“In the next 60 to 90 days, you’re going to see security in the United States like you’ve never seen before,” said retired U.S. Navy admiral Isaac Richardson in late June. “A portion of the nation’s reappraisal took a very hard look at general aviation…and the threat posed by general aviation aircraft as weapons.”
In a glimpse of what may lie ahead for business aviation, Richardson, now the Transportation Security Administration’s federal security director for Chicago, recited the TSA’s mandate: “To provide for improved airport perimeter access security, in particular that the TSA will assure at least the same level of protection as screening of passengers and their baggage at the commercial airports.”
Richardson, the lead speaker at the NBAA aviation forum and static display at DuPage Airport on June 27, is a 30-year naval officer, F-14 pilot and former captain of the aircraft carrier USS Nimitz. He also happened to be just 150 ft away from the portion of the Pentagon that was struck by a hijacked airliner last September 11. “I’m here to read the tea leaves a bit,” he said, explaining his presence at the Dupage event.
According to NBAA, more than 1,000 people from 28 states attended the event, although the precise breakdown of visitors and exhibitors was not available. Twenty-six aircraft were on display at the show, ranging from the Pilatus PC-12 to the Boeing BBJ. In addition to Richardson’s presentation on aviation security, other forums included the realities of corporate aviation insurance, aging aircraft issues, communicating with senior management and the benefits and features of the business airplane.
NBAA president Jack Olcott explained changes in airspace access responsibility since September 11– first from the FAA to the National Security Council, then to the Secret Service, then to the TSA and now perhaps a final blending of all security concerns into a full cabinet-level position in the proposed Department of Homeland Security.
Olcott urged visitors to “follow closely the development of the Department of Homeland Security and be realistic about how long that formation will take because it will integrate 22 agencies, about 100 different departments and 170,000 people who presently reside in eight different cabinets and require a budget of $37.5 billion. The government wants all of this completed by September 11.
Richardson said, “Who is in control of your aircraft and who you are carrying on your airplane are big issues.” This also means knowing who is in a secure area at a GA airport, what defines a secure area, whether pilots have a valid license and much more.
Olcott emphasized that business aviation operators always know exactly who their passengers are and that they have practiced a high level of security for years.
But GA has never had airline-type security. Because many airports don’t even have fences, the question of how to control access was an obvious one. Said Richardson: “Although we might all argue the true definition of this new law, we can all agree that security will be much tighter than we have ever seen before. The real message is that we need to work this out together. This is no bureaucratic process where something is driven down people’s throats.” He spoke of the challenge of general aviation’s 18,000 available airports vs the airline’s 430 across the nation and said work groups have been formed to examine best-practice solutions to GA security issues.
“We’ve initiated discussions with industry groups, such as NBAA, to actively develop plans for the exchange of ideas,” Richardson said. “You will be hearing more from the TSA, such as invitations to sit on industry panels to give a voice to the general aviation policy-making arena. Some forums will be on new regulations, while others will address specific security concerns at individual airports. I think the best-practice review we’re planning will need a dose of reality, however, before anything is implemented in the field.”
To enhance perimeter security, Richardson said the working group has looked at new technologies, new training and enhanced enforcement. “We’re also testing some of these new technologies at 20 airline airports around the country,” he said. TSA is considering using a model airport to work the kinks out of new security procedures. The current schedule calls for all the formal recommendations to be completed by next month.
But the TSA’s direction on general aviation is still unclear. “I’ve been purposely vague and wishy-washy for a reason,” Richardson told his Dupage audience. “We will end up looking at GA, but we are also looking at shipping and trucks as well. This is all a white sheet of paper right now. I don’t want a lot of people upset thinking the TSA is simply doing this or that.” But don’t look for TSA employees at your local GA airport any time soon. “I also don’t have a good answer to how everyone will pay for all of this, but it is certainly something the TSA is looking at.” Richardson plans to initiate a local committee in the Chicagoland area to field concerns from regional airspace users.
