Archive for the ‘Aviation Insurance’ Category:
Google began positioning its new flight-finding feature at the top of general search results for airline booking information earlier this month. And its new competitors in the $110 billion online travel industry aren’t happy about the search giant crashing the party, according to a recent Wall Street Journal report.
Chasing The Market To The Bottom
Travel is hot for 2012 and beyond. An increasing number of people say they’ll do more leisure traveling in the coming year, and even more say they’ll fly if they can find good deals in 2012. Good deals are going to be hard to find. The airlines attempted to raise prices 22 times in 2011 (and nine of those attempts were successful).
Business travel spend is expected to have grown 6.9% in 2011 compared to 2010, hitting $250.2 billion. The forecast for 2012 is 4.3% growth in business travel spend for 2012 (or $260.9 billion).
While revenue growth in the travel sector looks promising the user experience continues to decline. Flying today is like traveling by bus with few frills and even fewer fun times. Consider some of the recent headlines:
- Airline Technology Leading to Customer Alienation
- Airlines Score Lowest In Customer Satisfaction
- 92% of Executive Unhappy With Business Travel Experiences
- Airline Delays, Cancellations and Complaints Rise
I could go on with an endless list but by now the picture should be obvious. Current market dynamics within air travel services is propelling a race to the bottom and Google knows this. In other words air travel suppliers have boxed themselves into competing on price and thus air travel services have become a commodity. The meaning of the term commodity is used to describe a service for which there is demand, but which is supplied without qualitative differentiation across a market.
Google knows that search has the greatest influence over consumer choices for travel services. 93% of people who seek information on travel services use search. Consumers seek ratings and reviews, news articles, word of mouth and blog post which in the end influences their decisions. When there is little differential in a market then price becomes the initial decision factor followed by “social influences”, i.e. quality of the experience.
As a result, the present online travel bazaar is very competitive and the margins are shrinking . The tight competition led the market to compete on price rather than experience. Google recognizes this and simply stepped in and made the shopping experience better. Google doesn’t care about the price of air service they care about providing the price to consumers seamlessly.
As fortunes are made by leveraging technology to become ever more efficient, there is yet far greater wealth to be had by unleashing the discovery of new experiences and creation of new opportunities. That is exactly why we created Social Flights. We are changing the direction of the race to the top.
This post first appeared on 4.26.11 in CS&A Insurance blog – Clear on Top
How do we determine is something is dangerous? Is there a universally known definition or just a matter of opinion? Webster defines the term as follows:
dan·ger·ous – adj – able or likely to inflict injury or harm
If we stop and think about the literal definition of dangerous, we realize that it applies to most things in our life. We start off each day with dangerous acts…shaving, taking a shower, cooking breakfast, driving to work…all of which have the ability to inflict injury or harm. How many of us have cut ourselves when shaving? How about burned yourself while cooking? And what about having an accident in a car? The generally accepted odds are that 1 in 4 people will be involved in a serious car accident in their lifetime. Let’s take that a step further, based on the average number of automobile trips made by Americans in their lifetime the odds of being killed in an accident are 1 in 140. Driving is the most dangerous activity undertaken by most Americans on a daily basis and very little thought is given to the dangers encountered because it is just a routine part of life.
Why does the general public view flying as being dangerous? Any time we cheat the laws of gravity we are entering into a “dangerous” scenario by definition; but is it really dangerous, or is it just different? According to the National Safety Council, the odds of being killed in a plane crash are about 1 in 250,000. In comparing these statistics you are 1,786 times more likely to die in a car than in a plane…in other words you are more likely to die on the way to the airport than in flight to your destination.
So what is it that is driving this dangerous view of flying? In short, lack of education and the media. This is a funny combination in my mind because the media is supposed to educate, but often times they are just as uneducated as the masses to which they are pontificating. How does a blind man know what color the sky is? He trusts the person describing it to him, even if that person is colorblind. In absence of knowledge we tend to believe whatever sounds the most accurate. So without further ado I give you some media quotes concerning recent flying scenarios making headlines.
