership are availed of while cost is reduced to the bare minimum, various
types of arrangements are made such as
a) Joint ownership agreement,

b) Time sharing agreement,
c) Fractional ownership or
d) Interchange agreement
These types of arrangements throw up challenges in regard to adequacy of

insurance protection since all parties under various scenarios would need to be
protected in the event of a claim and possibility of claims and counter-claims.

Breach of warranty endorsement provides that the insurance company will

indemnity even though the Named Insured may have done something to
invalidate the insuring agreement such as violating the open pilot warranty.
Combined single limits puts the aggregate limit on the indemnity available
under the policy per occurrence, i.e. against various sub-covers such as
passenger legal liability, cargo legal liability, third party liability, etc.
Underwriters impose sub-limits for sub-covers or per passenger in order to

reduce the exposures. However smooth limit is also sometimes given which
means no sub-limits. The entire limit is thus available to all the sub-covers
collectively or to any one individual claimant.
7. Minimum Insurance Requirement
Article 50 of the Montreal Convention 1999 requires that state parties “shall
require their carriers to maintain adequate insurance covering their liability”
there under, and “may be required by the state party into which it operates to
furnish evidence”.
However, the insurance levels required or deemed “adequate” are not specified
by the Montreal Convention. Therefore, it is up to each Montreal Convention
contracting state to determine what levels of insurance are “adequate” under
its national law. Many states have actually defined their minimum requirements
as to liability insurance. However, these requirements vary across the globe,
with developed countries typically requiring higher levels of insurance.
It is at times observed that the minimum insurance requirements under national

law are usually well below the level of liability required by the lessor. The
lessee can typically expect the required level of liability insurance imposed by
the lessor to be in the region of $500,000,000 or higher depending upon the size
of the airliner.
8. Regulatory Aspects
Aircraft on wet lease have to comply with the regulator in the state of registry
and state of operator. Operation of aircraft on dry lease could require
registration of aircraft in state of operation.
Article 83 of second version of Convention on International Civil Aviation,

Chicago 1944 which came into effect on June 20, 1997, provides for the
possibility of transferring certain functions and duties from the State of Registry
to the State of Operator. The State of Registry thus shall be relieved of
responsibility in respect of these functions and duties.
India has ratified Article 83 and made changes in the local regulatory provisions,
which allows for transfer of responsibility for airworthiness and operational
control of leased aircraft operations.

Operator has to
a) ensure that aircraft continues to be airworthy and there is in place an

appropriate framework for operation such as aircraft maintenance
programme including maintenance policy, storage and service lives of
components;
b) training of engineers and flight crew, infrastructure for investigation of

failed components, repair and overhaul of the rotables on the aircraft,
formulate an operations manual for the type of aircraft, compliance with
the safety regulations and fit the requisite instruments and equipment in
the leased aircraft in accordance with the DGCA regulations;
c) ensure compliance with relevant Airworthiness Directives, and that

modifications and inspections declared mandatory by DGCA are complied
with. The lessor is required to give an undertaking in the lease
agreement that he will comply with all the applicable CAR rules.
Indian civil aviation regulations require that the leased aircraft should have
been type-certificated by Federal Aviation Administration of USA or Joint
Airworthiness Authority of Europe or Civil Aviation Authority of UK or any other
authority acceptable to DGCA. It is the operator’s responsibility to confirm that
the lease agreement does not contain any provision which will be binding on the
DGCA. The DGCA has the powers to withdraw permission for operation of a
leased aircraft in India if safety of the aircraft operations is in doubt or there is
any other non-compliance.
9. Protection/s available to Financiers
Aviation industry is heavily reliant on the support of financial market.

