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Insurers Could Give Billions for Flight 370; Second Look at High-Tech Monitoring System

Aired March 21, 2014 - 10:30   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

COSTELLO: And, you know, I know these guys are expert fliers, but I personally always worry about everyone's safety. This is a very windy part of the world with very choppy seas. How low do they fly? I just wondered how the wind affects them.

LAGRONE: Well, ordinarily, so P-8s were designed to operate actually on the level of a regular airliner. So you've got the cruising altitude of a P-8 Poseidon at about 30,000 feet. It's based on the airframe of a 737. And it's -- you know, that's ordinarily probably where they operate from. But, I mean, they can get as low as they need to, to go and detect submarines. So I mean, it all depends on the context of the mission. But, you know, you could go much, much lower than 30,000 feet.

So a scenario could be a P-8 at a very high altitude could detect something with its radar and then want to go in for a closer look and it could get down several thousands of feet to get a better look at it with that video camera that's mounted underneath there. So it all depends on the context of the situation. But those pilots are all very well trained and, you know, they know to keep an eye out for weather and how to stay safe in those kind of conditions.

COSTELLO: And I'm glad they do. Sam Lagrone, thanks so much for your insight this morning. I appreciate it.

LAGRONE: Thanks so much.

COSTELLO: Still to come in the NEWSROOM, they help power your laptops and cell phones but have known to overheat and cause fires. Now officials says lithium ion batteries were in the cargo of that missing Malaysian Airlines jet. Could they be to blame? We'll talk about that next.

(COMMERCIAL BREAK)

COSTELLO: Today we're learning more about the cargo aboard Malaysia Airlines Flight 370, specifically lithium ion batteries, which the Malaysian government confirmed were part of the plane's cargo. In the past, those batteries have overheated and in some cases caused crashes.

Joining me now is Bob Francis, former vice chairman of the NTSB.

Welcome, Bob.

BOB FRANCIS, FORMER NTSB VICE CHAIRMAN: Nice to be here.

COSTELLO: Thanks for being here. I appreciate it. Officials stress these batteries were packed properly and according to all guidelines. In your mind, could they really pose a danger?

FRANCIS: Potentially they could. And fire is certainly one of the things that we're considering as we look at what happened out there. I think that perhaps lithium batteries in the cargo hold might have sent us down some trails that are a little different than this but given how little is really understood of the entirety of what happened, it's something that's going to have to be looked at just as closely as anything else.

COSTELLO: What do you mean if lithium batteries are to blame, they would have sent us down different paths?

FRANCIS: Well, I think that instead of focusing on the cockpit of the airplane and the controls, et cetera, that there would -- there would have been other things that would have been happening if the fire had been a general fire in the aircraft coming up from the cargo hold.

COSTELLO: Right. And the pilots would have had time to sound some sort of alarm if there was smoke or fire in the airplane, right?

FRANCIS: Well, and that, theoretically would apply to the cockpit as well. But I think that if there was something that were -- they felt was just in the cockpit, they might have been a little less prone to call right away.

COSTELLO: So the working theory right now seems to be the plane was sort of flying to nowhere and crashed when it ran out of fuel. But just because that's a working theory, are we any closer to knowing if that theory is correct?

FRANCIS: The answer to that is no. But I think you've got to predicate your reaction and what you're using your resources for on something. And that's as good a starting point as there is at this stage.

COSTELLO: So as you watch the search for this debris take place, they just can't find anything. At first, Australian officials were hopeful. And now today one official came out and said, you know, it could be a cargo container. We just don't know. We're less hopeful than we were a day ago.

FRANCIS: I think that given the length of the one piece, 80 feet or whatever it is, makes it pretty unlikely that it's the aircraft.

COSTELLO: So, in your mind, you're just sitting back and you're watching all of this, 14 days have gone by. What missing piece of information do we need to really focus this investigation?

FRANCIS: Well, I think at the stage that we are at now, if we want to -- if we want to find the aircraft, we're going to have to find some wreckage on the surface to give us an idea of -- at least a general idea of where it is. And it's enormously difficult, even with Air France, where we knew what track they were on coming across the Atlantic. It still took two -- it still took two weeks to find out where it was.

COSTELLO: Other investigators have said that it would be helpful if we had more information about the conversation between air traffic controllers and these pilots, not only from this flight but from past flights. But if they had anything pertinent, wouldn't that have come out by now?

FRANCIS: I would certainly think so. I mean, if the other end is the controllers and I can't imagine that if the controllers thought that there was any reason to have any sort of help from their conversations, they would have reported it.

