Wednesday, March 5, 2014

How Badly Does a Crash Hurt an Airline's Finances

     In writing my recent book STALKING THE SKY, I wanted readers to understand how airlines protect themselves financially against the possibility of losing an airplane. The airlines are well-protected by insurance and often by the way they may have financed that particular aircraft.

Here's an excerpt:

A moment later, he turned to Will. "Is the company’s insurance in order?"
Will nodded. The airline and its investors were protected, he knew, by a Lloyd’s of London syndicate that would make good on the liability to victims’ families within rather high limits. A second syndicate insured the aircraft itself: GUA would be repaid its share of the plane’s value, and the members of the public who had financed the rest of the transport’s cost by buying loan certificates and leasing the plane to the airline would be similarly reimbursed.
The Old Man reflected aloud, "The stock market’s been too skittish lately not to get terrified when something like this happens. The average guy thinks we’re in the hole for thirty-five million dollars’ worth of aircraft. Or else he’ll think passengers will stay away. Probably will, too, for a week or so. The truth is, recovering the cash value of a jetliner can be a damned blessing, although I’d rather have lost a 707—they’re older and a hell of a lot less efficient. Damned stockholders and smart-ass analysts don’t think that way. By noon tomorrow our stock should have dropped to eight or below." Buck’s fist slammed against the desk. "That’s just the opportunity that son of a bitch Girard has been waiting for!"


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