Financiers thus are important stakeholders in the industry. Financiers would like
to obtain as much as protection as available. This would also depend on what is
available from the insurance market, current industrial climate and would
change in response to changing risk landscape and prevalent business practices.
a) Additional name insured
Financiers can have their interest noted, seek an assignment of the

insurances or choose to be an additional named assured. Being additional
named insured however would offer highest level of protection since this
would create a direct contractual relationship with the insurers. As a
consequence, any claim would have to be negotiated with the financier as
well. Being additional named insured creates original interest for the
financiers rather than derivative interest through the borrower operator.
Derivative interest can be prejudiced since it involves original insured.

b) Certificate of Insurance
It is usually a condition of the financiers before the transaction is concluded

that the borrower would provide a certificate of insurance from the
insurance brokers placing the insurances as acceptable to them. Borrowers
usually provide drafts of the insurance certificate to the financier.
Financiers have their in-house team of legal experts or outside legal

consultants to vet the certificate for acceptability and criteria for financial
strength rating of insurers on the panel for the aircraft. Borrowers commit
to keeping the insurance in full force and effect during the time the
financing agreements are in place.
Any financier will usually seek to ensure that the level of indemnity
protection provided by insurance placement is satisfactory in terms of
coverage and quantum of monetary limits and placed with credible set of
(re)insurers. The cover for hull would need to be placed on an "agreed
value" basis in order that risk associated with market value or a replacement
aircraft may pose.
c) Breach of Warranty Coverage
Financiers would seek a breach of warranty coverage so that lessee’s

negligence and non-compliance do not jeopardise their recoveries.
Financiers are named as additional insured for liability coverage and sole
loss payee for hull claims. They would thus get the agreed value directly in
the event of a total loss of the aircraft.
In case a lessee is located in country with less than sound financial system
and institutions or credibility of insurers in a particular domicile is less than
acceptable, they would like to have a cut-through clause so that monetary
proceeds are not routed through these entities and thus ensuring that
recovery of claim amount is not jeopardised.
10. AVN 67B Clause
It used to be a common practice for the underwriters to vet manuscript

endorsements together with extensive finance / lease documentation or with
relevant parts of the documentation. This was recognised by way of formulation
of the clause AVN 67 “The Airline Finance/Lease Contract Endorsement” in 1991
by a committee of Lloyd’s and London Company underwriters. This was
amended to AVN67A in February 1991 and again to AVN 67B in October 1994.
Amendments were based on feedback and aimed at addressing concerns of the
financing community. This standardised cover eliminated the need for
underwriters to vet the finance documentation and offer cover which would
meet the requirements of financiers.

This clause was drafted such that a financier need not review policy and insurer
need not review the financing contracts. It provides for
a) Robust breach of warranty cover;

b) Severability of interests and
c) Notice of cancellation or change in cover.
Under the clause, the insurer is required to give the financier, via the broker,
30 days’ notice of cancellation or material alteration of the policy (except in
case of provision for cancellation or automatic termination stipulated in the
policy). In the hull war-only version of AVN 67B, this period is reduced to 7 days
(again, subject to any shorter periods in the policy). This aimed at standardising
the administration aspect of the policy endorsement with economy in effort
involved.
It remained unclear whether under AVN 67 the effect of breach of warranty

cover was to extend cover available under an existing policy or to create a
separate contract of insurance between a financier / lessor and insurer. The
amended clause AVN 67B creates a separate contract with financiers / lessors.
This clause underlines the utility of standardised wording in saving time and
efforts for underwriters as also all the other stakeholders involved together with
a great deal of certainty and consistency.
AVN 67B is a “stand-alone” endorsement clearly stipulating the “Contract

Parties” and the “Contracts”, and overrides any conflicting provisions in the
underlying insurance policy in regard to the express provisions of the
endorsement. Barring the provisions of the endorsement, the terms, conditions,
limitations, warranties, exclusions and cancellation provisions of the underlying
policy prevail for the contracting parties. Similarly the underlying policy is not
varied by any provisions in the contract(s). This eliminates the need for insurers
and brokers to review the financing contracts.
Breach of warranty coverage ensures that insurance cover would still be

available to financiers in the event of any act or omission (including a
misrepresentation or non-disclosure) by the primary insured – in respect of
which financiers / lessors must not have “caused, contributed to or knowingly
condoned the said act or omission” - whether prior to inception of the policy or
during its term.
Brokers play an important role in ascertaining and advising the clients as regards
the match between the insurance requirements as stipulated under the
financing agreements and as provided under the insurance policy. It is left to
the brokers to formulate the need for amendment for coverage and devise a
suitable endorsement for agreement of the lead insurer. The broker also issues
a draft certificate of (re)insurance in respect of the finance/lease contract,
evidencing the insured’s coverage and noting the relevant transaction details
for the AVN67B endorsement. The other contract parties then review and seek
changes in the draft certificate of (re)insurance as required. Once agreed, the

broker will issue the final certificate of (re)insurance incorporating the

conditions of AVN67B endorsement.
11. AVN 99 Aircraft Finance /Lease Contract- Continuing Liability

