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Do Airlines Budget For/insure Diversions?  
User currently offlineVC10er From United States of America, joined Feb 2007, 2941 posts, RR: 10
Posted (3 years 2 months 2 weeks 5 days 10 hours ago) and read 2673 times:
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I know there are a 100 reasons or more an airplane has to make an unplanned landing..from a suspicious reading in a cockpit to a crack pot leaving a scary note in a lav. There are small diversions (eg I was on LH to GRU and due to fog we had to divert to Campinas for 3 hours- along with 10 other VLA's from UA to JJ) and then there is the entire fuel dump from a 777 or 747 or A319 and a return to the departure airport. I'd assume an entire fuel dump from a 747 would cost a lot more than E190! And many, many more reasons and circumstances and types of diversions and a wide range of different costs.

Naturally I assume none are cheap and I also figure they have planned somehow for these unavoidable expenses. Are they insured for those incidents to recover fuel costs and potentially even emergency vechicals, hotels, missed connections, landing charges? Can, after all these years a UA, AA or DL and others have an average forecast of about how many diversions may occur and accrue for it. But, it seems "insurable". Costly insurance, but insurable. Or do they really just take the hit on their bottom lines?

Anyone know?


The world is missing love, let's use our flights to spread it!
8 replies: All unread, jump to last
 
User currently offlinejkudall From United States of America, joined Mar 2004, 615 posts, RR: 1
Reply 1, posted (3 years 2 months 2 weeks 5 days 7 hours ago) and read 2550 times:

It's more or less simply the cost of being an airline and the costs for such diversions are almost usually on the burden of the airline themselves. It's assumed diversions will come up from time to time, which they do. As you noted it could be for a number of reasons, but usally a medical emergency, mechanical, fuel diversions, etc. Customers pay for it in the ticket cost in one way or another.


I can't imagine any insurance company would insure on something that occurs as frequently as diverted flights happen. A major airline could have several diversions a day. Most go unnoticed by the general public.


User currently offlinemcr From United Kingdom, joined Jul 2005, 128 posts, RR: 0
Reply 2, posted (3 years 2 months 2 weeks 5 days 2 hours ago) and read 2391 times:
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Quoting VC10er (Thread starter):
Costly insurance, but insurable. Or do they really just take the hit on their bottom lines?

No insurance company (that wants to stay in business) is going to insure against an event that they know is going to happen on such a regular basis. Why would they?


User currently offlineVC10er From United States of America, joined Feb 2007, 2941 posts, RR: 10
Reply 3, posted (3 years 2 months 2 weeks 4 days 22 hours ago) and read 2294 times:
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Quoting mcr (Reply 2):

When you guys put it that way...it does feel like a "duh" question. But given that a very, very expensive diversion (like a full 747/A380 fuel dump etc) could be insured for- but the insurance could cost more than eating all the associated costs.
What I wonder most is how an airline makes any money at all!

Thx



The world is missing love, let's use our flights to spread it!
User currently offlinehomsar From United States of America, joined Jan 2010, 1189 posts, RR: 0
Reply 4, posted (3 years 2 months 2 weeks 4 days 11 hours ago) and read 2205 times:

Quoting VC10er (Reply 3):
What I wonder most is how an airline makes any money at all!

The answer, throughout much of history, has been: they don't.



I was raised by a cup of coffee.
User currently offlineokie From United States of America, joined Jul 2003, 3102 posts, RR: 3
Reply 5, posted (3 years 2 months 2 weeks 4 days 10 hours ago) and read 2195 times:

Quoting VC10er (Thread starter):
I'd assume an entire fuel dump from a 747 would cost a lot more than E190! And many, many more reasons and circumstances and types of diversions and a wide range of different costs.


First off they only have to dump fuel to get down to Max Landing Weight. Generally speaking their are few circumstances where a fuel dump is required except on some long range flights where the plane is at near max weight to start.

Maybe with the exception of some 757's which were purchased with the dump option, I do not think there are any narrow body aircraft in current commercial passenger operations that even have the ability to dump fuel or the need.

Okie


User currently offlineFlighty From United States of America, joined Apr 2007, 8634 posts, RR: 2
Reply 6, posted (3 years 2 months 2 weeks 4 days 10 hours ago) and read 2189 times:

Quoting VC10er (Thread starter):
Costly insurance, but insurable. Or do they really just take the hit on their bottom lines?

If insurance is costly, above the underlying event cost, an airline would not want to buy that.

It's not a "hit on their bottom lines" to be existing on Earth (their only viable market) where unpredictable weather happens. Also, their business is to fly people. Humans get sick or misbehave or they die sometimes. This isn't a hit to the bottom line... it is an existential reality when you are doing business, with people, on Earth. At least for airlines. So yes, it's just a part of the business. It does cost a lot of money. But so does fuel. Or maintenance. It's just unaviodable to pay these costs (on a pro-rated basis) if people want to fly by airplane. So I'm just giving some semantics, confirming what you already know.

Dispatchers have a rough idea of scenario costs and occasionally make decisions based on saving some money, when can be done safely. Sometimes there are 2 choices and the cheaper option is just as good. So they go with that.


User currently offlinePPVRA From Brazil, joined Nov 2004, 8969 posts, RR: 39
Reply 7, posted (3 years 2 months 2 weeks 2 days 15 hours ago) and read 2052 times:

Insurance is based on risk, and there is a risk of a diversion happening. However, if it's not a significant financial risk, why bother? It probably won't save you money anyway.

As for the frequency of diversions, everything is relative. Multiple diversions a day is still a tiny number of total flights.

[Edited 2011-08-09 14:52:07]


"If goods do not cross borders, soldiers will" - Frederic Bastiat
User currently offlineElevated From United States of America, joined Feb 2010, 296 posts, RR: 1
Reply 8, posted (3 years 2 months 2 weeks 2 days 10 hours ago) and read 2023 times:

Same thing goes for go-arounds. We had to do one the other day and it added an extra 15 minutes to our block time. I am pretty sure our airline didn't send the controllers the bill for vectoring us in too close behind a slower plane ahead of us.

The airline also absorbs the extra fuel associated with things like that as well, not our fault it happened! If there was such an insurance for such instances, I could just imagine how expensive it would be.


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