Document ID: FAA-2005-20836-0046
Agency: faa
Document Type: Rule
Title: Airworthiness Directives; Boeing Model 727-200 and 727-200F Series Airplanes; 737-200, 737-200C, 737-300, and 737-400 Series Airplanes; 747-100, 747-100B, 747-100B SUD, 747-200B, 747-200C, 747- 200F, 747-300, 747-400, 747SR, and 747SP Series Airplanes; 757-200, 757-200CB, and 757-200PF Series Airplanes; and 767-200 and 767-300 Series Airplanes
Posted Date: 2008-11-10T05:00Z

[Federal Register: November 10, 2008 (Volume 73, Number 218)]
[Rules and Regulations]               
[Page 66497-66512]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr10no08-4]                         

=======================================================================
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DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 39

[Docket No. FAA-2005-20836; Directorate Identifier 2005-NM-028-AD; 
Amendment 39-15730; AD 2008-23-09]
RIN 2120-AA64

 
Airworthiness Directives; Boeing Model 727-200 and 727-200F 
Series Airplanes; 737-200, 737-200C, 737-300, and 737-400 Series 
Airplanes; 747-100, 747-100B, 747-100B SUD, 747-200B, 747-200C, 747-
200F, 747-300, 747-400, 747SR, and 747SP Series Airplanes; 757-200, 
757-200CB, and 757-200PF Series Airplanes; and 767-200 and 767-300 
Series Airplanes

AGENCY: Federal Aviation Administration (FAA), DOT.

ACTION: Final rule.

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SUMMARY: We are adopting a new airworthiness directive (AD) for certain 
Boeing transport category airplanes. This AD requires replacing any 
insulation blanket constructed of polyethyleneteraphthalate (PET) film, 
ORCON Orcofilm[reg] AN-26 (hereafter ``AN-26''), with a new insulation 
blanket. This AD results from reports of in-flight and ground fires on 
certain airplanes manufactured with insulation blankets covered with 
AN-26, which may contribute to the spread of a fire when ignition 
occurs from sources such as electrical arcing or sparking. We are 
issuing this AD to ensure that insulation blankets constructed of AN-26 
are removed from the fuselage. Such insulation blankets could ignite 
and propagate a fire that is the result of electrical arcing or 
sparking.

DATES: This AD is effective December 15, 2008.
    The Director of the Federal Register approved the incorporation by 
reference of certain publications listed in this AD as of December 15, 
2008.

ADDRESSES: For service information identified in this AD, contact 
Boeing Commercial Airplanes, P.O. Box 3707, Seattle, Washington 98124-
2207; telephone 206-544-9990; fax 206-766-5682; e-mail DDCS@boeing.com; 
Internet https://www.myboeingfleet.com.

Examining the AD Docket

    You may examine the AD docket on the Internet at http://
www.regulations.gov; or in person at the Docket Management Facility 
between 9 a.m. and 5 p.m., Monday through Friday, except Federal 
holidays. The AD docket contains this AD, the regulatory evaluation, 
any comments received, and other information. The address for the 
Docket Office (telephone 800-647-5527) is the Document Management 
Facility, U.S. Department of Transportation, Docket Operations, M-30, 
West Building Ground Floor, Room W12-140, 1200 New Jersey Avenue, SE., 
Washington, DC 20590.

FOR FURTHER INFORMATION CONTACT: Shannon Lennon, Aerospace Engineer, 
Cabin Safety and Environmental Systems Branch, ANM-150S, FAA, Seattle 
Aircraft Certification Office, 1601 Lind Avenue, SW., Renton, 
Washington 98057-3356; telephone (425) 917-6436; fax (425) 917-6590.

SUPPLEMENTARY INFORMATION:

Summary of the NPRM

    We issued a notice of proposed rulemaking (NPRM) to amend 14 CFR 
part 39 to include an airworthiness directive (AD) that would apply to 
certain Boeing Model 727-200 and 727-200F series airplanes; 737-200, 
737-200C, 737-300, and 737-400 series airplanes; 747-100, 747-100B, 
747-100B SUD, 747-200B, 747-200C, 747-200F, 747-300, 747-400, 747SR, 
and 747SP series airplanes; 757-200 and 757-200PF series airplanes; and 
767-200 and 767-300 series airplanes. That NPRM was published in the 
Federal Register on April 4, 2005 (70 FR 16986). That NPRM proposed to 
require removing all insulation blankets within the pressurized areas 
of the affected airplanes and installing a new insulation blanket 
meeting the requirements of Section 25.856(a) of Title 14 of the Code 
of Federal Regulations (CFR) (14 CFR 25.856(a)). That NPRM also 
proposed to allow operators to develop methods for distinguishing 
between insulation blankets constructed of AN-26 and other materials. 
In addition, that NPRM proposed a provision that, if the FAA approves 
such a method, operators would not be required to remove blankets they 
determine are not constructed of AN-26.

Related Activities

    After issuance of the NPRM, we extended the comment period of the 
NPRM by 60 days due to the extensive scope and significant potential 
impact of the NPRM. An NPRM, extending the comment period, was 
published in the Federal Register on June 6, 2005 (70 FR 32738). 
Subsequently, we decided that more time was necessary for interested 
parties to continue to evaluate the proposal and to submit additional 
comments with more specific details concerning issues. An NPRM, 
reopening the comment period, was published in the Federal Register on 
November 23, 2005 (70 FR 70749).

Differences Between the NPRM and the Final Rule

    We have extended the compliance time of the required replacement 
from 72 months to 96 months. The revised compliance time should 
minimize the cost impact on operators by allowing more planning time to 
comply with the requirements of this AD. We also have revised the cost 
information and note that there is a substantial change in estimated 
cost due to increased parts and labor costs, reduced number of 
airplanes, and assumed service change for the future fleet. In 
addition, we have deleted the reinstallation requirement of paragraph 
(h)(2) of the NPRM. The reinstallation requirement would have created 
an undue burden on operators because not all removals of insulation 
blankets are done at a heavy maintenance visit with the necessary 
replacement materials available.

Comments

    We gave the public the opportunity to participate in developing 
this AD. We considered the comments received from the 21 commenters. 
The significant comments are as follows.

Questioning the Safety Risk of AN-26

    Several commenters, such as the Air Transport Association (ATA) on 
behalf of its members, Boeing, KLM, and Northwest Airlines (NWA), 
request that we reconsider the NPRM because AN-26 poses a lower safety 
risk than indicated in the NPRM, and that AN-26 was not considered 
unsafe during certification.
    Boeing states that its in-service events/test data show limited 
flame spread and no damage to structure/systems due to aged AN-26. 
Boeing implies that the mitigating actions for the NPRM should be 
revised to correspond to the low risk presented by the data, which are 
proportionally associated with the combination of contamination, 
ignition, and flame propagation.
    In addition, Boeing states that the replacement of AN-26 for all 
locations

[[Page 66498]]

may not be required due to the isolation of materials from ignition 
sources or lack of susceptibility to high levels of contamination. NWA 
agrees with Boeing's conclusion that AN-26 (based on flame propagation 
characteristics by itself) without contamination is not an unsafe 
condition (i.e., high-level threat) for airplanes.
    Based on our review of the details of the in-service events/test 
data, we do not agree with Boeing to revise the NPRM to reflect its 
presented information or with its conclusions about the data. With 
regard to ignition and propagation, we have examined the incident/event 
history of fires involving airplanes manufactured between 1981 and 1988 
and, in particular, those events that have involved AN-26 thermal/
acoustic insulation materials. Results of this examination revealed 
that flames have propagated on the thermal/acoustic insulation 
materials initiated from several types of ignition sources such as 
electrical arc/sparks and lightning strikes. Flight or ground personnel 
extinguished some of these fires with extinguishing equipment while 
other fires self-extinguished. It is unknown whether all of these fires 
would have self-extinguished and how much of the material would have 
been consumed or if the fire would have spread to other materials. 
These events took place in several areas of the airplanes, but 
primarily in inaccessible areas, those that are hidden from view from 
the passengers and flight crew. The burned areas ranged from a 
relatively small area (< one ft\2\) to a large area (40 ft\2\). Some of 
these events resulted in significant system and/or structural damage to 
the airplane.
    We also do not agree with the commenters suggestions that an unsafe 
condition only exists if contamination is present. Data from in-service 
events and tests, conducted by both Boeing and us, support the 
conclusion that relatively uncontaminated, in-service AN-26 has ignited 
and resulted in unacceptable flame propagation behavior. As discussed 
in the ``Background'' section of the NPRM, we have concluded that the 
flammability characteristics of AN-26 are more a factor of fundamental 
material properties than a factor of contamination.
    Contamination, in many cases, can increase the susceptibility to 
ignition and flame propagation, although, in certain cases, some forms 
of contamination actually inhibit the propagation of flames. In 
addition, as discussed in the ``FAA's Determination and Requirements of 
the Proposed AD'' section of the NPRM, we issued Flight Standards 
Information Bulletin for Airworthiness (FSAW) 00-09, ``Special Emphasis 
Inspection on Contamination of Thermal/Acoustic Insulation,'' effective 
September 28, 2000, to ensure that operators have procedures defined in 
their approved maintenance programs for the inspection for 
contamination and corrective action. Boeing also has revised service 
letters alerting operators to methods for preventing and removing 
contamination. The procedures in these documents serve to mitigate the 
separate risk associated with contamination.
    NWA also comments that AN-26 was not considered unsafe at the time 
of certification, and that we are changing the flammability test for 
insulation material 20 years after certification.
    We do not agree. Whether or not AN-26 meets the certification 
flammability requirements that were applicable to the affected 
airplanes is irrelevant to the determination of an unsafe condition. As 
mentioned in Amendment No. 25-111 (68 FR 45045, July 31, 2003), prior 
certification standards did not adequately distinguish between 
acceptable and unacceptable materials. As a result, we did, in fact, 
change those standards in Amendment No. 25-111, and the old test 
methods are no longer applicable to thermal/acoustic insulation. As 
such, our long-range plan is application of Amendment No. 25-111, where 
material that met the previous standards will be reduced by attrition 
as required by the associated 14 CFR Part 91 and Part 121 operational 
rules.
    Furthermore, in response to NWA's observation that we are changing 
test methods to account for electrical arcing, the arc/spark test is 
only used to assess whether an unsafe condition exists. It is not used 
as a certification standard. We have determined that the most common 
ignition threat is electrical arcing/sparking. When AN-26 is subject to 
arcs and sparks, it ignites and propagates a fire with characteristics 
unlike other insulation material we have evaluated. These 
characteristics create the unsafe condition.
    KLM and NWA are concerned that in addition to AN-26, there may be 
additional materials that should be subject to the requirements of the 
NPRM. KLM states that it received a list of several thermal/acoustic 
insulation materials from ORCON, the manufacturer of AN-26, that do not 
comply with 14 CFR 25.856(a).
    As discussed in the NPRM, this AD addresses an identified unsafe 
condition (i.e., insulation blankets constructed of AN-26, if not 
removed from the fuselage, could ignite and propagate a fire that is 
the result of electrical arcing or sparking). AN-26 differs from other 
films in use, except for metallized polyethyleneteraphthalate (MPET) 
material which has been addressed in other similar rulemaking, in that 
it is susceptible to propagation of a fire from a small ignition 
source. Other films, while not necessarily meeting the requirements of 
14 CFR 25.856(a), do not have this susceptibility. It is the 
susceptibility to small ignition sources that creates the unsafe 
condition.
    ATA states that AN-26 is not as unsafe as MPET. ATA states that 
investigation results of in-service events and the FAA Technical 
Center's video recording of the tests of insulation blankets 
constructed of MPET indicate that propagation characteristics of AN-26 
is not a safety threat.
    We do not agree with ATA's assertion that AN-26 poses a propagation 
hazard significantly less than that posed by MPET. We have determined 
that each material is susceptible to ignition and propagation from a 
small ignition source and thus presents an unsafe condition. The flame 
propagation characteristics of MPET in a specific test scenario are not 
a recognizable standard with which to compare other materials, 
including AN-26, as MPET has not been deemed the baseline material for 
safety evaluations. For this same reason, we also do not agree that the 
comparison of propagation characteristics of AN-26 and MPET should be 
factored into the development of an appropriate compliance time for the 
required replacement.