Endorsement
It is increasingly routine for lessors and financiers to require the airline to

provide ongoing third party liability cover in their favour for up to two years
after expiry of the lease/financing. Clause AVN 99 provides this cover. The
cover extends beyond the end of lease period after the aircraft is delivered
back to the lessor. The cover essentially addresses the risks arising from the
maintenance activities carried out by the operator during the time aircraft was
in his possession.
12. Lessors’and financiers’ liability
Lessors, secured parties, owners and financiers could potentially face liability
arising from an accident while the aircraft is given out on lease and actually
operated by someone else. This falls under the theory of recovery in tort law
named negligent entrustment.
Definition
A claim for negligent entrustment arises when one party is held liable for
negligently giving someone else a “dangerous instrumentality” with which that
person causes injury to a third party.
Usually, the “dangerous instrumentality” takes the form of a motor vehicle, but
could involve any inherently dangerous item, such as guns and explosives.
This involves the party allowing someone else to use a dangerous

instrumentality though they either know or should know that such usage could
be dangerous to third party. Thus, a guardian of a child who knows that the
child tends to driverecklessly allows the child to borrow a motor vehicle may be
held liable for negligent entrustment in the event of an accident. The negligent
entrustment depends on:
a) Entrusting inherently dangerous item to a person he or she knew or

should have known would be unsafe with it;
b) That the person to whom the item was entrusted was incompetent and
unfit to use it;
c) That the defendant had known or should have known that the person
entrusted was incompetent, unfit or incapable of safely using it; and
d) That the incompetent user proximately caused an injury to the third
party through the dangerous item.

Example
On April 19, 2000, Air Philippines Flight 541– Boeing 737 crashed into a mountain
in Samal Island in the Philippines, killing 124 passengers, all Philippine citizens
and 7 crew members. An investigation committee appointed by the President of
the Philippines determined that the pilots’ loss of situational awareness while
attempting to land caused them to inadvertently steer the aircraft into the
mountain. The airline could not be named as a defendant in the U.S. lawsuits.
However, only the lessors of the aircraft were sued for liability.
Following a class action suit between Layug Et al. (An Illinois resident,
JovyLayug, whose mother was on board) v. AAR Aircraft and Engine Group Inc.,
and Fleet Business Credit Corporation, prior and current owner / lessor of the
aircraft respectively that met with an accident, compromise settlement of USD
165M was effected. It was contended that these lessor companies should not
have leased “the decrepit airplane to Air Philippines, an under-funded and
unsafe start-up airline”, and that lessors have “a duty to provide oversight to
ensure that passengers fly on airliners with the latest equipment, the best
maintenance and finest training available.”
This was despite Federal Aviation Act (section 44112) of USA providing “[a]
lessor, owner, or secured party is liable for personal injury, death, or property
loss or damage on land or water only when a civil aircraft, aircraft engine, or
propeller is in the actual possession or control of the lessor, owner, or secured
party...”.
The law aimed at promoting aircraft financing through protection and immunity
to lessor, owner, or secured party without operational control since attaching
liability to them would result in discouraging such financing. It is believed that
this case was settled quite early into the court proceedings and court
interpretation was not entirely sound. It remains a matter of interpretation as
to the degree of protection afforded by the act apart from the facts and
circumstances of the case. Lessors and owners can indeed be held liable for any
maintenance defects created while the aircraft was under their custody and
control.
Negligent entrustment involves one party negligently providing another party

with an object that could cause harm and injury to a third party with that
object. In an airline organisational context, if attitude, policies, practices and
systems within the Organisation are such as to compromise safety and lessor
leases an aircraft to such an airline, it can be considered negligent entrustment.
Negligent entrustment is based on common law of bailment and based on the

assertion that the lessor knew or should have known that the lessee aircraft
operator was not competent to safely operate the aircraft.

