By Jared Shelly
Mining tycoon Ken Talbot was a stickler for aviation safety, but one mistake cost him his life.
Rather than taking one of his state-of-the-art jets on a 2010 flight from Cameroon to the Congo in Africa, he and the board of directors at Sundance Resources opted for a small chartered CASA C-212 turbo prop plane. With the landing strip in the Congo not tarred, the idea was that the lighter prop plane would make a safer landing. But the CASA C-212 has a checkered safety history, with more than 500 fatalities around the world since 1971, according to the Aviation Safety Network.
On June 19, the plane crashed, killing all 11 people on board. Not only did Sundance Resources suffer the anguish of losing co-workers, but the business lost the experience and knowledge of key leaders.
The deaths serve as a tragic reminder that aviation safety varies greatly from region to region and aircraft to aircraft. But with companies increasingly hunting for new business opportunities around the globe, executives are exploring deeper and deeper into emerging markets for new customers, new supply chains or new worksites.
That means executives may be inclined to fly on commercial airlines with dangerous safety histories or charter small planes or helicopters without knowing much about the staff, training or equipment.
Some companies in Western countries, like the United States and Canada, wrongly think that aviation infrastructure and equipment is uniform across the world, said Charlie LeBlanc, president of security services at FrontierMEDEX, a company that offers safety solutions for business and leisure travelers.
"There is a certain level of expectation we have on standards of safety and security of an aircraft," said LeBlanc. "This is a fatal assumption."
The potential perils are numerous. Many governments simply don't have comprehensive aviation safety standards in place -- or the ability to enforce those rules. Or foreign airlines might be struggling financially, making them prone to taking short cuts when it comes to safety.
A relatively new phenomenon is Western airlines partnering with other air carriers around the world. For example, a traveler can take Air Canada flights from Toronto to Beijing to Egypt -- however the flight from Beijing to Egypt could be with a domestic Chinese airline -- even though the ticket and itinerary say Air Canada.
"I don't know who I'm flying," said LeBlanc.
Many times traveling to a particular country is not the issue -- it's traveling inside the country that's the problem. Sao Paolo, Brazil, for example, is notorious for its heavy automobile traffic, so many executives take helicopters around the city. How do you know if the one you are chartering has stringent safety standards?
Executives are also going deeper into emerging countries. No longer are they stopping at a large city, but they're instead chartering prop planes or helicopters to get to much more remote locations. They often lack information about who's operating these planes.
"I see executives that get their administrative assistants to Google 'charter airlines in Argentina.' They give them a credit card number and the vetting process is nothing more than 'they have a nice website, ' " said LeBlanc.
Do these plane operators have paperwork, permits and licenses in accordance with local laws? If you fly into Mexico, for example, you are required to have liability coverage from a Mexican insurance company. If not, local authorities can requisition the aircraft, said Michael P. Kriebel, general aviation head, U.S. for Allianz.
Sometimes executives charter a plane but that plane has been involved in a criminal investigation. Unbeknownst to the corporate passengers, the plane can be boarded by local authorities and the passengers thrown in jail.
"In Latin America, they will arrest 10 people, throw them in jail and figure it out later," said LeBlanc. "We had customers thrown in jail."
It's also important to follow geo-political risks around the world. During the United States' confrontation with Libya in 2011, travel in Libyan airspace was forbidden, meaning flights from Spain and other countries needed to be rerouted.
A good barometer of a foreign airline's safety is whether it has the rights to fly directly into the United States, Canada or the European Union. Another option is to subscribe to independent databases (like Argus) that perform thorough assessments of airlines and charter companies and produce safety reports.
Many companies will rely on a third-party vendor like FrontierMEDEX, Global Rescue or International SOS to offer aviation security insights and evacuate people who are in danger.
Some companies send a safety team to a location ahead of executives so they can perform an assessment. Some are even days-long processes where the security team examines safety manuals, equipment and processes, said LeBlanc.
"There are very large mega-multinationals that won't let [executives] get on planes not certified by safety personnel," said LeBlanc.
Insurers like Allianz certainly recommend it.
"We would not recommend that they get on any airplane unless their director of safety or chief pilot has vetted that operation and make sure it's in compliance with what they consider to be best practices," said Kriebel.
Risk management departments, insurers or third-party vendors can also develop local expertise to identify the best carriers in specific countries.
"Within our network, we can contact our colleagues around the world and say 'our client is going to [a specific country], can you recommend a helicopter operation that you know is operating to an acceptable standard?" said Kriebel.
The risks are so high that some companies won't even let employees book their own travel, said Ed Hannibal, North America leader for the global mobility practice at Mercer. Others forbid certain executives from riding together on one aircraft.
Other companies might accept more risk. Oil and gas companies, for example, typically display more of a risk appetite in their search for new places to drill.
"They don't care where [oil] is, they're going to find it and find a way to get it out of the ground -- regardless of political risks or security," said LeBlanc.
Whatever the specific company rules, coordination throughout the organization is key.
"Make sure that travel, security, HR and the business are all synched up around the security concerns or travel concerns," said Hannibal.
Insurance pricing in aviation has been soft for years, as more and more underwriters continue entering the market, which puts pressure on rates, said Kriebel. And while the trend of executives travelling to places far and wide to expand business is growing, underwriting is growing along with it.
"There hasn't been a hardening in our market for a few years," said Kriebel. "My opinion is there needs to be because there's way too much capacity and with capacity or over-capacity, there tends to be a slow steady erosion of underwriting quality."
JARED SHELLY is senior editor/web editor of Risk & Insurance®. He can be reached at firstname.lastname@example.org.
May 1, 2013
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