Insurers evaluate VLJ risks

 - September 15, 2006, 6:49 AM

As the industry prepares for very light jets (VLJs) to live up to their billing to transform personal transportation, air-taxi and charter operations, members of the Aviation Insurance Association recently gathered for their annual conference in Grapevine, Texas, to consider risk exposure implications and market opportunities if the VLJ phenomenon turns its promoters’ rosiest visions into reality.

Conference keynote speaker Jim Coyne, president of the National Air Transportation Association, told the assembly of aircraft insurance brokers, underwriters and attorneys that he believes the VLJ phenomenon is perhaps “indirectly a victim of over-hyping.” He continued, “I don’t think it will be as revolutionary and emerge as quickly as some may be expecting. There could be as many as 5,000 VLJs in the sky during the next 10 years, but it’s not going to happen overnight.”

Coyne said the VLJ programs have encountered concerns that were unanticipated when they were initiated, “especially training and safety. As you all know, the big word is ‘new.’ We’ve never had so many owner-flown aircraft at those altitudes where the VLJs will operate.” He added that as VLJs reach market they “will create a new model for charters–an unproven model.” In the end, Coyne asked the insurance professionals, “Does the business model make sense? There are always going to be surprises. For you in the insurance industry it’s your job to be prepared for surprises.”

With no operational history, the VLJ fleet will challenge underwriters to weigh potential risks posed by high-performance turbine aircraft flown by owner-pilots, many of whom will have little or no prior jet experience. The aircraft themselves, having no accident track record, will at first be rated on factors such as pilot-training programs and the assumed safety built into their designs in the form of advanced technology.

New Technology Enhances Safety
Balancing the relative lack of jet experience among many VLJ pilots and the lack of operational data on the aircraft themselves is the advanced flight and systems display technology embodied in the VLJ designs. Will Lovett, chief underwriting officer for AIG Aviation, believes the technology that has helped reduce accident rates in the larger jets by increasing pilot situational awareness and decreasing workload will create “a very dynamic market” in the VLJ sector. He suggested that the advanced sensors and electronic instruments in the VLJs may reduce pilot error–to which 80 percent of accidents are attributed–and curtail the large number of accidents that occur in the landing phase.

Lovett emphasized that for avionics such as taws (terrain awareness and warning systems), weather radar, tcas, head-up displays (hud), enhanced-vision systems (EVS) and advanced electronic display concepts such as “highway in the sky” (hits) to be reflected in lower insurance premium rates and higher coverage limits for the VLJ class of aircraft will require additional flight and systems training for those who must learn to operate them.

Programs designed for first-time users of these systems will combine ground classroom, simulator and remote online self-study curricula with in-aircraft flight training followed by type-rating checkrides to assess how well prospective VLJ pilots have mastered the systems and aircraft performance characteristics.

For those pilots instructors deem unready for prime time in a single-pilot jet cockpit, mentoring arrangements are already established whereby a CFI experienced in the aircraft model will ride with the new VLJ pilot for a minimum number of hours or until he demonstrates acceptable proficiency.

Lovett predicted that the integrated flight and systems information displays aboard the VLJs “will have a significant impact on accident rates. Jim Anderson [who heads AIG Aviation’s Scottsdale, Ariz. office] and I have been working with the VLJ manufacturers for the past two years” to assess the safety impact of the new technology and innovative training protocols, he said.

After outlining what is likely to become the typical VLJ flight training scenario and syllabus, Anderson observed, “The VLJ manufacturers recognize the risk factors that are important to the insurance business and they’re doing a good job of addressing those factors. Over the next 12 years there are predicted to be 20,000 new general aviation aircraft in the air, and 4,500 will be VLJs. As a result, there are a number of risk-management issues that need to be addressed.”

The Eclipse 500, Adam A700 and Cessna Mustang are all slated to receive type certification this year. They are to be followed by the Diamond D-Jet (first flown this spring), Embraer Phenom 100 and possibly the Excel-Jet, Spectrum 33 and fighter-like Javelin “personal jet.” Anderson said the aviation insurance industry is for the first time facing questions on risk evaluation of turbofan-powered aircraft weighing less than 10,000 pounds, to be flown by a single pilot and sporting the latest iteration of flight-deck automation.

Anderson continued, “We’re going to be very accommodating” to the owner-pilot “providing that he completes the training and type-rating program.” Responding to an audience question about how insurers will address the fact that pilots in a position to buy and fly their own VLJs are often middle-aged, Anderson replied, “We’re working on that, not just for the VLJ market but for the entire industry.”

Another listener posed the question, “What pilot do we give a green light to, and whom do we tell, ‘Forget about it’?”