Example
Yemenia Airlines Flight 626 Airbus A310 from Sana'a, Yemen, to Moroni,
Comoros crashed on 30 June 2009 at around 1:50 am local time while on
approach to Prince Said Ibrahim International Airport killing all but one of the
153 passengers and crew on board. Following the accident, a lawsuit was
brought against International lease Finance Corporation (ILFC), the leasing
company by more than 1,000 family members of victims of the crash.
It is contended that ILFC was liable under negligent entrustment because it

should have known the aircraft was poorly maintained and that the Yemenia
Airlines pilots were incompetent and plane was so poorly maintained that
French Aviation inspectors banned it from flying into French airspace in 2007
due to safety concerns.
ILFC sought to move the case to France since the crash happened closest to
French territory and many passengers had ties to France. The court considered
the feasibility of enforcing a French judgment against the U.S. Company in case
the judgement went against the company and denied the request. The case is
tried in US Federal Court under Comorian law.
Some lessors and financiers choose to conduct pre-lease risk audits on potential
high-risk clients to protect themselves from any future negligent entrustment
claims.
An aircraft owner can generally be held liable for any injury caused by a pilot
through negligence or error when such a pilot was flying the aircraft with his
permission. Owners incur liability through the actions of his agent. If however,
the owner knowing that the pilot is not competent entrusts the flying job to
such a pilot, it would amount to negligent entrustment. It is argued that airline
operators are agents of lessors and financiers in accident claims.
The negligent entrustment differs from vicarious liability in that the lessor
himself is held to be negligent as against the lessor being held liable for the
negligent actions of his agent. Claims which cannot be based on vicarious
liability can possibly be based on negligent entrustment. While courts may
hesitate to hold owners and lessors vicariously liable for the accident caused by
the operator, they may allow claim for negligent entrustment.The distinction
between vicarious liability and negligent entrustment is important since the law
may operate differently for these two causes of actions.
More activism on the part of plaintiff lawyers, more awareness about rights in
general among victims, more consciousness about insurance mechanism in
society and availability of social media are some of the factors contributing to
rise in claims costs. Additionally, general inflation, medical inflation and
growing prosperity in emerging and developing economies also contribute to the
increasing claim awards. Rise in expected standards of care and more pro-

consumer stance of the judiciary in general are other factors contributing to the
higher awards.
Test Yourself 1
Which of the following is the most common mode of aircraft acquisition?
I. Lending
II. Leasing
III. Venture capital
IV. Debt financing

SUMMARY CHAPTER 8
Summary
a) Leasing is a very common mode of aircraft acquisition. Aircraft engines are

also acquired on lease. Leasing of engines is a very common practice among
aircraft operators, particularly airlines.
b) Leasing can take different forms with variations in terms and conditions of
the lease agreement. There are three main types of leases:
i. ACMI (Aircraft, Crew, Maintenance, and Insurance), or the wet lease;

ii. Dry lease; and
iii. Damp lease.
c) In case of wet lease, the lessor provides the crew, including pilots,
engineers and flight attendants, to the lessee.
d) A dry lease involves transferring an aircraft for operation without any

support like maintenance, crew or insurance. Dry lease is of two types:
i. Operating lease and

ii. Finance lease
e) Damp lease is quite similar to wet lease but without the crew. In Damp
lease, crew is provided for by lessee. Lessor would provide maintenance and
insurance of the aircraft.
f) Arrangements similar to leases usually for a shorter duration are entered

into among Corporates and business aviation entities in order to optimise
aircraft usage.
g) Interchange agreement is an arrangement whereby a person “leases” his

airplane to another person in exchange for equal time, when needed, on the
other person’s airplane, and no charge is made, except for the difference
between the cost of owning, operating and maintaining the two airplanes.
h) Time-sharing agreement is an arrangement whereby a person “leases” his

airplane with flight crew to another person, and no charge is made for the
flights conducted under that arrangement other than fuel, oil, crew travel
expenses etc. Mostly, operational control does not get transferred in such
cases.

