A380 "Poses Significant Insurance Challenges For The Airlines"

With the introduction last week of the 555-passenger Airbus A380, an aviation insurance expert says the world's aviation industry must now look to the past to accommodate what may be its future.

Wayne Wignes, president of Aon's Aviation Group, says the A380, with a tail assembly nearly 80 feet high and a fuselage measuring nearly 240 feet, poses significant insurance challenges for the airlines. He predicts insurance liability limits will rise for the entire industry, regardless of whether a given airline places an order for the A380. "An airline doesn't have to own the aircraft to be affected by the increased liability limits," he says."There will likely be a need for an alternative capital market for this airplane. Airlines will probably have to carry $3 billion in liability limits to indemnify themselves."

That, Aon says, pushes the edge of the financial capabilities of the traditional aviation insurance market, which usually works with liability limits in the $1.5 to $1.75 billion range. "That is simply a bridge too far for a small community with finite resources. So the airlines will have to depart from their traditional approaches," according to Wignes.

He says that is what happened some 35 years ago when Pam Am introduced the 747. In 1969 a new financial model was developed to accommodate the liability demands posed by the jumbo jet. Wignes suggests the industry should refer to that model as the basis for creating a new financial facility.
 
The introduction of the Airbus also poses some equally daunting operational challenges. "Some taxiways simply aren't long enough," Wignes says. "In other cases, airport gates may have to be spaced farther apart to contend with an airplane with a 262-foot long wingspan."

Providing nearly every insurance and risk management resource to support the growth of the aviation industry, Aon delivers risk management solutions to many companies in a variety of aviation industry sectors, including: airlines, corporate aircraft, helicopters, airports, fixed-base operations and aerospace product manufacturers. Aon Aviation is the US airline market share leader.

FMI: www.aon.com