Impact of Accidents on the Aviation Industry - Case Study Example

CRITICAL EVALUATION OF THE IMPACT OF THE RECENT ACCIDENTS (MH370, MH17 AND AIR ASIA) IN THE AVIATION INDUSTRY AND ANALYSIS OF THE MEASURES AVAILABLE TO ENHANNCE AVIATION SAFETY Name Course Tutor Date Executive Summary The report begins by giving an overview of what forms its basis in a clear and concise introduction. The next stage is the literature review aimed at separating the main aim into subtopics so as to get a deeper insight of what the paper is to achieve. At a glance this section contains the causes of air craft accidents, its impacts and measures taken to ensure safety in the aviation industry. The report then presents recommendations that could be used to further ensure safety and reduce the impacts that are discussed. The last section is the conclusion that summarizes the whole report. Introduction Air transport is still one of the dynamic modes that grow to satisfy the modern civilization gaps. However, there have been mishaps that impact on this mode of transport. The year 2014 was not so much successful for the AirAsia and Malaysian Airlines (Taneja, 2014). In this disastrous year two of the company’s planes had accidents under mysterious circumstances (Taneja, 2014). These tragic dramas that gloomily covered the two players in the aviation industry were reflected globally on the media, press and the internet, leading to the change of ideas between the audiences about the safety of flying. The most appalling rumor being that the planes were shot down or they simply disappeared (Taneja, 2014). MH370 disappeared off its track on 8th, March 2014 after which the whereabouts 239 passengers on board the plane has not been traced. It is claimed that the communication systems were shut down (Taneja, 2014). There are various postulations with some suggesting that the plane could have been hijacked, rogue pilots, or fire were responsible for the loss. On the same year the MH17, was blown in the Ukrainian skies, just exactly four months after the first tragedy (Taneja, 2014)The passengers on board the plane totaling to 298 were all presumed dead. This stoked superpower rivalry between the West and the Russian rebels (Taneja, 2014). AirAsia jet with 162 passengers on board also crashed en route Surabaya to Singapore (Taneja, 2014). There has been debris collected by the Indonesian authorities, believed to be the bodies of the passengers. These occurrences and the previous as well as others in the whole world raises questions on air travel regulation bodies as well as air safety networks globally (Taneja, 2014). There are associated loses that are incurred as a result of these accidents being that air travel is the only fastest means to facilitate transportation of everything across the globe (Taneja, 2014). This report critically evaluates the impacts that the recent air crashes on the aforementioned airplanes as well as others had on the aviation industry and also analyzes the measures available to enhance aviation safety. The model looks at the whole aviation industry. Literature review Aircraft Accidents There are several circumstances that can render an accident of an air plane to be considered an accident. Safety still remains a concern for all the stakeholders in the aviation industry. The only year where the fatalities were recorded to be low was 2011 (ICAO, 2013). Generally, despite the few spots due to the accidents, air transport still remains to be considered the safest mode of transport both for commercial and domestic purposes by the wider scholarly as well as the public domain (Cento, 2009). Safety is promulgated by lack of any hindrance in the normal function ability of any given system. There are no any well defined parameters to measure safety whatsoever, therefore, most literature by different authors agrees to the number of accidents occurrences to be the alternative for measuring safety. The airline industry is safe except in situations where accidents occur, they are usually fatal in nature (Cento, 2009). Most literature has drawn a good and clear-cut definition to delineate what constitutes an aircraft accident from what is not. The National Transport Safety Board and Federal Aviation Administration have come up with a common global definition (Cento, 2009). An aircraft accident may then be defined as an occurrence that comes along with the operation of the aircraft in the time span between boarding and the crew has moved off the plane, and in which any individual is seriously injured or the plane has substantial damage (Cento, 2009; ICAO, 2013). Fatal injuries are those which lead to death after 30 or less days. Serious injuries give rise to casualties and never result to any death. The damage on the airplane comes when the plane is inoperable whatsoever the repair (Cento, 2009). Causes of Aircraft Accidents There are different causes of accidents including: mechanical failures, human errors, environmental factors and hijacking (Cento, 2009). The human errors can further