Anderson advised the speaker to contact the OEM of the particular aircraft, who will be in the best position to evaluate the potential customer’s experience level, qualifications and aptitude.

He noted that Eclipse and Adam have similar pilot training syllabi for the Eclipse 500 and Adam A700 VLJs, with separate pipelines for low- and high-time turbine pilots. Training for both of those aircraft, as well as the Mustang and Phenom 100, Anderson added, encompasses initial skills assessment, ground school, simulator and flight training and mentor pilot programs.

He predicted wide use of VLJs in the air-taxi market due to their relative advantages in acquisition and operating costs, suggesting that in the near future a VLJ operator could offer air-taxi service for as little as $1 per passenger mile, resulting in a one-way fare from Phoenix to San Diego, for example, of approximately $300.

Anderson added that new fabrication techniques and materials such as composites offer manufacturing cost and weight reductions but, from an underwriting standpoint, have yet to achieve a long-term record of integrity. He specifically mentioned the friction-stir aluminum welding process Eclipse uses, said to be 10 times faster than conventional welding with a lighter joint.

He noted also that the Avio integrated avionics suite in the Eclipse 500 has gotten close scrutiny both with regard to reduced pilot workload, enhanced situational awareness and better decision making and the reliability promised for its redundancy and reversionary modes. The system, jointly developed by Avidyne, BAe Systems and General Dynamics, integrates every aspect of flight control, navigation, systems status annunciation and mode selection on large, flat-panel electronic displays, totally replacing legacy electromechanical “steam gauge” indicators for all but a handful of standby backup instruments.

Anderson and Lovett agreed that certain risk factors, especially single-pilot operations by low-time pilots, raise a red flag. “Is this going to help or hinder in determining risk management factors?” Anderson asked rhetorically. “Historically, single-pilot [operations have] had slightly higher accident rates. Can training bring low-time pilots without previous jet experience to acceptable safety levels. Time will tell.”

Anatomy of a Hypothetical VLJ Mishap
Patrick Bailey, of the Bailey & Partners aviation insurance law firm in Santa Monica, Calif., addressed some of the less tangible aspects of risk prediction and management–decision-making and judgment. In a breakout session he presented a hypothetical accident scenario involving a VLJ, which, if not averted by intensive pilot evaluation, training and insurance planning, could be the subject of an NTSB report.

Bailey laid out a set of equipment and pilot parameters representing a typical VLJ mission in a hypothetical aircraft representative of the half dozen expected to enter the market by 2010. The Icarus Valkyrie 86 is a pressurized, composite, low-wing, twinjet certified under FAR Part 23 in the normal category. It is approved for day and night VFR and IFR and flight in icing conditions. It is authorized for single-pilot operation.

The $2.1 million Valkyrie 86 seats the pilot and five passengers and, with an mtow of 9,950 pounds can fly 1,320 nm with IFR reserves at 375 ktas. The swept wide-chord wing with spoilers gives the Icarus jet a 41,000-foot service ceiling.

The aircraft’s integrated avionics include GPS, enhanced gpws, tcas, an RVSM air-data package, electronic primary flight display and multifunction display. In addition to a three-axis automatic flight control system, the Valkyrie has weather radar with lightning detection and display.

The pilot, corporate executive Robert Abel, 51, received simulator, ground and flight training totaling 40 hours at the Icarus Aircraft factory training facility in Wichita, plus 30 hours of flight time with an insurance-required transition mentor. He has a total of 46 hours in type and 350 hours total multi-engine, of which 304 was in the Beech B55 Baron he previously owned. Abel is instrument and multi-engine rated with 1,600 hours logged PIC and a private pilot certificate earned in 1996. He has not received upset recovery training.

Abel’s transition mentor is a FlitePro Aviation staff instructor with ATP certificate and type rating for the Valkyrie 86, in which he has 215 hours. This CFI has 2,531 total hours, of which 544 are jet, and serves as instructor and counselor to the owner-pilot after completion of the time-in-type requirements.

Abel has insurance coverage that includes single limit bodily injury, property damage and limited passengers, with $100,000 limit for each passenger and $3 million for each occurrence. Conditions of coverage include retention of a transition mentor and pilot requirements permitting flight by any person who is a graduate of the Icarus factory training program who holds a private or commercial certificate with MEL and instrument ratings and a minimum of 1,000 total hours logged, including at least 50 hours flight instruction from a properly certified and rated flight instructor acting as a transition mentor in the make and model aircraft.

