Lufthansa's Unlimited Liability -- March 27, 2015

For the archives.

Updates

March 28, 2015: another note on Germanwings liability -- according to The Guardian:

An international agreement generally limits airline liability to around $157,400 for each passenger who dies in a crash if families do not sue, but if families want to pursue compensation for greater damages, they can file lawsuits. 

Lufthansa has offered victims' families an initial 50,000 euros. The money will be separate from the compensation the airline will have to pay for the disaster. 

Original Post

Bloomberg is reporting:

The families of passengers on the doomed jet operated by Deutsche Lufthansa AG’s Germanwings will able to seek unlimited recoveries from the carrier because the pilot may have deliberately crashed the plane into the French Alps, lawyers said.

“The liability for the victims would be uncapped,” said George Leloudas, a lecturer at Swansea University College of Law who specializes in aviation law. “From the perspective of the airline it’s difficult. There are no real defenses that you can use. It is irrational. That is why you buy insurance.” 

I wrote a reader either yesterday or two days ago (I forget) that the average payout would be $5 million/passenger. That sounds low but two infants would collect far lower as just one (very cold) example. 150 x 5 = 750 million; rounding, gets us to $1 billion. Bloomberg continues:

“We believe there is at least $1 billion of insurance cover on offer for Germanwings,” James Healy-Pratt, an aviation lawyer at Stewarts Law LLP in London, said in a phone interview. “We have actually assessed the likely compensation total to be around $350 million.”  

Well, isn't that helpful. I'm sure the juries will be told that the airline has "at least" $1 billion of liability insurance. If this weren't going to be litigated in Germany, I would wager we will see at least one $100 million settlement.

Lufthansa will probably cut some of the losses through profits made on all the ticket sales to US lawyers heading to Germany.

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Wasting His Breath

Exploration of the Arctic by the US won't begin under this administration. The AP is reporting:

The U.S. should immediately begin a push to exploit its enormous trove of oil in the Arctic waters off of Alaska, or risk a renewed reliance on imported oil in the future.

The U.S. has drastically cut imports and transformed itself into the world's biggest producer of oil and natural gas by tapping huge reserves in shale rock formations. But the government predicts that the shale boom won't last much beyond the next decade. [Which decade are we talking about? The Bakken will easily last through 2030 and might finally be over by 2100.]

In order for the U.S. to keep domestic production high and imports low, oil companies should start probing the Artic now because it takes decades of preparation and drilling to bring oil to market, according to a draft of the study's executive summary.

"There will come a time when all the resources that are supplying the world's economies today are going to go in decline," said Rex Tillerson, CEO of Exxon Mobil and chairman of the study's committee. "This is will be what's needed next. If we start today it'll take 20, 30, 40 years for those to come on."

Disclaimer: this is not an investment site. Do not make any investment, financial, relationship decisions or travel plans based on anything you read here or think you may have read here. It may "take 20, 30, 40 years for those [projects] to come on" but I think investors in the oil and gas industry are going to see exciting things in 2017, and possibly as early as 2016.

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Costo - American Express

An Aesop Fable

I haven't been to a Costco in a very long time. Until yesterday.

Our older daughter invited me to join her at Costco yesterday; she had some things she needed to pick up, mostly related to the youngest granddaughter.

I had forgotten how nice Costco was; also how incredible the savings were.

This particular Costco is located in a very high-income area near the DFW airport. Each of those customers might have had an American Express card through Costco. I thought about that yesterday while looking at all the customers. Costco recently announced it had parted ways with American Express and will partner with another credit card company.

Yesterday while enjoying my Polish hot dog and 20-oz diet Pepsi (free refills) for $1.50 ($1.62 with tax), I thought it was  a huge loss for American Express to lose the Costco account.

I thought about blogging about that yesterday but then decided not to. Until now. Today Barron's is reporting that it may have a silver lining for American Express to have lost this account:

American Express explained the backstory of Costco. Sounds like they were in a situation where the demands were such that renewing Costco would have lowered returns, and at the expense of better deals due to rigid non-competes.  

Sounds like a modern-day Aesop's fable.

On the way home, I noted that the Costco parking lot was overflowing, hard to find a parking spot. Just down the street, Sam's Club's parking lot was relatively empty.

Maybe Sam's Club has a bigger parking lot.