be classified as errors of the pilot, unsafe acts, unsafe supervision, and organizational influences. Inadequate supervision is the main determinant of human error. It accounts for half the propensity of an accident occurring. The other half is ensured by the capabilities of the pilot. Mechanical failure on the other hand is often experienced in any phase of the airplane travel that is landing, flight and takes off phases. It is usually escalated by pilot errors as well, lack of a good number of ground crew and flaws during manufacture (Cento, 2009). The pilot might be ignorant of simple safety precautions and might also have misjudgment of the status quo leading to accidents. Ground crews inadequacy on the other hand means the plane is not inspected prior to taking off and the authenticity of the passengers and the crew is also not verified at that same point. Poor design of the plane and lack of adherence to set manufacturing and testing standards might also lead to mechanical failures. Additionally, there are weather conditions that can render air transport invalid or may hamper the transport routes. Research indicates this to be a contributing factor to aircraft accidents; however such accidents are usually rare being that design scientists and engineers have controls to keep this in check. The most common weather related accidents occur due to poor visibility, turbulence and winds. The training of the pilot and the experience in the field can help mitigate this. Last but not least, terrorist actions could also lead to airplane mishaps (Cento, 2009). The act of terrorism has no boundaries; it affects nearly all the industries in the world. This could include: suicide attacks, external weapons used to attack the planes in the airways, explosives being detonated in the aircrafts and hijacking of the planes leading to disappearance. Impacts of the Accidents on Aviation Industry Whenever an accident occurs it really dents the aviation industry and all the associated stakeholders. The most felt impact even in the economy is the financial costs that are related to the accident. The industry includes the carriers and the manufactures (ICAO, 2013). Whenever there is an accident the associated costs are shared between the carrier and the manufacture. The costs are both direct and indirect in nature. There is also associated loss to the society in the form of deaths that also directly reflects a loss in the industry too. Aviation companies as any other company value high profit probabilities by having hopes that there will be as low accidents or no accident at all as possible (ICAO, 2013). This is mainly propagated by the costs that arise from the accidents should they happen. The valuation of accidents is divided into direct and indirect costs. The former is borne by the company in the form of recovery and medical associated costs of the victims, legal fees, accident investigation costs and property damages costs (Cento, 2009). On the other hand, indirect costs refer to those that accrue from delay of activities or operations of the company after an accident has occurred. These costs may vary form company to company as policies and regulations vary too. They include: loss of normal business due to fear from the passengers, negative publicity, legal battles between the company and the airlines, aggravated insurance premiums, since the risk category of the aircraft accident can increase and loss of human resource that would mean that replacement, training, induction costs will have to be met (Cento, 2009). Once the air accidents occurs the airlines have the task of recruiting in new staff who have to be vetted keenly, this costs the organization time and money. There are also matters of compensation to the relatives who lost their family members in the tragedy (Cento, 2009). The latter really eats into the airlines finances being that the value is always decided by the court and insurers. Additionally, when the accident occurs it increases the risk definition by the insurance companies, this means that the premiums also rise concurrently (Kaplanski, 2009). There has been varied view on the relationship there is between aircraft accidents and the airlines financial value (Kaplanski, 2009). Proponents of this premise argue that accidents have no financial impact on the airline in question. However, it is common sense that any aviation accident will lead to the aforementioned costs that in turn have a contribution to the financial performance of the air line (Kaplanski, 2009). The stocks of the airline are drastically affected under such occurrences with effects ranging from the same day the accident occurs to few weeks to months after the mishap. The passengers will have some fears and thus the traffic of passengers using the same airline will also reduce instantly. While there is a direct relationship between the reduction in stock value of the airline associated with the accident, research fails to prove the relationship of the aircraft accident to the stock value