Abel’s final flight (and first solo trip after three mentored cross-countries) was originally planned from San Jose to Chesterfield, Mo., with his brother and sister-in-law. His mentor had signed him off to make this flight, with a fuel stop at Pueblo, Colo.

Bailey pointed out several issues regarding the flight:

• Abel and his aircraft were underinsured, as were Icarus Aircraft and FlitePro Aviation.

• Though they should have been, upset recovery procedures were not part of the flight manual.

• A partial refueling was performed en route, but a partial refueling procedure was not included in the flight manual, possibly contributing to the pilot’s later distress.

• Abel was not yet comfortable with the Valkyrie’s glass cockpit and was probably confused by its relative complexity.

The route of flight changed when Abel decided to pick up two additional passengers at Scottsdale Airport (SDL) in Arizona. He departed SJC at 10:20 a.m. PDT on May 25, landing at SDL shortly after noon. The new routing to SUS via ABQ, AMA and TUL covered 1,100 nm.

Departure from Scottsdale, originally planned for 3 p.m. MST, was delayed several times because, Abel told the Flight Service briefer, “My passengers are late.” A 1:55 p.m. FSS weather update included a synopsis of a weather system over north Texas and Oklahoma, the briefer advising “building thunderstorms” across the route. Abel finally got airborne at 5:15. Due to the 5,000-foot density altitude and the weight of two additional passengers plus their baggage, he was unable to carry full fuel when he took off.

Bailey imagined that the NTSB report would read, “An Icarus Valkyrie 86 was destroyed at 8:45 p.m. when it crashed into a wooded area while on an ILS approach to Spirit of St. Louis Airport in St. Louis, Mo. The pilot and four passengers were killed. The aircraft was on an IFR flight plan operating in IMC.”

In addition, he presented the following as excerpts from the “NTSB factual report”:
“According to radar plots, the aircraft was cruising at FL370, heading toward building thunderstorms north of Tulsa, Okla. The pilot requested numerous deviations around weather. Thereafter, the pilot reported seeing ‘a hole’ and announced that he would navigate through it. Five minutes later radar showed aircraft at FL400. Six minutes after that, radar data showed the airplane descending rapidly in a left-hand turn at a rate of 5,700 fpm. The airplane appeared to level off at FL190. The pilot made an emergency call to Kansas City Center stating that the wing flaps were jammed in the ‘full down position.’ Center responded, ‘State intentions.’ The pilot responded, ‘We’re very low’ on fuel and repeated, ‘flaps jammed full down.’

“Given the weather conditions, the destination airport was the only airport available, and emergency radar vectors were issued for the GPS Runway 26L Approach to SUS because the ILS was out of service. The aircraft was observed to intercept the 088-degree radial from the Foristell VOR and cross the initial approach fix outbound. Shortly thereafter the aircraft disappeared from radar. It crashed at 8:46 p.m. CDT about four miles northeast of the fix. There were no survivors.

“Post-crash investigation revealed that, according to Abel’s flight instructor at Icarus Aircraft, the pilot said he ‘felt a lot more comfortable knowing he had an airplane capable of topping bad weather.’ Abel’s pilot training records at Icarus Aircraft showed no simulator or flight instruction given in ‘upset recoveries.’ The topic was covered only in ground training.

“Wreckage examination confirmed that the wing flaps were jammed in the full down position and that the flap control valve may have failed, causing the hydraulic actuator to remain in the full flap down position. The component manufacturer stated that there were no known field problems with this unit, but conceded that it was a relatively new design made specifically for this model aircraft.”

In the litigation that inevitably follows such an event, it became clear that Abel’s insurance coverage, especially the $100,000 per-seat limitation, was not appropriate. More appropriate coverage, Bailey said, would be $5 million, with no per-seat limit.

Underwriting Risks
Aviation Insurance Association president Tom Thornton stated that the emerging very light jets (VLJ) represent yet-to-be-quantified underwriting risks with new–in many cases revolutionary–airframe and systems designs and production methods, flown by owner-pilots many of whom will be coming straight from the piston-engine world. However, with thousands of aircraft expected to enter service in the next decade, VLJs also present a sizeable insurance market.

Thornton, a Miami attorney specializing in defending insured parties in damage and liability suits, observed that if underwriters would “provide better (higher) seat coverage limits it would reduce the plethora of product liability claims. Presently there is no other target,” he said, that offers the level of awards worth a plaintiff trial lawyer’s time and effort “even if it’s abundantly clear that pilot error is involved.”

Thornton said that tort reform (which remains stalled in Congress) is nevertheless making progress at the state level. “State-by-state, more legislatures are passing tort reform measures. Florida, for example, has acted to enact curbs on joint-and-several liability claims,” he noted.