Service Information

    Several commenters, such as ATA, Continental, and NWA, express 
concern about the lack of service information in order to comply with 
the AD. ATA notes that paragraph (f) of the NPRM states that the 
insulation blankets must be replaced ``using applicable maintenance 
manual procedures.'' ATA states that such a provision is inadequate, 
and that the effective date of the AD should be delayed to ensure 
appropriate service information is available to operators. While 
preparing for the MPET ADs \1\ (hereafter ``MPET ADs''), ATA found that 
the maintenance manual procedures:
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    \1\ ADs 2000-11-01, amendment 39-11749 (65 FR 34321, May 26, 
2000), and 2000-11-02, amendment 39-11750 (65 FR 34341, May 26, 
2000).
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     Describe the fabrication of insulation blankets, but 
provide no instructions for the removal or installation of insulation 
blankets; and
     Do not adequately address the wholesale replacement of an 
insulation blanket system nor provide any

[[Page 66499]]

accounting for assessing or planning the labor or logistical support 
required to mount the proposed replacement.
    In addition, ATA states that having service information with 
detailed procedures for replacing AN-26 in the flight deck and 
electronics compartment (areas in which insulation blankets are rarely 
replaced during the lifetime of an airplane) is necessary to ensure 
that the electrical systems are not disturbed during the proposed 
replacement. Without approved service information, ATA also states that 
the NPRM, in effect, relies on the future development and FAA's 
approval of operators' equivalent methods, alternative methods of 
compliance (AMOC), or supplemental type certificates (STCs), or a 
combination of these methods. ATA points out that it took 9 to 18 
months to develop and to get approved 22 STCs for a similar issue 
(i.e., strengthened flight deck doors).
    Continental states that the NPRM does not refer to any approved 
service information with instructions for inspecting systems that are 
disturbed during the AN-26 replacement. Without this service 
information, Continental also states that Boeing, operators, and the 
FAA will be unable to determine whether there are compliance issues 
similar to those the FAA previously noted before the issuance of the 
MPET ADs. Continental concludes that requiring operators to develop 
their own service information will cause operators and the FAA an undue 
burden after the AD is released and could cause compliance issues.
    As an alternative to extending the effective date of the AD, ATA 
requests that we consider issuing a supplemental NPRM that proposes a 
reasonable compliance time once appropriate service information is 
available. ATA appreciates the reopening/extension of the comment 
period of the NPRM to evaluate AMOCs; however, ATA notes that the 
results of the evaluated AMOCs revealed that none of them have a high 
likelihood of substantially reducing the cost impact of the NPRM. Since 
no AMOCs have been approved for use, ATA states that any estimate of 
their economic benefits and impacts would be somewhat speculative. ATA 
believes that waiting for approved service information will ensure a 
reasonable cost impact and will ensure the availability of at least one 
practical method of compliance throughout the compliance time of the 
AD.
    After issuance of the NPRM, we reviewed the following Boeing 
special attention service bulletins:

            Table--Boeing Special Attention Service Bulletins
------------------------------------------------------------------------
   Boeing Special Attention
      Service Bulletin--             Dated--            For model--
------------------------------------------------------------------------
727-25-0300...................  April 30, 2008...  727-200 and -200F
                                                    series airplanes.
737-25-1572...................  April 30, 2008...  737-200, 737-200C,
                                                    737-300, and 737-400
                                                    series airplanes.
747-25-3429...................  April 30, 2008...  747-100B, 747-100B
                                                    SUD, 747-200B, 747-
                                                    200C, 747-200F, 747-
                                                    300, 747-400, 747SP,
                                                    and 747SR series
                                                    airplanes.
757-25-0295...................  April 30, 2008...  757-200, 757-200CB,
                                                    and 757-200PF series
                                                    airplanes.
767-25-0411...................  April 30, 2008...  767-200 and 767-300
                                                    series airplanes.
------------------------------------------------------------------------

    The special attention service bulletins describe procedures for an 
optional one-time general visual inspection to determine if the 
existing insulation blankets are constructed of AN-26, removal of 
existing insulation blankets, and installation of new insulation 
blankets. We have determined that accomplishing the actions specified 
in those special attention service bulletins is considered an 
acceptable means of compliance with the requirements of paragraphs (f) 
and (g) of this AD. Therefore, we have revised paragraphs (f) and (g) 
of this AD accordingly.
    Alternatively, we determined that existing maintenance manual 
procedures should be sufficient for accessing and replacing AN-26 in 
the flight deck, as well as the electronic and passenger and cargo 
compartments. Maintenance manual procedures also provide instructions 
for restoring disturbed systems and conducting detailed inspections of 
disturbed wiring. Therefore, we determined that it is possible to do 
the required replacement in these areas by developing the necessary 
installation data in conjunction with existing maintenance practices. 
We also determined that these areas will most likely be accessed during 
a heavy maintenance check, which would better facilitate replacement of 
insulation materials; and we have accounted for this in the compliance 
time.
    We also acknowledge that the maintenance manual procedures describe 
methods for fabricating replacement insulation blankets as well as 
removal and installation of blankets in several locations throughout 
the airplane. We also are aware that, through existing maintenance 
manual procedures, it is possible to utilize existing insulation 
blankets as templates in conjunction with new thermal/acoustic 
insulation materials meeting 14 CFR 25.856(a) to create replacement 
insulation blankets. While some operators may not be equipped or may 
decide not to manufacture replacement insulation blankets, we are aware 
that there are resources available in the industry to manufacture and 
install replacement insulation blankets in almost all locations without 
specific service information from Boeing.
    Furthermore, we are also aware that certain operators and modifiers 
are developing their own installation data. We support the efforts of 
these parties to generate potential methods of compliance. However, we 
have not received any specific proposals to date.
    US Airways requests that the NPRM be withdrawn and reissued when 
approved methods of identifying insulation blankets constructed of AN-
26 and service information are available. Boeing, British Airways (BA), 
Continental, Henderson Projects, FedEx, NWA, and Transport Canada Civil 
Aviation request that the NPRM be revised to include a method of 
identifying non-compliant insulation blankets constructed of AN-26. Two 
commenters specifically request that the first paragraph in the ``FAA's 
Determination and Requirements of the Proposed AD'' section of the NPRM 
be revised to include Boeing's AN-26 visual identification flow chart. 
Without such a method, the two commenters state that operators will be 
required to get approval from the FAA before installing replacement 
insulation blankets, which will cause a significant work overload for 
all respective parties. Another commenter states that Note 1 of the 
NPRM is not adequate to identify AN-26 and would like to see color 
pictures and a description of AN-26. Other commenters state that 
including such a method will help offset the

[[Page 66500]]

economic impact on operators. One other commenter states that many 
original insulation blankets have been replaced with locally fabricated 
insulation blankets, which do not have visible markings.
    We acknowledge that operators need a better method to identify 
insulation blankets constructed of AN-26. We are aware that ORCON used 
a variety of methods to part-mark the subject materials, and in some 
cases, there is no part marking at all. We are also aware that more 
than one material has been qualified to Boeing's material specification 
during the timeframe AN-26 was used.
    We do not agree, however, to include Boeing's AN-26 visual 
identification flow chart in the current form in the AD. We have 
determined that the flow chart does not provide an adequate means of 
identifying insulation blankets constructed of AN-26 and lacks key 
characteristics necessary to aid personnel. However, Boeing has 
provided instructions for identifying insulation blankets constructed 
of AN-26 in the service information described previously.

Need for More Meetings/Central Repository

    ATA requests that we form an Aviation Rulemaking Committee (ARC) to 
coordinate insulation-related initiatives of large scope that may arise 
in the future. ATA also requests that we work with manufacturers to 
coordinate the development and publication of a central repository of 
data showing:
     Thermal/acoustic insulation materials that have passed 
current flame propagation test standards; and
     Plans to test in-service materials that have not yet been 
tested.

ATA states that rulemaking applicable to insulation material can have a 
tremendous impact on labor, out-of-service time and, in particular, the 
development of methods of compliance and associated service 
instructions, planning, logistic support, and configuration control, 
for both production and out-of-production airplanes. ATA further states 
that experience with insulation blanket rules similar to the NPRM have 
shown that such initiatives should be regarded as significant, and are 
candidates for extensive, close, and preferably advance coordination 
within the industry and the FAA.
    We do not agree. We note that data regarding in-service materials 
are already available from the FAA Technical Center. We have not seen 
any tendency for aged material to perform differently than new 
materials. While none of the data suggest that there is a trend toward 
increased flammability with age, we support further investigation into 
this issue. However, we do not plan to test additional materials, 
unless new information surfaces to suggest a need. We do not agree that 
a central repository of data, whether descriptive or substantiating, is 
necessary. We have gathered test data for a number of in-service 
materials, which can be accessed at: http://www.fire.tc.faa.gov/ppt/
materials/Flammability_test.zip. These data were obtained by the 
International Aircraft Materials Fire Test Working Group (IAMFTWG) on a 
strictly voluntary basis. In general, data are proprietary to the 
applicant, and we cannot disclose those data to the public. We would 
support an industry initiative wherein design approval holders 
voluntarily disclose such information.
    We do agree that it is necessary to coordinate insulation-related 
initiatives; however, we do not agree that it is necessary to form an 
ARC. We, along with several manufacturers and operators, are a member 
of the IAMFTWG, which studies improvements to flammability standards, 
specifically those for non-metallic materials within the pressurized 
portions of an airplane. The group is divided into several task groups, 
one of which is the Aging/Contamination Task Group. Members of this 
task group evaluate in-service parts from operators to study 
contaminants and to determine materials used by manufacturers and 
operators, and conduct laboratory tests to artificially age various 
film materials. However, the IAMFTWG is not an FAA-chartered committee 
and thus does not make specific rulemaking recommendations, nor can we 
task it to do so. However, we actively participate in IAMFTWG meetings 
and intend to utilize information provided by this group to determine 
how contamination may impact the risk of fire and/or fire propagation 
and also determine if alternative regulatory action may be appropriate. 
In addition, the potential for forming a working group on aging and 
contamination insulation materials was formally presented to the 
Transport Airplane and Engine Issues Group (TAEIG) of the Aviation 
Rulemaking Advisory Committee. Based on the minimal feedback from the 
group members, we determined that such a working group is not 
necessary, and therefore, we do not plan to initiate any activity 
beyond that in the IAMFTWG.
    NWA proposes that we withdraw the NPRM until we can task industry 
to develop a reasonable resolution to our insulation flammability 
concerns (i.e., aging and contamination).
    We agree that it may be necessary to conduct studies on the effects 
of contamination on insulation materials. However, we do not agree to 
withdraw the NPRM until another industry task group can be formed to 
address aging and contamination outside of current, ongoing activity. 
We have concluded that the flammability characteristics of AN-26 are 
more a factor of fundamental material properties than a factor of aging 
or contamination. As discussed previously, we extended the comment 
period of the NPRM in June 2005, as well as reopened the comment period 
in November 2005. During that time, industry was unable to arrive at a 
common approach or to propose specific AMOCs that are alluded to in 
comments that were submitted to the NPRM. Any additional delay for 
further study would be unacceptable, because doing so would allow the 
unsafe condition to persist.