of other airlines (Kaplanski, 2009). However, in case the financial market is stable, the stock value does not have to reduce since it already accounts for the margin of those errors occurring (Kaplanski, 2009). This would mean that the demand of air travel will not be affected at all by the accident. The consumers of various airlines may also view the crash as a signal that air transport is generally less safe compared to other means. The consumers as a result will have mistrust on the whole industry. As a result of this the share prices are also bound to be affected in that the investors will make irrational decisions based on the status quo (Kaplanski, 2009). The media has a significant role to play in the share price of the airline involved. The investment sentiment of the brokers is influenced at last (Cento, 2009). The negative returns on the airline a few days to weeks after the crash can be attributed to the media through news and print that makes the customers shy off flights (Kaplanski, 2009). As fatalities of the accidents increase there is also a corresponding reduction in company returns, in case the fatalities are high, the whole industry including the rival airlines will have the effect of negative returns (Kaplanski, 2009). However, when fatalities are less, only the associated airline suffers whereas the other rival airlines benefit. The airlines that have not been involved in the accident might also change their routes to avoid such inconveniences thus reducing their returns especially if the route is the one that handles most passengers and cargo (ICAO, 2013). Changing of routes further jeopardizes other airlines because it would mean that some airways will be allowing more planes than it can really sustain without any peril. This could also be a propellant of air accidents as a result of poor coordination or failure of the technologies in place as well as ignorance of the pilot (Cento, 2009).Additionally, there is also a likelihood of investors shifting to other industries where accidents are less prone; in this case, the industry will not be able to sustain itself for a long time (ICAO, 2013). Measures in Place to Enhance Aviation Safety Generally speaking the aforementioned impacts on the industry, various regulatory bodies have been involved in the process of ensuring that there are safety precautions are in place to mitigate the number of mishaps such as that of MH17 and AirAsia (ICAO, 2013). Some of the major regulatory bodies in the aviation industry include ICAO, FAA, EASA, National Transport S Board and International Air Transport Authority among others (Higdon, 2015). The first recommended step by the bodies is change in the organizational processes of the various airlines in the industry. As seen above there are various causes responsible for the accidents experienced in the aviation industry. There are equally a number of methods that can be used to mitigate them. First off, FAA and ICAO suggest that with the appropriate and upgraded technology systems there is the possibility of accidents reduction (Higdon, 2015). Such technologies should incorporate the use of satellite technology so as to identify the position and velocity of an aircraft. International Civil Aviation Organization (ICAO) mandates that all member states have in place a state safety programme that will roll out to institute safety targets as well as data analysis systems that can be used to forecast the probability of accidents and avert them amicably (ICAO, 2013). All air control systems are also being integrated with the air safety management systems. These systems have the necessary risk margins that if reached, then signals are sent back to the pilot so that they can make informed decisions. The other measure is regular risk assessments and analysis through monitoring of the effectiveness of safety programs instituted by various airlines in the industry. After investigating the accidents and incidents in the aviation industry, reports are drafted and proactive measures taken (ICAO, 2013). For example, the pilots, mechanics and investigators can give their insights or expert advice through reports so as to make the stakeholders aware and inform their decisions too. Standard operating procedures can then be set from the data gathered at different points in the industry (ICAO, 2013). To get rid of the human errors that form the most part of accidents, the pilots should be trained and educated (Higdon, 2015). Recurrent training is usually offered to the pilots, this increases their competency in proactive decision making during normal flights and when there is an emergency. However much the process is not cost effective it in the end counts as a measure that saves the aviation industry a huge amount of cash lost during the crashes (ICAO, 2013). The pilots are trained using cutting edge technology and corresponding flight and aptitude tests conducted using flight simulation devices (Higdon, 2015). This conforms to the set standards in training airline personnel