COSTELLO: So if you were part of this investigation, what would your level of frustration be?

FRANCIS: High.

(LAUGHTER)

COSTELLO: I just can't --

FRANCIS: I don't know, I mean, I don't mean to be flip but this is as difficult as anything I've ever seen. And I'm not sure where we go from here unless something is found, unless some wreckage from the aircraft is found. And even if that's the case, it's going to be with the currents and the RINs and everything else, the tides, to be able to trace a life preserver that you find in the middle of the ocean back to where the fuselage is is going to be an enormous problem.

COSTELLO: Bob Francis, thanks so much for your insight. Appreciate it as always.

FRANCIS: You're welcome. Wish I could be more positive.

(LAUGHTER)

COSTELLO: Me too, but I get it. I understand. Thanks so much.

Still to come in the NEWSROOM, a heartbreaking way for the families of Malaysia Flight 370 as search planes return yet again with no answers.

Kate Bolduan caught up with one father who is holding out hope for his son. We'll have his story next.

(COMMERCIAL BREAK)

COSTELLO: Search missions over the Indian Ocean have wrapped up for a second day and brought back with them no new leads in the search for missing Flight 370. And for families waiting for words about loved ones, it's been unbearable.

Kate Bolduan caught up with the father of one of the missing.

KATE BOLDUAN, CNN ANCHOR, NEW DAY: Carol, despite today's search coming up empty, even the possibility of debris is bringing a range of emotions from passengers' families. I spoke with one man whose son is not only missing but of particular interest to police because of his background as an aviation engineer.

Salamat Omar says he's sure his son had nothing to do with it. That he welcomes investigation and says police have yet to contact him.

(BEGIN VIDEOTAPE)

BOLDUAN (on camera): On some level, do you hope that this is not the plane?

(Voice-over): For some of the families of those onboard Flight 370, the discovery of possible debris is being met with despair. But for others, hope.

Salamat Omar says he still believes his son is alive. But with the new developments in the search, he is preparing for any eventual outcome. His son, Karul Omri, is an aviation engineer who was a passenger on board.

(On camera): As the days pass, does it get harder or is it just the same?

(Voice-over): "The sadness is still there," he says, "but I'm trying to stay strong."

All of the families of the 239 people on flight 370 struggle with the same emotions in their own way. Some venting anger at the Malaysian government. And in Beijing, Thursday, paramedics were called to the family's hotel when news of possibly discovering the plane's debris broke. There were fears that some might commit suicide. Here in Malaysia, many families are staying at one hotel, watching, waiting for any new detail.

(On camera): Mr. Salamat, I look at you and you are standing so strong. You are waiting for concrete information. Have you yet allowed yourself to cry over the fear of losing your son?

He says, "He feels extremely depressed, but being with other families makes it more bearable, calms his soul?

(END VIDEOTAPE)

BOLDUAN: I asked Mr. Salamat, if this is the plane that they find off of Australia, will he go to Perth? He told me, absolutely. And said that Malaysia Airlines has promised if any part of the plane is found, they will be flown to that location. Until then, he waits -- Carol.

COSTELLO: Kate Bolduan, many thanks.

Still to come in the NEWSROOM, insurance payoffs to some Flight 370 families have already begun. Hundreds of thousands of dollars more could be headed their way. We will tell you who could be forced to pay and why. Next.

(COMMERCIAL BREAK)

COSTELLO: Anguished families aren't the only ones waiting for signs of Flight 370. Insurers are also watching and waiting for answers. Some of those families have already received as much as $20,000 in automatic payments. This is meant to help fly wherever they need to go and stay in hotels. Pay for expenses while their loved are missing. But insurers could be on the hook for billions of dollars more.

Alison Kosik is following this part of the story.

Good morning, Alison.

ALISON KOSIK, CNN BUSINESS CORRESPONDENT: Good morning, Carol. The airline industry spends billions of dollars on planes, fuel, maintenance and on insurance. A 777 like the Malaysia Airlines jet that disappeared likely carried a $2 billion policy. That insures the plane itself. It also includes liability for passengers in case something happens.

(BEGIN VIDEOTAPE)

KOSIK (voice-over): Two hundred and thirty- nine people aboard a giant aircraft that disappears into the night. Government officials still piecing together information, family members are understandably outraged. But even if the victims are never found, liability insurance can help their families, though that process likely won't be easy.

BRIAN HAVEL, LAW PROFESSOR, DEPAUL UNIVERSITY: One of the procedures is to ensure that in the event of a disappearance like this there is a presumption of death, which is ruled by a court.