“The Monday night close call, left Obama’s jet 2.94 miles away from slamming into the 200-ton C-17 plane…” – New York Post
This is what is known in the aviation world as a “go around”. It happens on a daily basis and exists for just such an occasion. When the required separation cannot be maintained or does not exist, the controllers direct the pilots to break off the approach and send them around to try it again. Let’s put this in perspective just to give you an idea how far 2.94 miles is…try 15,500 feet. This is a greater distance than all those aircraft that pass over your house on approach to landing if you live within 30 miles of a major airport. If their landing lights are on when they fly over your house at night, they are probably below 10,000 feet and only 1.89 miles away from slamming into your house.
“The pilots landed their planes safely but without help from the airport tower.” – ABC News
“Planes forced to land without help from tower at Reagan Natl” – America’s Newsroom
News flash…the tower does not and cannot help a pilot land an airplane. The tower can only give direction and recommendation just like the traffic cop at an intersection. Pilots land without help from the tower thousands of times every day…it’s how we were trained from Day 1.
Let’s face it, flying is still a widely misunderstood activity and as long as there are reporters there will be inaccurate news reports. As pilots, we are a relative minority and the understanding of flight is still a wondrous mystery to most. The how’s, why’s, and what if’s are the stuff of Hollywood legend. Entire movies have been made around the fear of flying and the perceived dangers that they instill are numerous. Aviation activities still draw front page news, from the airshow to the accident and the engine failure to the ATC actions. Is flying dangerous? Yes. Is it more so than other daily activities? No. It is up to us as pilots, air traffic controllers, and all other aviation support personnel to do all we can to operate as safely as possible and calm the fears of the general public.
Be professional, train appropriately, and be personable. Just because we can fly does not mean we are above anyone else.
As I said yesterday, both the Phenom 100 and the 300 are single pilot certified and are designed to be flown by professional pilots, as well as owner pilots. The latter present a challenge as they are generally a group with little or no pure turbojet time. Many have flown complex turbo prop aircraft but most owner pilots have spent little time in “fast movers” and lack a complete understanding of their roles and responsibilities in the ATC system. The solution lies in training and competent mentoring. Embraer includes two “entitlement” training slots for pilots with the purchase of an Executive Jet. The training at ECTS is a thorough introduction into the Phenom and an accurate assessment of acquired skills and knowledge. The problem is that training ends with the check-ride and subsequent type rating. And, in any sphere, knowledge without wisdom is incomplete.
A typical type-rating oral exam consists of knowing aircraft systems and limitations along with the immediate action items associated with specific emergency procedures. A more thorough oral drills deeper with questions involving the working relationships of systems and an understanding of why things work the way they do. The rating-ride is a carefully choreographed series of events that test specific learned procedures such as the loss of an engine on takeoff, the“V-1 Cut”, as well as single-engine approaches and landings. The entire check ride is given within the confines of a single airport and is an accurate assessment of skills and accomplishment. The FAA oral and rating-ride are excellent tests of pilot preparedness for the unexpected problems that seldom (thankfully) occur in real life. What a rating-ride can’t do is impart experience and judgment to a first-time jet pilot. With experience comes wisdom and the safest way for the first-time jet pilot to get that wisdom is with the assistance of a mentor.
Slow down, you move too fast.
You got to make the morning last.
Just kicking down the cobble stones.
Looking for fun and feelin’ groovy.
(59th St. Bridge Song by Simon and Garfunkel)
Up until recently, Air Traffic Controllers could logically assume that everyone in a jet “kicking down the cobble stones” was a pro-pilot or at least performed like one. The advent of the personal jet has changed that. Now anyone with a million dollars, or even less with financing, can buy a jet to look for fun and feel groovy hanging out with the big boys. Herein lies the problem. The old instructor adage of “slow down and make yourself time for the approach” only works at the cabbage patch, but these personal jet aircraft aren’t staying in the cabbage patch.
