Aviation

Following a flurry of press coverage about lost baggage in late 2022, the prevailing view is that tracking devices such as the Apple Airtag or Samsung Galaxy Smart Tag are permissible in checked luggage, and do not constitute a breach of aviation dangerous goods regulations issued by the International Civil Aviation Organisation (ICAO). The US Federal Aviation Administration has stated “luggage tracking devices powered by lithium metal cells that have 0.3g or less of lithium can be used on checked baggage”. The European Aviation Safety Agency by contrast notes Regulation (EU) 965/2012 on air operations places responsibility on airlines, saying the devices are allowed as long as they have no impact on the safe operation of the aircraft. Typically these tags operate with a CR2032 battery containing around 0.1g of lithium. The reality is that these devices are basic and exist to track location, operating as little more than a GPS-style beacon. However, technology has perhaps moved more quickly than the regulators, and we foresee ICAO issuing more specific guidance to provide further clarity.

In the twelve months to October 2022, jet fuel prices increased by around 47%. Many consumers around the world are facing the onslaught of energy inflation, fuelled by world trade difficulties, volatile markets and the impact of Russia’s invasion of Ukraine. These factors have had a considerable impact on the aviation insurance sector. While nothing has crystallised in this regard, we foresee significant potential increases in fuel costs and insurance premiums looming. The upside for the aviation industry is a (passenger) customer-base that, although stretched financially, perhaps now sees travel post-COVID as more of a luxury. They are therefore willing to pay more to fly, enabling cost increases to be passed on to the end-user.

For 2023, the British Space Age will be well and truly established as rocket launches to place satellites in orbit are expected from Cornwall and elsewhere. In October 2022, the modified Boeing 747, Cosmic Girl, arrived at Newquay Airport in anticipation of regular satellite launch operations from Spaceport Cornwall (the UK’s first horizontal launch spaceport). This B747 aircraft has been converted to carry and release a rocket which will then propel attached satellites into orbit. Further, we expect that the growing development of UK space facilities, from Cornwall to the Shetland Islands, where capabilities permit, will begin to host private, human spaceflights and sub-orbital hypersonic flight, at first for those willing and able to pay the substantial costs of recreational travel to the edge of space, but subsequently developing into potential scheduled passenger worldwide point-to-point transportation and cargo operations. In terms of insurance, evolving space operations have the potential to see the further development of policies that insure bodily injury for space passengers, spaceflight delay and cancellation, and D&O liability as regards the management of space operating companies.

Since the start of the COVID-19 pandemic in 2020, empty or near-empty flights operated by commercial passenger airlines have been of increasing concern. From the end of 2019, it is reported that more than 5,000 empty flights, and a further 35,000 flights at below 10% capacity, operated to or from UK airports. These so-called ‘ghost flights’ are of particular concern given their impact in terms of carbon emissions. Ghost flights are the result of many, different factors including aircraft repositioning, aircraft airworthiness certification and pilot licensing requirements. One factor that has come under heated political and regulatory scrutiny is the need by airlines to fulfil the “use it or lose it” rule in order to maintain hard-won and costly airport slots at busy airports for the next equivalent season. However, the extent to which this rule contributes to ghost flights is not entirely certain as the normal 80:20 rule (whereby 80% of flights on a route must actually operate in order to retain slots for the next equivalent season) only applies to the very busiest airports and was suspended from the end of March 2020 because of the sharp drop in passenger numbers and border restrictions imposed due to the pandemic. Alleviation measures introduced a relaxation of the rule to 50:50 in October 2021, rising to 70:30 from the end of March 2022. We expect the 80:20 rule will be reinstated in 2023, but the issue of ghost flights will likely continue to be a topic of further debate and discussions around reform of the rules will increase, in the UK and beyond.

The push to achieving zero aviation emissions is set to continue apace in the UK during 2023. On a global level, over 290 airlines have committed to goals aimed at achieving net zero emissions by 2050. The UK government continues to support technology, fuel and market-based measures to address aviation emissions as part of its wider commitment to ‘Jet Zero’ (the government’s vision for the UK to become a global trailblazer in zero emission flight and to build a world-leading Sustainable Aviation Fuel (SAF) industry). £180mn of additional funding is earmarked to support the development of SAF plants in the UK, further bolstering a UK ambition to see 10% SAF blended into the UK fuel mix by 2030. At present the percentage in the UK is lower than 0.1%. A planned £1bn waste-to-SAF plant in Teeside is due online in 2027. The government has committed to have at least five commercial-scale SAF plants under construction in the UK by 2025. If that goal is to be realised, we expect further announcements of SAF plant development in the course of 2023.

In 2023 we can expect a review, consolidation and simplification of UK General Aviation (GA) pilot licensing and training regulation as part of the Civil Aviation Authority (CAA) 2021/22 General Aviation Change Programme. Driving the review is a “clear and indisputable mandate” from the GA community itself, calling for an overhaul of the current system in favour of a more straightforward and integrated set of licences, and consolidating where possible the existing two-tiered regulatory structure. A CAA consultation published on 18 October 2022 is the first of a multi-phase process, confined to regulated private pilots, instructors/examiners of private pilots, and commercial ballooning. It will look at licensing, ratings and certificates covering the full range of GA aircraft categories: aeroplanes, microlights, helicopters, sailplanes, touring motor gliders/self-launching motor gliders, gyroplanes, and balloons. From an employment regulation perspective, the GA community has called for better pathways to convert from one licence to another should an individual’s flying career progress. The aim of the CAA is that in creating much simpler routes to flying light aircraft, this might present an opportunity to open GA flying to a range of new pilots, encouraging diversity and reinvigorating this sector.

2023 is likely to see further disruption to scheduled passenger flights across UK airports as labour shortages within the industry look set to remain an issue. These staff shortages (both in terms of recruitment and retention) impact across the board: from airport staff to third-party providers, ramp agents and UK Border staff. UK airports and airlines are finding it particularly challenging to hire workers from the European Union in the light of restrictions imposed following the UK’s departure. In addition, many job cuts in the industry left the existing workforce sceptical about returning to the airline business. Jobs need to be redesigned and new business models and decision-making processes need to emerge to help with the labour shortage. Technology has a key role to play and this must be introduced in partnership with employees. The buzzwords will be automation, electrification, digitalisation and data sharing. It is no longer a question of re-using old strategies but defining new norms for a sustainable future workplace.

2023 is set to herald further recovery in Indonesia’s aviation sector. According to Indonesia’s Central Statistics Bureau, during the period of January to August 2022, the number of international passenger flights increased by a staggering 788% compared to the same period in the preceding year. The Official Airline Guide has identified Indonesia as the most significant air market in South East Asia, recording 10 million seats in October 2022 which stands at 70% of its 2019 capacity level. The demand for passenger seats is expected to continue to rise. However, with some reduction currently in terms of the Indonesian fleet due to repossessions by lessors, we may see pinch points in terms of passenger demand outstripping capacity. Many local airlines have indicated an intention to increase the number of aircraft in their fleet over the next few years, with some looking to expand their network by adding more international routes. Travel insurers may expect a boost in sale of their products and similarly, aviation insurers with interest in the region should anticipate a rise in number of flight operations and the related potential for claims.