SUMMARY CHAPTER 8
i) As the Lessor would like to ensure that his assets are duly protected, an
aircraft operation can typically require following type of insurance cover
i. Hull insurance,
ii.Liability insurance,
iii.
Hull war insurance,
iv.Liability war insurance (to the extent liability insurance does not provide
adequate war liability write back insurance) and
v. Deductible insurance.
j) Dry lease puts the onus of putting insurance in place on the lessee. He will
arrange for all the different types of coverage required.
k) Under a wet lease agreement, lessor retains the operational control of the
aircraft. He also charges the lessee for insurance. Thus, onus of arranging
for all insurance is on the lessor.
l) Aircraft on wet lease have to comply with the regulator in the state of
registry and state of operator. Operation of aircraft on dry lease could
require registration of aircraft in state of operation.
m) Aviation industry is heavily reliant on the support of financial market.

Financiers being important stakeholders in the industry like to obtain as
much as protection as available.
i. Financiers can have their interest noted, seek an assignment of the

insurances or choose to be an “additional named assured”. Being
additional named insured however would offer highest level of
protection since this would create a direct contractual relationship with
the insurers.
ii. It is usually a condition of the financiers before the transaction is

concluded that the borrower would provide a “certificate of insurance”
from the insurance brokers placing the insurances as acceptable to
them.
iii. Financiers would seek a “breach of warranty coverage” so that lessee’s

negligence and non-compliance do not jeopardise their recoveries.
n) AVN 67B is a “stand-alone” endorsement clearly stipulating the “Contract

Parties” and the “Contracts”, and overrides any conflicting provisions in the
underlying insurance policy in regard to the express provisions of the
endorsement.
o) Lessors, secured parties, owners and financiers could potentially face

liability arising from an accident while the aircraft is given out on lease and
actually operated by someone else. This falls under the theory of recovery in
tort law named negligent entrustment.

CHAPTER 8 SUMMARY
p) A claim for negligent entrustment arises when one party is held liable for
negligently giving someone else a “dangerous instrumentality” with which
that person causes injury to a third party.
q) In an airline organisational context, if attitude, policies, practices and

systems within the Organisation are such as to compromise safety and lessor
leases an aircraft to such an airline, it can be considered negligent
entrustment.
r) Negligent entrustment is based on common law of bailment and based on

the assertion that the lessor knew or should have known that the lessee
aircraft operator was not competent to safely operate the aircraft.

Answer 1
Leasing is the most common mode of aircraft acquisition.
Question 1
___________ lease agreement involves transferring an aircraft for operation
without any support like maintenance, crew or insurance?
I. Dry lease
II. Wet lease
III. Damp lease
IV. Soft lease
Question 2
Which of the following lease agreements, puts the onus of putting insurance in
place on the lessee?
I. Dry lease
II. Wet lease
III. Damp lease
IV. Soft lease
Question 3
In wet lease agreements, the onus of arranging for all insurance is on
______________?
I. Only lessee
II. Only lessor
III. Either lessor or lessee
IV. Both lessor and lessee

Answer 1

Dry lease agreement involves transferring an aircraft for operation without any
support like maintenance, crew or insurance.
Answer 2

Dry lease puts the onus of putting insurance in place on the lessee.
Answer 3
Under a wet lease agreement, lessor retains the operational control of the
aircraft. Thus, onus of arranging for all insurance is on the lessor.

CHAPTER 8 ANNEXURE
Annexure
A. Airline finance / lease contract endorsement
It is noted that the Contract Party(ies) have an interest in respect of the

Equipment under the Contract(s). Accordingly, with respect to losses occurring
during the period from the Effective Date until the expiry of the Insurance or
until the expiry or agreed termination of the Contract(s) or until the obligations
under the Contract(s) are terminated by any action of the Insured or the
Contract Party(ies), whichever shall first occur, in respect of the said interest
of the Contract Party(ies) and in consideration of the Additional Premium it is
confirmed that the Insurance afforded by the Policy is in full force and effect
and it is further agreed that the following provisions are specifically endorsed to
the Policy:-
1. Under the Hull and Aircraft Spares Insurances
1.1 In respect of any claim on Equipment that becomes payable on the basis
of a Total Loss, settlement (net of any relevant Policy Deductible) shall be
made to, or to the order of the Contract Party(ies). In respect of any other
claim, settlement (net of any relevant Policy Deductible) shall be made with
such party(ies) as may be necessary to repair the Equipment unless otherwise
agreed after consultation between the Insurers and the Insured and, where
necessary under the terms of the Contract(s), the Contract Party(ies).
Such payments shall only be made provided they are in compliance with all
applicable laws and regulations.
1.2 Insurers shall be entitled to the benefit of salvage in respect of any