especially aeronautic engineers and pilots as well as run way operators. In these systems the pilots are trained on how to maneuver through precarious situations that otherwise jeopardizes the lives of passengers and the well being of the aviation industry. The pilots and other staff are also encouraged to attend safety seminars and meetings (Higdon, 2015). Air control bodies have agreements in place to ensure that data that is of global safety is disseminated all through the industry. One of such is the memorandum of understanding between International Air Transport Association, Commision of the European Union and United States Department of Transport to enable global interchange of safety information. As long as any party in the aviation industry is able to contribute to the safety information there is the possibility of incorporating them into good practices in the industry. ICAO also does a safety evaluation through its Universal Safety Oversight Programme from which member states benefit in that they are able to be shown the deficiencies and necessary correction measures recommended. Transparency and sharing of the information after each audit has helped overstep safety in the aviation industry (ICAO, 2013). ICAO has also instituted regional aviation safety groups that have the mandate of harmonizing and coordinating all efforts as well as programs geared towards aviation risk reduction (ICAO, 2013). To reduce the harm of planes being hijacked, most of the airlines have overstepped security in the airports and are scrutinizing every person in a keen manner. Additionally, there are technologies in place other than the old systems that enable track the plane in air (ICAO, 2013). The pilots are also trained on how to communicate back with the control rooms should there be an emergency (Higdon, 2015). Recommendations The above stated measures are in and have been in place despite the increasing number of accidents. The only thing the industry can do as at now to evade the aforementioned impacts is to come up with effective and proactive solutions that target the whole world. The industry is large; therefore, the key players should be encouraged to join in with the global regulatory bodies so that there is an agreement and harmonization in the whole industry. ICAO has only 96 member states; this should be expanded to maybe cover the whole world so that confusion can be evaded (ICAO, 2013). Prior to departure, the planes must be assessed by the necessary personnel and true accounts reported (Cento, 2009). The health of the pilot should also be evaluated prior to being allowed to take the plane off the runway. Proper technology should also be incorporated to provide real-time data transmission between the plane and the control personnel (Cento, 2009). There should be audits and incentives to the pilots, since currently there lacks such audits. Collaboration between different states will be beneficial in that through the global information interchange such things as terrorism can be evaded handy (ICAO, 2013). Lastly, all the stakeholders in the industry should be trained on safety practices and emergency reporting methods. Conclusion Despite the large number of accidents, air transport still remains the most preferred faster and safe means of transport. It is therefore necessary that precautionary measures be taken by key stakeholders in the aviation industry to mitigate any aircraft accidents. As can be seen in the report the major causes of aircraft accidents are human errors, weather conditions, mechanical failures, and terrorism. The good news is that all these if properly managed there can be a milestone in safety of the aviation industry. It is essential to understand that most airlines or states are not members of international aviation bodies that are mentioned in the report. This makes the coverage and coordination as well as harmonization of operations difficult. It is therefore essential that a large body be instituted and the states encouraged joining in, for unison in the industry. The report has achieved its purpose in evaluating the impacts of the accidents as well as measures to ensure safety. Additionally, the recommendations presented herein could form a good ground for the success of safety programmes in the aviation industry. Bibliography Cento, A. 2009, “The airline industry: Challenges in the 21st century”. Heidelberg: Physica- Verl. Higdon, D. 2015, Aviation Safety - Top Ten Aviation Risk Reduction Steps. Retrieved from http://www.aviationsafetymagazine.com/airplane/Plane-Crash-Risk-Reduction.html ICAO. 2013, “State of Global Aviation Safety”. Retrieved from http://www.icao.int/safety/State%20of%20Global%20Aviation%20Safety/ICAO_SGAS_book_EN_SEPT2013_final_web.pdf Kaplanski, G.2009, “Sentiment and Stock Prices: The Case of Aviation Disasters”, Journal of Financial Economics Vol. 95, No. 2, pp. 174-201, February Taneja, M. 2014, September 10, “Recent Airline Accidents and the Implication”. 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