KOSIK: In some countries, that ruling could be difficult to get but it's essential for the next step of filing a claim. Victims' families have protection under what's known in the aviation industry as the 1999 Montreal Convention.

Malaysia signed on to that treaty. It outlines where liability claims can be brought, including the airline country of operation, the location of its corporate headquarters, where the ticket was bought, a passenger's final destination, a passenger's permanent residence.

Whether the victims are found or not, a basic cause of the disappearance will still be determined.

DANIEL ROSE, AVIATION ATTORNEY, KREINDLER & KREINDLER: From a legal point of view, this is -- it's not an unprecedented situation where an aircraft has not been recovered. And, indeed, legal cases have been made out many times where the aircraft is not recovered and it's done through, you know, what's called really circumstantial evidence.

KOSIK: That evidence will point to one of two scenarios, that the disappearance was caused by an intentional act, like terrorism, suicide or sabotage. Experts say, in that case, Malaysia Airlines would likely be liable or that a mechanical or systems issue was to blame. If that happens, airplane maker Boeing and other manufacturers could be brought into the insurance claims, leading to an even bigger legal process.

Lawyers say the claims must be filed on a passenger-by-passenger basis through a complex web of payouts, policies, possible lawsuits and legal obligations. Unfortunately, with the victims' families having already gone through so much at the center of it.

(END VIDEOTAPE)

KOSIK: As far as the lawsuit goes, the amount a family can claim depends on everything from the age of the deceased to what that person earned to what country the case is filed in. And there's no maximum amount a family can ask for if there is a lawsuit filed. But there is a time limitation, that families have up to two years to sue the airlines starting from the date when the aircraft should have arrived -- Carol.

COSTELLO: Alison Kosik, reporting from New York this morning, thank you.

Still to come in the NEWSROOM, a high-tech data recorder is getting a second look in the wake of Flight 370's disappearance.

(COMMERCIAL BREAK)

COSTELLO: The clock is ticking on retrieving crucial evidence in Flight 370's disappearance. Batteries that power the pings from the flight data recorder are expected to only last another 16 days. But if a high-tech data recorder had been in use, we would already have some answers about that plane.

CNN's Laurie Segall has more for you.

LAURIE SEGALL, CNN MONEY TECH CORRESPONDENT: Hey, Carol, right now the plane sinks to the bottom of the ocean, the flight data recorder goes with it. But we spoke with one company that says that doesn't have to be the case and that we could have had a lot more answers about the missing jet.

(BEGIN VIDEOTAPE)

SEGALL (voice-over): When Malaysia Airlines Flight 370 disappeared, the story of what went wrong vanished with it. The answers might be stuck in the flight data recorder, the so-called black box, but what if we had those answers all along?

RICHARD HAYDEN, DIRECTOR, FLIGHT AEROSPACE SOLUTION: We would know where the aircraft has gone, where it is and we would have information on what happened in the meantime.

SEGALL: Canadian company Flight makes live streaming data recorders that send information in real time. It's part of the satellite based system that monitors a plane's exact location, engine condition and more.

HAYDEN: The system transmits every -- say every five to 10 minutes on a normal flight.

SEGALL: If something goes wrong, like the plane deviating from its route, the system will start streaming live second by second data.

MARY SCHIAVO, CNN AVIATION ANALYST: That kind of information is not only life saving but it adds a tremendous measure of security for our country.

SEGALL: There are several mechanisms that transmit a plane's data. But Hayden says unlike those systems, the technology behind Flight is more intensive, sharing a tremendous amount of information. So much information critics say it can be difficult to monitor and analyze if widely adapted.

Right now Flight's technology is only fitted to 350 planes run by 40 operators. It can be installed for about $100,000. Normal data transmission cost carriers between a few dollars to $15 per flight hour and goes up for continuous streaming in a rare emergency.

SCHIAVO: They are very cost sensitive and they simply will not add additional safety measures unless mandated by the federal government.

SEGALL: As investigators look for high-tech clues in the search for Flight 370, the high-tech data recorder is getting a second look.

HAYDEN: The technology exists, it's in service. It's economical. And the question now is how to get more widespread use of it?

(END VIDEOTAPE)

SEGALL: And now, Carol, it's important to note that this technology might have been helpful if it had been use. But like the transponder on Flight 370 it would have been responsible for someone to just turn it off if he knew where to look -- Carol.

COSTELLO: Laurie Segall, many thanks.

And thank you for joining me today. I'm Carol Costello. "AT THIS HOUR" with Berman and Michaela starts now.