A gap has developed between those who understand ATC and fly accordingly and those who feel as if ATC will accommodate their lack of skills and judgment. The saner parties have been the insurance companies who have insisted upon some level of supervision for low time aviators. Insurance companies, at a loss for how gauge skills and judgment, have resorted to insisting on a certain number of hours (usually 25) of supervised flying. Typically those hours are flown in the course of business for the newly minted personal jet aviator.
Perhaps a better way to ensure the safety and success of the owner-flown community would be to adopt the commercial aviation technique of mentor flying for newly type-rated jet pilots by creating a private IOE (initial operating experience) process. Airlines have long recognized that meaningful mentor programs consist of more than the supervised “drilling of holes” in the sky. A truly effective mentor program imparts a higher level understanding and competence to the new pilot.
With training fresh in the mind of the newly typed pilot, the mentor reinforces good technique and emphasizes the “real world” application the newly learned skills. And it takes both training and experience to protect your Phenom investment.
The Icelandic volcano (with the name that is hard to spell, much less pronounce) causing disruption to air travel in Europe has brought the importance of air travel to the forefront. Thousands if not hundreds of thousands of travelers were stranded trying to get home to or from Europe. Business and leisure travelers alike were grounded with no options for travel if they were leaving the continent. Even U.S. President Obama was forced to miss the State funeral of Polish President Lech Kaczynski as a result of the ash.
Europe has the world’s most developed transportation infrastructure with high speed trains, excellent highway systems and airports, but when you are traveling to and from the continent you still have to cross water. That only happens by boat or air. The boat takes days and the air – a few hours!
The system of air travel not only employs millions across the world but it also supports the global economy by connecting businesses across the globe and by bringing tourists to many economies reliant on tourism for economic health.
Reuters News reports that “the International Air Transport Association (IATA) estimates that the crisis caused by a volcanic ash cloud above Europe cost airlines revenues of more than $1.7 billion by Tuesday.”
This is just the direct economic impact to the airlines, and in no way considers the impact to the business travelers who were stranded on one side of the pond or the other. What about the lost productivity? Even with today’s knowledge of human productivity values, there is probably no way to measure this cost; but, common sense says that it has to be immense.
On a small scale, and in terms that directly relate to my business, our Vice President of Business Development, Bill Minkoff, had planned to be in Prague this week at a meeting of business aviation companies. There is no way to tell how many opportunities to connect with aviation entrepreneurs in Eastern Europe we missed because of the disruption. Bill had hoped to get valuable face time with our Eastern European counterparts, making connections for future opportunities. He had also planned to stop for a meeting in Italy. The Italian meeting may be rescheduled for a few weeks from now when things settle down; but, the Prague trip (and its opportunities) is just gone.
When I think about the value of airlines and the air mass transit system, I believe that their greatest value is in their international travel options. Even with all of the problems of the airline system as a whole, international routes are the most effective and efficient in moving people, and they are the most difficult to replace with an alternate form of travel when things go wrong.
News sources commented that private jet travel soared during the shut down of airline travel since private jet operators had the flexibility to fly out of airports that were not closed by the ash and to take advantage of small windows of weather opportunity that the airlines, with their inflexible systems, could not. The charter operators in some regions may have gotten a boost from this crisis; but, even with their increased activity, they could not even begin to meet the needs of the stranded travelers.
Richard Branson said in an interview on National Public Radio that he feels confident that the European Union aerospace authorities will come up with solutions to mitigate the impact should this or other volcanoes create trouble in the future. The biggest key is identifying how much ash can be in the air before safety of flight is compromised. Based on the losses of the past week and the possibility of a recurrence, I am confident that EASA will research this and come up with good data to avoid unnecessary grounding of flights.
Here in the United States, we can always get in our cars and drive. In some cases, we might not spend much more time driving than we would have if we had flown. On 9/11, when all flights were grounded, I was stuck in Pennsylvania just south of Pittsburgh. We were fortunate to be able to get a car and made it home in 12 hours. The same principle applies in Europe if you are staying on the continent. The trip may take longer, but driving is still an option.