Compliance Time

    BA and Transport Canada Civil Aviation agree with the 72-month 
compliance time for the replacement required by paragraph (f) of the 
NPRM.
    ABX Air (ABX), ATA, Champion Air, Continental, DHL, FedEx, 
International Air Transport Association (IATA), KLM, Lufthansa, NWA, 
UPS, and US Airways request that the 72-month compliance time for the 
replacement of AN-26 required by paragraph (f) of the NPRM be extended. 
The commenters propose new compliance times ranging from 96 months to 
144 months.
    Certain commenters state that such an extension will align with 
their scheduled maintenance intervals such as a heavy maintenance, 4C-
check, C-check (two intervals), or D-check, and will thereby eliminate 
disruptions in flight schedules. One commenter also states that 72 
months would result in an undue maintenance burden. Another commenter 
states that 72 months would result in unnecessary grounding of 
airplanes due to the associated cost burden. Others state that such an 
extension is necessary to offset the economic impact.
    Another commenter states a longer compliance time is necessary due 
to the assertion that AN-26 is not as unsafe as MPET--an insulation 
subject to an AD with a 60-month compliance time. The commenter notes 
that investigation results of in service events and FAA Technical 
Center test data associated with AN-26 indicate that the propagation 
threat to safety is limited when compared to similar MPET data.

[[Page 66501]]

    We agree that the 72-month compliance time in paragraph (f) of the 
NPRM can be extended. Based on the information supplied by the 
commenters, and in consideration of the impact this type and level of 
replacement action imposes on the operators and the size of the 
affected fleet, we have determined that extending the compliance time 
to 96 months will not adversely affect safety. We acknowledge that our 
efforts with industry to minimize ignition sources and to reduce 
contamination on insulation blankets are actions that reduce the risk 
of fire, and thus are mitigating actions that support the compliance 
time extension. While these factors partially mitigate the risk and 
enable us to allow a compliance time that is longer than the 60-month 
compliance time for the MPET ADs, they do not adequately address the 
risk of flame propagation without removal or appropriate modification 
of insulation blankets constructed of AN-26. As a secondary 
consideration, this extension will allow the required replacement be 
conducted during a regularly scheduled heavy maintenance visit for the 
majority of the affected fleet, when the airplanes would be located at 
a base where special equipment (i.e., special rigs, devices, etc., to 
facilitate removal and installation of equipment) and trained personnel 
would be readily available, if necessary. Therefore, we have revised 
paragraph (f) of this AD to require a compliance time of 96 months.

Delete Freighter Airplanes From the Applicability

    DHL requests that freighter airplanes be deleted from paragraphs 
(c)(1) and (c)(2) of the NPRM, because the risk for casualties in the 
event of a fire is almost zero on those airplanes.
    We do not agree with DHL to exclude freighters or those airplanes 
that have been converted from a passenger to a freighter configuration 
from the applicability of this AD. AN-26 is primarily used in areas of 
airplanes that are unoccupied, behind lining materials, and hidden from 
view. The risk of an in-flight fire and the propagation of a fire in 
those areas is essentially the same whether the airplane is equipped to 
fly passengers or cargo. Therefore, we have made no change to the AD in 
this regard.

Changes to the Applicability

    After issuance of the NPRM, we determined that Model 757-200CB 
series airplanes are subject to the identified unsafe condition of this 
AD. Currently, there are no affected Model 757-200CB series airplanes 
on the U.S. Register. Because the identified unsafe condition is likely 
to exist or develop on other products of this same type design that 
could be registered in the United States in the future, we have revised 
the applicability of this AD to include Model 757-200CB series 
airplanes. Since no Model 757-200CB series airplanes are affected by 
this AD, notice and opportunity for public comment before issuing this 
AD are unnecessary.

Limit Replacement to Cover Film Material, Not Entire Insulation Blanket

    Boeing and NWA request that paragraphs (d) and (f) of the NPRM and 
the ``FAA's Determination and Requirements of the Proposed AD'' section 
of the NPRM be revised to refer to the replacement of the cover film 
material only, not the entire insulation blanket. Boeing notes that the 
FAA has only determined that AN-26 cover film is non-compliant with 14 
CFR 25.856(a). Boeing states that requiring replacement insulation 
blankets to be in full compliance under that rule is unnecessary and 
places an undue hardship on the airlines and the supply chain for 
replacement insulation blankets. Boeing also states that most 
replacement insulation blankets are now available in the supply chain, 
but the availability is strained to meet production needs that started 
in September 2005.
    For comparison, Boeing points out that the MPET ADs only require 
replacement of films to remedy the unsafe conditions of those ADs--not 
tapes, threads, felts, hook/loop, etc., which are not part of the 
safety issue. In addition, Boeing states that requiring the latest 
materials for treatments or construction of replacement insulation 
blankets will slow their installation, which will place an additional 
burden on industry. Boeing states further that incorporating its 
suggested change of mandating replacement of AN-26 cover film only will 
also support alternate mitigation approaches to satisfy the safety 
issue.
    We do not agree with the commenters' requests to limit the required 
replacement to cover film materials only. Operational rules have been 
implemented that require thermal/acoustic insulation materials 
installed as replacements to meet the requirements of 14 CFR 25.856(a). 
As such, there is significant benefit in defining a consistent standard 
for this AD both from a level of safety perspective and from a 
practical standpoint in order to avoid confusion. As stated in the 
preamble of Amendment No. 25-111, the requirement is also applicable to 
``tapes or hook and loop fasteners that are affixed to the film. 
Research testing has shown that these details can have a pronounced 
effect on the flame propagation characteristics of the insulation cover 
material.''
    We do not believe that the supply chain for replacement materials 
will be unnecessarily strained. The compliance time extension is 
intended to allow for planning and ensuring availability of necessary 
materials.
    In general, film material is intended to provide a level of 
protection to the insulation batting or ``felt'' from contamination and 
moisture. We have determined that removing the film alone may introduce 
undesirable effects such as the breakdown of the insulation or batting 
material due to the effects of moisture or other agents, which have not 
been evaluated as part of this AD.
    We acknowledge, however, that removal and replacement of AN-26 film 
cover material and associated affixed details such as hook/loop, 
threads, etc., with materials compliant with the requirements of 14 CFR 
25.856(a) may be an option for consideration of an AMOC should an 
operator elect to pursue this means versus outright replacement of the 
blanket assembly. We have made no change to the final rule in this 
regard.

AMOCs

    Transport Canada Civil Aviation requests that the criteria for 
evaluating and approving AMOCs for the replacement in paragraph (f) of 
the NPRM be included in the final rule to assist industry in developing 
such AMOCs.
    Boeing requests that we define the acceptance criteria in the AD 
rather than requiring operators to obtain the criteria from the 
Manager, Seattle Aircraft Certification Office (ACO). Boeing states 
that this change, as well as airlines' input on implementation and cost 
impact, will allow industry to develop solutions.
    We partially agree. We agree with the commenters that a description 
of the criteria and test methods for evaluating AMOCs is needed to 
reduce the flow time and overall implementation costs of the AD. 
However, we do not agree that a change is necessary to this AD in this 
regard. We have developed an FAA document that describes criteria and 
test methods for evaluating AMOCs. You may view this document at http:/
/www.fire.tc.faa.gov/materials/AN_26_AMOC.pdf; or in the AD docket on 
the Internet at http://www.regulations.gov.
    Boeing requests that the FAA follow Boeing's AMOC plan for ``Spray-
on

[[Page 66502]]

Solution,'' which it provided to the FAA in September 2004. In 
addition, Boeing believes that its plan, approach, and schedule for the 
overall safety issue aligns with the potential risk level that is 
apparent from incident analysis and testing. Boeing states that the FAA 
is aware of the development and progress of its spray-on fire retardant 
solution, and that when approved, it will be an acceptable remedy to 
the identified fire propagation condition with AN-26.
    Other commenters request that a specific AMOC such as Boeing's 
spray-on-solution be included in the paragraph (f) of the final rule. 
Some commenters request that the final rule not be issued until there 
is an approved AMOC relating to spray-on fire retardants or covering 
material using existing insulation materials.
    We acknowledge that Boeing has been in the process of developing a 
spray-on fire retardant as an AMOC for the replacement required by this 
AD. We understand that AMOCs can be valuable to assist operators in 
complying with ADs. However, Boeing has not submitted its modification 
to us for approval yet. We do not consider it appropriate to delay 
issuance of this final rule, since we have determined that an unsafe 
condition exists and that replacement must be conducted to ensure 
continued safety. We will work with Boeing or other entities to approve 
its modification when the development is complete and substantiating 
data are provided.
    Boeing and Continental request that paragraph (h)(1) of the NPRM be 
revised to allow the Boeing Commercial Airplanes Delegated Compliance 
Organization (BDCO) to approve AMOC requests, in addition to the 
Manager, Seattle ACO. Continental states that allowing such delegation 
to the BDCO will enable operators to rapidly respond to day-to-day 
operational issues and will lessen the operational burden of the 
required replacement.
    We do not agree with Continental to delegate AMOC approvals to the 
BDCO, nor do we agree with Boeing to revise our AMOC approval process. 
In some ADs, we have authorized the BDCO to approve AMOCs for certain 
structural repairs of cracking that are found during routine 
maintenance or inspections. These repairs warrant ``routine'' handling. 
However, we consider the required AN-26 replacement to be complex in 
nature, and there are potential new and novel approaches for 
compliance. It is crucial that the FAA be aware of all modifications 
made to AN-26. It is essential that we have feedback as to the type of 
modifications being made. Given that possible new relevant issues might 
be revealed during this process, it is imperative that we have such 
feedback. We can be assured of this feedback and of the adequacy of the 
modification methods only by reviewing the modification proposals.
    We have determined that standardization and continuity of 
modification approvals can best be maintained by having one single 
point of approval for all AMOCs to the requirements of this AD. Since 
the Manager, Seattle ACO, is accountable for the primary oversight for 
the actions regarding this AD, it is appropriate to establish and 
maintain this single point of approval. We have made no change to the 
AD in response to these comments.

