SR111 liability vs SR bankruptcy

[bluecrane]

SR has been one of the few airlines that offered unlimited payments to their passengers (not limited to lower Warsaw convention amounts) in case of accidents. At the time of the Halifax accident, a lot of people wondered wether SR would be able to pay. Have they ever paid, or has this "problem" also been solved elegantly by the bankruptcy?

[380]

I think I heard that the whole sum is covered by the insurances. But don't quote me, I'm not sure.

[ 28 December 2001: Message edited by: 380 ]</p>

[L1011]

Most airlines operating in the real world that suffer a hull-loss, go out of business within five years. I believe the figure is over 60%. Pan-Am, Valujet, TWA, Swissair are examples.

Don't know if there is any research as to why this is so. Loss of pax confidence, liablitiies, lawsuits and damage to the brand I suppose.

Obviously does not apply to CAL, KAL, etc. Government bail-outs keep them in the air probably.

[Al Weaver]

&gt;Most airlines operating in the real world that suffer a hull-loss, go out of business within five years. I believe the figure is over 60%. Pan-Am,
Valujet, TWA, Swissair are examples.

Don't know if there is any research as to why this is so. Loss of pax confidence, liablitiies, lawsuits and damage to the brand I suppose.

Obviously does not apply to CAL, KAL, etc. Government bail-outs keep them in the air probably.&lt;

What a ridiculous selective use of data. Ignores all the other US airlines with hull loses that are still in business.

Obviously there is no cause-effect in such a simplistic argument as above.

[clipstone]

If Swissair work on the same basis as EU airlines (I accept they are no an EU airline) then their insurers will have agreed to payment under resolution EU2027/97 which says they cannot file a defence up to 100,000SDR's per pax for death (approx £90k) and in the event of being liable they will have unlimited liability.

On this basis, Swissair's insurers will be on the hook for the payments to the pax not Swissair, therefore it's totally unrelated to the payments.

Just as an aside, BMI, BA, LH, AF etc have all had major hull losses and are all still with us, I admit a couple of them have government backing, but not sure one can use the hull loss as an excuse.

[Biggles Flies Undone]

There are lots of sweeping statements here, and most of them are wrong!

SR are not ‘one of the few’ to go for unlimited liability – far from it. Full list available from IATA:

<a href="http://www.iata.org/legal/_files/Miasign.doc?IMAGE2.X=30&IMAGE2.Y=13" target="_blank">http://www.iata.org/legal/_files/Miasign.doc?IMAGE2.X=30&IMAGE2.Y=13</a>

Airlines have losses, particularly hull losses – that’s why they buy insurance.

The current incurred position (claims paid and reserved) for the SR loss is a fraction of the liability limit carried by the airline at the time of the loss.

[L1011]

Whoa lomapaseo, did I hit a nerve?

In the post-1990 period, the only US major that has had hull losses and survived is AA. Whether they will weather Little Rock and the NY A-300 we can't say right now. (Let's leave 9/11 out of this)
Shall we wait five years and see lomapaseo?

Why do pilots hate statistics? Is it because they don't understand the science?

[ 29 December 2001: Message edited by: L1011 ]</p>

[jetstar1965]

Also ignores quite a few major European airlines who have suffered hull losses over the years and seem to be still in business. I think a struggling world economy and the 11th Sept attacks had more to do with Swissairs demise rather than the loss of the MD11. <img src="smile.gif" border="0">

[MrNosy]

Most airlines which suffer a 'hull loss' DO NOT go out of business. There are, on average, about 50 - 60 'hull losses' suffered by airlines world wide a year. How many have failed? For every apparent failure following an accident there a hundred, hundreds even, which do not. The number of airlines which have gone out of business following a 'disaster' (say a fatal accident killing passengers)over the years is also minimal and the reasons for the failures which did occur were complex. The 'disaster' may have been the 'trigger' but other, mainly pre-existing, circumstances caused the failure.

[L1011]

MrNosy and other optimists:

My original assertion was that "most airlines in the real world" that have an accident go out of business.

Not ALL but MOST. And especially not the national carriers that are protected by their governments -regardless of whether it makes economic sense to do so. This does not apply to 3rd world carriers only, the likes of Air France and Iberia do not operate in the real world either. But those privatised carriers that face the wrath of the market get severely punished for a hull loss. isn't capitalism wonderful?

Let's party tonight and re-start the discussion when the hangover recedes. Maybe I will even have the time to trawl ASN databse and figure out some numbers.

Happy 2002 to everyone. Hope it is less eventful that this year was.

[MrNosy]

Hi L1011 Happy New Year.

I feel that we may end up getting into a p***ing contest on this one! This is a complex subject and it would be very useful to have a detailed analysis of the different factors leading to an airline failure following an accident - compare ValuJet and Birgenair, Pan Am and TWA and so on.

There have been a number of published studies on this topic but none, to my mind, have successfully identified all the possible factors and their relationships which would allow the impact of a given accident on a company to be modelled in advance.

Since the only way to get the CEO and the Board to spend money on safety is often to show them how much it will hurt to have an accident - it would be nice to be able to put the impact on the company in terms of $ (the only thing they may understand).

[L1011]

HNY Nosy old chap,

You are right a water extrusion competition would accomplish little.

However, I do believe a strong link exists and it is quite worthy of some research, make that lot's of research. Any graduate students out there looking for a thesis topic?

Any idea where I can find the studies you mentioned? Have not seen anything that explored the topic very much myself.

I also think that all of us "aviation professionals" should be supportive of the assertion, at least until it is disproved conclusively. Our jobs might depend on it. The bean-counters jobs too.

Safe flying buddy.

[MrNosy]

Hi L1011

Some papers re impact on aviation companies of accidents;-

Crisis in the Cockpit? The role of Market Forces in Promoting Air Travel Safety. The Journal of Law and Economics (my photocopy doesn't have the journal volume unfortunately)

The Impact of Catastrophes on Shareholder Value, The Oxford Executive Research Briefings (includes a consideration of ValuJet)

Market Forces and Commercial Aircraft Safety, The Journal of Industrial Economics Sept. 1987. p.61 (looks at the problem from the point of view of the aircraft manufacturer)

Safety Standards and Profitable Operations, Flight Safety Foundation 14th. Annual Int'l Air Safety Seminar, 1961. (a bit old!)

An Analysis of the Impact of Accidents on Airline Performance, Yueh-Ling Hsu, MSc thesis, Cranfield University 9/99 (uses China Airlines as a case study!)

If any one reading this knows of other reports on this topic, details gratefully received.

I don't think any of these are easy to get hold of but if you ever have a couple of hours to kill at LHR, you are welcome to look at our copies.

[L1011]

Mr. Nosy,

If you would email me privately we can fix a date to take up that kind offer of yours to read those papers.

Take it your office is in Hounslow. Please sedn phone numbers as well. Icome to LHR quite often but avoiding it right now - too cold.