In today’s global economy, air travel is irreplaceable when it comes to moving people around the planet.
A volcano eruption on an island nation in the middle of the North Atlantic would seem to be a geographically isolated event. In the past week, we have found out differently. We must take better care of improving the system of airline travel we have created over the past 75 years if we want to prevent an economic crisis caused by another “isolated event.”
On January 25, Dan Robles suggested that Social Currency might be used to fight terrorism. Some of our friends on Linkedin joined the conversation.
Greg Johnson, President, CEO and founder of OneSky Jets, says:
“I think there are a few interesting points of discussion in Dan’s latest post. The first relates to where we catch terrorists… Trying to stop them at the airport checkpoint is an effort in futility. Terrorists are a determined lot and as Dan states, they only have to succeed once. The answer lies in knowing more about everyone who elects to fly as personally invasive as that may sound.
The U.S. and other countries are already starting to collect more data from passengers…birthdate and place of birth in addition to name, even on domestic flights. There has been an ongoing debate about a federal ID card although my opinion is that an additional card would be redundant. The databases exist today to to give law enforcement a pretty decent ability to profile passengers and I only see that capability expanding.
The typical terrorist’s desire to keep a low profile works against them when they are attempting to blend in to an increasingly data-driven society. The absence of data or abnormal patterns will stand out.
I don’t believe that “social currency” on its own is enough. There are billions of peaceful people on the planet that are not actively engaged in social networking today. The fact that my Mother isn’t on Facebook, LinkedIn, or MySpace shouldn’t (on its own) subject her to an additional level of security screening, however a college student today without an online presence might throw a red flag or two.
Also, don’t think that law enforcement isn’t already leveraging social networks. I have an associate who has been involved in government facial recognition projects. When the government needed a database of names and photos to test this new technology, where do you think they went? The publicly available pages of Facebook!
So the net/net here in my opinion is that the publicly available data in social networks can and will be used by governments of the world as one facet in a multi-dimensional campaign to know who is flying before they get anywhere near the airport and in the big picture, that’s a good thing.”
Mike Osborne, Operations AME at Honeywell, shares this concern:
“How do you propose to ascertain their networks and claims? Either or both seem easy enough to falsify.”
My reply is:
“I believe that the idea is to go for a “preponderance of evidence.” Just as the lack of a credit report, utility bills or bank records casts doubt on the authenticity of an identity, the lack of social credit and social activity history casts doubt on the social interaction and perhaps even identity of the passenger. Certainly, just as false credit reports, etc. can be created to support an alias, false social backgrounds could be created to support it as well. I think the point that Dan Robles is making is that to create monetary history and social history that coincide is difficult and would make it more difficult for terrorists to support several believeable aliases.”
Kenneth J. Goldstein, President at KJG International Consulting, responds:
“No as left to their own devices, most would not provide a sufficient background to grant the rest of us security.”
What do you think?
This has to be every FBO and aviation insurance carrier’s worst nightmare to deal with. This week at Dulles Airport in Washington D.C., a hangar storing several large cabin business jets collapsed due to the weight of the snow from the blizzard that hit the area over the weekend.
There could easily be $150 million worth of aircraft totaled or damaged to the point they will be out of service for a long time. The hangar, which was a fairly new structure, is worth probably $5 million itself.
Whose insurance covers this one? The aircraft owners or the owner of the hangar?
I have asked our insurance agent Tom Chappell to keep an eye on this and write on the issue of insurance coverages and how this possibly could play out. For those of us in the aviation services businesses it will be an eye opener as to the amount and scope of the insurance coverage we have.
What a mess!
Make sure this doesn’t happen to you: http://www.chappellsmith.com/
(Author’s note: The following is meant to engage new ideas rather than promote any specific scheme or ideology)
Given the events of the last few months weeks, it’s time to for the aviation industry to get serious with Social Media. This article demonstrates how an alternate currency can be used to severely reduce or eliminate terrorist risk in commercial aviation. Think I’m kidding, read on.
