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Airlines exposed to disasters when aircraft remain parked in the middle of the pandemic



The prolonged decline in air travel caused by COVID-19 has left many aircraft vacant in the United States, raising concerns about the risk of aggregation, especially in areas prone to natural disasters.

While larger commercial airlines generally have the resources to mitigate the risks under normal circumstances, the pandemic makes it more challenging for some because they reduce their networks and lay off workers, several experts say.

Risk concentrations were already a growing concern in the aviation sector before COVID-19, for both U.S. and international airlines, says Brad Meinhardt, Las Vegas-based CEO of Arthur J. Gallagher Inc.'s aviation business.

Grounding of Boeing 737 Max aircraft in March 201

9 due to safety issues meant that many airlines

"Underwriters actively asked about concentrations of this particular model aircraft, and some insurers had a significant concern about them," said Meinhardt.

Under COVID-19, the problem has been extended to other aircraft. "We have moved beyond the MAX to the regular aircraft fleet that does not fly and needs a place to go, and these exposures are significant," said Meinhardt.

Airlines have "thought a lot" about how to mitigate natural disaster-related risks in the event of aggregated exposures, says Jeff Bruno, Parsippany, New Jersey-based president and chief insurance officer at Global Aerospace Inc.

or hurricane-prone areas are kept ready with their statutory paperwork and they have crews to fly them to safety well before a storm, he says.

If aircraft cannot be evacuated under certain circumstances, they are fully powered so they are weighed properly and parked strategically from flying debris and behind buildings, Bruno said.

Larger airlines tend to have more hubs and more flexibility in where they can park their aircraft, and n to their aircraft fleets, the values ​​of these aircraft and the potential for adverse weather in different parts of the country, says Jason Saunders, Atlanta- based president of Willis Towers Watson Aerospace, a unit of Willis Towers Watson PLC. [19659002] However, COVID-19 adds another layer of logistical complications to dealing with extreme weather risks, Saunders said.

Airlines need to consider where to fly the aircraft, the current state of the aircraft in storage, how fast aircraft can be moved, the readiness of their crew and whether they have enough crew, he said.

"It's a challenge right now with airlines firing people and getting employees," Saunders said. [19659002] Aircraft aircraft, which include private aircraft and commercial aircraft, which are stored, also have an increased risk, and exposures for maintenance, repair and renovation increase, says Meinhardt.

This year, $ 250 million aircraft have been destroyed on the ground mainly in the Southeast due to severe weather events, "so you can see what can happen when you have concentrations of even general aircraft in certain parts of the country," said Meinhardt. [19659002] "A COVID-19 environment is not necessarily required to provide an example of what can happen when a significant storm passes through an area and aircraft are thrown at each other," he said.

While general aviation insurance is tailored based on an airline's exposure and history, a common problem for owners is that "a significant portion of their fleet is grounded somewhere, spread across different airports wherever they can find space," says Matt Drummelsmith, president , Aviation Specialty Insurance, a Columbus, Ohio-based broker.

The airline's risk managers should take into account the weather risk when looking for space to rent for the storage of their aircraft, he said.

"There is obviously not enough hangar space built because something similar is not being considered where 80% of the fleet would not fly," says Drummelsmith.

"The hangar capacity was built to maintain about 10% of the fleet at any given time. Well, now it's the inverse, but there is no hangar space. Aircraft sit on ramps exposed to the weather. It would make sense for them to choose places that not exposed to the weather, he says.

In the midst of the pandemic and with the increasing number of idle aircraft, Swiss Re Ltd. has introduced a new coverage for insurance companies called "Sleeping Beauties."

"We realized early on when aircraft were grounded there was a Many of their fleets were stored in the same place and this created concentration risks for our customers, the insurance units, says Greg Schiffer, Armonk, New York-based head of reinsurance of special lines at Swiss Re.

The coverage uses data from Swiss Re flight tool & # 39; Goldeneye & # 39; to quantify exposure by airline and location and then overlap the reinsurance cover that insurers must see where they can have gaps, he said.

In the United States, many airlines have a concentration of assets in New Mexico and idlers are also parked in locations in Florida, Georgia and Texas, areas prone to natural disasters such as hurricanes, Schiffer said.

This can leave insurers with potential reinsurance gaps when they face exposure beyond expected levels.

“Many insurance companies will purchase coverage up to a 1-in-100 or 1-in-250-year event. Of course, millions of dollars of exposure in a certain place can distort that number, he says.

The Sleeping Beauties coverage offers replenishment or roll-down coverage to protect insurers against natural disaster risks but does not cover aviation. war risks such as terrorism, hijacking and sabotage. Swiss Re did not disclose capacity and limit the information.

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