Insuring Aviation Safety

The May 25 crash of American Airlines flight 191, snuffing out 273 lives, illustrates once again the disaster known as government safety regulation.

Although the National Transportation Safety Board investigation had not been completed as of this writing, certain facts had already come to light. Apparently, it was loss of two of the plane's three hydraulic systems (which operate the flight controls) that led directly to the crash. That, in turn, was due to the loss of the engine. And loss of the engine was apparently due to cracks in several key structural elements in the pylon (the structure which fastens the engine beneath the wing).

In its usual "lock the barn door after the horse has escaped" fashion, the Federal Aviation Administration made a great show of grounding all DC-10s—several times—and making grave pronouncements. But no amount of posturing could forestall the asking of basic questions of the agency that supposedly looks after the safety of air travelers:

• Why weren't the cracks and other deficiencies that turned up in the engine pylons of 59 of 134 hastily inspected DC-10s identified earlier, as part of the airlines' routine (FAA-required) maintenance checks?

• How was the DC-10 able to receive an FAA Airworthiness Certificate if a single failure can knock out two of its three (supposedly fail-safe) hydraulic systems, leading to a loss of control?

The FAA is none too eager to have such questions asked—because its people know all too well what the answers are. As pointed out in these pages (see "Is This Any Way to Run an Airway?" REASON, Jan. 1979), the system by which the FAA seeks to ensure safety in aircraft design and operation is dangerously flawed. Yet because no one in the Washington establishment can think of an alternative, the FAA is reduced to "covering its tail" and asking for ever bigger budgets to correct its deficiencies.

Why doesn't the system work? To begin with, there's the basic conflict of interest inherent in the FAA's dual responsibility of both promoting aviation and ensuring safety. When it comes right down to dollars and cents trade-offs between an extra margin of safety and holding down costs, both aircraft builders and airlines may be tempted to err on the side of economy—and the FAA tends to go along. Like any other single-industry regulatory body, its people identify with the industry they regulate, and the agency is the industry's captive. Thus, most of the day-to-day tasks of checking out designs and supervising maintenance are left to industry personnel, with minimal FAA supervision.

Not that more active FAA involvement could be counted on for much. Of all the Washington bureaucracies, none has a worse reputation for incompetence, sloth, foot-dragging, and confusion than the FAA. Virtually every major crash leads to a General Accounting Office or congressional study of the agency's failings. FAA horror stories abound—Airworthiness Directives cancelled or watered down, fines for safety violations reduced to token levels, design standards hopelessly out of date—but after awhile the alarm dies down and aviation's generally good safety record lulls everyone back to complacency…until the next disaster.

Perhaps worst of all is the soothing effect the FAA has on aviation consumers. Ever since it was created—at the behest of fledgling manufacturers and operators—one of the agency's principal functions has been to defuse the public's fear of flying, to obliterate any thought of "safety" (and its opposite: danger) from the minds of air travelers. As a result, nobody thinks to shop around for the safest airlines (can you name the five major airlines that do not fly DC-10s?*) or the safest type of jetliner.** All become interchangeable, blessed by the government.

What the aviation community has done is to socialize the air safety function—and therefore to muck it up. As in the case of nuclear power, the aviation industry has gotten the government—i.e., the taxpayers—to foot the bill for setting up and enforcing safety standards. The several billion dollars a year in taxes supporting the FAA constitute an insurance subsidy, just as the Price-Anderson Act constitutes an insurance subsidy to nuclear power. And the results—diffusion of responsibility, distorted incentives, and bureaucratic confusion—are similar in both cases.

So what is the solution? As with nuclear power, the key to restoring proper responsibility for safety is to cut out the subsidy. In the case of aviation, that means returning to the insurance industry its proper role of developing and enforcing air safety standards. If insurance underwriters grow too lax with an airline or an aircraft builder, it is their profits that will suffer. It will be very much in their economic self-interest to develop and maintain state-of-the-art standards and the machinery to see that they are complied with.

This will not go down easily with the powers-that-be. Despite the mounting costs of air crashes (about $40 million to replace the DC-10 and another $100 million in liability claims, in the Flight 191 crash), the insurance industry will probably not be eager to take on the massive job of developing a modern air safety standards program and designing rate structures to motivate compliance. Nor will the FAA bureaucracy be eager to close up shop and go out of business. Yet the longer this solution is put off, the longer the carnage will continue. Air traffic is growing by leaps and bounds, new airlines are entering the field in unprecedented numbers, and a new generation of jet transports is on the drawing boards.

What Congress needs to do is to take seriously the numerous reports of GAO, the National Transportation Safety Board, and its own committees over the past decade—all documenting the inability of the FAA to do the job. Mustering great political courage, it must then set a target date—perhaps five years hence—at which time the FAA will go out of business and the air safety job will be transferred to a nonprofit aviation safety organization, on the model of Underwriters Laboratory (electrical equipment safety) and the Insurance Services Office (fire safety).

Will it take more piles of twisted metal and charred bodies to convince our lawmakers that aviation safety is too important to be left in the hands of political hacks and tenured civil servants? Let us hope not. The time to act is now.

* Braniff, Delta, Eastern, Pan Am, and TWA.
** The 737 and 727 are in first and second place, respectively.