Obviously an airline will not let you board an airplane if you don’t have the financial currency sufficient to buy ticket. Why should an airline let you board an airplane if you do not have social currency sufficient to fulfill your social obligations while in the air?
People with extreme social currency deficiencies are routinely stripped of their rights by a jury of peers and isolated from society for a period of time (where they would not board an airplane anyway). While there are many systems in place to manage the various degrees of social currency deficiency, none appear to be able to identify a terrorist without also violating the rights of non-terrorists.
However, many people are willing to share information about themselves to associates with whom an economic benefit is shared or exchanged. This happens a billion times per week on Linkedin, Facebook, and Twitter – why not among fellow passengers? After all everyone is already connected by six degrees.
What would a terrorist’s Facebook profile say about them? Do they have a lot of referrals on Linkedin? Do they post great work on Flikr? Is their community orchestra featured on My Space? Are their posts popular on twitter?
Should a social currency credit score become imperative to social transactions as the financial credit score is for financial transactions?
Banks and Insurance companies already rely on a highly invasive “Credit Score” to establish financial risk profile as a means of protecting themselves and their other clients. Why wouldn’t an airline use a social credit score to establish a social risk profile as a means of protecting themselves and the lives of their other clients?
Ruse and lose
Sure, the bad guys can adapt to social media as they have adapted to all other measures. The problem is that the greater the size and scope of their social media ruse, the more difficult it is to maintain the ruse. A threshold score could be set to nearly eliminate this possibility. Those folks can then simply opt into the full body scan.
The Paradigm Shift
As the saying goes, the attacker needs to be successful only once, while the defender needs to be successful every time. The concept of a Social media credit score flips this paradigm on it’s head. The attacker’s social credit score needs to be successful every time. The defender needs to be successful only once.
You know that feeling in the pit of your stomach when you just know something bad is about to happen? You don’t know when, you don’t know where - you just know it’s coming. I call that the “wet sneaker” feeling. Recent airport security breaches have resulted in some serious wet sneaker feelings for me.
I blogged about air mass-transit security issues on 27 December and 2 January. I no longer work in air mass-transit. However, their reality affects mine; so, I pay attention. Airline security failures have resulted in enormous losses for private aviation in the past and I am concerned that they will again.
We all remember the September 11 attacks with sickening clarity. Even typing the words, I find myself feeling nauseated. At 9:30 AM that morning, the FAA issued a nationwide ground stop followed by instructions to airborne aircraft to land at the nearest airport. On September 12, the ground stop was slowly lifted, allowing air carriers, both scheduled and unscheduled, back in the sky. That same day, aviation insurance underwriters began canceling all War Risk coverage. At 4:00 PM on September 14, the ground stop was lifted for general aviation flights operating under Instrument Flight Rules (IFR). Although no general aviation aircraft were involved in the attacks, they were grounded for 78.5 hours. War Risk coverage was eventually offered again at an increased rate. In the case some of our aircraft, the rate increased by about 100%. Many small operators closed their doors.
I’m sure I’m not the only person who saw a causal relationship there. To be honest, I started this article with the angle of “air mass-transit security failure = loss of life and property = higher insurance premiums = business closures.” Recently, I spoke with our insurance agent, Tom Chappell of CS&A Insurance, who destroyed my theory with facts. With 35 years of experience, Tom has forgotten more about aviation insurance than I’ll ever know. Even before the attacks, he noted an aviation underwriting trend towards a hardening market. The market was already moving towards to higher premiums. The attacks just accelerated the process which was, in Tom’s words, “like hitting a slice into the wind – it just exacerbates the slice.” But, insurance premiums weren’t the only costs that went through the roof- fuel prices also soared. Adequately capitalized operators with good business plans had a tough time of it; but, under capitalized operators and those with poor business plans shut down. It’s industrial evolution, I suppose: The survival of the fittest. (Somehow this process doesn’t apply to air mass-transit, but Allen Howell addressed that on Friday.) Time passed. Fuel costs decreased to near pre-attack rates. Aviation insurance underwriters calmed down and reversed some of the drastic rate increases that were knee-jerk reactions to the attacks. The market softened.
