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GA's next challenge

Editor in Chief Thomas B. Haines owns a 1972 Beechcraft A36 Bonanza, which is aging quite gracefully.

Editor in Chief Thomas B. Haines owns a 1972 Beechcraft A36 Bonanza, which is aging quite gracefully.

Throughout this year, you'll see regular coverage in AOPA Pilot and through AOPA's electronic communication channels of the whole debate surrounding the future of FAA funding. If user fees or other onerous funding changes that dramatically affect general aviation costs are implemented, many believe it will be a death knell for general aviation as we know it in this country (see " User Fees Debate: Battle Brewing," page 78). General aviation of the future may look more like that in Europe today — where user fees have existed for years. There, only the ultrawealthy fly anything. The wealthy fly microlights and none of them enjoy the robust infrastructure that we enjoy in this country.

Some would argue that the FAA funding debate is as big as the product liability insurance issue that general aviation faced in the 1980s and early 1990s. Then, GA manufacturers were being forced out of business — or at least out of the piston-aircraft manufacturing business — by skyrocketing product liability costs driven by frivolous lawsuits. The situation for the manufacturers improved in the late 1990s after the GA manufacturers, organized labor, and consumer groups — including AOPA — banded together to support federal tort reform legislation. The result, the General Aviation Revitalization Act of 1994 (GARA), provided an 18-year statute of repose, meaning that once an aircraft or component reached 18 years of age, the manufacturer could not be sued for negligent manufacturing or design. It was assumed that after 18 years of use, the product was safe and reliable.

The legislation had the desired effect of relieving the manufacturers of liability for aircraft that might be as much as 70 years old. Imagine an airplane that had been flying safely for 70 years, flown by perhaps hundreds of pilots, and serviced by dozens of mechanics, being involved in an accident and a jury deciding that the airframe manufacturer was at fault because of a poor design. It was those sorts of nuisance lawsuits that GARA helped prevent. At least partly as a result of the legislation, Cessna went back into the production of piston-powered airplanes, Piper Aircraft emerged from bankruptcy, and new aircraft companies such as Cirrus, Columbia, and Diamond developed and are thriving.

Without GARA, general aviation as we know it might not exist today. Similarly, without a successful resolution, the FAA funding debate may drive GA out of business.

Not a perfect cure

Although GARA allowed general aviation of the 1990s to come off life support, it was not a perfect cure. Not surprisingly, not all of the plaintiff attorneys who made a healthy living filing frivolous lawsuits against airframe manufacturers packed up and went in search of some other industry — although some of them did.

Those who stayed focused on GA looked to shift the blame to some other entities not protected by the 18-year statute of repose. They found their target in engine and component manufacturers and maintenance shops. The statute of repose does not supply much protection to those companies that manufacture or overhaul engines and other components that are replaced on a cycle of less than 18 years. Once a component is replaced, the 18-year waiting period starts all over again. So a vacuum pump manufacturer, for example, saw little benefit from the legislation because most vacuum pumps are replaced — or should be replaced — at frequencies of less than 18 years. A new pump put on an airplane is simply a new opportunity to be sued should an accident occur that could somehow be tied back to the vacuum system.

As we saw in the crash of Missouri Gov. Mel Carnahan, in some cases — with a clever plaintiff attorney and an uninformed jury — the connection between the vacuum system and the accident can be tenuous at best but the award might still be against the manufacturer (see " Waypoints: Lose/Lose," March 2004 Pilot).

Before GARA, when airframe manufacturers with deep financial pockets were available targets for lawsuits, plaintiff attorneys rarely bothered suing maintenance shops, which typically do not have the financial wherewithal of large manufacturers. But with GARA putting the airframe manufacturers out of target range, the attorneys began focusing on the component manufacturers and maintenance shops.

It's taken a dozen years, but the result now is that some maintenance shops are beginning to shy away from working on aircraft older than 18 years of age. The thinking is that if the shop works on a younger aircraft and it crashes, the airframe manufacturer will be the easy lawsuit target. But if the airplane is older than 18 years of age, the shop — and its insurance company — will more likely be the target.

AOPA members have reported that at least two large FBOs have implemented policies restricting work on older aircraft. The decisions are mostly based on insurance costs. AOPA has not found any aviation insurance underwriters unwilling to write policies for shops working on older airplanes. But we have had some reports where insurers have increased premiums for shops that work on older aircraft.

"The 18-year statute of repose caused shops to become targets," William Caudell, president of Frederick Aviation, the FBO at AOPA's home airport of Frederick Municipal Airport in Maryland, told me last year. Although the company has never been sued for a maintenance-related accident, it still carries a $5 million liability insurance policy. Caudell would like to have a $10 million policy, but no insurance company will write such a high limit for any reasonable premium because Frederick Aviation does maintenance work on aircraft more than 18 years old — as well as newer aircraft.

Caudell must each year at renewal time provide the insurance company with a detailed list of the types of aircraft that Frederick Aviation works on and note the number of older aircraft. Even with its $5 million limit, the company carries a higher limit than most small to mid-size shops. These days, most shops that work only on piston-powered aircraft have minimal insurance, according to Caudell. He claims that his insurance premium is more than the total revenue of many small shops.

At least one insurance executive concurs with Caudell's thinking. "The repair and overhaul business is the worst place to be. Many are not carrying insurance at all," says a senior underwriting executive at a large aviation insurance company who asked not to be identified. "It's a serious problem for all of general aviation. We need those shops [especially as the fleet ages]. They are turning into shade-tree mechanics."

With the average age of a general aviation airplane now 35 years, it's a problem that won't go away soon. For now, some numbers are in the favor of those of us who own and operate older aircraft. About 82 percent of the fleet is more than 18 years old, so it's unlikely that overnight all shops are going to focus exclusively on the remaining 18 percent of the fleet.

AOPA is in regular discussion with the insurance underwriters and affected FBOs working to assess the exposure of maintaining older aircraft. Most in the industry agree that the prospects for additional tort reform that might offer greater protection to maintenance shops and component manufacturers are unlikely anytime soon. The user-fee battle is taking center stage this year, but the aging-aircraft issue will demand attention soon. Stay tuned.

E-mail the author at [email protected].

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