Academic journal article Defense Counsel Journal

General Aviation Revitalization Act: Its Effect on Manufacturers

Academic journal article Defense Counsel Journal

General Aviation Revitalization Act: Its Effect on Manufacturers

Article excerpt

The general aviation industry is rebounding as a result of GARA, but will the legislation also have unintended consequences?

THE AGE of flight began in America with the Wright brothers. It continued through the 20th century with American manufacturers at its helm. In the 1960s and 1970s, the United States led the world in the field of general aviation, but in the 1980s and 1990s, this industry weathered a major downturn in retail sales and a significant increase in product liability lawsuits.(1) Seeing a connection between the decline of the general aviation industry and the increase of tort litigation, Congress enacted the General Aviation Revitalization Act (GARA), 49 U.S.C. [sections] 40101, in 1994.

Did product liability actions against manufacturers of small aircraft lead to the severe downturn of the general aviation industry? Was this legislation needed and will it accomplish its intended purpose as embodied in its title?

WHAT IS GENERAL AVIATION?

General aviation is a catch-all label for aviation activity that does not fall under the Federal Aviation Administration's (FAA) regulations for scheduled and nonscheduled airline operations.(2) General aviation includes "business aviation, air cargo, flight training, pleasure flying, agricultural aerial application, air taxi and air charter, aerial law enforcement, air ambulance service, and countless other aviation activities" that do not include the airlines.(3) For the purposes of GARA, general aviation includes aircraft that have been issued an airworthiness certificate by the FAA, at the time of receiving this certificate had a maximum capacity of less than twenty passengers, and at the time of the accident was not engaged in scheduled passenger carrying operations.

RISE AND FALL OF GENERAL AVIATION

A. The Fall

During the 1970s, the general aviation industry in the United States was at it high point. Its best year was 1978, when more than 14,000 single-engine airplanes were built. In the late 70s, there were 29 manufacturers producing general aviation aircraft , and the industry had revenue of more than $2 billion a year.(4)

By the 1990s, however, the industry came full circle to the brink of extinction.(5) Industry employment fell by 65 percent. The largest manufacturers were having trouble keeping production going.(6) Cessna, the manufacturer of one of the most widely recognized planes in the world, the Cessna 172, had stopped building piston single-engine aircraft and had decided to concentrate on jets and multi-engine turboprops. Piper, the maker of the Piper Cub, was forced to file for bankruptcy in 1991.(7) Since 1978, unit sales had dropped 95 percent.(8) From 1976 to 1986, claims paid, defense costs and expenses in products liability suits rose from $24 million to more than $210 million for three leading manufacturers.(9) In total, the industry produced only 555 aircraft in 1993.(10)

Explanations for this trend were many, but one thing was certain, the manufacture of piston single-engine aircraft was in serious jeopardy.

B. Product Liability Litigation

The primary cause of the decline of the general aviation industry cited in the debate over GARA was the increased liability imposed on the manufacturers of small airplanes.(11) Speaking about the decline of sales of airplanes in the 1980s, an executive at Cessna said that the "major factor was the continuing and escalating cost of defending product liability suits."(12) Another executive at Cessna stated the "unlimited exposure to litigation is the sole reason" that Cessna closed its single-engine production lines in 1986 and the "sole reason those lines are still closed."(13)

This unlimited exposure to litigation is called the "liability tail." These manufacturers were being sued over crashes of airplanes that were 30 and 40 years old. By 1980, Piper had a liability tail of 135,000 active light piston aircraft and untold thousands of inactive and damaged aircraft that could be returned to serviceable condition at any time. …

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