The last 18 months have been very difficult for private aviation. Charter operations and corporate flight departments have disappeared. Many previously strong operations are foundering. Extremists are exploiting gaps in security for air mass-transit and, according to Tom Chappell, the insurance market is beginning to harden again. Enter the wet sneaker feeling.
Aviation as a whole is a fluid and volatile industry. There are cycles of highs and lows that sometimes change with little warning. The industry is vulnerable to outside changes over which it has little or no control – things like fuel costs, insurance, employee benefits, government policy and regulation. Private aviation accidents and incidents have an inconsequential effect on air mass-transit. However, in stark contrast, air mass-transit accidents and incidents can have catastrophic effects on private aviation.
I seriously doubt that any general aviation contingent will be invited to participate in the decision-making process concerning new airport security procedures, even though our livelihoods may depend on it. So, until we effectively band together, we eat our Tums, write our legislators and live with wet sneakers.
Over the past few weeks I have posted several articles on social media – the new method of communicating to the market. I am an admitted novice in the world of social media and technology, but my eyes are starting to open to the possibilities created when social technology and business aviation collide.
We have discussed the opportunity social media presents to fight the war the airlines have declared on general aviation by getting our message out in an unfiltered way. We have also discussed social media as a means to increase our visibility to the market as well as to communicate with that market in order to innovate and better meet its needs on its own terms. All of these are game changing strategies.
So now I want to ask some what ifs!
What if there was a social grid or network built for the purpose of becoming the e-marketplace for private and business aviation travel solutions? What if this social network allowed, encouraged and facilitated the market to come together to aggregate a demand that is currently outside of the supply that traditional channels of distribution make available to the market?
What if the market could then go to the suppliers of private aviation and request trips or routes of travel where individual travelers could buy seats, filling the aircraft, driving the price down? Maybe the price would still not be as low as mass transit airline travel, but still would be much lower than today’s pricing of private aircraft flights.
What if travelers could input their travel profiles into the social grid in such a way as to speak to the entire market and to form affinities around common travel patterns? Would travelers be willing to share their travel information with the market in a profile, sharing where they go, when and how often? Would travelers talk to each other about their travel needs if those conversations led to more new, innovative and efficient travel solutions than have ever existed before?
What if all air charter providers and small scheduled airlines (niche airlines) could input supply into the grid, including empty legs? What if on-demand charters were quoted instantly so that the market had real time visibility to the solutions they need? What if all of these suppliers could participate on a level playing field and in a system that costs the users only when a transaction takes place?
What if the other parts of the business travel supply chain were able to participate as well? Would the hotels, resorts, rental car and limousine services have an interest in participating in the grid?
What if private aviation operators could collaborate to create a bigger market? What if we woke up someday and realized that we’ve been monopolized by technology controlled by some organization that isn’t even in our business? What if we all created a new collective “social grid” in which the general market of travelers realized they could use our system rather than the old commercial system?
What if we could collectively reinvent ourselves as an industry with the aim of serving the larger market? What would be required? Who would agree to collaborate? Who would agree that if we don’t, someone else will? And we’ll all lose when we should have been leading all along?
If we could simply start to build a dialog around all of these questions what could we do? Should we do it? If not, then let’s not even try to answer these questions. Let’s keep doing what we’ve been doing. Einstein once said “insanity is doing the same thing over and over and expecting different results.” What happens if we all decide to be sane?
If you think we need to do something else then join me and invite others to join us in creating a new future where we can all win.
Who will jump into the dialog? Who will invite others to do so as well? Is there anyone out there?
Where are the answers to all of these “what ifs”? Could they be out there in the market of conversations that could create the new system that creates the answers?
The answers are out there in the minds of people wanting to create a new future. Are you one of them?