Exclude Certain Areas From Requirement To Replace AN-26

    ABX, Boeing, DHL, Florida West International Airways, Lufthansa, 
and NWA request that paragraph (g) of the NPRM include a provision to 
exclude areas (i.e., electrical equipment bay, flight deck, adjacent 
areas, and certain areas behind the smoke barrier) that can be isolated 
and contained and thus pose a limited fire risk.
    Some commenters state that removal of structure or systems to gain 
access to certain areas may be more detrimental to safety of the 
airplane. Two commenters also state that some areas containing AN-26 
are not accessible after original installation. In addition, the 
commenters state that their suggested provision will provide for 
efficient implementation methods and will allow compliance with the 
NPRM for the entire airplane.
    We do not agree with these commenters' rationale to include a 
provision in paragraph (g) of this AD to exclude certain areas of the 
airplane. We have evaluated the areas to which the commenters refers 
and have determined that such areas are accessible. We do acknowledge 
that certain areas may be easier to access when a major maintenance 
activity is also occurring in these areas. Proper planning as to the 
time of blanket replacement to coincide with other major maintenance 
work, development of proper procedures, and training of maintenance 
technicians and inspectors will minimize the chance of causing damage 
to wires or other systems. We will require any operator/modifier that 
develops its own installation data to include specific instructions to 
ensure that any displaced wires, systems, and installations are in an 
airworthy condition after doing the required replacement.
    We are not aware of any specific locations on the affected aircraft 
where AN-26 cannot be accessed after original installation. If there 
are certain areas that are completely inaccessible, we may consider 
proposals for AMOCs, in accordance with paragraph (i) of this AD, which 
include appropriate substantiating data.
    Boeing proposes to exclude certain areas up to 20 square feet and 
has provided test and in-service data intended to support its request. 
Boeing proposes that an equivalent area to the ``foam block'' be 
defined to allow exempt areas. Boeing notes that the ``foam block'' is 
defined by the FAA Technical Center as a realistic in-service fire 
threat taking into account materials and contamination. Boeing states 
that the crown test with the ``foam block'' is used by the FAA to 
determine acceptable flame propagation performance. In addition, Boeing 
states that the heat released from AN-26 film up to 20 square feet is 
equivalent to the heat released from a polyurethane foam block.
    We do not agree with Boeing that it is appropriate to determine an 
acceptable amount of square footage of insulation blankets constructed 
of AN-26 based on the size of the Heptane-soaked ``foam block'' used 
during FAA tests. The ``foam block'' was established as an appropriate 
ignition source when doing intermediate and full-scale tests and the 
resultant development of a suitable test standard capable of evaluating 
improved thermal/acoustic insulation materials (i.e., 14 CFR part 25, 
Appendix F, Part VI), but does not constitute a standard for an 
acceptable area of AN-26. We do not agree that heat release 
characteristics of the ``foam block'' can be translated to an 
acceptable area of AN-26. Insulation blankets constructed of AN-26, 
even in limited amounts, may be ignited via a small ignition source and 
may propagate flames to other nearby materials and potentially lead to 
a catastrophic event.
    We do not agree that the data, submitted by Boeing, to exclude 
certain areas (i.e., electrical equipment bay, flight deck, and 
adjacent areas) up to 20 square feet of AN-26 support its conclusion 
that leaving AN-26 in place in those areas provides an acceptable level 
of safety. Those areas are located where potential ignition sources are 
likely to exist and thus are susceptible to the identified unsafe 
condition of this AD. We have determined that the data submitted by 
Boeing and the tests done by the FAA Technical Center support our 
conclusion that AN-26 is susceptible to ignition and propagation, and 
has an unacceptable ignition and

[[Page 66503]]

flame propagation behavior. This AD is intended to eliminate initiation 
and propagation of an AN-26 fire in areas containing critical equipment 
where the consequence of a fire would be severe.
    ABX states that the NPRM does not have any supporting data to 
justify total replacement of insulation blankets constructed of AN-26. 
Based on data it has collected from the Service Difficulty Report (SDR) 
database, ABX concludes that there is no safety benefit to replacing 
insulation blankets constructed of AN-26 in areas that have no or 
minimal ignition sources.
    We do not agree with ABX that there are no data to support 
replacing insulation blankets constructed of AN-26 in the entire 
airplane. There are several incidents as cited in the NPRM that clearly 
show the involvement of AN-26 in fire propagation. In addition, we have 
conducted testing that shows that AN-26 can propagate a fire under 
realistic conditions, and therefore even materials not near an ignition 
source can become involved. While we agree that the SDR database does 
not in itself contain this information, we do, in fact, have sufficient 
information to conclude that AN-26 throughout the airplane represents 
an unsafe condition. We have also received a report of burned 
insulation blankets initiated by chafed wires and a resultant 
electrical arc which was discovered by maintenance personnel. In 
addition, potential ignition sources exist throughout the airplane and 
insulation blankets constructed of AN-26 are located throughout the 
airplane. As discussed previously, we have determined that insulation 
blankets constructed of AN-26 in all areas of the affected airplanes 
must be replaced, unless specific justification for an AMOC is 
provided.
    Lufthansa states that the MPET ADs excluded areas with lower levels 
of risk for ignition sources.
    We find that clarification is necessary. The MPET ADs do not 
exclude any areas because of perceived lower levels of risk for 
ignition sources. The preamble of the MPET ADs states that ``MPET 
insulation blankets in all areas of the affected airplanes must be 
addressed.'' It also states that `` * * * most [affected airplanes] do 
not have MPET insulation blankets in the nose section of the airplane. 
Also, a number of airplanes do not have MPET insulation blankets in the 
fuselage, but have MPET insulation blankets only on the air 
conditioning ducting.'' As such, the service information referenced in 
the MPET ADs identifies certain areas where MPET is not installed, and 
therefore, those areas are not subject to corrective action. Boeing 
does not include this specific provision in service information for AN-
26, as AN-26 is installed throughout the affected Boeing airplanes. 
However, we are aware that a number of AMOCs to the MPET ADs, excluding 
certain areas from replacement, have been approved. For this AD, we 
have accepted specific exclusion areas, which are identified in the 
applicable special attention service bulletin described previously for 
Model 747 and 767 airplanes.
    While some of the commenter's proposals to exclude areas of 
replacement were accompanied by general rationale, the identification 
of risk mitigating factors and exclusionary details were not specific 
enough to enable us to approve such proposals other than those 
identified in the special attention service bulletins. However, we may 
approve requests for an AMOC under the provisions of paragraph (i) of 
this AD if operators can show that leaving AN-26 in place is acceptable 
because other design features prevent ignition and/or propagation of a 
fire in the specific area requested. Any request to leave AN-26 
installed in an airplane must provide justification that the identified 
unsafe condition has been mitigated, and that an acceptable level of 
safety is maintained.

Requests to Delete, Revise, or Limit Parts Installation Requirements

    ABX, ATA, BA, Boeing, Champion Air, Continental, DHL, IATA, 
Lufthansa, NWA, and US Airways request that paragraph (h) of the NPRM 
be deleted or revised for various reasons.
    In summary, the commenters state that a requirement to replace 
insulation blankets constructed of AN-26 that have been removed in a 
piecemeal fashion would have very little overall safety benefit and 
would create a significant burden on immediate maintenance actions. In 
addition, the commenters state that the replacement process should be 
consistent with the flammability requirements to minimize the impact 
with airline maintenance processes. They note that we similarly 
addressed the replacement issue in 14 CFR 25.856 and this existing 
replacement requirement is sufficient and will apply to in-service 
airplanes affected by the NPRM.
    We partially agree with the commenters' requests. We do not agree 
that paragraph (h) should be deleted. As stated in the preamble of the 
NPRM, some international civil aviation authorities have not adopted 
regulations similar to 14 CFR 91.613(b)(1), 121.312(e)(1), 
125.113(c)(1), and 135.170(c)(1) to prohibit insulation blankets 
constructed of AN-26 from being installed after a certain date. 
Therefore, we have determined that paragraph (h) of this AD is 
necessary to inform the international civil aviation authorities of the 
need to prevent that installation.
    However, we do agree to revise paragraph (h)(1) (reidentified as 
paragraph (h) of this final rule) to eliminate confusion with the 
regulations noted previously by the commenters. We have revised 
paragraph (h) of the AD to clarify that insulation blankets constructed 
of AN-26 may not be installed ``as a replacement'' unless they have 
been modified to meet the flame propagation requirements of 14 CFR 
25.856(a).
    In addition, we do agree with the commenters that the proposed 
conditions for reinstallation of insulation in paragraph (h)(2) would 
create an undue burden on operators because, as mentioned by some of 
the commenters, not all removals of insulation blankets are done at a 
heavy maintenance visit with the necessary replacement materials 
available. This may cause unnecessary downtime of airplanes to allow 
for fabrication and installation of the applicable insulation blanket. 
In consideration of the comments provided on this issue, we have 
deleted paragraph (h)(2) of the NPRM.

Issue Special Airworthiness Information Bulletin (SAIB)

    Boeing requests that we issue a SAIB to inform industry about 
mitigation approaches for material susceptible to contamination. Boeing 
suggests that the SAIB reflect certain risks identified in its data and 
emphasize replacement of significantly contaminated blankets.
    We partially agree. We acknowledge that providing information to 
reduce contamination of insulation blankets in general is needed. 
However, this information has been provided in FSAW 00-09, as described 
previously. Therefore, we have determined that no SAIB specific to AN-
26 is necessary.

Clarification of Compliance Language

    We have slightly revised the wording in paragraph (c)(1) of this AD 
to reflect currently used compliance language. That is, we have 
replaced the reference to ``an original Airworthiness Certificate'' 
with a reference to ``an original standard Airworthiness Certificate.''

Clarification of Unsafe Condition

    We have revised the unsafe condition in this AD to state, ``Such 
insulation blankets could ignite and propagate a fire that is the 
result of electrical arcing

[[Page 66504]]

or sparking.'' We find that including the word ``ignite'' further 
clarifies the unsafe condition of this AD.

Costs of Compliance

    This final cost analysis incorporates industry's comments, updated 
fleet data, and a changed assumption on the future fleet service. This 
AD affects 669 U.S. registered airplanes (Back Aviation Solutions, 
Fleet iNET database, January 5, 2007), 41 of which are foreign 
operated. We estimate compliance cost for the 628 U.S. operated and 
registered airplanes only. The number of airplanes is reduced from 
those in the NPRM because of airplane retirements or changes from U.S. 
to foreign operation. A substantial decrease in estimated cost results 
from the net change of increasing parts and labor cost, but reduced 
number of airplanes, and a changed assumption of service for the future 
fleet.
    Boeing commented to the docket that nonrecurring engineering design 
costs of defining new blanket parts and defining removal and 
replacement kits were not accounted for in the NPRM. Across the five 
major models addressed in this AD, Boeing estimates 40,000 part numbers 
would need to be redefined and replaced. Boeing estimates a minimum of 
eight hours/part to account for the required engineering, planning, 
procurement, tooling, and changes in ``Instructions for Continued 
Airworthiness.'' ATA also noted non-recurring engineering costs should 
be accounted for and estimated material costs would be over twice the 
estimates given in the NPRM. UPS commented that the parts costs for a 
757-200PF would be approximately triple the estimate given in the NPRM. 
In response to these comments, we revised estimates of material cost 
for all affected airplanes and increased our original estimates by 
9.7%. More importantly, to account for non-recurring engineering costs, 
we then doubled our revised parts cost estimates. This results in an 
estimate of $30.4 million for non-recurring engineering costs (average 
of $48,392 per airplane times 628 airplanes). If we estimate the 
engineering wage rate at $100 per hour, this is close to the value of 
Boeing's estimate of non-recurring engineering costs: 40,000 x 8 x $100 
= $32 million, or $50,955 per airplane.
    UPS commented that our labor hour estimate was too low for Model 
757-200PF airplanes, but ATA commented that our estimates of labor 
hours were consistent with operator experience with the MPET ADs. 
Accordingly, we have not changed our labor hour estimates. ATA 
estimated labor rates would be up to 30 percent higher than the $65 
hourly rate given in the NPRM for this final rule. We increased our 
wage rate estimate to $80 an hour. FedEx noted that the NPRM did not 
take into consideration additional out-of-service maintenance time 
necessary for compliance. ATA provided an estimate of an average of 3.6 
days of out-of-service time per airplane and also a cost estimate for 
out-of-service time. We accept ATA's estimate of 3.6 days of out-of-
service time per airplane. We estimate out-of-service cost as the 
opportunity cost of capital: Airplane value \2\ x Proportion of a year 
the airplane is out of service (3.6/365) x Productive return on capital 
(0.07).\3\
---------------------------------------------------------------------------

