AINsight: Better Pilot Training Saves Money

The insurance industry has discovered an enigma in commercial aviation: the rate of aircraft hull losses and fatalities is at historic lows, yet the financial consequences of non-catastrophic operational incidents have surged to unsustainable levels. A recent study suggests that these operational incidents—including tailstrikes, hard landings, runway excursions, flap overspeed events, and ground collisions—are largely preventable through better, more effective pilot training.

In 2023, the fatal accident rate for IATA member airlines was a low 0.03 per 1 million flights, while the escalating costs of survivable incidents have detached from historic norms due to the increasing complexity of composite airframes, a challenged global supply chain, and a tighter insurance market.

Andy O’Shea, executive chairman of the Airline Pilot Club, recently published “The Financial Pathology of Pilot Training Deficiencies,” a report that digs into the costs associated with preventable operational incidents in aviation. The study examined 32,000 industry claims worth almost $15 billion. Of this total value, 63% involved non-catastrophic events and ground collisions.

An Industry Headache

According to O’Shea, the former training chief at Ryanair, the insurance industry refers to these events as “attritional losses.” One industry CEO referred to these incidents as their “headache in safety and cost.” The report argues that “the industry’s financial vulnerability has shifted from catastrophic loss of hulls to attritional accumulation of ‘minor’ pilot-related operational incidents.”

The report indicates that, historically, a tailstrike resulting in structural damage would typically incur sheet metal repair expenses totaling tens of thousands of dollars. Today, these costs often surpass a million dollars. Minor incidents now lead to significant costs since affordable repairs and soft insurance markets are no longer available.

O’Shea analyzed a single tailstrike event that incurred a financial impact of $12 million when factoring in composite material repair, extended downtime, and loss of revenue. Indirect costs have the potential to increase this financial impact by a factor of three to five when lease penalties, regulatory compensation, and reputational erosion are considered.

These “attritional losses,” such as a scraped wingtip, wrinkled fuselage, or cracked pressure bulkhead, O’Shea said, “are survivable for the passengers but financially toxic for the operator.” As the frequency of these events increases, they become a constant operational tax.

O’Shea argues that these operational incidents could be prevented with more effective pilot training. In the example above, the cost of a single tailstrike event ($12 million) is the equivalent of thousands of hours of full-flight simulator training. He added, aircraft operators who “cut training budgets to save simulator time are effectively elevating a risk that, when realized, obliterates the savings of years of reduced training. Cutting training budgets is a false economy.”

Economics of an Incident

Training managers who choose to cut costs should keep in mind that for every dollar spent on fixing physical damage, airlines typically lose an additional two to three dollars in indirect expenses.

Expenses of an operational incident include:

Operational disruption. Unscheduled maintenance events may cause flight cancellations, crew duty time exceedances, and an AOG situation.

Asset utilization loss. An out-of-service aircraft does not generate revenue. Current lease rates for a narrowbody jetliner (A320neo or Boeing 737 Max) are $400,000 to $460,000 per month. Every day that the aircraft sits in a hangar costs an airline $15,000 in lease costs. A tailstrike or hard landing may take an aircraft out of service for months.

Airport disruption fees. An aircraft disabled on a runway may delay airport operations or in-flight diversions. Airports now charge “maintenance and service recovery fees” to recover lost revenue for such events.

Specialized equipment. Disabled aircraft may require specialized recovery equipment. As an example, rental rates for heavy-lift cranes can exceed $500 per hour. 

Engineering assessment. Damage beyond the limits of the structural repair manual requires an engineering order from the OEM. Engineering orders are costly and take time.

Labor cost. The report cited a “simple condition inspection” of an Airbus A320 hard-landing event that took 11 hours and cost nearly $1,600.

Major structural work. Repairing a damaged aircraft may require special tooling or facilities and can be time-consuming.

Parts procurement. In a challenged supply-chain environment, replacement parts may take months to arrive—if they are even available.

The Multimillion-dollar Question: Is It a Total Loss?

Higher parts prices and labor costs can prompt an insurer to declare a constructive total loss (CTL). According to the study, runway excursions are the leading cause of CTLs in nonfatal accidents.

The report presents the equation that insurance companies use to classify an aircraft as a write-off or CTL. For example, if a 15-year-old A320 valued at $15 million suffers major landing gear, engine, and fuselage damage in a runway excursion, repairs exceeding $12 million could make it a write-off. Based on the age of the aircraft, the cost of repairs, and the salvage value of parts and components (avionics, APU, et cetera), the insurer would write off the aircraft rather than repair it.

Making the Case

O’Shea’s report leads to a single conclusion: “Pilot-related operational incidents are an unsustainable financial liability.” The industry has mitigated the risk of fatality, but it has failed to mitigate the risk of expense.

To counter these costly incidents, operators are encouraged to reevaluate training ROI, invest in new training programs, use flight data monitoring, and educate pilots on the costs of repairing modern aircraft.