What’s worrying airline executives? Mid-flight aircraft hacking, IT failure and legal risks of mergers, survey finds
United Airlines’ experience showed that flight control is vulnerable to cyber breach
Executives in the aviation industry are grappling to keep up with the technology arms race, as digital vulnerability and rapid technological change rank as some of the top concerns among management, according to a poll of senior executives in aviation.
Risk advisory firm Willis Towers Watson’s Transportation Risk Index polled 147 senior executives in the aviation industry on what risks are keeping them awake at night.
Mark Hue Williams, the company’s global head of transportation, said risks faced by the global aviation industry are becoming more diverse, complex and interlinked, creating new challenges for both the aviation industry and insurance companies.
“There is no number one overriding risk concern,” Williams said, “but cyber issues show up as an ever-present concern across all regions and sub-sectors of the industry.”
A cybersecurity researcher in the US last year told the FBI that he had hacked into the computer systems aboard a United Airlines aircraft and even managed to control an aircraft engine during a flight. United Airlines, which ranks No 2 globally in terms of fleet size, also made headlines last year for an incentive scheme rewarding hackers for spotting holes in its computer system, after falling victim to several technological problems since 2012.
“More airlines are coming to the table asking for help with cyber and to assess their vulnerability,” Williams said.
Cyber risks ranging from data breaches, failure of IT systems, to aircraft hacking are particularly dangerous for the aviation industry not only for the consequences but also because they amplify other risks, he said.
“The insurance industry is only going through the first stages of responding to industry concerns,” he said, and that there has yet to be more tailor-made and region-specific solutions.
Wills Tower Watson estimates cyber risk insurance across all industries to be a US$2.5 billion (HK$19.41 billion) market.
“We estimate that number will increase tenfold in 10 years to US$25 billion,” he said.
Another concern highlighted by the survey identified legal risks associated with mergers and acquisitions as the most severe and the hardest to manage, the survey found.
It was the No 1 issue among airport operators, and also rated of high concern to aircraft manufacturers as well as airline executives in the US and Europe.
Chinese companies have been aggressive in foreign acquisitions, with the HNA Group, which spent about US$17 billion worldwide last year, being the clear leader in aviation deals.
But some deals have also been blocked or subject to longer regulatory scrutiny, such as the China Eastern-Qantas joint venture eventually approved in August.
“The survey result does not mean that we should expect to see more deals encounter regulatory roadblocks, but the industry is increasingly worried about that happening,” Williams said.