    \2\ Airliner Price Guide, vol. 57, January 2006.
    \3\ A 7% return on capital is required by the Office of 
Management & Budget. See OMB, Circular A-94, ``Guidelines and 
Discount Rates for Benefit-Cost Analysis of Federal Programs'', 
October, 29, 1992, p. 8 (http://www.whitehouse.gov/omb/circulars/
index.html).
---------------------------------------------------------------------------

    The NPRM overestimated compliance cost by not taking into account 
the fact that passenger airplanes eventually will be retired from 
passenger service. This omission was particularly consequential, as the 
affected airplanes are old, having been delivered into service over the 
period July 1981 to December 1989. As of January 1, 2009, the youngest 
airplane in the AD fleet will be 20 years old. Historically, on average 
airplanes leave passenger service at 25 years, either directly into 
retirement or for conversion into cargo service. For the purposes of 
this analysis, we convert all passenger airplanes into cargo airplanes 
at 25 years. This conversion to cargo service greatly reduces the 
estimated cost of the AD as our estimate of the direct material and 
labor costs for cargo airplanes is just 40% of those costs for 
passenger airplanes. Still, this cost estimate is substantially higher 
than assuming the airplanes retire at 25 years of service. Given the 
eight-year compliance period for the final rule, all passenger 
airplanes in the AD fleet will reach 25 years of passenger service at 
most three years prior to the end of the compliance period, at which 
time we assume they will be converted into cargo service.
    In the table, ``Cost of compliance,'' the NPRM cost estimates are 
modified and expanded in accordance with the above discussion. ``Labor 
hours per airplane'' is unchanged, but ``Labor cost per airplane'' 
increases because of the increase in the labor hourly rate from $65 to 
$80. ``Parts cost per airplane'' has been increased by 9.7% to reflect 
increased material cost. ``Labor costs per airplane'' and ``Parts costs 
per airplane'' are summed to obtain the column of ``Total remove & 
replace cost per airplane.'' This cost is multiplied by the number of 
airplanes \4\ to obtain ``U.S. fleet remove & replace cost.'' ``Out-of-
service cost per airplane'' \5\ is calculated as an opportunity cost of 
capital and multiplied by the number of airplanes to obtain the 
following column of ``Total out-of-service cost.'' ``Total out-of-
service cost'' added to ``Total remove & replace cost per airplane'' 
equals ``Total Cost.'' Since we have no information on these 
maintenance schedules by operator or airplane model, we assume that an 
equal number of the affected airplanes will undergo heavy maintenance 
at the end of each of the eight years from the effective date of the 
AD.\6\ Accordingly, we calculate ``Present Value Total Cost'' in the 
table by discounting ``Total Cost'' by the average (0.7464) of the 7% 
discount factors for one through eight years.\7\ As noted earlier in 
the preamble, compliance time was increased to 8 years to more closely 
agree with operators' heavy maintenance schedules.
---------------------------------------------------------------------------

    \4\ Back Aviation Solutions, Fleet iNET database, January 5, 
2007.
    \5\ For the 767-200 freighter category, airplane values were not 
available for 26 airplanes. Accordingly, out-of-service cost per 
airplane was estimated using airplane values for the remaining 16 
airplanes in the category.
    \6\ This assumption is largely consistent with passenger 
airplanes complying later in the compliance period than cargo 
airplanes in order to extend their lives in passenger service to 25 
years.
    \7\ OMB, Circular A-94, p. 8.
---------------------------------------------------------------------------

    We estimate the total cost of the final rule to be about $177.7 
million, with a present value of about $140.8 million. The $177.7 
million total cost is 53 percent of the $334.1 million total cost 
estimated in the NPRM. Thus, even though our estimated labor rate has 
increased by 23.1% and we have more than doubled our estimates of parts 
cost, our estimate of total cost is much lower because of a reduction 
in the number of affected airplanes and, most importantly, because of 
the much lower AD costs for cargo airplanes compared to passenger 
airplanes.\8\
---------------------------------------------------------------------------

    \8\ The cost of the rule may be somewhat lower than estimated to 
the extent that airplanes go directly into retirement at age 25 
rather than converting to cargo service as assumed here. Moreover, 
even if an old airplane is not due for retirement, the operator will 
still retire if more economical than compliance, in which case the 
costs of the rule will also be less than assumed here.

[[Page 66505]]

                                                                                    Table--Cost of Compliance
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                             Remove and replace parts & labor cost                    Out-of-service cost
                                                            -----------------------------------------------------------------------------------------------
                                                                                                    Total                                                                  Present
                           Model                              Mechanic   Labor cost  Parts cost   remove &              U.S. fleet    Out-of-   Total out-   Total cost  value total  Total cost
                                                              hours per      per         per       replace    Number     remove &     service   of-service                   cost       per AP
                                                              airplane    airplane    airplane    cost per    of APs     replace     cost per      cost
                                                                                                     AP                    cost         AP
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
727-200 (& variants).......................................       1,618    $129,440     $69,966    $199,406        39   $7,776,834      $1,354     $52,823   $7,829,657   $5,844,153    $200,760
737-200, 737-200C, 737-300, 737-400 (& variants)...........       1,483     118,640      64,136     182,776       319   58,305,544       3,444   1,098,651   59,404,195   44,340,023     186,220
747-100, 747-200, 747-300, 747-400, 747SR, 747SP (&               5,933     474,640     256,542     731,182        42   30,709,644       7,414     311,382   31,021,026   23,154,476     738,596
 variants).................................................
757-200 (& variants).......................................       2,256     180,480      97,544     278,024       120   33,362,880       5,946     713,491   34,076,371   25,435,023     283,970
767-200 and 767-300 (& variants)...........................       3,236     258,880     139,932     398,812       108   43,071,696       6,636     716,702   43,788,398   32,684,199     405,448
                                                            ------------------------------------------------------------------------------------------------------------------------------------
    Total/weighted average.................................       2,238     179,054      96,785     275,839       628  173,226,598       4,607   2,893,050  176,119,648  131,457,874     280,445
                                                              wt. ave.    wt. ave.    wt. ave.    wt. ave.     total      total      wt. ave.      total       total        total      wt. ave.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

[[Page 66506]]

Explanation of Change to Paragraph (f)(1) of This AD

    We have revised paragraph (f)(1) of this AD to remove reference to 
the ``applicable maintenance manual procedures.'' Instead, paragraph 
(f)(1) of this AD specifies to ``Remove all insulation blankets from 
the pressurized areas of the fuselage and install new insulation 
blankets using a method approved by the Manager, Seattle Aircraft 
Certification Office (ACO), FAA.'' Operators should note that while 
their existing maintenance manuals should be sufficient for 
accomplishing the actions required by paragraph (f)(1) of this AD, they 
must contact the Manager, Seattle ACO, for information regarding 
approval of these procedures for compliance with paragraph (f)(1) of 
this AD.

Conclusion

    We have carefully reviewed the available data, including the 
comments received, and determined that air safety and the public 
interest require adopting the AD with the changes described previously. 
We have determined that these changes will neither increase the 
economic burden on any operator nor increase the scope of the AD.

Final Regulatory Flexibility Analysis

A. Introduction and Purpose of This Analysis

    The Regulatory Flexibility Act of 1980 (Pub. L. 96-354) (RFA) 
establishes ``as a principle of regulatory issuance that agencies shall 
endeavor, consistent with the objectives of the rule and of applicable 
statutes, to fit regulatory and informational requirements to the scale 
of the businesses, organizations, and governmental jurisdictions 
subject to regulation.'' To achieve this principle, the RFA requires 
agencies to solicit and consider flexible regulatory proposals and to 
explain the rationale for their actions to assure that such proposals 
are seriously considered. The RFA covers a wide-range of small 
entities, including small businesses, not-for-profit organizations, and 
small governmental jurisdictions.
    Agencies must perform a review to determine whether a rule will 
have a significant economic impact on a substantial number of small 
entities. If the agency determines that it will, the agency must 
prepare a regulatory flexibility analysis as described in the RFA.
    We determined that this final rule will have a significant economic 
impact on a substantial number of small entities and, accordingly, as 
required by section 603(a) of the RFA, we prepared and published an 
initial regulatory flexibility analysis (IRFA) as part of the NPRM for 
this final rule (70 FR 16986, April 4, 2005). Section 604 of the RFA 
also requires an agency to publish a final regulatory flexibility 
analysis (FRFA) in the Federal Register when issuing a final rule. 
Section 604(a) requires that each final regulatory flexibility analysis 
contain:
     A succinct statement of the need for, and objectives of, 
the rule;
     A summary of the significant issues raised by the public 
comments in response to the IRFA, a summary of agency's assessment of 
such issues, and a statement of any changes made to the NPRM resulting 
from such comments;
     A description of and an estimate of the number of small 
entities for which the final rule will apply;
     A description of the projected reporting, recordkeeping 
and other compliance requirements of the final rule, including an 
estimate of the classes of small entities which will be subject to the 
requirement and the type of professional skills necessary for 
preparation of the report or record; and
     A description of the steps the agency has taken to 
minimize the significant economic impact on small entities consistent 
with the stated objectives of applicable statutes, including a 
statement of the factual, policy, and legal reasons for selecting the 
alternative adopted in the final rule and why each one of the other 
significant alternatives to the final rule considered by the agency 
which affect the impact on small entities was rejected.

B. Need for and Objectives of the Final Rule

    We are mandating a new AD for certain Boeing transport category 
airplanes. The AD will require air operators to remove and replace 
insulation blankets made of AN-26 with new insulation blankets. The AD 
is prompted by reports of in-flight and ground fires on certain 
airplanes manufactured with insulation blankets covered with AN-26. 
Following the reports of in-flight and ground fires, the airplane 
manufacturer and the FAA undertook extensive investigations and 
flammability tests. Even though AN-26 met the certification standards 
in 1981, the results of these flammability tests showed that AN-26 will 
propagate a fire when subjected to electrical arcing and sparks.
    We are issuing this AD to ensure that operators remove insulation 
blankets made of AN-26 from the fuselage. We previously issued similar 
ADs on another insulation material that affected certain McDonnell 
Douglas and Aerospatiale model airplanes.

C.1.A. Summary of the Significant Issues Raised by the Public Comments 
in Response to the IRFA, a Summary of the Assessment of the Agency of 
Such Issues, and a Statement of Any Changes Made to the NPRM Resulting 
From Such Comments

C.2.A. Description of the Steps the Agency Has Taken To Minimize a 
Significant Economic Impact on Small Entities and Why Other Significant 
Alternatives to the Final Rule That Affect Small Entities Were Rejected

    There were no responses to the IRFA, but there were many comments 
to the NPRM itself, which have relevance for small and large entities 
alike. In response to these comments, the FAA made major changes to the 
NPRM that significantly reduced the economic impact on the affected 
firms.
    Twelve commenters, including one small firm (included in our data 
analysis below), requested we extend the compliance time from the 
proposed 6 years to 8 to 12 years, some noting that an increased 
compliance time would more closely correspond to heavy maintenance 
schedules (when all insulation blankets are removed). As discussed in 
the preamble to the final rule, we have increased the compliance time 
to 8 years. This reduces the economic impact of the final rule in two 
ways. First, it increases the likelihood that a firm will be able to 
comply with the final rule at the time of a scheduled heavy maintenance 
check, thereby minimizing out-of-service time. Second, it allows the 
average firm to delay compliance, thereby reducing the discounted cost 
of the final rule. If we maintain our assumption that an equal number 
of firms will undergo heavy maintenance in each year of the compliance 
period, then an increase in the compliance period reduces the average 
present-value discount factor from 0.8468 to the 0.7464 used in our 
analysis, thereby reducing the present value cost of the final rule by 
(.8468-.7464)/.8468 = 11.1%.
    Paragraph (h)(2) of the NPRM proposed that any insulation blanket 
removed within six months of the final rule's effective date could not 
be reinstalled unless it was compliant with the safety standards of 
this final rule. Several commenters stated that this provision was 
impractical and imposed an undue burden. In particular, the small firm 
noted that:

    ``* * * as a supplemental carrier, our aircraft frequently 
operate away from a maintenance base for extended periods. The

[[Page 66507]]

requirements of paragraph (h)(2) could generate significant out of 
service time if a blanket has to be removed while the aircraft is 
away from base since a replacement blanket would not be readily 
available.''