property for which a claims settlement has been made.
2. Under the Legal Liability Insurance
2.1 Subject to the provisions of this Endorsement, the Insurance shall operate
in all respects as if a separate Policy had been issued covering each party
insured hereunder, but this provision shall not operate to include any claim
howsoever arising in respect of loss or damage to the Equipment insured under
the Hull or Spares Insurance of the Insured. Notwithstanding the foregoing the
total liability of Insurers in respect of any and all Insureds shall not exceed the
limits of liability stated in the Policy.
2.2 The Insurance provided hereunder shall be primary and without right of
contribution from any other insurance which may be available to the Contract
Party(ies).
2.3 This Endorsement does not provide coverage for the Contract Party(ies)
with respect to claims arising out of their legal liability as manufacturer,
repairer, or servicing agent of the Equipment.

3. Under ALL Insurances
3.1 The Contract Party(ies) are included as Additional Insured(s).
3.2 The cover afforded to each Contract Party by the Policy in accordance with
this Endorsement shall not be invalidated by any act or omission (including
misrepresentation and non-disclosure) of any other person or party which
results in a breach of any term, condition or warranty of the Policy PROVIDED
THAT the Contract Party so protected has not caused, contributed to or
knowingly condoned the said act or omission.
3.3 The provisions of this Endorsement apply to the Contract Party(ies) solely
in their capacity as financier(s)/lessor(s) in the identified Contract(s) and not in
any other capacity. Knowledge that any Contract Party may have or acquire or
actions that it may take or fail to take in that other capacity (pursuant to any
other contract or otherwise) shall not be considered as invalidating the cover
afforded by this Endorsement.
3.4 The Contract Party(ies) shall have no responsibility for premium and
Insurers shall waive any right of set-off or counterclaim against the Contract
Party(ies) except in respect of outstanding premium in respect of the
Equipment.
3.5 Upon payment of any loss or claim to or on behalf of any Contract

Party(ies), Insurers shall to the extent and in respect of such payment be
thereupon subrogated to all legal and equitable rights of the Contract
Party(ies) indemnified hereby (but not against any Contract Party). Insurers
shall not exercise such rights without the consent of those indemnified, such
consent not to be unreasonably withheld. At the expense of Insurers such
Contract Party(ies) shall do all things reasonably necessary to assist the Insurers
to exercise said rights.
3.6 Except in respect of any provision for Cancellation or Automatic Termination

specified in the Policy or any endorsement thereof, cover provided by this
Endorsement may only be cancelled or materially altered in a manner adverse
to the Contract Party(ies) by the giving of not less than Thirty (30) days notice
in writing to the Appointed Broker. Notice shall be deemed to commence from
the date such notice is given by the Insurers. Such notice will NOT, however, be
given at normal expiry date of the Policy or any endorsement.
EXCEPT AS SPECIFICALLY VARIED OR PROVIDED BY THE TERMS OF THIS

ENDORSEMENT:
1. THE CONTRACT PARTY(IES) ARE COVERED BY THE POLICY SUBJECT TO

ALL TERMS, CONDITIONS, LIMITATIONS, WARRANTIES, EXCLUSIONS AND
CANCELLATION PROVISIONS THEREOF.