Corporate aviation insurance was the focus of the afternoon forum at Dupage. Moderated by Mike Sweeney, USAIG president and COO, the panel included Jeff Bauer, president of NationAir, Sue McKeon, an attorney with Kansas City-based Cooling and Herbers, and Stephen Johns, president of LL Johns & Associates, an insurance agency in Waterford, Mich.
Sweeney explained that one reason the aviation insurance industry’s profitability has plummeted since September 11 was because the nosedive had actually begun long before the events of last September.
In 2000, premiums taken in by insurance underwriters for the airlines totaled some $1.2 billion, while claims totaled nearly $1.8 billion, putting insurance companies behind the power curve. Sweeney said, “The cost of settling claims and repairing aircraft has continued to climb. Underwriters either had to raise premiums or get out of the market. Premiums are expected to rise this year, and next year could be even worse. Reinsurers are telling us to expect higher premiums as they try to dig themselves out of the hole they dug before September 11. This is an opportunity for them to recover… which means higher costs for all. ”
Reinsurance companies dumped many problems on the underwriters, but coverages were eventually reinstated at much higher prices. “If there is another terrorist event,” Sweeney cautioned, “I suggest the same process will happen again, but there may not be a reinstatement of coverages. This past year has been our worst nightmare, but it is the reality of the market today.” Johns added, “15 years ago there were 15 underwriters that we represented and five would write business aviation insurance. Today there are eight underwriters and three who will write business aviation insurance.”
Finding quality insurance coverage was also a major topic. Sweeney said, “The most expensive insurance you can buy is the policy from a company that doesn’t respond when you have an accident.”
Johns added, “You might want to get your premiums down to save money, but it may not pay off. We used to look at cost first, then coverage and finally the security of the insurance company. Now we need to look at the security of the company first, the coverage and then cost. By the time some flight departments might learn an insurance company is in trouble, it may be too late to do anything about it. Some insurers have already collapsed and others may follow. If the company that insures your aircraft fails, your company could be on the hook alone.”
Everyone on the panel offered tips on how to keep premiums in line. First, talk with your company risk-management people. Have them work closely with your broker and underwriter. Make certain you discuss how you differentiate your operation from your competitors. Take a hard look at your current security plan. Look also at your training and how you cope with safety issues on the road. Do your pilots stay with the aircraft until it is put away at night, or do they leave it all to the FBO? Ground-handling losses have recently been increasing at an astronomical rate, the participants noted.
Johns explained the realities of pilot experience relative to insurance underwriting. “Copilot experience requirements are often now approaching the same level as captains to maintain some coverages. Pilot record documentation has become much more important, as has annual simulator training. Some companies may need more frequent training than in the past. Inexperienced pilots or crews without recent experience may have trouble getting coverage. Single-pilot operators and owner pilots have found it difficult to get insurance–or at least the same sort of coverages they once had.”
According to Johns, other realities in this new insurance world include, “pilots being asked to sign waivers that relieve FBOs of all responsibility for movement of the aircraft. But an insurance company would rather take the chance of an aircraft being damaged on the ramp in a storm than accept the risk for damage from the FBO.” McKeon followed up on the hold-harmless discussion: “The crews must develop a corporate policy with their legal counsel since signing these documents could be violating the operator’s own insurance policy.”
Other murky areas mentioned included the diminutive value issue, or how much less an aircraft is worth in the future when it sustains major damage today. No current policy covers that sort of problem. Some older aircraft may also not be able to get coverage at all or may have huge deductibles.
But NationAir’s Jeff Bauer sees light at the end of the insurance tunnel: “Insurance is simply a transfer of risk for a price. Anything a flight department manager can do to lessen the risk he is transferring to the insurance company will help keep premiums low. We try to get the best deal by being an advocate for our customers, which we can’t do unless we know a lot about your business. Never turn down the opportunity to have an underwriter come out and visit your company. If they are not calling to meet with you at your business, find a new broker.” Bauer added, “The most successful companies we work with have a culture of safety at the top that runs through the entire organization.”