    As discussed in the preamble to the final rule, we agree with the 
commenters that the reinstallation provision would impose an undue 
burden. We have deleted paragraph (h)(2) of the NPRM.
    The FAA believes there are no currently available additional 
alternatives to the final rule that would allow the safety objectives 
of the final rule to be achieved.
    For a complete summary of public comments and our responses, please 
see the preamble to the final rule.

D. A Description of and an Estimate of the Number of Small Entities for 
Which the Final Rule Will Apply

    To estimate the number of small entities, we first identified all 
U.S.-operated affected civilian airplanes from a commercial fleet data 
provider (BACK Aviation Solutions, Fleet-iNET database, November 20, 
2006). Using information provided by company Web sites and other 
Internet sources, we removed large commercial operators and commercial 
operators that are subsidiaries of firms larger than the Small Business 
Administration (SBA) size standard for the North American Industry 
Classification System (NAICS) industry in question.\9\ For example, for 
Atlas Air, Inc., the number of employees is 1220--below the 1500 
employee threshold for the NAICS air transportation industries, in one 
of which it operates (``Nonscheduled Chartered Freight Air 
Transportation''). Atlas Air, however, is a subsidiary of Atlas Air 
Worldwide Holdings (AAWH), which has 2007 employees.\10\ As 2007 
employees exceed the SBA threshold, we did not include Atlas Air as a 
small entity.
---------------------------------------------------------------------------

    \9\ U.S. Small Business Administration. Table of Small Business 
Size Standards Matched to North American Industry Classification 
System Codes, July 21, 2006.
    \10\ The employment figures for Atlas Air and AAWH are for 2005.
---------------------------------------------------------------------------

    Following this process, we ended up with 45 firms. From information 
on firm Web sites or from other Internet sources, we were able to 
classify most of these 45 firms by NAICS industry. For 15 firms, which 
constitute most of the firms classified in four NAICS air 
transportation industries (see table, ``Possible small firm operators 
affected by the final rule by NAICS industry''), we were able to find 
employment data showing that they were small by the SBA size standard 
for these industries (upper bound of 1500 employees). Although we have 
no size evidence for the remaining 30 firms, we suspect that many are 
small by SBA size standards. We believe a substantial number of small 
entities, in particular economic activities, are affected by this final 
rule.

                Table--Possible Small Firm Operators Affected by the Final Rule by NAICS Industry
----------------------------------------------------------------------------------------------------------------
                                                           Number of
                   Operator                       Number                            NAICS industry
                                                   APs     employees
----------------------------------------------------------------------------------------------------------------
Aviation Technologies Inc. (PA-USA)...........          1  .........  336413--Oth. A/C Part & Auxiliary Equip.
                                                                       Man.
Ameristar Jet Charter Inc.....................          2        160  481111--Scheduled Passenger Air
                                                                       Transportation.
Maxjet Airways................................          3  .........  481111--Scheduled Passenger Air
                                                                       Transportation.
Ryan International Airlines...................          2        649  481111--Scheduled Passenger Air
                                                                       Transportation.
Sierra Pacific Airlines.......................          1         32  481111--Scheduled Passenger Air
                                                                       Transportation.
Kitty Hawk Aircargo...........................          3        201  481112--Scheduled Freight Air
                                                                       Transportation.
Northern Air Cargo............................          4        225  481112--Scheduled Freight Air
                                                                       Transportation.
Champion Air..................................          5        739  481211-Nonscheduled Chartered Passenger
                                                                       Air Transp.
Gold Transportation Inc.......................          1  .........  481211-Nonscheduled Chartered Passenger
                                                                       Air Transp.
Omega Air Holdings DBA Focus Air..............          3        151  481211-Nonscheduled Chartered Passenger
                                                                       Air Transp.
Pace Airlines.................................          4        549  481211-Nonscheduled Chartered Passenger
                                                                       Air Transp.
Sky King Inc. (CA-USA)........................          2         75  481211-Nonscheduled Chartered Passenger
                                                                       Air Transp.
Vision Airlines...............................          1  .........  481211-Nonscheduled Chartered Passenger
                                                                       Air Transp.
Wedge Aviation Inc............................          1  .........  481211-Nonscheduled Chartered Passenger
                                                                       Air Transp.
Astar Air Cargo...............................          6       1023  481212-Nonscheduled Chartered Freight Air
                                                                       Transp.
Capital Cargo International Airlines..........          3        188  481212-Nonscheduled Chartered Freight Air
                                                                       Transp.
Cargo 360.....................................          3  .........  481212-Nonscheduled Chartered Freight Air
                                                                       Transp.
Cargo Aircraft Management (all entries).......          5  .........  481212-Nonscheduled Chartered Freight Air
                                                                       Transp.
Evergreen International Airlines..............          3        394  481212-Nonscheduled Chartered Freight Air
                                                                       Transp.
Kalitta Air...................................          3        786  481212-Nonscheduled Chartered Freight Air
                                                                       Transp.
Southern Air (CT-USA).........................          4        179  481212-Nonscheduled Chartered Freight Air
                                                                       Transp.
Tradewinds Airlines (NC-USA)..................          1        263  481212-Nonscheduled Chartered Freight Air
                                                                       Transp.
Celtic Capital Corporation (all entries)......          3  .........  522298--All Other Non-Depository Credit
                                                                       Intermediation.
Aerolease Financial Group Inc. (all entries)..          1  .........  532411--Comm'l Air . . . Transp. Equip.
                                                                       Rental & Leasing.
Aeroturbine Inc. (all entries)................          1  .........  532411--Comm'l Air . . . Transp. Equip.
                                                                       Rental & Leasing.
Automatic LLC (all entries)...................          1  .........  532411--Comm'l Air . . . Transp. Equip.
                                                                       Rental & Leasing.
Aventura Aviation LLC (all entries)...........          2  .........  532411--Comm'l Air . . . Transp. Equip.
                                                                       Rental & Leasing.
Echelon International Corporation.............          1  .........  532411--Comm'l Air . . . Transp. Equip.
                                                                       Rental & Leasing.
First Chicago Leasing Corporation (all                  1  .........  532411--Comm'l Air . . . Transp. Equip.
 entries).                                                             Rental & Leasing.
GA Telesis LLC................................          2  .........  532411--Comm'l Air . . . Transp. Equip.
                                                                       Rental & Leasing.
JT Power LLC (all entries)....................          2  .........  532411--Comm'l Air . . . Transp. Equip.
                                                                       Rental & Leasing.
Pegasus Capital Corporation (all entries).....          5  .........  532411--Comm'l Air . . . Transp. Equip.
                                                                       Rental & Leasing.
Nomads Inc....................................          1  .........  561520--Tour Operators.
NBA Orlando Magic.............................          1  .........  711211--Sports Teams and Clubs.
A & W Aeronautics Services Inc................          1
AA 767 LLC....................................          1
Apollo Aviation Capital LLC (all entries).....          1

[[Page 66508]]

Aviation Finance Group LLC....................          1
BCM Majestic Corporation......................          1
Blackwater USA LLC (all entries)..............          1
IDM Aviation Services LLC (all entries).......          1
Jet Partners LLC (NY-USA).....................          3
Leading Edge Group LLC........................          2
RPK Capital Management Group LLC (all entries)          1
WP Supply Corporation.........................          1
                                               -----------------------------------------------------------------
    Total.....................................        96
----------------------------------------------------------------------------------------------------------------
Sources: 1. List of firms & number of affected airplanes--Back Aviation Solutions, Fleet iNET database,
  November, 20, 2006. 2. Employment data--Ameristar Jet Charter, http://www.ameristar.com; Kalitta Air &
  Southern Air: http://www.transtat.bts.gov, Air Carrier Financial Reports (Form 41 Financial Data), Schedule
  P10. All others--http://www.bts.gov/Programs, Airline Date and Statistics, Number of Employees, Certified Air
  Carriers (Full-time and Part-time).

E. Reporting, Recordkeeping, and Other Compliance Requirements

    We expect that small entities will incur little or no new reporting 
and recordkeeping requirements as a result of this final rule. Boeing 
will incur substantial reporting and recordkeeping costs, but is not a 
small entity.
    This AD will require compliance from operators of large commercial 
transport category Boeing Model 727, 737, 747, 757, and 767 airplanes 
having an original standard Airworthiness Certificate or original 
Export Certificate of Airworthiness issued between July 1981 and 
December 1988 inclusive. The AD also applies to five specific Boeing 
Model 747-400 airplanes delivered in 1989.\11\
---------------------------------------------------------------------------

    \11\ Boeing Model 747-400 airplanes with serial numbers 23719, 
23720, 23814, 23816-23820, 23999, 24061, and 24062.
---------------------------------------------------------------------------

    The AD requires that operators of affected Boeing airplanes replace 
insulation blankets made of AN-26 with new insulation blankets 
complying with 14 CFR part 25.856(a). As shown in the ``Cost of 
Compliance'' section of the final rule, this operation requires 
thousands of labor hours and, consequently, is an expensive operation 
that will have a significant economic impact on the substantial number 
of small firms we have identified above. That impact is documented and 
analyzed below.
1. Economic Impact on Small Operators Assessed With Financial Data
    In our analysis of the economic impact of the final rule on small 
entities, we were restricted to 14 of the 45 potential small entities 
owing to the availability of Department of Transportation financial 
data for air transportation operators. These operators are 14 (of the 
15) operators identified in table, ``Small firm operators affected by 
the final rule by NAICS industry,'' as small entities based on 
employment. We first incorporate into the analysis the final rule's 8-
year compliance time, a period specified to closely agree with airplane 
heavy maintenance schedules. Since we have no information on these 
maintenance schedules by operator or airplane model, we assume that an 
equal number of affected airplanes will undergo heavy maintenance at 
the end of each of the eight years from the effective date of the final 
rule.\12\ Accordingly, we calculate the variable ``Present Value AD 
Cost'' in the table by discounting ``AD Cost'' \13\ by the average 
(0.7464) of the 7% discount factors for one through eight years.\14\ As 
we noted previously, we reduced the economic impact of the final rule 
by extending the compliance time from six to eight years. That reduced 
impact is reflected here in a lower Present Value AD Cost.
---------------------------------------------------------------------------

    \12\ As noted in the ``Cost of Compliance'' section of this 
rule, this assumption is largely consistent with passenger airplanes 
complying later in the compliance period than cargo airplanes in 
order to extend their lives in passenger service to 25 years.
    \13\ AD Cost is for the affected fleet of each operator and is 
calculated using cost per airplane from the ``Costs of Compliance'' 
section.
    \14\ A 7% discount rate is required by the Office of Management 
& Budget. See OMB, Circular A-94, ``Guidelines and Discount Rates 
for Benefit-Cost Analysis of Federal Programs'', October, 29, 1992, 
p. 8 (http://www.whitehouse.gov/omb/circulars/index.html).
---------------------------------------------------------------------------

    The last column of table, ``Financial data by small operator for 
assessing the economic impact of the final rule,'' shows that Present 
Value AD Cost as a percentage of Operating Revenues is 1% or greater 
for 8 of the 14 operators (and as high as 13.1%). The median impact is 
1.0% of Operating Revenues. We sort the table by Operating Revenue to 
demonstrate the economic impact tends to be higher for the smallest of 
the small operators. We should note that these percentages do not 
represent a continuous impact on operating revenues. Rather, they 
measure the economic impact of the final rule as a one-time capital 
cost relative to the financial size of the operators.