2. THE POLICY SHALL NOT BE VARIED BY ANY PROVISIONS CONTAINED IN THE

CONTRACT(S) WHICH PURPORT TO SERVE AS AN ENDORSEMENT OR
AMENDMENT TO THE POLICY.
SCHEDULE IDENTIFYING TERMS USED IN THIS ENDORSEMENT
1. Equipment (Specify details of any aircraft, engines or spares to be covered):
2. Policy Deductible applicable to physical damage to the Equipment (Insert all

applicable Policy deductibles):
3. (a) Contract Party(ies):

AND (b), in addition, in respect of Legal Liability Insurances:
4. Contract(s):
5. Effective Date (being the date that the Equipment attaches to the Policy or
a specific date thereafter):
6. Additional Premium:
7. Appointed Broker:
AVN 67B
28.9.94
B. AVN 99 AircraftFinance /Lease Contract – Continuing Liability

Endorsement
It is noted that the Contract Party(ies) had an interest or interests in respect of

the Equipment under the Contract(s) when the Equipment was being operated
by the Insured pursuant to the Contract(s). Accordingly, in respect of the said
interest(s) of the Contract Party(ies), with respect to losses occurring during the
period from the Effective Date until
(i) the date and time at which the Insurance expires or, if earlier,
(ii) the date and time at which the Insured has no further obligation to insure
the said interest(s) of the Contract Party(ies), as notified by the Designated
Contract Party to the Insurers (via the Appointed Broker, if any) (such
notification to be given promptly and in any event within 30 days after such
date), and in consideration of the Additional Premium, it is confirmed that, as
required by the Contract(s), the Legal Liability Insurance afforded by the Policy
is in full force and effect, and it is further agreed that the following provisions
are specifically endorsed to the Legal Liability Insurance section of the Policy:
1. The Contract Party(ies) are included as Additional Insured(s).

2. Subject to the provisions of this Endorsement, the Insurance shall operate in

all respects as if a separate Policy had been issued covering each party
insured hereunder. Notwithstanding the foregoing the total liability of
Insurers in respect of any and all Insureds shall not exceed the limits of
liability stated in the Policy.
3. The Insurance provided hereunder shall be primary and without right of

contribution from any other insurance which may be available to the
Contract Party(ies).
4. This Endorsement does not provide coverage for any Contract Party with
respect to claims arising out of its legal liability as manufacturer of, or
performer of maintenance, repairs or other operational activities on, the
Equipment.
5. The coverage afforded by the Policy is amended by this Endorsement to

provide coverage in respect of the liability of the Contract Party(ies) to the
pilots and crew of the Equipment (excluding liability to those pilots and
crew employed by the Contract Party(ies)), on the basis that for the
purposes of providing such coverage under this Endorsement, such pilots and
crew shall be deemed to be passengers.
6. The cover afforded to each Contract Party by the Policy in accordance with
this Endorsement shall not be invalidated by any act or omission (including
misrepresentation and non-disclosure) of any other person or party which
results in a breach of any term, condition or warranty of the Policy
PROVIDED THAT the Contract Party so protected has not caused, contributed
to or knowingly condoned the said act or omission.
7. The provisions of this Endorsement apply to each Contract Party solely in its
capacity as former financier, former lessor or former lease servicer or
manager under the Contract(s), and not in any other capacity. Knowledge
that any Contract Party may have or acquire or actions that it may take or
fail to take in that other capacity (pursuant to any other contract or
otherwise) shall not be considered as invalidating the cover afforded by this
Endorsement. For this purpose “lease servicer or manager” means a
Contract Party who is appointed by one or more other Contract Party(ies) to
provide services relating to the Equipment in connection with the
Contract(s) (other than services of a kind specified in paragraph 4 above).
8. The Contract Party(ies) shall have no responsibility for premium, and

Insurers shall waive any right of set-off or counterclaim against the Contract
Party(ies).
9. Upon payment of any loss or claim to or on behalf of any Contract

Party(ies), Insurers shall to the extent and in respect of such payment be
thereupon subrogated to all legal and equitable rights of the Contract
Party(ies) indemnified hereby (but not against any Contract Party). Insurers

shall not exercise such rights without the consent of those indemnified, such
consent not to be unreasonably withheld. At the expense of Insurers such
Contract Party(ies) shall do all things reasonably necessary to assist the
Insurers to exercise said rights.
10. Except in respect of any provision for Cancellation or Automatic Termination

specified in the Policy or any endorsement thereof, cover provided by this
Endorsement may only be cancelled or materially altered in a manner
adverse to the Contract Party(ies) by the Insurers giving not less than thirty
(30) days’ notice in writing to the Contract Party(ies) (via the Appointed
Broker, if any). Notice shall be deemed to commence from the date such
notice is given by the Insurers. Such notice will NOT, however, be given at
normal expiry date of the Policy or any endorsement.
EXCEPT AS SPECIFICALLY VARIED OR PROVIDED BY THE TERMS OF THIS

