Mystery Surrounds Air France Crash

Liability Claims to Come Could Exceed $1 Billion, Some Experts Predict

The tragic disappearance of Air France flight 447 over the Atlantic early on June 1 remains a mystery. The plane’s 216 passengers and 12 crew members perished as all contact was lost with the Airbus 330-200 in the middle of the Atlantic Ocean. The crash site was finally located on June 6.

Automatic data feeds, which were accessed hours after the plane went missing, registered an “electrical fault,” and described a succession of events that could have led to the plane’s demise between 11:10 and 11:14 p.m. local time. These included: failure of onboard computer systems (which, have backups); a loss of cabin pressure; the disengagement of the plane’s autopilot, and malfunctions in the speed and stabilization monitors. Those four minutes signaled the aircraft’s probable breakup.

Whatever led to the AF447 tragedy may forever remain a mystery. Modern airliners, certainly the A330 series, which has an outstanding safety record (no fatal incidents since a test flight in 1994) don’t simply disappear in mid flight. Most fatal accidents, although there have been remarkably few lately (See chart below), occur at either landing or taking off.

So far, the focus of current speculation centers on the “pitot” tubes, which monitor the speed of the aircraft. Airbus had indicated that these should be replaced with a more up to date device, as there had been reports that extreme cold made the speed readings unreliable. But Airbus did not make the change mandatory.

Paul Louis Arslanian, the head of France’s air accident investigation agency, described the cause of the crash as stemming from “a series of events.” The series of failures, as recorded from the automatic signals, do seem to show a sequence and all of them in succession could have caused the fatal crash. However, other aircraft traversed the same zone at around the same time without having significant difficulties. If the flight recorders are ever recovered, they could provide some answers. But that seems an unlikely prospect.

Victim Compensation

Given the circumstances, figuring out how to compensate the families won’t be easy. There are, however, certain international conventions and treaties that will apply. France’s AXA Group is the lead underwriter, but many other insurers are also involved, as aviation coverage is routinely spread among a number of carriers.

Loretta Worters, vice president-communications of the Insurance Information Institute, provided the following summary by e-mail of the general guidelines that have been established to cover aviation disasters. For the A330-200, she said it is “valued at around $180 million,” with the hull of the aircraft “insured for at least $100 million, probably more.”

In terms of liability claims, there are differences between international and U.S. claims. U.S. commercial airline carriers have historically settled liability claims against them totaling between $1.5 million and $2 million per victim (if the accident took place in the U.S.).

However, liability for personal injuries and deaths involving international flights falls under the Montreal Convention, which provides that air carriers are strictly liable for proven damages up to 100,000 in “special drawing rights” (SDR), a mix of currency values established by the International Monetary Fund (IMF). It established a payout of approximately $138,000 per passenger at the time of its ratification by the United States in 2003. As of June 2009, it had risen to around $154,800.

The Montreal Convention was brought about mainly to amend liabilities to be paid to families for death or injury while on board an aircraft. As of December 2008, there were 87 signatories, including the United States, European Union (EU), Canada, China, Japan, Korea and Mexico.

Where damages of more than 100,000 SDR are sought, the airline may avoid liability by proving that the accident that caused the injury or death was not due to their negligence or was attributable to the negligence of a third party. This defense is not available where damages of less than 100,000 SDR are sought.

The Montreal Convention also amended the jurisdictional provisions of the Warsaw Convention. It now allows the victim or their families to sue foreign carriers where they maintain their principal residence, and requires all air carriers to carry liability insurance.

Those lawsuits, however, could be costly. Plaintiffs may seek between $3 million and $4 million per passenger, according to sources in the London market, which, as a center of aviation underwriting, will have some exposures. When the A330’s value is added in, the claims could exceed $1 billion.

Topics USA Aviation