Report: airliners crash less, but repairs are more expensive

Despite the long-term trend for fewer airline fatalities, innovations in aircraft are raising the cost to repair and replace planes, according to a study released Thursday.

The study by Allianz Global Corporate and Specialty insurer and Embry-Riddle Aeronautical University noted that the fatality rate for commercial flights dropped to two people per 100 million passengers during the last decade, from 133 per 100 million during the 1960s.

But planes filled with sophisticated electronics -- and made of composite material rather than metal – are becoming more expensive to repair and replace. Looming risks to the industry include drones and cyber attacks on the automation in planes and air-traffic control.

"The conclusion we reached with this study is that over the past several years, commercial flying has become much safer through a variety of reasons," said Joe Strickland, Allianz's global head of aviation for the Americas. "It certainly becomes incumbent upon us to balance all the positive things that have developed within the industry to stay on the forefront of using the technology responsibly."

The 210 deaths in commercial aviation last year nearly cut in half the 414 a year earlier, the report said, based on data from the International Air Transport Association.

"The safety of aircraft continues to improve," said David Williams, assistant professor of aerospace and occupational safety at Embry-Riddle. "My message is that it's absolutely safe to fly."

Williams and Strickland each said a flurry of catastrophes this year shouldn't affect the long-term accident rates. The two largest disasters also haven't been blamed on crews or aircraft.

Malaysia Airlines had one plane go missing in March with 239 people aboard, with the search continuing in the Indian Ocean. Another Malaysia plane was shot down over Ukraine in July with 298 aboard.

"It's just unheard of to have an aircraft – especially a commercial aircraft – shot down at 33,000 feet," Williams said.

An Air Algerie flight crashed in July, killing 118, and a TransAsia flight crashed and killed 48 people, with weather blamed as a factor in both incidents.

"Analysts say the recent air disasters do not necessarily reflect any major systemic problems with safety," the report said.

Airlines compare favorably to other risks. The one death in 29 million passengers on U.S. and European airlines last year compared to a one in 10.5 million risk of death from lightning strike or one in 340,000 from riding a bicycle.

The report credited greater safety to reliable engines, precise radios and electronics, and better monitoring of how each part of a plane is performing. For example, engines shut down in flight twice every 10,000 hours in 1970, compared to once in 100,000 hours last year, according to the report.

But higher accident rates linger in Africa and Asia, which combined for 28% of the accidents in 2012 – and 88% of the fatalities. Williams of Embry-Riddle said African airlines tend to fly older planes built before 1990, when planes started getting better navigational equipment, and planes became sturdier for passengers to survive accidents.

As planes become more sophisticated, the rare losses become more expensive. The total value of the commercial fleet could soon top $1 trillion worldwide, after the exposure to insurance companies grew from $576 billion in 2000 to $896 billion, the report said.

Despite fewer losses of aircraft, the industry risks more costly repairs to composite planes such as the Boeing 787 and Airbus A350, damage to equipment on the ground and the risk of grounded flights, according to the report.

Aviation-insurance premiums were at their lowest levels in years before this year's losses, the report said. But crashes remain the major losses for insurance, representing 37% of the value of claims, the report said.

"Higher insured values is one factor that insurers consider when it comes to the cost of insuring commercial aircraft," Strickland said. "However, advances in technology, increased length of airframe life, as well as capacity available in the insurance market and other factors all contribute to insurance rates available."

Threats on the horizon include drones and computerized attacks.

The Federal Aviation Administration is developing regulations to avoid collisions between commercial planes and drones. But the report noted that Air Force accidents involving deaths or at least $1 million in damage increased dramatically during the last decade with greater use of drones.

Strickland said military applications have often migrated to commercial uses, but the key is for regulators to keep pace with technology.

"It's the urgency of that situation that is the key priority," Strickland said.

While cyber attacks sound like science fiction, they represent a potential threat to aircraft computers, navigation systems and propulsion systems, according to the report.

"Data breaches and cyber attacks are perceived to be growing risks," said Ludovic Arnoux, Allianz's head of aviation risk consulting.