ENDORSEMENT:
1. THE CONTRACT PARTY(IES) ARE COVERED BY THE POLICY SUBJECT TO ALL

TERMS, CONDITIONS, LIMITATIONS, WARRANTIES, EXCLUSIONS AND
CANCELLATION PROVISIONS THEREOF.
2. THE POLICY SHALL NOT BE VARIED BY ANY PROVISIONS CONTAINED IN THE

CONTRACT(S) WHICH PURPORT TO SERVE AS AN ENDORSEMENT OR
AMENDMENT TO THE POLICY.
SCHEDULE IDENTIFYING TERMS USED IN THIS ENDORSEMENT
1. Equipment1:
2. Contract Party(ies):
3. Designated Contract Party:
4. Contract(s):
and references in this Endorsement to “the Contract(s)” mean the contract(s)
listed above, as amended or supplemented from time to time.
5. Effective Date2:
6. Appointed Broker:
7. Additional Premium:
AVN 99
2 August 2007

IC 76 Aviation Insurance

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IC 76 Aviation Insurance

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CHAPTER 1

INTRODUCTION TO AVIATION INDUSTRY AND

Aviation is about conquest of air, conquest of altitude and conquest of distance.

1. First practical airplane by Wright brothers (1905)

2. DELAG - World’s First Passenger Airline (1909)

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3. Captain Alcock and Lieutenant Brown crossing of the Atlantic in Vimy IV

IC-76 AVIATION INSURANCE 3

5. First Official Airmail flight by a heavier than aircraft (1911)

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6. First regularly scheduled Airmail Service (1918)

7. Beginning of commercial air passenger service (1914)

In parallel, experiments in vertical and hover flight continued resulting finally

The first official airmail flight by a heavier-than-aircraft was flown in ______.

IC-76 AVIATION INSURANCE 5

B. Features of Aviation Industry

The following features of aviation insurance distinguish it from other insurance

1. Aviation Industry is quite diverse in its scope

Fixed wing aircraft range from 2-seater piston-engine aircraft to wide-bodied

2. Operators and Service Providers in Aviation Industry

3. Involves crossing national boundaries

4. Disputes are likely to be more complex

Owing to the potential for involvement of international law and foreign

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A tyre manufacturer may not be provided product liabilities cover by other

5. Aviation hull insurance

Aviation insurance was in early days written by marine underwriters. That is

6. Elaborate checks at various intervals result in early identification of

Aviation industry continues to evolve in terms of aerospace technologies and

Elaborate checks of various types at various intervals result in early

These are further aided by extensive and extremely detailed investigation of

IC-76 AVIATION INSURANCE 7

Catastrophic potential of aviation operations were demonstrated in the

8. Volatile underwriting results

On the business aviation side, an organization tracking business jets

9. High level of technique and expertise

The conduct of Aviation Insurance requires a high level of technical expertise in

Which of the following statement is incorrect?

I. In the early days, aviation insurance was written by marine underwriters

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C. Aviation Insurance Industry

1. Aviation class of insurance

Aviation class of insurance primarily aims at catering to the risk management

By convention, efforts are made to delineate a particular class from other

a) Product liability coverage arising from catering company providing food

2. Categories of Aviation industry based on aircraft usage

Aviation industry based on aircraft usage can be broadly categorised as military

Diagram 1: Categories of Aviation Industry

Military aviation usually chooses self-insurance or no insurance since these

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Aircraft ownership and operation creates exposures by way of damage to or

As far as aircraft operation is concerned, the liability arises from

i. Injury to or death of passengers and third parties (passengers are third

ii. Loss of or damage to baggage, cargo and mail.

Aircraft operations are categorised either as:

b) General aviation operation.

Each of these is covered in detail in subsequent chapters.

Another segment is the aerospace segment which comprises of product

IC-76 AVIATION INSURANCE 11