““CEOs go to their vacation homes just after companies report favorable news, and CEOs return to headquarters right before subsequent news is released. More good news is released when CEOs are back at work, and CEOs appear not to leave headquarters at all if a firm has adverse news to disclose. When CEOs are away from the office, stock prices behave quietly with sharply lower volatility. Volatility increases immediately when CEOs return to work.” —David Yermack, a New York University finance professor, whose recently released study shows a correlation between when CEOs take their private jets on vacation and movements in their companies’ stock price ”
How flight safety has evolved
To appreciate how safe air travel has become, it's helpful to realize how risky it once was and to understand how rules and regulations have evolved to address that problem.
The first aviation fatality occurred on Sept. 17, 1908, when a malfunction caused Orville Wright to lose contol of his Wright Flyer while he was demonstrating the airplane to Army officials at Fort Myer in Virginia. The resulting crash killed passenger Lt. Thomas Selfridge and severely injured Wright.
Many accidents later, in 1926, Congress put the U.S. Department of Commerce in charge of air travel and commerce. In 1938, oversight responsibility for civil aviation passed to an independent government agency called the Civil Aeronautics Authority. President Franklin D. Roosevelt eventually split that authority into two agencies, the Civil Aeronautics Administration and the Civil Aeronautics Board. The CAA issued pilot and aircraft certification, enforced safety regulations and developed new air routes, while the CAB enacted safety rules, investigated crashes and regulated economic aspects of the airline industry.
Meanwhile, air travel remained far from safe. In his 1939 book, Wind, Sand and Stars, Antoine de Saint-Exupéry wrote that aircraft malfunctions and accidents were so common when flying the mail over the Sahara Desert that it was customary to send two aircraft so the second one could pick up the mail and continue after the first one crashed.
Seventeen years later, the U.S. government took greater notice of air safety after a United Airlines DC-7 collided with a Trans World Airlines Super Constellation as both aircraft flew low over the Grand Canyon to give their passengers an up-close view. The resulting 128 deaths prompted Congressional hearings into airspace and air traffic control management amid much fanfare but with little resolve.
About two years later, in 1958, two more midair collisions, this time between military jets and airliners, resulted in another 61 fatalities. Congress had had enough and moved to improve air traffic control and establish a comprehensive federal agency to oversee aviation. The resulting Federal Aviation Act of 1958 transferred the functions of the Civil Aeronautics Administration to a new independent body, the Federal Aviation Agency. ("Administration" replaced "Agency" in 1967, when the FAA became part of the Department of Transportation.)
"When I first went to work for the FAA in the late 1960s, the accident rate was still appalling," said a retired FAA inspector who still does contract work for the agency and asked that his name not be used. "In 1972 there were 3,214 aviation-related fatalities. Think about it. That's an average of about eight people a day. You know the old joke about what's the biggest lie in aviation? 'I'm from the FAA and I'm here to help you.' The truth is, thanks in large part to FAA oversight and regulation, that number dropped to 876 last year."
How Regulations Develop
FAA regulators take action when an accident investigation finds a deficiency in the system or identifies an action not covered by existing Federal Aviation Regulations. The FAA also has a data center that looks at trends that could suggest issues that might need more regulation, such as pilot fatigue. "No one [at the FAA] is sitting around wondering how they can change regulations," the retired inspector said. "Change is spawned principally by a reaction to something. Many regulations are written retrospectively in response to an incident or accident."
The public can also petition the FAA and suggest new regulations as well as changes to or elimination of existing regulations. And every three years, the Department of Transportation formally keeps in touch with end users by soliciting public comment about existing regulations.
"Once an issue has been identified and all the information is fed into FAA headquarters, it is given a priority," said Doug Carr, vice president for safety, security and regulation for the National Business Aviation Association. "At any one time, there are probably 100 to 300 regulatory issues under development, many of which are not operationally related."
After the FAA identifies a project, the agency must prioritize it, Carr said, adding that "there's an office charged with the rulemaking process and everyone feeds all information to that office." That office serves official notice to the public, designates a comment period during which the public may respond, develops a timeline for implementation and a budget to support the rulemaking team. It also addresses comments when they come in, makes modifications if appropriate and publishes the final rule.
"Rulemaking is not a simple process," Carr said. "It's designed to be slow and thoughtful because once you implement a regulation it's difficult to rescind or change it. Often, the first idea for a solution turns out to be something you really don't want to implement. Being slow and deliberate gives potential users time to reflect on what [the solution] will affect and how it will be to live with. The FAA really does listen to what the end users say, but it is still up to the FAA to make the final decision."
Carr explained that the NBAA plays a big role in the process. "Once regulatory solutions are proposed, we provide the voice of the [business aviation] community," he said. "We explain to the FAA its potential impact on users and when appropriate, will address a better way of dealing with the situation."