                               Table--Financial Data by Small Operator for Assessing the Economic Impact of the Final Rule
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                            PV AD cost/
                                                                                          Op. Revenue ($                   Present value     operating
                    Airline                                Type           Employment \1\     000) \2\       AD cost \3\     AD cost ($)       revenue
                                                                                                                                             (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Kitty Hawk Aircargo............................  C                                   201           3,799         558,660         416,991            11.0
Omega Air Holdings dba Focus Air...............  C                                   151          12,634       2,215,788       1,653,891            13.1
Sierra Pacific Airlines........................  P                                    32          12,967         186,220         138,997             1.1
Sky King Inc...................................  P                                    75          18,535         372,440         277,994             1.5
Northern Air Cargo Inc.........................  C                                   225          45,440         744,880         555,988             1.2

[[Page 66509]]

Capital Cargo International....................  C                                   188          46,913         602,281         449,550             1.0
Pace Airlines..................................  P                                   549          57,160         842,630         628,949             1.1
Southern Air Inc...............................  C                                   179          59,614       2,954,383       2,205,188             3.7
Tradewinds Airlines............................  C                                   263          60,848         738,596         551,297             0.9
Champion Air...................................  P                                   739         142,301       1,003,802         749,250             0.5
Ryan International Airlines....................  P                                   649         157,888         567,940         423,917             0.3
Astar Air Cargo Inc............................  C                                  1023         331,929       1,204,563         899,100             0.3
Kalitta Air LLC................................  C                                   786         372,546       2,215,788       1,653,891             0.4
Evergreen Int'l Inc............................  C                                   394         392,103       2,215,788       1,653,891             0.4
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                 .......................  ..............       1,714,676      16,423,758      12,258,895             1.0
                                                                                                   Total           Total           Total          Median
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Employment data is for 2005.
\2\ Op. Revenue is the average for 2003-2005, but for Omega Air Holdings is the 2005 value only.
\3\ AD Cost is for the affected fleet of each operator and is calculated using cost per airplane from the ``Costs of Compliance'' section of this final
  rule. See table, ``The cost of the final rule relative to the value of the affected fleet by operator.''
Note: The discount factor for AD Cost is 0.7464, the average of the 7% discount factors for Years 1 through 8 from the effective date of the AD.
Sources: 1. Employment data--Kalitta Air & Southern Air: http://www.transtat.bts.gov, Air Carrier Financial Reports (Form 41 Financial Data), Schedule
  P10. All others--http://www.bts.gov/Programs, Airline Date and Statistics, Number of Employees, Certified Air Carriers (Full-time and Part-time). 2.
  Operating Revenue--http://www.transtat.bts.gov, Air Carrier Financial Reports (Form 41 Financial Data), Schedules P1.1 & P1.2.

2. Economic Impact on Small Operators Assessed With Affected Fleet 
Values
    Since, as noted previously, the costs of this final rule occur as a 
one-time capital cost, another way to assess the economic impact of the 
final rule is to measure the costs of the final rule relative to the 
capital value of the airplanes the final rule affects. Table, ``The 
cost of the final rule relative to the value of the affected fleet by 
operator,'' lists the 14 operators, the number of affected airplanes, 
AD Cost per airplane, Total AD Cost, and Affected Fleet Value. The key 
variable in that table is Affected Fleet Value, which sums affected 
airplane values for each operator. These values were obtained from the 
Airliner Price Guide, vol. 57, January 2006. That table shows that AD 
Cost as a percentage of Affected Fleet Value is high, with a median 
value of 12.2 percent and values ranging as high as 32.9 percent.\15\ 
Both measures of the cost of compliance--discounted AD cost relative to 
operating revenue (table, ``Financial data by small operator for 
assessing the economic impact of the final rule'') and AD cost relative 
to affected fleet value (table, ``The cost of the final rule relative 
to the value of the affected fleet by operator'')--indicate that this 
final rule will have a significant economic impact on a substantial 
number of small entities.
---------------------------------------------------------------------------

    \15\ Relatively high Total AD Cost/Affected Fleet Value 
percentages may reflect low airplane values. Low airplane values 
suggest airplanes may retire before the compliance deadline, thus 
allowing operators to avoid or reduce compliance cost. See 
discussion in Section 4.

                                Table--The cost of the Final Rule Relative to the Value of the Affected Fleet by Operator
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                          Affected fleet   AD cost/fleet
               Operator                     Type          Equipment type (LAR     Number    AD Cost/AP     Total AD cost   value ($ mil)       value
                                                               code) \3\            AP          ($)             ($)             \2\          (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Astar Air Cargo......................  C               Boeing 727-200F.........        6         200,760       1,204,563            7.27            16.6
Capital Cargo Int'l Airlines.........  C               Boeing 727-200F.........        3         200,760         602,281            3.27            18.4
Champion Air.........................  P               Boeing 727-200..........        5         200,760       1,003,802            3.05            32.9
Evergreen International Airlines.....  C               Boeing 747-200B/SCD.....        3         738,596       2,215,788           30.44             7.3
Kalitta Air..........................  C               Boeing 747-200B (2), -          3         738,596       2,215,788           14.44            15.3
                                                        200B/SCD(1).
Kitty Hawk Air Cargo.................  C               Boeing 737-300F.........        3         186,220         558,660           22.33             2.5
Northern Air Cargo...................  C               Boeing 737-200 (3), 200C/       4         186,220         744,880            3.52            21.2
                                                        F (1).
Omega Air Holdings DBA Focus Air.....  C               Boeing 747-200B/SCD (2),        3         738,596       2,215,788           24.68             9.0
                                                        -300/SCD (1).
Pace Airlines........................  P               Boeing 737-200 (2), -300        4     210,657 \1\         842,630           14.25             5.9
                                                        (1); 757-200 (1).
Ryan International Airlines..........  P               Boeing 757-200..........        2         283,970         567,940           15.42             3.7
Sierra Pacific Airlines..............  P               Boeing 737-200..........        1         186,220         186,220            0.84            22.2
Sky King Inc. (CA-USA)...............  P               Boeing 737-200..........        2         186,220         372,440            1.72            21.7
Southern Air (CT-USA)................  C               Boeing 747-200B/SCD (2),        4         738,596       2,954,383           33.72             8.8
                                                        -200F (2).
Tradewinds Airlines (NC-USA).........  C               Boeing 747-200B/SCD.....        1         738,596         738,596            8.42             8.8
                                      ------------------------------------------------------------------------------------------------------------------

[[Page 66510]]

    Total/Average....................  ..............  ........................       44      376,028       16,545,237        183.37           12.2
                                                                                              (wt. avg.)         (total)         (total)        (median)
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Cost/AP for Pace Airlines is weighted average of 737s and 757 costs.

 Pace Airlines P Boeing 737-200 and -300 3 186,220 558,660
 Pace Airlines P Boeing 757-200 1 283,970 283,970

\2\ Affected Fleet Value is the sum, by small operator, of the values of affected airplanes. Airplane values were obtained from the Airliner Price
  Guide, vol. 57, January 2006.
\3\ Equipment Type & number of airplanes were obtained from Back Aviation Solutions, Fleet iNET database, January 17, 2007.

3. Disproportionality Analysis
    Disproportionality analysis addresses the question of whether small 
entities bear a larger compliance burden than larger entities. Large 
operators may be able to negotiate better pricing from outside sources 
for purchase, installation, and inspection of insulation blankets. We 
do not have the data that would allow us to assess that potential 
advantage. Data are readily available, however, to calculate the 
percentage of operators' airplanes affected by this final rule. We use 
this simple measure to compare the equipment compliance burden of the 
small operators with the 15 large airline operators affected by the 
final rule. One small operator, Maxjet Airways, was added to the small 
operator list, so as to have equal-sized small and large comparison 
groups.\16\ The data are shown in table, ``Proportionality analysis 
using the percentage of the fleet affected by the final rule, by small 
and large operators,'' which sorts the data by Affected Fleet as a 
percentage of Total Fleet for both small and large operators. As 
measured by this variable, small operators generally have a higher 
compliance burden than large operators--a result summarized in the 
higher mean percentage (38% vs. 29%) and much higher median percentage 
(31% vs. 17%) for small operators.
---------------------------------------------------------------------------

    \16\ We identified Maxjet Airways as a highly likely small 
entity by Maxjet's small total fleet size compared with other small 
operators.

               Table--Proportionality Analysis Using the Percentage of the Fleet Affected by the Final Rule, by Small and Large Operators
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        Affected                                                               Affected
                                              Affected                 fleet/total                                   Affected                fleet/total
              Small operator                   fleet     Total fleet      fleet             Large operator            fleet     Total fleet     fleet
                                                                        (percent)                                                             (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Kitty Hawk Air Cargo......................            3           32          9.4   Alaska Airlines..............            2           93          2.2
Kalitta Air...............................            3           20         15.0   American Airlines............           31          374          8.3
Astar Air Cargo...........................            6           31         19.4   United Parcel Service........           15          148         10.1
Ryan International Airlines...............            2           10         20.0   United Air Lines.............           40          310         12.9
Capital Cargo Int'l Airlines..............            3           14         21.4   Atlas Air....................            3           23         13.0
Evergreen Int'l Airlines..................            3           14         21.4   Continental Airlines.........           48          366         13.1
Tradewinds Airlines (NC-USA)..............            1            4         25.0   Hawaiian Airlines............            4           29         13.8
Champion Air..............................            5           16         31.3   Federal Express..............           18          105         17.1
Sky King Inc. (CA-USA)....................            2            6         33.3   Southwest Airlines...........           83          479         17.3
Southern Air (CT-USA).....................            4            9         44.4   Delta Air Lines..............           72          319         22.6
Pace Airlines.............................            4            8         50.0   US Airways...................           41          113         36.3
Sierra Pacific Airlines...................            1            2         50.0   Northwest Airlines...........           44          114         38.6
Northern Air Cargo........................            4            7         57.1   Aloha Airlines...............           13           24         54.2
Omega Air Holdings DBA Focus Air..........            3            4         75.0   America West Airlines \1\....           29           39         74.4
Maxjet Airways............................            3            3        100.0   ABX Air......................           38           38        100.0
                                           ----------------------------------------                               --------------------------------------
    Totals................................           47          180  ............  Totals.......................          481         2574  ...........
--------------------------------------------------------------------------------------------------------------------------------------------------------
    Median................................  ...........  ...........         31.3   Median.......................  ...........  ...........         17.1
--------------------------------------------------------------------------------------------------------------------------------------------------------
    Mean..................................  ...........  ...........         38.2   Mean.........................  ...........  ...........         28.9
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ American West Airlines merged with U.S. Airways on September 27, 2005. A merger of the FAA operating certificates was expected in 2007.
Source: Back Aviation Solutions, Fleet iNET database, December 5, 2006.
Note: Medians and means are column averages. Affected Fleet/Total Fleet for all small operators is 47/180 = 26.1% compared with 481/2574 = 18.7% for all
  large operators. These figures are equivalent to weighted means of the Affected Fleet/Total Fleet percentages with the operator's total fleet numbers
  as weights. As an average of the column of percentages, the unweighted mean corresponds to the median, and more appropriately reflects the situation
  of the typical operator in its group.

[[Page 66511]]

4. Conclusion on Economic Impact
    On the basis of our analysis in sections E.1-E.3 above, we conclude 
this AD will have a significant economic impact on a substantial number 
of firms.\17, 18\
---------------------------------------------------------------------------

    \17\ The cost of the rule may be somewhat lower than estimated 
to the extent that airplanes go directly into retirement at age 25 
rather than converting to cargo service as assumed here. Even if an 
old airplane is not due for retirement, the operator will still 
retire if more economical than compliance, in which case the costs 
of the rule will also be less than assumed here.
    \18\ In addition to the lower Present Value AD Cost discussed in 
Section E.1, another benefit of the extended compliance time, 
especially to small operators, is the increased economic feasibility 
of retirement or freighter conversion as an alternative to 
compliance.
---------------------------------------------------------------------------

International Trade Impact Analysis

    The Trade Agreement Act of 1979 prohibits Federal agencies from 
establishing any standards or engaging in related activities that 
create unnecessary obstacles to the foreign commerce of the United 
States. The statute does not consider legitimate domestic objectives, 
such as safety, as unnecessary. The statute also requires consideration 
of international standards and, where appropriate, that they be the 
basis for U.S. standards. We are issuing this final rule because of a 
known safety problem and thus the AD is not considered an unnecessary 
obstacle to international trade.

Unfunded Mandates Reform Act Assessment

    Title II of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-
4) requires each Federal agency to prepare a written statement 
assessing the effects of any Federal mandate in a proposed or final 
agency rule that may result in an expenditure of $100 million or more 
(adjusted annually for inflation with the base year 1995) in any one 
year by State, local, and tribal governments in the aggregate, or by 
the private sector. The Act deems such a mandate to be a ``significant 
regulatory action.'' We currently use an inflation-adjusted value of 
$136.1 million.
    This AD does not contain such a mandate.

Authority for This Rulemaking

    Title 49 of the United States Code specifies the FAA's authority to 
issue rules on aviation safety. Subtitle I, section 106, describes the 
authority of the FAA Administrator. ``Subtitle VII: Aviation 
Programs,'' describes in more detail the scope of the Agency's 
authority.
    We are issuing this rulemaking under the authority described in 
``Subtitle VII, Part A, Subpart III, Section 44701: General 
requirements.'' Under that section, Congress charges the FAA with 
promoting safe flight of civil aircraft in air commerce by prescribing 
regulations for practices, methods, and procedures the Administrator 
finds necessary for safety in air commerce. This regulation is within 
the scope of that authority because it addresses an unsafe condition 
that is likely to exist or develop on products identified in this 
rulemaking action.

Regulatory Findings

    We have determined that this AD will not have federalism 
implications under Executive Order 13132. This AD will not have a 
substantial direct effect on the States, on the relationship between 
the national government and the States, or on the distribution of power 
and responsibilities among the various levels of government.
    For the reasons discussed above, I certify that this AD:
    (1) Is not a ``significant regulatory action'' under Executive 
Order 12866; and
    (2) Is not a ``significant rule'' under DOT Regulatory Policies and 
Procedures (44 FR 11034, February 26, 1979).
    You can find our regulatory evaluation and the estimated costs of 
compliance in the AD Docket.

List of Subjects in 14 CFR Part 39

    Air transportation, Aircraft, Aviation safety, Incorporation by 
reference, Safety.

Adoption of the Amendment

0
Accordingly, under the authority delegated to me by the Administrator, 
the FAA amends 14 CFR part 39 as follows:

PART 39--AIRWORTHINESS DIRECTIVES

0
1. The authority citation for part 39 continues to read as follows:

    Authority: 49 U.S.C. 106(g), 40113, 44701.

Sec.  39.13  [Amended]

0
2. The FAA amends Sec.  39.13 by adding the following new AD:

2008-23-09 Boeing: Amendment 39-15730. Docket No. FAA-2005-20836; 
Directorate Identifier 2005-NM-028-AD.

Effective Date

    (a) This airworthiness directive (AD) is effective December 15, 
2008.

Affected ADs

    (b) None.

Applicability

    (c) This AD applies to Boeing airplanes, certificated in any 
category, specified in paragraphs (c)(1) and (c)(2) of this AD.
    (1) Boeing airplanes listed in Table 1 of this AD, having an 
original standard Airworthiness Certificate or original Export 
Certificate of Airworthiness issued between July 1981 and December 
1988 inclusive.

               Table 1--Applicability of Certain Airplanes
------------------------------------------------------------------------

-------------------------------------------------------------------------
                                  Model

727-200 and 727-200F series airplanes.
737-200, 737-200C, 737-300, and 737-400 series airplanes.
747-100, 747-100B, 747-100B SUD, 747-200B, 747-200C, 747-200F, 747-300,
 747SR, and 747SP series airplanes.
757-200, 757-200CB, and 757-200PF series airplanes.
767-200 and 767-300 series airplanes.
------------------------------------------------------------------------

    (2) Boeing Model 747-400 series airplanes, serial numbers 23719, 
23720, 23814, 23816, 23817, 23818, 23819, 23820, 23999, 24061, and 
24062.

Unsafe Condition

    (d) This AD results from reports of in-flight and ground fires 
on certain airplanes manufactured with insulation blankets covered 
with a specific polyethyleneteraphthalate (PET), ORCON Orcofilm[reg] 
AN-26 (all variants, including AN-26, AN-26A, and AN-26B), hereafter 
referred to as ``AN-26,'' which may contribute to the spread of a 
fire when ignition occurs from sources such as electrical arcing or 
sparking. We are issuing this AD to ensure that insulation blankets 
constructed of AN-26 are removed from the fuselage. Such insulation 
blankets could ignite and propagate a fire that is the result of 
electrical arcing or sparking.

Compliance

    (e) You are responsible for having the actions required by this 
AD performed within the compliance times specified, unless the 
actions have already been done.

Replacement

    (f) Except as provided in paragraph (g) of this AD, within 96 
months after the effective date of this AD, do the actions specified 
in paragraph (f)(1) or (f)(2) of this AD.
    (1) Remove all insulation blankets from the pressurized areas of 
the fuselage and install new insulation blankets using a method 
approved by the Manager, Seattle Aircraft Certification Office 
(ACO), FAA. The new insulation blankets must comply with 14 Code of 
Federal Regulations (CFR) 25.856(a). The areas where the affected 
insulation blankets are installed include, but are not limited to, 
the following areas:
    (i) Crown area of the airplane;
    (ii) Areas behind flight deck panels and circuit breaker panels;
    (iii) Areas behind sidewalls, lavatories, closets, and galleys;
    (iv) Cargo compartment areas;
    (v) Air ducting;

[[Page 66512]]

    (vi) Waste and water tubing; and
    (vii) Areas attached to the underside of floor panels.
    (2) Remove the existing fuselage insulation blankets and install 
new insulation blankets, in accordance with the Accomplishment 
Instructions of the applicable service bulletin specified in Table 2 
of this AD.

           Table 2--Boeing Special Attention Service Bulletins
------------------------------------------------------------------------
   Boeing Special Attention
      Service Bulletin--             Dated--            For model--
------------------------------------------------------------------------
(i) 727-25-0300...............  April 30, 2008...  727-200 and -200F
                                                    series airplanes.
(ii) 737-25-1572..............  April 30, 2008     737-200, 737-200C,
                                                    737-300, and 737-400
                                                    series airplanes.
(iii) 747-25-3429.............  April 30, 2008...  747-100B, 747-100B
                                                    SUD, 747-200B, 747-
                                                    200C, 747-200F, 747-
                                                    300, 747-400, 747SP,
                                                    and 747SR series
                                                    airplanes.
(iv) 757-25-0295..............  April 30, 2008...  757-200, 757-200CB,
                                                    and 757-200PF series
                                                    airplanes.
(v) 767-25-0411...............  April 30, 2008...  767-200 and 767-300
                                                    series airplanes.
------------------------------------------------------------------------

Exception

    (g) The actions described in paragraph (f) are not required for 
any insulation blanket that is determined not to be constructed of 
AN-26, using an identification method approved by the Manager, 
Seattle Aircraft Certification Office (ACO), or in accordance with 
Appendix A of the applicable service bulletin specified in Table 2 
of this AD.

    Note 1: Insulation material that is part-marked with a date of 
manufacture indicating that it was manufactured before July 1981 or 
after December 1988 is not constructed of AN-26.

Parts Installation

    (h) As of the effective date of this AD, no person may install 
any insulation blanket constructed of AN-26 as a replacement unless 
it has been modified to comply with 14 CFR 25.856(a), in accordance 
with a method approved by the Manager, Seattle ACO.

Alternative Methods of Compliance (AMOCs)

    (i)(1) The Manager, Seattle ACO, ATTN: Shannon Lennon, Aerospace 
Engineer, Cabin Safety and Environmental Systems Branch, ANM-150S, 
FAA, Seattle Aircraft Certification Office, 1601 Lind Avenue, SW., 
Renton, Washington 98057-3356; telephone (425) 917-6436; fax (425) 
917-6590; has the authority to approve AMOCs for this AD, if 
requested in accordance with the procedures found in 14 CFR 39.19.
    (2) To request a different method of compliance or a different 
compliance time for this AD, follow the procedures in 14 CFR 39.19. 
Before using any approved AMOC on any airplane to which the AMOC 
applies, notify your appropriate principal inspector (PI) in the FAA 
Flight Standards District Office (FSDO), or lacking a PI, your local 
FSDO.

Material Incorporated by Reference

    (j) You must use the applicable service information contained in 
Table 3 of this AD to do the actions required by this AD, unless the 
AD specifies otherwise.
    (1) The Director of the Federal Register approved the 
incorporation by reference of this service information under 5 
U.S.C. 552(a) and 1 CFR part 51.
    (2) For service information identified in this AD, contact 
Boeing Commercial Airplanes, P.O. Box 3707, Seattle, Washington 
98124-2207; telephone 206-544-9990; fax 206-766-5682; e-mail 
DDCS@boeing.com; Internet https://www.myboeingfleet.com.
    (3) You may review copies of the service information that is 
incorporated by reference at the FAA, Transport Airplane 
Directorate, 1601 Lind Avenue, SW., Renton, Washington; or at the 
National Archives and Records Administration (NARA). For information 
on the availability of this material at NARA, call 202-741-6030, or 
go to: http://www.archives.gov/federal_register/code_of_federal_
regulations/ibr_locations.html.

               Table 3--Material Incorporated by Reference
------------------------------------------------------------------------
    Boeing Special Attention Service
               Bulletin--                            Dated--
------------------------------------------------------------------------
727-25-0300............................  April 30, 2008.
737-25-1572............................  April 30, 2008.
747-25-3429............................  April 30, 2008.
757-25-0295............................  April 30, 2008.
767-25-0411............................  April 30, 2008.
------------------------------------------------------------------------

    Issued in Renton, Washington, on October 24, 2008.
Ali Bahrami,
Manager, Transport Airplane Directorate, Aircraft Certification 
Service.
[FR Doc. E8-26352 Filed 11-7-08; 8:45 am]

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